Keeping the train on track

Someone on LinkedIn said, “Good governance is like keeping the train on track.” I like that analogy as it runs parallel to the description of the CEO who ‘keeps the trains running on time.’

You need both ─ good direction and good execution.

You also need the third phase of the board’s work – monitoring progress.

It may have been John and Miriam Carver who described the work of the board as:

1. Setting direction,
2. Delegating authority, and
3. Monitoring progress.

In over twenty years working with boards and serving on boards, I find it’s the third step that gets dropped most often. This Winston Churchill quote says it well:

“However beautiful the strategy, you should occasionally look at the results.”

Why is looking at the results such a challenge?

Maybe it’s because evaluating the progress of not-for-profits (NFPs) lacks the clarity of stock price, shareholder value, and return on capital ─ metrics monitored by many in the public or private company world.

Or maybe it’s because CEOs in the NFP sector rarely have performance pay, or ‘pay at risk’, that depends on metrics that matter to stakeholders. Why not have linkages that are relevant? Why not have performance pay aligned to metrics that matter to those we serve?

Monitoring progress against priorities in the strategic plan still matters – a lot. You know the phrase … what gets measured gets managed.

For NFPs, measuring outcomes that matter to those we serve requires more rigor than simply tracking busy work – how many calls answered, how many visits, how many hits to the website.

How do you measure culture? Social responsibility? Impact?

Thankfully, there are resources and experts available to help develop those metrics and collect actionable data that go beyond tracking busy work.

For now, I’ll focus on the major goals and objectives in the strategic plan. Where is this train headed? If there is a lack of clarity on the direction the board has delegated to management, any track will get you there.

Therefore, governance matters. Strategic direction helps to answer the questions “Why does this organization exist? What is its positive impact on society?” These questions are not only for NFPs to think about. Today, with the rise of the ESG (environmental, social, governance) discussion, an organization’s work and its impact on stakeholders is just as relevant for private and public companies.

The term “ESG” brings to mind environmental issues like climate change and resource scarcity. These are an important element of ESG, but the term means much more. It covers social issues like a company’s labor practices, talent management, product safety and data security; and it covers governance matters like board diversity, executive pay and business ethics.

Why does this matter to the Savvy Director?

To keep the train on track, those drivers of success really do matter if the train is to arrive on time. The savvy director has a learning and growth mindset that is open to new ideas and ways of thinking. This includes paying attention to the organization’s core purpose for existing, and monitoring progress on the major goals of the strategic plan.

At some point, there needs to be a good discussion as to whether the strategic plan is still current. Are the most important strategic items taking a priority spot near the top of your meeting agenda?

The savvy director also has governance courage – doing the right thing for the right reasons. They may need to ask the question others are thinking about but hesitant to ask. For example, “Please help me understand why we are spending time on this issue. How does it connect to our strategy?”

When a new proposal comes to the board for discussion and approval, has management made it clear which strategic goal is supported by this initiative? If not, why not? Are board members thinking this way or are they getting caught up in a ‘new shiny bauble’ moment?

Here’s another mechanism. When the board provides feedback to the CEO as part of the annual talent development process, are board members asked for feedback on their perceptions of progress toward the strategic goals?

What would happen if, one year into your new strategic plan, you were to ask board members to articulate the three or four major goals of the plan? Or to recall the vision, mission or core values? How many would remember? Seriously. Try it.

As a savvy director, you can have an impact by leading by example. That means being prepared for the upcoming board or committee meeting and asking the key questions that keep the strategy top-of-mind. Your questions need not be pointed or confrontational. Stay curious. Use safe, open-ended questions to generate discussion.

The CEO needs you to do this. The board needs you to do this. Your ESG stakeholders need you to do this. Your ability to help keep the current strategy front and centre will go a long way to helping everyone know when it’s time to update the plan!

Your takeaways:

• The strategic plan belongs to everyone and each person in the governance process has a role to keep it alive, current and relevant.
• Frequent board agenda items that are not part of the current strategy may raise questions as to whether the CEO is focused enough on the current plan. Alternatively, these may generate new questions about the possibility of updating the strategic plan.
• A new CEO often wants to update the strategic plan within the first year of their mandate. This is a good thing as the strategic planning process generates buy-in and increases commitment from the fresh energy they bring to the organization.
• For every new strategic plan, part of the architecture must be the means by which the board will monitor results, provide constructive feedback, and with what frequency.

Leave a comment below to get in on the conversation.

Thank you.

Scott

Originally published on September 4, 2021

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online membership with practical tools for board directors with a growth mindset. 

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