Ebook Sport Governance: Part 2

Ch07-H6999.qxd 9/29/06 11:50 AM Page 104 Offensive 7 game plans: strategic governance Overview A fundamental aspect of the governance role is to determine the strategic direction of an organization and monitor perform-ance toward desired outcomes. This chapter examines the role of the board in strategy formulation, implementation and moni-toring as well as the processes that facilitate board involvement. The pressures on boards to engage with strategy are reviewed along with a number of prescribed guidelines on how boards should undertake their role in organizational strategy. The empirical evidence from both corporate and nonprofit sectors on the engagement of boards with strategy is reviewed. Finally, issues involved with enhancing the strategic contribution of the boards of nonprofit sport organizations are detailed. Strategic contribution of the board 104 Much of the practitioner-oriented literature highlights the value of boards engaging in strategy as a way of focussing board activities and ‘aligning Ch07-H6999.qxd 9/29/06 11:50 AM Page 105 Offensive game plans: strategic governance the board, CEO and others with a common sense of direction’ (Fishel, 2003: 105). According to Nadler (2004), there are a number of benefits for organizations that actively seek the involvement of board members in strategic activities. First, board members have an increased level of under-standing of the environment in which their organization operates and the internal capabilities of their organization, thus enabling the board to make more meaningful contributions to strategic discussions. Second, by being involved, board members develop a sense of ownership and therefore commitment to organizational strategy. Third, board members bring dif-fering perspectives to strategic issues facing their organization and can therefore improve the quality of decisions. Fourth, the processes involved in strategic thinking, debate over possible directions and strategies, and strategic planning force the board and senior staff to work closely with one another. Fifth, board members tend to feel more satisfied with their role when they believe that their skills and knowledge has been put to good use and they have contributed to the organization in some mean-ingful fashion. Finally, board members act as more informed and vocal advocates for their organization, when championing and defending organ-izational strategy. The governance guidelines produced by Sport and Recreation New Zealand (SPARC, 2004) outlined the benefits of the boards of sport organ-izations engaging in strategic activities (see Figure 7.1). The dilemma for boards that seek to contribute to the strategy of their organizations is to find an appropriate balance between organizational performance and conformance. Cornforth (2003a: 13–14) argued that: these contrasting roles require a very different orientation and behav-iour on the part of board members. The conformance role demands careful monitoring and scrutiny of the organisation’s past perform-ance and is risk-averse. The performance role demands forward vision, an understanding of the organization and its environment and per-haps a greater willingness to take risks. How then can boards make a meaningful contribution to organizational strategy while adequately monitoring conformance? As Edwards and Cornforth (2003) noted, empirical studies of the strategic role undertaken by nonprofit boards and how they meet the competing demands of per-formance and conformance roles are rare. As a starting point, it is neces-sary to define what is meant by the strategic contribution of the board. Edwards and Cornforth (2003) identified two principal problems in attempt-ing such a definition. The first is the ‘fuzziness of the boundary between operational detail and strategic focus’ (Edwards & Cornforth, 2003: 78). Not only can board members find it difficult to distinguish between the two, they are often only made aware of strategic issues through examining opera- 105 tional details which raise questions for the future of the organization or the Ch07-H6999.qxd 9/29/06 11:50 AM Page 106 Sport Governance A process for ensuring the organization’s purpose, desired strategic outcomes and values are constantly kept in the frame and relevant. A positive vision of the future which channels energy and resources and motivates directors and staff. A process which can engage all directors regardless of their level of experience or expertise in the organization’s operational activities. An orientation towards the future that reduces commitment to the status quo and encourages a broader view. The commitment and confidence of key stakeholders on whom the organization depends, be they members, donors, funders or the like. A basis for effective governance by keeping both board and staff focussed on what’s important. A process for identifying and reconciling conflicting expectations. A framework for monitoring and assuring performance accountability. Figure 7.1 Benefits of sport boards engaging in strategic activities (Source: SPARC (2004: 56–57); reproduced with permission of Sport and Recreation New Zealand) efficacy of current strategy. Board members are also reliant on their organi-zation’s CEO and staff to provide information on which to base their deci-sions. For board members to be able to focus solely on strategic issues require the CEO and staff to identify and present matters that are strategic-ally significant as agreed by the board and management alike. In order that the right sort of reports are provided to the board ‘requires time, skill, board input and a high degree of trust between board members and senior managers’ (Edwards & Cornforth, 2003: 78). The second problem is determining the difference between policy and strategy. Policy should be considered to be the values that drive board deci-sions while strategy should be seen as how an organization positions itself in the marketplace or relative to other similar organizations. In practice, however, board members may find it difficult to differentiate clearly between the policy and the strategy. Making a strategic decision usually involves the application of a policy framework or set of values. Edwards and Cornforth (2003) cautioned that the role of nonprofit boards in focussing on strategic contributions depends on how they perceive the overriding purpose of their organization. As a guide, strategic contributions of the board can be considered to be things such as the board commission-ing papers and conducting discussions that incorporate assessments of organizational resources and capability, organizational performance, and options and priorities for the future (Edwards & Cornforth, 2003). 106 In their conceptualization of the strategic contribution of the board Edwards and Cornforth (2003) identified the relationship between Ch07-H6999.qxd 9/29/06 11:50 AM Page 107 Offensive game plans: strategic governance organizational context, inputs and processes. The strategic contribution of the board is considered an outcome of their involvement in the organiza-tion. The inputs of board member skills, experiences, values and knowledge have an impact on the way in which the board receives and considers information and makes decisions. Both the inputs and the processes are affected by the environmental context in which the board and organiza-tion operate, such as the relationship between government and the non-profit sector, the regulatory environment, government policy, governance guidelines and the broader impact of globalization processes. Nadler (2004) argued that engaging the board in strategy development is vital for boards and CEOs to maintain a healthy working relationship and for effective governance to occur. Organizations engage in four discrete types of strategic activity: strategic thinking, strategic decision-making, strategic planning and strategy execution. Strategic thinking ‘involves the collection, analysis and discussion of information about the environ-ment of the firm (or organization), the nature of competition, and business design alternatives’ (Nadler, 2004: 26). This entails an analysis of what products or services to provide to the market, how an organiza-tion is going to compete with others and what shape the organiza-tion could take to facilitate its operations. Strategic decision-making involves making choices between alternatives in order to allocate organizational resources. Strategic planning identifies priorities for action, sets objectives and organizes the resources to enable the organiza-tion to execute its strategic decisions. Finally, strategic execution is where the organization ‘focuses on implementation, monitoring results and appropriate corrective action’ (Nadler, 2004: 26). The board’s level of engagement with each of these four strategic activities needs to comple-ment that of the CEO and paid staff. Figure 7.2 outlines an ideal balance for the role of board and senior management in each of the four strategic activities. Nadler’s (2004) model for how a board can make a strategic contribu-tion to an organization is dependent on several conditions. First, the board must be balanced but diverse. In other words, the board should comprise independent members able to question and challenge decisions and strategies. Second, the board should possess some specific knowledge of the operating environment of the organization. The CEO and senior staff must decide to engage with the board and vice versa to ensure a com-plete understanding and personal commitment amongst the key decision-makers about the origins of the strategy and the merits of their decisions. Third, the CEO must be receptive to new ideas and open to strategic input. The culture of the board, within its accepted norms and standards of behaviour, must support ‘constructive contention and the importance of different points of view’ (Nadler, 2004: 32). Finally, the board must feel that it is accountable to its stakeholders as this will motivate them to be 107 more engaged with important strategic decisions. Ch07-H6999.qxd 9/29/06 11:50 AM Page 108 Sport Governance Description of task Role of the board Role of senior management Strategic thinking Collecting, analysing and discussing information about the environment of the firm, the nature of the competition, and broad business design alternatives – different views of customer value proposition, scope competitive advantage and profit capture Strategic decision-making Making the fundamental set of decisions about the business portfolio and business design Strategic planning Translating the critical strategic decisions into a set of priorities, objectives and resource allocation actions to execute the strategy Strategic execution Undertaking the various initiatives and actions consistent with the strategic plan, including adjustments over time to account for environmen-tal changes and different outcomes Be an active participant in the strategic thinking process Bring an outside perspective and accumulated wisdom Test the consistency of management’s thinking Collaborate with management Provide input for management’s decision-making Provide ultimate review and approval on major decisions (resource allocation, initiatives, portfolio challenges, etc.) Review core strategic plans presented by management Ensure understanding of the plans and their potential risks and consequences Comment and make suggestions on plans, as appropriate Approve plans Review the process and progress of implementation of key initiatives vis-à-vis established milestones and objectives Initiate the process of strategic thinking Set the agenda, pose the questions and issues Provide rich and meaningful information Actively participate with the board in the discussions Summarize the output of board and management working together Make critical decisions Develop proposals to the board for critical directional decisions and major resource allocation Engage with the board in its review of decisions Develop plans, working with staff support and operating management Review plans to ensure consistency with corporate objectives and strategy Present plans to the board for review Ensure resources and leadership for execution are in place Monitor progress of execution Make changes in either the execution or the plan depending on outcomes 108 Figure 7.2 Strategic tasks and roles (Source: Adapted from Nadler (2004: 27); reprinted with permission of the Emerald Insight Group) ... - tailieumienphi.vn