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Aligning Corporate Governance with Business Strategy and Value Creation

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Title: Aligning Corporate Governance with Business Strategy and Value Creation


1
Aligning Corporate Governance with Business
Strategy and Value Creation
  • Justine McCarthy
  • 6 December 2005

Member of the Eurogroup Consulting Alliance
2
Roadmap
  • Developing strategy the role of the Board and
    Management
  • Strategy development process
  • Operationalising the strategy and measuring
    performance
  • Evaluating the Boards performance
  • Case study
  • Questions

3
Developing strategy the role of the Board and
Management Team
Member of the Eurogroup Consulting Alliance
4
Strategy Role of the Board and Management Team
  • Role of the Board
  • Review, challenge, discuss and approve the
    strategy
  • Participate in and support the process (perhaps
    through a Strategy Sub Committee of the Board for
    larger organisations)
  • Assist in establishing performance measures
  • Monitor strategy implementation

Board
Board
Role - Advisory Team
Management Team
Management Team
5
Strategy Role of the Board and Management Team
Board
  • Role of the Management Team
  • Develop the strategy
  • Utilise the key skills around the Boardroom table
  • Present and obtain
  • Board approval
  • Manage and report on
  • strategy implementation

Management Team

6
How the Board can add value
  • Provide a clear mandate for the Management Team
    for the strategy development process
  • Utilise specific expertise, e.g. knowledge of
    overseas markets, raising capital etc.
  • Participate in workshops with the Management Team
  • Act as an informal sounding board
  • Provide access to key contacts
  • Ensure that the Board and Management Team are on
    the same ambition wavelength

7
Strategy development process
Member of the Eurogroup Consulting Alliance
8
Strategy the result - what is it?
  • Easy to communicate roadmap that defines the
    business and establishes direction over the next
    3 / 5 years with clear milestones
  • Identifies choices that have to be made
  • Helps to articulate what the organisation will
    and will not do
  • Creates a renewed momentum and focus on value
    creating activities
  • Provides a vehicle for the CEO to report to the
    Board

9
Overview of a strategy the key elements
  • Vision what success will look like
  • Mission our purpose
  • Corporate objectives achieve the vision
  • Actions and milestones operationalise the
    strategy
  • Monitoring progress make sure you deliver






10
The Strategic Planning Pyramid links corporate
and functional objectives
KPIs
Vision
Key Assumptions
Mission
Corporate Objectives

Functional Objectives
  • Sales
  • Operations
  • Finance
  • Marketing
  • HR

Strategies to achieve the objectives
Actions milestones
11
Basic strategy questions
What business are we in? What business do we
want to be in?
Do we have the right corporate governance
arrangements in place to support where we want to
go?
12
Understanding the strategic issues
Future organisation structure
How to internationalise the business?
Where are the opportunities?
How do we optimise shareholder value?
ABC Ltd
How ambitious do we want to be?
What sort of firm do we want to be going
forward?
Changes in regulatory environment
Impact of technology
What do we want to be famous for?
Matching capability with opportunity
Understanding future customer needs
13
Strategy the process - what is it?
  • Brings management and key staff up to a common
    level of understanding about the market
  • Builds consensus and ownership
  • More than a document/report, it provides an
    opportunity to think differently
  • Identifies what the company wants to be
  • Sets objectives it seeks to achieve
  • Details the supporting strategies and actions

Sometimes the process may be as important as the
outcome!
14
Getting the process going
  • Start with the end in sight
  • Obtain Management Team consensus on the key
    strategic issues
  • Agree how you will develop the strategy, who
    should be involved etc., the specific
    responsibilities and the shape of the end product
  • Bear in mind the audiences for the end product
    (staff, investors, banks, stakeholders etc.)
  • Set a demanding timescale otherwise the world
    may have changed during the process!
  • A 70 (?) view of the future is about as good as
    you will get!

15
One standard approach
  • 2. Market view
  • Market
  • prospects
  • Clients
  • Competition
  • Stakeholders
  • Threats
  • Opportunities
  • 1. Get Ready
  • Objectives
  • Process
  • Resourcing
  • Timescale and
  • checkpoints
  • Outputs
  • Planning
  • assumptions
  • 5. Vision, values
  • objectives
  • Review planning
  • assumptions
  • What do we want to
  • look like in 2010
  • Supporting values
  • Culture
  • Corporate
  • objectives
  • Delivering the strategic change
  • Setting tasks, responsibilities and dependencies

7. Implementation plan
  • 4. Opportunities to 2010
  • Product / service
  • Alliances
  • Geographic
  • Etc
  • Strategies
  • Actions
  • Milestones

6. Strategies and actions
  • 3. Internal view
  • What are we
  • good at?
  • Strengths /
  • weaknesses
  • Areas for
  • improvement

Timescale
16
How long should the process take?
  • Urgency rate of change in the market
  • Recognition of the need
  • Status quo may be too comfortable
  • Management Team and key managers time available
  • Availability of a process owner
  • Sophistication of the Management Team

17
Sample timescale
Months 2006
Tasks
June
Feb
March
April
May
Jan
1. Get ready
2. Market view
3. Internal assessment
4. Identify the opportunities
5. Vision, values and objectives
6. Strategies and actions
7. Implementation Plan
18
Sample end product….format depends on organisation
  • Presentation style document in Storyboard form
    with the following draft
  • index
  • Introduction
  • Market context
  • SWOT
  • Vision and values
  • Corporate Objectives
  • Strategies, actions, KPI, and milestones
  • Key financials
  • Next steps
  • Supporting appendices

19
Operationalising the strategy and measuring
performance
Member of the Eurogroup Consulting Alliance
20
CSFs in implementation
  • Strong leadership from the Board and Management
    Team
  • Timely reporting on progress of implementation to
    the Board
  • Critical that progress in implementing the plan
    is
  • Monitored and evaluated to ensure that any
    delays, issues or concerns are identified and
    addressed early at all levels
  • Implementation will be smoother if it is
  • Positioned as part of the day job
  • Driven by the line managers
  • Owned by and visibly driven by the Management
    Team
  • Supported by continuous communication throughout
    the life of the plan
  • Organisation must be seen to DO things need to
    balance visible quick hits vs the longer term

21
Critical that all objectives are aligned and
consistent with the Vision
  • Observations
  • Do not plan in silos
  • Many functional objectives will have dependencies
    elsewhere which need to be planned for
  • e.g. Systems support for a CRM initiative
  • Make sure every member of the Management Team is
    involved in the process

22
From functional objectives to implementation
  • Identifying new business ideas / opportunities
  • What criteria do you use to screen them, e.g.
  • Material impact on bottom line
  • Fit with existing business
  • Investment requirements
  • Speed to market
  • How to take the agreed ideas forward
  • Identifying measures of success

23
Measures should cover the short to the longer term
  • Shorter term measures should be stitched into the
    annual business plan
  • Business Plan one year horizon - examples
  • Sales targets
  • Cost reduction / efficiency targets met
  • Key hires made
  • Strategic Plan two/three years horizon
  • New channels to new markets opened
  • Joint venture in place
  • Acquisition made
  • New products in the market

24
Evaluating the performance of the Board
Member of the Eurogroup Consulting Alliance
25
Key elements need to be in place to be able to
assess performance
  • Strategy for the company
  • Annual business plan
  • Terms of reference for the Board
  • Governance Framework
  • Board workplan for the year to be assessed

26
What can be evaluated?
  • Collective performance of the Board
  • Individual performance of each Board member and
    the Chairperson

27
How can the Board be evaluated?
  • Self assessment
  • Questionnaire
  • 360 degree feedback
  • Interviews of the Board members
  • Boardroom discussion led by the Chairperson or an
    independent facilitator
  • Benchmarking
  • …..or a combination of the above

28
Case Study
Member of the Eurogroup Consulting Alliance
29
Background - Health services provider employing
4,500 plus staff across a range of disciplines
  • Brief from the CE to us
  • Management Team to set vision and direction very
    quickly
  • Strategy must support national objectives
  • Wants to use the process to build strategy
    development skills in his top 150 managers
  • Process to be led by their own project manager
    and staff
  • Focus to be on providing a management tool which
    can be used on a day to day basis
  • Significant knowledge transfer component required

30
Our role
  • Lead the facilitation process with the Management
    Team to establish the vision and set direction
  • Play a back office role in supporting the project
    manager to develop the detail and manage the
    procees
  • Train and support the project manager in
    structuring and leading the process and managing
    the 14 project teams (9 operational and 5
    functions)
  • Faciliate training sessions
  • Quality assure interim and end products from each
    team
  • Ensure all interdependencies are identified and
    integrated into the plans

31
Structure
Management Team
Project Team
Prospectus
Project Teams
32
Issues
  • Learning curve was steep for many as they had
    never done this before
  • Took some time to get common agreement and
    understanding on what key terms meant, e.g.
    objectives, goals, etc
  • Keeping project teams at the appropriate level of
    detail was a challenge, comfortable with
    operational detail, but not at policy or strategy
    level
  • Time of significant uncertainty in the health
    services which complicated matters

33
Benefits
  • 150 managers bought into the process and the plan
  • The strategic plan became a Workbook for year
    one and had immediate currrency
  • Subsequently showcased as a model for a way of
    developing strategy
  • Despite change in the healthcare sector it is
    being implemented

34
Questions
Member of the Eurogroup Consulting Alliance
35
Justine McCarthy
  • Justine is a Senior Manager with Prospectus.
    Before returning to Ireland to join Prospectus,
    she worked as a management consultant and project
    manager for System 21 Management Consultants in
    the UK. Prior to this Justine worked with the
    Jefferson Smurfit Group in four of their
    corrugated packaging and printing plants across
    Scotland, England and Wales.
  • Justine has worked with companies developing and
    implementing strategies, reviewing organisation
    structures and governance arrangements, and
    working on strategic positioning pieces and
    business cases. Most recently, she has been
    working in the healthcare sector, last year
    working for Beaumont Hospital in writing their
    winning bid to become the Radiotherapy Treatment
    Centre in Dublin.
  • Last year, Justine published a book on Corporate
    Governance with David Duffy called the Management
    of Management, a practical guide to corporate
    governance. It is a hand-book for anyone either
    on a Board or thinking about becoming a member of
    a Board giving practical advice on roles and
    responsibilities and providing checklists for
    Chairpersons and Chief Executives.
  • Visit www.prospectus.ie
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