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What Is The Role of the Board of Directors in Strategic Management?

  • 30th Sep'22

Despite their differences, boards and management might agree that a strategic plan is necessary. They occasionally disagree about how to define the board's and management's roles in creating and carrying out the strategic plan. Who truly determines the strategy is the key query. Some people think the board decides it, while others think the board waits for management to decide it before approving it. The exact procedure varies greatly from company to firm. The key is to guarantee that the process is followed and that everyone is in agreement. The most secure method for boards and managers to work on the company's strategic plan is through board management software.


Incorporate Boards' Strategic Roles into Management Plans

Where each of them draws the line between managing strategy and managing the company concerns both boards of directors and managers equally. Strategic planning eventually falls under the purview of the board. When company performance is poor, they have come under intense pressure to be prepared with answers about strategy for shareholders, regulators, and others.

Another issue is whether and how many boards should rely on outside specialists to help them analyze business strategy. Independent analysis from outside experts can support top management challenges by establishing independence. Others contend that if boards must perform all of this labor, what function does the CEO play and whether that individual is qualified for the position?

Another school of thinking holds that major events like a change in the CEO, a significant investment opportunity, a potential acquisition, a drop in sales, or an unwanted takeover offer should be the main triggers for boards to get involved in strategic planning. Boards may decide to conduct strategic planning retreats and include it heavily in the CEO's performance review.

Senior executives, including CEOs, should have a strong understanding of both the current state of the business and its prospective future state. CEOs are typically the most knowledgeable about how to handle difficulties associated with strategic planning because of their extensive involvement in the day-to-day activities of the organization.

The final direction for their organizations is decided by the board of directors, as can be seen from best practices. They are also accountable for studying, evaluating, comprehending, and approving particular strategic programs and plans. These are the great characteristis of a great board member. Along with that, they must be able to evaluate and comprehend the problems, opportunities, and risks that affect performance in the present market to perform their duties in strategic planning.


The role of boards in strategic planning

There are numerous methods for boards to engage in strategy-related tasks without micromanaging the CEO or going beyond their authority. The strategy should be in line with the company's vision, so those two subjects need to be discussed at least occasionally throughout the year. Board directors should gather and assess information on the industrial environment, the nature of the competitors, and the business models in advance of a board debate about strategy.

To help establish the future allocation of resources and capabilities, boards can also create a platform for strategic decision-making that outlines the basics of the company portfolio and the dominant business model. To support the decisions that must be made about strategic planning, the board's participation in this process comprises establishing priorities, setting goals and objectives, sourcing resources, and distributing monies. The board is also in charge of keeping an eye on the strategic plan's implementation. As a result, the board must supervise how the strategic strategy is put into action. Boards may need to review the funding allocation as the strategy develops and take the effects of acquisitions and divestitures into account.


Special situations require substantial board attention

The board should have complete confidence in the strategic plan and the direction of the business after extensive data collection, analysis, and collaboration with management. What do you think makes a great board member? Someone who may need to take a more active role as more significant issues arise that could affect the strategic plan. There may be issues that force boards to reevaluate their choices regarding debt and equity that have an impact on the capital structure.

Acquisitions, mergers, and takeovers can all play a significant role in corporate strategy. These significant occurrences carry both significant dangers for the business and its owners, as well as potential chances for outside expansion.


Measuring the implementation of a strategy

In order to monitor the various aspects of the business, including finances, operations, organizational problems, goods, sales, marketing, and vendors, boards have many measurement options at their disposal.

Corporate strategy development is a difficult process. The CEO's position in the process is directly related to the board of directors' function in strategic management. Using a highly secure electronic platform like Board Effect, both parties must be able to collaborate and communicate regarding strategic planning. The ideal digital instrument for boards and their management staff to establish balance in the development of short- and long-term strategic plans is board management software.

The portal offers a collaborative online environment where strategic plans can be developed and evaluated. The outcome of the procedure is a comprehensive strategy that is probably going to receive the board's final, enthusiastic approval.



The earlier boards get involved in the strategic planning process, the easier it will be for them to monitor the plan's development and identify any changes in risk as it develops. The strategic plan will need to be fully explained to managers, and boards will need to be involved if situations arise that call for their expertise. The strategy plan will perform better than expected in ideal conditions. Boards can anticipate ongoing discussions and strategy sessions with managers when it results in mediocre or subpar performance, and a board portal streamlines meeting procedures so that those discussions stay private and safe.



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