The Governance Intent-Reality Gap (Trap)
I have been conducting an in recent months--to supplement and information my doctoral research work--asking directors and managers about the importance of strategy, and the extent to which the Board of their company is involved in strategy formulation.
The overwhelming majority of respondents to date have told me that the Board has a key role to play in [forming] strategy. However, after listening further and checking, I've discovered what appears to be a yawning gap between what respondents claim and what actually occurs in practice. Surprisingly few Boards actually spend much time on strategy at all. Rather, they concentrate on monitoring and controlling the past, on managing risk and on ensuring compliance.
Why is there an intent-reality gap when it comes to governance and strategy? And why is it so large? Surely, if Boards have a key role to play in forming strategy, they would be directly and heavily involved in the process? When pressed, Board members said they expect management to form strategy, for consideration and approval (or otherwise) by the Board. In reality, they spend the bulk of their time reviewing business performance. Is this smart? Looking backward is hardly a good technique when the goal is to drive forward.
If Boards are serious about maximising the performance and value of their organisation they govern, you would think they would spend the bulk of their time on strategy and the consideration of strategic options. What do you think is going on here? Is this another case of board members offering the so-called "correct" answer because they don't want to be exposed? Or does "consideration and approval" equate to "appropriate involvement"? Or is some other psycho-social interaction driving behaviour? I'd love to hear from you!