Strategic Planning: How to Create Alignment Between the Board and Management Team
By Michael Mendes

Creating alignment between managements strategic plan and the vision of the board of directors is critical to enable the success of a high-performance organization. Developing a streamlined and efficient process that yields a succinct strategy is the byproduct of truly exceptional planning. When aligned with the board, management has clarity on what economic outcomes the company is striving to achieve, when these objectives are to be met and how the organization achieves these objectives.

The maxim often attributed to Mark Twain, “I didn’t have time to write a short letter, so I wrote a long one instead” underscores the challenge of brevity. Distilling a planning process to yield a concise document can be difficult, but it forces an organization to make choices about what is important and how to deploy resources. While most organizations' strategic planning uses a strictly top-down approach, I have observed that a hybrid planning rubric which incorporates a bottom-up approach enables deeper ownership from the management team. While I am a strong advocate for a streamline planning process, the time dedicated to enabling the contribution of the management team to the foundational development of the plan is critical.

It is important to establish the overarching corporate direction through the effective development of the mission, vision and values statements. Traditionally, a mission statement communicates the purpose of the organization, while the vision statement provides insight into what the company hopes to achieve or become in the future. The values statement attempts to reflect the core principles and ethics of the organization, which should align with the organization's culture.

Mission, vision and value statements can be met with derision, and subject to well-deserved ridicule if they are not adopted and adhered to by leadership. But like building any good home, this work can serve as the solid foundation to any good plan and the behavior it inspires. This document should be condensed into a single page document, developed by the management team in consultation with the board and ultimately approved by the board. This process should be iterative in nature, with management sharing with the board an initial outline of key strategic objectives with specific targets and timeframes, and the stakeholders the organizations should focus to serve.  Management should facilitate discussion to seek alignment on these constructs which will directly impact the deployment of resources.  Enabling the board to contribute in a meaningful way before the plan is fully “baked” and then reviewing the proposed plan (which incorporates this input) in a separate session allows for a more robust and inclusive process.  While this document must be revisited each year, it should largely be a foundational document that evolves slowly and serves as a guidepost as to what the company strives to become. The long-term strategic objectives and the annual plans develop to support these targets should be a living document that is more prescriptive in nature and identifies the “what,” “when” and “how” to drive organizational success.

What. It is critical to establish a long-term strategic target, designed as an overarching framework for what the organization is looking to achieve in the future. The target date should be a specific date three to five years in the future. These targets must be specific, measurable, and identified to be obtained within the specified timeframe. Only three to five targets should be identified (the fewer the better) and they should be clearly force-ranked so that the most important targets are listed first.

The establishment of the goals (e.g., growth, EBITDA, market share, equity value, geographic expansion), the specific target, the time frame of achievement, and the order of priority should generate debate and expose the basis for a difference in opinions. Candid dialogue will be critical to enable this productive dialogue to forge a valuable target of what the company should strive to accomplish. Alignment in balancing the ambition of the plan and the associated risk will be critical and will require the full commitment of both the board and the management team.

When. Each year the annual plan should specifically outline key objectives which must be achieved in order for the organization to accomplish the long-term targets. Linking achievement of the annual plan to employee compensation is a critical bridge to aligning short term behavior with long-term results.

The rigor for which the leadership team and the board align the annual plan to the long-term strategic objectives will have a direct downstream impact on the organization at large. If the annual plan is not intrinsically linked to the long-term strategic plan, the long-term plan will soon be dismissed as a viable aspiration of the organizations. For example, if a company approves a strategic target to double in size over the next five years, but the initial year annual plan proposes only 8% growth, the long-term target will be disregarded as a viable aspiration.

Addressing this internal conflict and effectively aligning the long-term strategic target and the annual plan will result in the more effective deployment of resources and help drive the prescribed behavior. Establishing a clear understanding of the objectives of the organization and reinforcing performance with meaningful economic reward is a fundamental construct of value creation.

How. The culture of an organization reflects the behavioral norms of the employees. Employees are key stakeholders of the company and rewarding and encouraging behavior consistent with the values of the company will help enable sustainable success. The values of the company and the culture that forms serve as a guidepost to how talent in the organization is developed, and the type of employees that are attracted and retained by the firm.

My experience has illustrated the need to engage in an authentic and consistent manner with employees, and to have these values reinforced by the governance team. Management and the board must deploy resource and support behavior that aligns with these values. Compromising the values of the organization to archive short term objectives can be divisive and destroy the very value creation fabric of an organization.

Michael Mendes is the former CEO and managing partner of Just Desserts and served on the board. He has spent over 25 years as an executive and a CEO in the food industry and has served on numerous boards of both private and public companies.

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