Nonprofit governance is gaining a lot of attention these days. One reason is the cloud of uncertainty that goes along with economic conditions, political evolution and market challenges. Another issue is the desire for greater board effectiveness by nonprofit stakeholders, consistent with concerns of corporate board governance.

Research on board strategy and leadership points to at least five areas of board engagement that are especially essential for nonprofits:

1.   Foresight and Understanding –

The context for meaning and decision making.

2.   Organizational Perspectives –

The resources, culture, process considerations.

3.   Construction of Strategy –

The elements of direction, integration and execution.

4.   Focus on Cause-and-Effect –

The measures of intent, activity and impact.

5.   Board Thought and Behavior –

The interaction of people, ideas, systems and value.

Boards are accountable for management guidance, general compliance and mission discernment. They are also accountable for the evolution of the nonprofit organization, taking care of the near-term and getting ready for the long-term. The competencies of individual board members and the collaboration of board members and management provide the crucible for strategic leadership at the governance level.

From: Dewar Sloan Working Paper on Strategy and Nonprofit Boards

In a recent (11/10/08) Business Week cover story, strategist Michael Porter poses and good question about the political and economic direction of the country…Where is the Strategic Thinking?  More to the specifics…

1. What are we doing about the constraints that degrade America’s entrepreneurial strength?
2. What are we doing about the continuing erosion of educated citizens and foundation learning?
3. What are we doing about the principle disconnects between technical, social, political and economic policy?

Porter argues for some reality-based strategy analysis of national challenges, resource management concerns and the many factors that shape and drive the country’s competitive stance in the world.  The balance of national planning and global leadership?  Or the stab at national leadership and global development?  These are important questions at every level of the political/economic discussion.

Stepping Into the Cauldron

The optimist would suggest that we live in interesting times, and further, that we have some exciting frontiers.  In our precepts of strategic thinking as outlined in Prepared and Resolved, the opportunities for advancement are framed by two things – business reality and natural goals.  Our business reality is painted with VUCA – the volatility, uncertainty, complexity and ambiguity* of the world today.  Our natural goals remain, in balance, the economic performance, competitive edge, customer relevance and corporate stewardship of the realities we guide and represent.  These are touchpoints for every organization today.

Michael Porter’s question is a good one for the leadership of the nation.  Who will come together to construct the answers that will make sense for individuals and society?  And, how will we get “prepared and resolved” for change?

* Wikipedia: VUCA

One of the more challenging issues on the strategic agenda is a company’s intent to drive innovation. There are cultural and resource elements that temper this concern. And there are process and structure elements that promote and/or constrain innovation, and the practices and processes of innovation.

In our current work on corporate entreship, we’re exploring a series of cause-and-effect concerns in category development strategy and innovation. Below is a summary list of several strategy and measures under review…

• New Product Capacity to Solve Customer Problems
• New Product Profitability; Speed to Investment Returns
• Contributions to Intellectual Capital and KM Value
• Contributions to Competitive Position and Advantage
• New Product Throughput and Impact on Portfolio
• New Product Approach to Open Model Development

These measures are drawn from current business practice as well as the R&D Literature from around the world. What is less clear from the above list is the capacity to engage broader cultural and activity-based engagement in strategy and innovation. More to follow on this essential “organic growth” subject.

One of the more interesting discussions about governance today is the role of the board in strategy. Some companies take this very seriously, while others pass by the subject with only limited energy and insight. For many reasons, boards have stakes in corporate strategic leadership and management that are more and more important to enterprise success.

Oversight Was Yesterday
Today’s more engaged boards play significant roles in the creation and analysis of strategy direction, integration and execution patterns of the companies they serve. Boards temper the overall strategic risk behavior of the company. Boards appraise the realities and conditions of the business, and they help management frame what the company could do going forward, and what they should do near-term and long-term.

“New School” Boards and Strategy
Boards are called upon to share experience, knowledge, judgment and connections. Board members bring perspective and conversation to creative and analytic work on strategy. Boards provoke ideas and appropriate constructive debate on important subjects that reflect the key elements of strategy:

• On Strategy Direction … what kind of business evolution makes sense for the company, and why?

• On Strategy Integration … what resources, processes and capacities shape our ability to move forward?

• On Strategy Execution … what shapes and/or blocks our ability to work the plan and adapt as needed?

Boards govern. Management builds organizations that are prepared and resolved to meet their natural goals in a world that is ripe with risk and opportunity. “New school” boards know their place as an engine for the broader strategic agenda that drives business growth, performance and change.

Alan Murray speaks to the changing relationships between boards and the CEO in The Wall Street Journal excerpt [05/05/07] of his new book, Revolt in The Boardroom. The implications for strategic leadership are extensive and interesting.

The evolution of power in the office of the CEO has been in gear for several decades. Relationships between board governance and CEO behavior have been reset in the context of what we call the four natural goals of business. These include competitive advantage, financial performance, customer connections and corporate stewardship. These are defined in detail in Prepared and Resolved.

The current era of renewed transparency and focus on broader stakeholder concerns is a response to board and CEO behaviors that have often missed the mark on natural goals. Most of the Enron–era stories of disruptive behavior demonstrate the obvious disconnects between boards, executives and stakeholders on matters tied to these four natural goals.

Boardroom Strategy Discussion
The evolution of strategy, as reviewed by the board and the CEO cannot be settled into the emphasis of execution alone. There are three elements in the strategic agenda, and the board and CEO need to get on the same page here.

Strategy direction deals with focus and options. As Murray notes, strategy has to be meaningful to people across the organization.

Strategy integration deals with resources factors. The challenges of strategy integration often extend beyond the boundaries of the company.

Strategy execution deals with action plans and impact. The disciplines of strategy execution are broader than tactics alone, however.

Boards wake up to big surprises when the corporations they serve are blithe about the nature and dynamics of the strategic agenda. The culture of effective governance today and tomorrow is based on a serious focus on business results. The boardroom is a setting for strategic leadership and management, and that entails a remix of compliance and development roles for the board and the CEO. Does this help redefine the job of the contemporary CEO? The answer is yes. Does it address the meaning of leadership in the boardroom? Yes, and that sets the broader game for strategy and corporate culture.

We address the strategic roles of boards, executives, managers and front line employees in Chapter 09 of Prepared and Resolved. The emerging roles of board strategy and leadership are essential to the equation for business growth, performance and change.