The Board has overall responsibility for running the business from the strategic point of view. They are responsible for oversight and risk management.
The oversight role ensures long term business success and sustainability. They help ensure that the business or organization has a ‘strategic foundation’ upon which long term viability of the business is anchored. It is like having a strong foundation for the house. The stronger the foundation, the longer the house will stand.
Risk management role helps ensure going concern events or incidents with potential to fail the business are proactively anticipated, identified and effective mitigation measures implemented. That is why companies buy insurance or put in place internal control systems.
Who appoints the Board?
Board members are appointed by the owner or founder of the business. This person or entity entrusts the Board to manage the affairs of the business on their behalf. For the Board to perform their mandate, they must communicate their expectations of what success means to them.
They should communicate it to they person as they appoint to manage it on a day-to-day business. The Board’s responsibility is to appoint the CEO or Managing Director or the President.
Because the Board is responsible for the going concern and risk management, ideally they should be involved. Traditionally, management documents a business plan and take it to the Board for approval. The Board finds the things they have written are completely different from what they expect. This wastes a lot of time.
It is recommended that management invites the Board to be part of the strategy process so that there is total ownership. The expectations which the Board has from the stakeholders are able to be articulated in the strategy first time.
It is also important for management to know what the Board’s thinking is. What is the Board’s understanding of success? These are supposed to be documented in the strategy. It is basic practice for the Board to get involved in strategy. Getting it right takes a long time, in case the Board is playing a police man’s role other than a consulting and risk management role.