Should the Board drive Strategy?

‘This Board does not drive strategy adequately’ is a common criticism of Boards of Directors - we lament that Directors often don’t know enough of the company’s business to drive its strategic planning process, do not have enough hands-on experience in the industry, and so on and on.. I have had enough of such laments.. the right question to ask, I believe is – what is the role of the Board anyway? Is it to drive strategy? If it is, then what is the role of the CEO and CFO and CMO and every other CxO who makes up the senior management of the company? In many companies I work with, the CEO is also the Chairman and Founder of the company, or the scion of the founder. So he knows, better than anyone on his Board, what his company is about, and has his lifeblood invested in its well-being. In order to protect himself from ignorant Directors, he sometimes packs his Board with ‘yes men’ who will let him do whatever he likes (not always, I hasten to add.. some of my clients are very far-sighted). Unfortunately, the financial markets don’t think much of his Board.. and so on.. Clearly not a healthy situation. The way out is to understand what the proper role of the Board is. It is unrealistic to expect the Board, usually made up of people who are busy and active running their own businesses, to ‘drive’ the strategy of the company they have the honor of being ‘Directors’ of. What we can, and should expect of them, is that they should know the difference between a good strategy and a bad strategy, and, more importantly, to know when there is no strategy at all, merely a bunch of high-sounding slides. The management (CEO and his team) are the proper functionaries responsible for formulating a company’s strategy, for, remember, they are the ones who will have to execute it, and they are the ones who have to live and die by it. What the Board can and should do, is make sure they have a strategy and it appears to be well-founded and well-grounded. That is all. In an old, long-forgotten article, Elliott Jacques pointed out that, as we go higher up in any organization, the time horizon over which one ‘thinks’ becomes longer and longer. The horizon of the Board should be infinite, it is, after all, the role of the Board to ensure that the organization lives, and thrives, forever. The horizon of a CEO could be, say, ten years- the horizon over which a strategy or ‘theory of business’ may reasonably be expected to hold good. To ensure that the organization lives forever, the Board should consider the interests of all its stakeholders, including the community it lives in, and also ensure that it has a viable strategy. Of course, It should also ensure that the Management does not loot the company, and so on. But so far as strategy goes, it will never know enough to be sure it is the right, winning strategy – that is for the CEO to think about. The trouble, I think, is that many Directors were appointed to the Board because they were successful CEOs, so they naturally continue to think like CEOs. The sad truth is, being a good CEO and being a good Director are two different things..

On Scaling

On Scaling: Vipassana and Gyaanshala The numbers are so gigantic in India – any enterprise that wants to make a difference has to figure out how to scale. This is what we can learn from two amazing organizations: Vipassana centres and Gyaanshala. Take Gyaanshala first. It is an organization founded and run by my good friend Pankaj Jain in Ahmedabad – its aim is to provide primary education to slum children. Today, it is certainly the largest in India and perhaps in the world, with several thousand children enrolled. There are many aspects of this story, but the one I want to concentrate on here is: how did they solve the problem of scaling? The single biggest constraint facing any such enterprise today is lack of good teachers – that too, teachers willing to go and teach in slums, where the schools are located. Pankaj concluded that the only way to deal with the constraint was to make it go away – to evaporate the cloud, as Goldratt would have put it. He created a system where teachers become the least of the constraint – strong materials, detailed scripting of every session, and repeated and intense training and retraining of teachers, makes it possible for anyone to be a teacher in this system. Vipassana is another example. There are now Vipassana centres throughout the world, and thousands of people go through them every month. How has Mr. Goenka, the founder of these Centres in India, solved the scaling problem? In every session, at every centre, there are facilitators but their role is very limited – they hardly even speak. Even the instruction ‘take a break for 15 minutes’ is given by Goenkaji himself by a recorded audio. Every session is scripted in advance and controlled by an audio recording of Goenkaji. There is zero room for local deviations. And the experience is wonderful. The parallels are obvious, I do not need to explicate them…