http://www.chaordicsolutions.co.uk/blog/from-our-strategy-implementation-consultants/realising-strategic-potential-of-boards/
Extract from McKinsey Quarterly – Chinta Bhagat, Martin Hirt, and Conor Kehoe:
Too many boards just review and approve strategy. Three questions can help them and executives begin to do better.
It’s late afternoon in the boardroom, and the head of a major global infrastructure company’s construction business is in the hot seat. A director with a background in the industry is questioning an assumption underlying the executive’s return-on-invested-capital (ROIC) forecast: that the industry’s ratio of leased (versus owned) equipment will remain relatively constant. The business leader appears confident about the assumption of stability, which has implications for both the competitive environment and for financial results. But the director isn’t convinced: “In my experience, the ratio changes continuously with the economic cycle,” he says, “and I’d feel a whole lot better about these estimates if you had some facts to prove that this has changed.”
An uneasy silence settles over the room: the board member’s point appears quite relevant but requires a familiarity with the industry’s behavior and economics, and the rest of the board doesn’t have it. Finally, the chairman intervenes: “The question John is raising is critical and not just for our construction business but for our entire strategy. We’re not going to resolve this today, but let’s make sure it’s covered thoroughly during our strategy off-site. And Paul,” says the chairman to the CEO, “let’s have some good …
More … http://www.mckinseyquarterly.com/Governance/Boards/Tapping_the_strategic_potential_of_boards_3060
No comments:
Post a Comment