Defining the strategic role of boards and measuring boards' effectiveness in strategy implementation

Abstract

Purpose

The purpose of this research is to explore the potential role and the measurement of the effectiveness of boards of directors in strategy formulation and implementation – two aspects that have so far been left largely unaddressed by corporate governance research and practice.

Design/methodology/approach

Based on insights from strategy process literature, the paper suggests that, by ensuring consistency between resource allocation processes and the firm's intended strategy, boards could fulfil a meaningful role in strategy implementation. The proposed outside‐in analysis of resource allocation decisions is illustrated by a single case study of a major Swiss pharmaceutical company.

Findings

The proposed approach enables corporate governance scholars to look at how boards fulfil their role in strategy implementation from a perspective similar to that of financial analysts. It might thus be suited to complement existing methods in empirical corporate governance research.

Practical implications

The presented outside‐in analysis of resource allocation decisions helps board members to prevent role conflicts with executive management. In addition, boards may benefit from an analysis of implementation consistency, because it enables them to detect weak early warning signals of strategic divergence that require early intervention.

Originality/value

The paper contributes to the discussion of alternative methods for exploring strategy issues in corporate governance research. The suggested approach outlines a potential new vantage point to investigate board involvement in strategy implementation in the event that action research is not feasible. The tentative findings from the case study put forward a set of indicators for measuring the effectiveness of boards in guiding strategy implementation.

Citation

Brauer, M. and Schmidt, S.L. (2008), "Defining the strategic role of boards and measuring boards' effectiveness in strategy implementation", Corporate Governance, Vol. 8 No. 5, pp. 649-660. https://doi.org/10.1108/14720700810913304