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Top risks identified by boards in 2018. Risk 1: Strategic Direction

The Governance Evaluator 2018 Governance Capability Benchmark Report analysed board evaluation responses from over 70 boards comprising almost 700 members in order to provide insights into the governance performance of boards across the health, aged care, government, waste/resources and community sectors.

The first of five key areas identified for cross-sector improvement is Strategic Direction & Planning.

Strategic Direction

Strategic Direction is one of the top five areas identified by the 2018 GE Benchmark report by directors as a key area for improvement. Across all of the sectors we support, the Governance Evaluator questionnaire asks about three main areas for strategic direction; formulation, oversight and insight. In the health and aged care sectors, there is a fourth series of questions relating to population health planning.

Surprising, irrespective of the sector in which the board operates, there were three areas within which directors felt there was an opportunity for improvement:

  1. Greater emphasis is required to guarantee trends and issues in the sector the organisation operates within is uppermost in guiding board decision-making about the focus of the strategic plan
  2. The monitoring of the implementation of the strategic plan could be improved with regular, clear reports of progress
  3. An opportunity for directors themselves to be more strategic in their knowledge and understanding of their sector.

Governance Evaluator has also learned some great tips and insights from some of the more mature boards, in addressing these issues, who are changing the way they run their meetings to have more time to be strategic, receive information for being assured that their strategy is on track and lastly are not setting and forgetting their strategies, but rather keeping them alive and entirely relevant to the business and environment they are in.

The following article defines the four key areas of a board’s roles and responsibilities for strategic direction. It shows the cross-sector benchmark results for these areas highlighting that there is plenty of opportunity for building executive, board and director capabilities in these areas. Lastly, there are some great tips and resources to support capacity building.

What is (and isn’t) Strategic Direction & Planning?

Failing to plan is planning to fail. This oft-heard quote highlights the importance of planning in any organisation. Strategic planning can be described as a systematic formally documented process for deciding on the key decisions that an organisation must get right in order to thrive over the coming years. This plan provides the overall strategic direction for the board.

  • Strategic planning is not business planning, although the strategic plan should inform and shape the business plan.
  • Strategic planning is not production planning, although it should guide what is produced.
  • Similarly, it is not workforce or technology planning or any other type of operational planning;
  • and it definitely is not marketing, even though it guides who to market to and where to market.

Strategic planning is a process designed to yield an organisation-wide strategic plan – a statement of strategies designed to affect the long-term performance of the organisation as a whole.

 

Formulation of the strategy, oversight of the strategy, insight into the implementation of the strategy as well as the use of sector trends and issues to inform strategy, are key components of strategic direction. Each of these themes is explored in the Governance Evaluator’s board evaluation, via a series of targeted questions, each with four possible responses:

  • No: Represents an early capability assessment of the board in that area. Any responses in this category highlight the need for board capability improvement and education.
  • Yes, but qualified: Indicates that board capability is developing and not yet at a mature governance level. Again, these point to opportunities for focus and education.
  • Yes: Represents a mature governance capability within the board and the criteria wholly satisfied, as judged by the participants.
  • Unsure: Measures a construct other than overall board capability as it reflects individual members of the board or leadership team that are unsure of the board’s level of functioning.

The cross-sector results relating to strategic direction are expressed in the chart below:

Formulation

Best practice

It is recommended that a board periodically undertake a process to review or revise its strategic plan. The period covered by the strategic plan is decided by the organisation and is dependent on the extent of change in the external and business environments. These days given the pace of change, a 3-year plan is the norm. The plan will be relevant to the present-day environment with a clear set of objectives and strategies to drive the organisation’s long-term performance and to engage key stakeholders. One of the favoured ways for achieving a dynamic and relevant strategic plan is to engage in consultation and analysis of the organisation with the relevant key stakeholders.  This may include the following:

  • consultation with funding bodies and communities of interest
  • consultation with board members, executives and staff
  • analysis of socio-demographic and other relevant data
  • analysis of current government and other relevant policy directions
  • analysis of the organisation and recommendations for a sustainable future
  • analysis of the organisation’s readiness to implement the plan

Cross-Sector 2018 Benchmark Data key finding:

Strategic plans are generally developed but more work is needed to ensure they remain current and relevant.

Governance Evaluator has sourced some resources which we think you might find useful to build any board’s capabilities in this area:

The DHHS Directors Toolkit chapter 6: insightful strategy is also a useful resource for all, which can be accessed here.

Governance Evaluator customers can access the following, and other useful resources via the platform here.

  • Resource Manual – 1A: Strategic Planning Fact Sheet
  • Governance Evaluator TV – Strategic Direction webinar series.

Oversight

Best practice

The board must oversee the implementation of strategy by monitoring clearly identified measures of success and by identifying the strategic risks to be managed. It must also establish an agreed reporting structure for the strategic plan. An important part of the board’s periodic strategic planning review process is to analyse the current environment to identify any factors that may affect or put at risk the success of the present strategic plan and inform any alterations that may be required. The strategic plan informs management’s development of an annual business/operational plan.

Cross-Sector Benchmark key finding:

The monitoring of the implementation of the strategic plan could be improved with regular, clear reports of progress.

Governance Evaluator has sourced some tips and resources which we think you might find useful to build any board’s capabilities in this area:

Tips for assisting boards and directors to be assured of their strategic plan’s status: 

  • Agenda and board report papers all aligned to strategic direction goals and risks
  • All items for decision making aligned to strategic goals
  • For directors to have a clear line of sight of the status of strategic goals – traffic light report card for strategic goals with commentary where required as part of the board’s risk dashboard report

Governance Evaluator customers can access these and other useful resources via the platform here.

  • Governance Manual – Traffic Light Report Card template
  • Governance Manual – Clinical Governance Board Dashboard template
  • Resource Manual – 1B: Oversight, Foresight and Insight Fact Sheet

Insight

Best practice

An important part of this periodic strategic process is for boards to review the current environment to identify any factors that may affect or put at risk the success of the present strategic plan and inform any alterations that may be required. It is, therefore, good practice for boards to set aside time in their yearly agenda for ‘insight’. Boards may invite guest speakers or set up structured conversations for reviewing their present strategic direction and challenging their strategic thinking.

Cross-Sector Benchmark key finding:

There is an opportunity for directors to be more strategic in their knowledge and understanding of their sector and to set a formal program to review and challenge the strategic direction.

Governance Evaluator has sourced some tips and resources which we think you might find useful to build any board’s capabilities in this area:

Tips for helping directors to become more strategic

Create an opportunity for directors to have greater strategic focus and learnings at board meetings through possibilities such as:

  • Quarterly board meetings being one hour longer to discuss strategic issues or to have strategic insight time with inspiring/challenging guest speakers
  • Change the meeting agenda to have a strategic meeting one month and operational the next
  • Include a Strategic Horizon report into board agenda which may be provided/presented by different director each month
  • Directors lead strategic insight sessions presenting PESTEL

Links to Resources

Incorporate a Horizon Scan Report on the agenda for every board meeting. This type of report is typically a brief summary of emerging trends and issues (recent publications, news stories etc) that impact or could potentially impact the organisation.  Use these reports to help stay up-to-date and stimulate strategic discussions.

There are a number of online publications providing topical, interesting news. Examples include:

Health & Aged Care sectors: Using sector trends, needs and issues to inform decision making

Best Practice

A population health approach to planning aims to improve the health and wellbeing of whole populations and reduce health and social inequities in specific populations through local, collaborative planning for a broad range of interventions (Victorian Healthcare Association, Population Health Approaches to Planning Position Statement 2012). Health and community-based organisations have an important role to play in working with stakeholders to identify health and social inequities in the community of interest. Health organisations can reduce health inequalities due to inequities in access and service provision, and inform and advocate for action on the broader social determinants of health and wellbeing. Health inequities are the unnecessary, avoidable and unfair differences in health outcomes or opportunities that arise between groups. Health inequities result in some populations, such as lower socio-economic groups, having shorter lives, poorer health and being more likely to suffer from preventable disease and injury. Health inequalities refers to the differing health status of various groups.

Aged care is a highly regulated service and participants need to be responsive to these sources of regulation and high levels of media interest reflective of community concern about the care of vulnerable older Australians. Directors need to take a lively interest in the demographic, policy and community views of the sector. It is a sobering fact that 40% of residents in aged care facilities receive no visitors and as such are among our most vulnerable members of the community. There are also consumer sub-populations that may also have heightened levels of vulnerability such as consumers from culturally and linguistically diverse (AALD) groups, young people in nursing homes and members of the LGBTIQ community.

Cross-Sector Benchmark key finding:

In the health and aged care sectors, greater emphasis is required to guarantee trends and issues in population health planning and Aged Care service provision are uppermost in guiding board decision-making.

Governance Evaluator has sourced some resources which we think you might find useful to build any board’s capabilities in this area:

Links to Resources