Chapter 7: Strategy — Setting Direction Without Setting the Detail

What Good Looks Like — a board-level guide to governance done well

Ask a board what it does on strategy and most will say it "approves" it. That's the problem. Approval is the last step, and by the time a strategy arrives for sign-off, the thinking that matters has already been done, or skipped.

Chapter 2 drew the line between oversight and management. Strategy is where that line is hardest to hold. Boards are told to shape strategy, not just rubber-stamp it. They're also told not to run the business. Somewhere between those two instructions is the useful part.

What boards are actually for in strategy

The executive team builds the strategy. They know the services, the market, the workforce and the numbers far better than any non-executive can. The board's job is different. It sets the direction the strategy has to serve, and it tests whether the strategy will get there.

In practice that means a handful of things. Agreeing what the organisation is for, and what it won't do. Setting the boundaries: how much risk, how much debt, which lines can't be crossed on quality. Testing the assumptions a plan rests on. And holding the executive to account for delivery, once the plan is agreed.

None of that requires the board to write a single line of the plan.

Drifting too far back

The first failure is a board that leaves strategy entirely to the executive. The plan arrives polished, the presentation is confident, and the board's role shrinks to asking for clarification and saying yes.

HBOS is the classic case. The Parliamentary Commission on Banking Standards concluded that "the strategy set by the Board from the creation of the new Group sowed the seeds of its destruction." More striking still, it found that "the Board, in its own words, had abrogated and remitted to the executive management the formulation of strategy". By its own account, the board had handed strategy away.

Drifting too far forward

The opposite failure looks more energetic, and it's just as damaging. A board that rewrites the executive's plan line by line, debates which site should open first, or reopens a decision every time a director has a new idea isn't challenging. It's second-guessing.

The signs are usually easy to spot. The same decision comes back to the board three times. Board papers grow longer because executives are trying to pre-empt every question. Directors start proposing their own alternatives in the meeting. And the executive team, slowly, stops owning the plan, because the board has made it clear that it's really theirs.

Where challenge tips into second-guessing

The difference isn't how hard the question is. It's what the question is aiming at.

Challenge tests the reasoning. "This plan assumes we can recruit 40 nurses in 12 months. What happens to the plan if we only find 20?"

Second-guessing substitutes the board's judgement for the executive's. "I think we should open in Leeds instead of Manchester."

The first question leaves the executive owning the answer and makes the plan stronger. The second takes ownership away, often on the basis of less information than the executive already has.

A useful rule of thumb: challenge asks "how do you know?" and "what if you're wrong?" Second-guessing says "I'd do it differently." If a director genuinely thinks the executive has made the wrong call, the right response is to say so clearly, once, and to ask what evidence would change their mind. Then the board decides, and lives with the decision.

Where to start

A few habits make the difference.

Get involved early, not late. Hold a strategy session before the plan is drafted, to agree direction, boundaries and the questions the plan must answer. Approval then becomes a check, not a first look.

Write down what the board won't accept. Risk appetite, quality red lines, limits on borrowing. These are the board's real contribution to strategy, and they give the executive freedom inside them.

Test the three assumptions that matter most. Every plan rests on a few. Ask the executive to name them, and to show what happens to the plan if each one is wrong.

Decide once. When the board has agreed a strategy, it shouldn't reopen it without new evidence. Track delivery against agreed milestones instead.

Once a year, ask the executive how the board helped. And how it got in the way. The honest answer tells you which side of the line you've been on.