Boards of directors require a laser strategic focus in order to drive long-term organisational success and sustainability. This requires boards to consciously stay at the ‘governing level’, and leave operational matters to management.
Recently, we outlined the way in which high performing, purposeful boards will need to achieve the right balance across four key continuums in 2025. In this article, we dive deeper into the first of the four considerations – strategic focus.
What it means for boards – striking the ideal balance
A board’s primary role is to govern – setting the strategic direction, appointing the right CEO to deliver on that strategy, overseeing performance, setting risk appetite and monitoring risk and compliance management, as well as modelling, monitoring and ‘seeing’ desired culture.
However, the line between governance and management can sometimes blur. There is some benefit in constructive tension around this line between the board’s role at the governing / strategic level on the one hand and that of management’s at the operational level. This ensures good robust challenge, and that nothing ‘falls between the cracks’. On occasion, a board might need to adopt a more operational focus, such as during a crisis or leadership transition. However, overall boards must consciously come back to, and ideally seek to remain at, the strategic level, and resist the pull into day-to-day operational involvement.
Key consequences of a lack of strategic focus
In our experience, a failure to strike the right balance between the strategic focus of governance versus operational management can lead to several organisational challenges.
Loss of board focus on strategy and long-term performance
When boards adopt a heavy-handed day-to-day management approach, they risk diverting attention from key strategic issues including emerging risks and opportunities. This runs the risk of leading to a weakened long-term strategic direction and vision.
Board and management tension
Another side effect of a board delving too far into operations is unclear boundaries between the board and executive team. In our experience, this usually leads to a level of unhealthy tension. When boards weigh in on operational matters, executive management often feel undermined, disempowered or ‘micro-managed’.
Inefficient decision making
Without a clear delineation of responsibilities, confusion can also arise as to what decisions rest with the board and what decisions rest with management. This can mean that decision-making can become slowed down and, in turn, hamper organisational agility and responsiveness.
Actions for boards to take
To maintain a strong strategic focus consistent with their governing function, boards should look to implement or strengthen the following mechanisms.
Establish and adhere to a clear board charter
A well-defined board charter outlines roles, responsibilities and governance principles, providing a key reference point for directors and managers to be aligned on their purpose and function.
Maintain a current delegation of authority policy
A constitution vests a wide range of powers in the directors. To empower the management team to act and execute in line with the strategic plan, the board needs to delegate powers to the CEO (who might delegate onto others).
Clearly documented delegations of authority, covering both financial and non-financial matters, are critical to define decision-making responsibilities between the board and CEO. From a different perspective, the delegations of authority policy sets out governing matters (what the board reserves to decide for itself) and those relating to operations (what the board has delegated to management).
Agree on ‘principles of operation’ between board and management
Apart from the ‘hard’ governance artefacts of policies and procedure documents, the ‘soft’ aspects of governance (relating to dynamics and relationships) are also important.
A discussion resulting in agreed ‘principles of operation’ and mutual expectations between board and management can be a very useful mechanism to foster a constructive and collaborative relationship.
Ensure board reporting remains strategically focused
We often hear directors provide management with feedback that board reports and papers are too detailed, lack analysis and don’t have a clear ask of the board. Of course, the more detailed papers are, the more likely directors are to ask detailed, usually operational, questions.
Board reports should provide high-level insights that support strategic decision-making, as opposed to operational minutiae. The board has a key role in setting out its broad requirements in terms of the nature and content for each key board report, and the template for standard board briefing papers.
How Directors Australia can assist organisations
Directors Australia specialises in assisting boards develop and implement the suggested actions we’ve outlined above. Our board and governance advisory services can assist organisations to improve their performance in an increasingly complex and dynamic strategic environment. Underpinning this work is our Governing for Performance® framework.
Directors Australia can ensure your organisation adopts or strengthens its strategic focus in a number of ways:
- Board performance evaluations: We provide boards with a constructive assessment of continuous improvement areas and work with them to develop practical ways to realise them.
- Strategy facilitation: We assist boards and executives by facilitating strategic planning workshops. Having an effective strategic plan is critical to an organisation being able to deliver on its purpose, and can ensure a board does not involve itself in day-to-day operational matters.
- Governance reviews: We deliver ‘best fit’ governance reviews which focus on providing constructive, tailored and pragmatic advice. Our comprehensive board governance policy and documents checklist identifies any policy areas requiring additional focus or development.
- Governance policies: Given the complex and evolving nature of corporate governance, boards often require assistance with drafting and reviewing their key governance documents. We often assist clients with developing and refining documents such as, but not limited to, board charters and manuals, as well as board delegation of authority policies and schedules.
- Board and management relationship: We facilitate workshops between the board and executive team to ensure there is an opportunity to work through any issues and decide on their future way of working collaboratively and constructively to optimise the relationship.
By implementing the mechanisms outlined within this article, boards can sustain a clear strategic focus while empowering executive leadership to effectively run the organisation. A well-balanced board fosters long-term success, builds trust with management and other key stakeholders, and strengthens overall governance effectiveness.
As 2025 rolls on, ensuring the right balance between governance and management will be fundamental for boards seeking to navigate complexity and drive sustainable performance.
Directors Australia works with the boards of publicly listed, government, private, APRA-regulated and not-for-profit organisations Australia-wide to achieve real, ‘best fit’ corporate governance appropriate to the organisation’s nature, and thus enhance board and organisational performance.
For further information or to discuss how we can help, contact us here.
**Nothing in this article should be construed in any way whatsoever as legal advice. It is the reader’s responsibility to obtain expert legal advice on any issue which requires a professional legal opinion.
Kerryn Newton
Chief Executive Officer
