Boards play a critical role in advising CEOs on how best to navigate strategic opportunities and pitfalls. Boards should expect a clear strategy from the CEO that explicitly shows the rationale of product, market and capability choices being made that will propel the company to its EBITDA targets. Conversely, CEOs should receive a clear set of parameters or boundaries to use in setting the strategy.
In practice this Board / CEO exchange on strategic planning is often assumed and murky. The impact is Board Members and CEOs end quarterly meetings with more questions than answers.
To side step this expectation gap (and this gap, if left unchecked can have an enormous detrimental impact to EBITDA performance as well as speed and quality of decision making), we suggest a one page document called Strategic Latitude that every CEO and Board needs to co-create and audit.
2. Strategic Latitude – What is it?
What parameters, boundaries and expectations must be adhered to in both setting the strategy and achieving results?
3. Questions and Categories to Create a Study Strategic Latitude Document.
When we set the strategy for company ABC co – what are the stakeholder…
- Requirements to fill?
- Risks to Avoid?
- Problems to Remove?
- Restrictions to Uphold?
The output of these questions typically uncovers these types of the objectives that should be weighted on a relative scale 1=low to 10=high):
- Strategic Time frame
- Scale on Exit
- Cash Flow
- EBITDA Per year
- Capital Available for Projects
- Growth by Product Line or Market (or both)
- Inorganic Spend for Acquisitions
- Product / Market Concentration and Change
- Core Competencies to Maintain
- New Competencies Built to Drive Margin or Scale Advantage
- Risk Tolerance (probability and impact profile of decision making that is acceptable)
Below is a sample format that you may like to use to create a Strategic Latitude one pager for your company / board.
As you set your expectations for 2015, create a strategic latitude document to ensure all stakeholders are aligned.
For more information or assistance on creating this document for your company please feel free to contact Tim Lewko at email@example.com.