Academic journal article Journal of Management and Organization

Board and CEO Practice in Modern Strategy-Making: How Is Strategy Developed, Who Is the Boss and in What Circumstances?

Academic journal article Journal of Management and Organization

Board and CEO Practice in Modern Strategy-Making: How Is Strategy Developed, Who Is the Boss and in What Circumstances?

Article excerpt

ABSTRACT

The interplay of the board of directors (BOD) and the chief executive officer (CEO) in strategy-making has been the subject of some debate in the literature. Some experts argue the BOD should take a strong role in strategy-making while the alternative point of view is that the CEO is the key man or woman. In a qualitative study with 16 interviews of leading Australian industry figures, the CEO is found to be the key player in modern strategy-making. The findings identify how the BOD, individual directors and the CEO can combine to add value to the organization, in particular how these organization members can team up and interact to achieve a faster, more flexible strategy cycle. The modern organization focus needs to be on giving more emphasis to the empowerment, interaction and creativity of the CEO and top management team. The BOD should focus on questioning, criticizing, refining and enabling the strategy proposed by the professional managers. However, the study indicates these findings are subject to exception and variation in relation to factors including specialist knowledge, track record of performance, personality attributes, personal power, and political and influencing skills. The major focus of attention of the BOD and CEO is the strategic-thinking related activities in strategy-making. Strategic planning still has an important role in formalizing strategy content, usually in a regular cycle.

Keywords: corporate governance, board of directors, chief executive officer, strategy-making, qualitative interviews

INTRODUCTION

The practice of strategy has traditionally had a strong 'top-down' orientation, with company strategy passed down from the BOD, CEO and top managers to line management for implementation (Ireland & Hitt, 1999; Chizema & Kim, 2010). However, the strategy literature now agrees widely that organizations have had to cope with more uncertain environmental contexts in recent years (Hamel, 2000, 2009). Business competition is fierce; there is a need for organizations - which are competing increasingly in international markets - to be faster, more flexible and adaptable to customers and markets in the practice of modern, 21st century strategy-making (Ireland & Hitt, 1999; Burgelman & Grove, 2007). These developments have implications for the relative roles of company directors and the CEO. Dewally and Peck (2010) note we have much more to learn about strategy-making processes at the company director and CEO level of firms. Pye and Pettigrew (2005: S30) confirm this point noting that 'we still know relatively little about how boards and directors actually behave or conduct their roles effectively' and suggest multi-layered insight into strategic leadership of the organization would be valued. This paper focuses on the role of the BOD, individual directors and the CEO in the modern, 21st century organization.

The interplay of the BOD and the CEO has been the subject of some conjecture in the strategy literature (Kroll, Walters & Wright, 2008) with some experts arguing the board should take a stronger role (Kiel & Nicholson, 2003; Chizema & Kim, 2010) - although this is a matter of some contention (Nicholson & Newton, 2006; Bonn & Pettigrew, 2009). Recent contributions highlight strategy-making and governance as an evolving bargain between the BOD and CEO with subtle and sometimes not-so-subtle use of power and influencing skills (Daily, Dalton & Cannella, 2003; Shen, 2003; Combs et al., 2007; Payne, Benson & Finegold, 2009). Shen (2003) observes that this is a complicated area for academics and practitioners to understand. Others argue that with more recent focus on strategic thinking and a more open, inclusive and democratic organizational form (Mintzberg, 1994; Hill & Stephens, 2003), with the objective of achieving a faster strategy cycle (Hamel, 2000), the onus should be on professional managers working in an inclusive culture (Liedtka, 1998). …

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