Scanning the environment

Looking forward and outward

Many boards are inclined to focus inward and backwards instead of forward and outward. Being strategic is not something that an effective board is, or does, occasionally. Strategic thinking must be continuous because the external operating environment is always changing. A board should monitor issues and trends in its external environment that might affect the organisation’s performance.

When external issues are considered, many boards rely on anecdotal data shared by other board members. This tends to be somewhat hit and miss. It also makes boards overly reliant on their chief executives to table information regarding the external operating environment. There is a danger of information filtering when relying solely on the chief executive, or even particular board members.

Another danger is that boards procrastinate on matters that may be threatening or unpalatable. Because a board largely consists of volunteers who serve for short terms, there is a high risk that a board will avoid issues that could threaten an organisation’s future. Every board should satisfy itself that it is facing and addressing critical organisation-wide issues in a timely way. Asking whether the board is facing up to reality is a good starting point.

To address these risks a board should:

Periodically: Kick the tyres, and define the main strategic challenges.

Regularly: Check the radar screen.

Kick the tyres (get out of the car)

While boards usually have considerable experience of the activities they are governing, it is not always current, or broadly based. It makes good sense to explore what is happening away from head office. It is also worth linking directly with the boards of similar organisations. The presence of truly independent directors will also help provide the necessary perspective for regular tyre kicking.

Check the radar screen

Boards must work to understand their organisation’s operating environment. The environment is dynamic and scanning must be continuous. It is not possible to develop future-focused strategies until the board has a view on what the future could hold. Identifying the emerging needs and preferences of the organisation’s stakeholders is also critical here.

Environmental scanning should feature as a regular agenda item for board-wide consideration.