Aligning Corporate Governance with Business Strategy and Value Creation

1. Aligning Corporate Governance with Business Strategy and Value Creation Justine McCarthy 6 December 2005

2. Roadmap Developing strategy � the role of the Board and Management Strategy development process Operationalising the strategy and measuring performance Evaluating the Board�s performance Case study Questions

3. Developing strategy � the role of the Board and Management Team

4. Strategy � Role of the Board and Management Team

5. Strategy � Role of the Board and Management Team

6. How the Board can add value Provide a clear mandate for the Management Team for the strategy development process Utilise specific expertise, e.g. knowledge of overseas markets, raising capital etc. Participate in workshops with the Management Team Act as an informal sounding board Provide access to key contacts Ensure that the Board and Management Team are on the same ambition wavelength

7. Strategy development process 

8. Strategy � the result - what is it? Easy to communicate roadmap that defines the business and establishes direction over the next 3 / 5 years with clear milestones Identifies choices that have to be made Helps to articulate what the organisation will and will not do Creates a renewed momentum and focus on value creating activities Provides a vehicle for the CEO to report to the Board

9. Overview of a strategy � the key elements Vision what success will look like Mission our purpose Corporate objectives achieve the vision Actions and milestones operationalise the strategy Monitoring progress make sure you deliver

11. Basic strategy questions

13. Strategy � the process - what is it? Brings management and key staff up to a common level of understanding about the market Builds consensus and ownership More than a document/report, it provides an opportunity to think differently Identifies what the company wants to be Sets objectives it seeks to achieve Details the supporting strategies and actions

14. Getting the process going Start with the end in sight: Obtain Management Team consensus on the key strategic issues Agree how you will develop the strategy, who should be involved etc., the specific responsibilities and the shape of the end product Bear in mind the audiences for the end product (staff, investors, banks, stakeholders etc.) Set a demanding timescale � otherwise the world may have changed during the process! A 70% (?) view of the future is about as good as you will get!

16. How long should the process take? Urgency � rate of change in the market Recognition of the need Status quo may be too comfortable Management Team and key managers� time available Availability of a process owner Sophistication of the Management Team

17. Sample timescale

18. Sample end product�.format depends on organisation Presentation style document in Storyboard form with the following draft index: Introduction Market context SWOT Vision and values Corporate Objectives Strategies, actions, KPI, and milestones Key financials Next steps Supporting appendices

19. Operationalising the strategy and measuring performance

20. CSFs in implementation Strong leadership from the Board and Management Team Timely reporting on progress of implementation to the Board Critical that progress in implementing the plan is: Monitored and evaluated to ensure that any delays, issues or concerns are identified and addressed early at all levels Implementation will be smoother if it is: Positioned as part of the day job Driven by the line managers Owned by and visibly driven by the Management Team Supported by continuous communication throughout the life of the plan Organisation must be seen to DO things � need to balance visible quick hits vs the longer term

21. Critical that all objectives are aligned and consistent with the Vision Observations Do not plan in silos Many functional objectives will have dependencies elsewhere which need to be planned for e.g. Systems support for a CRM initiative Make sure every member of the Management Team is involved in the process

22. From functional objectives to implementation Identifying new business ideas / opportunities What criteria do you use to screen them, e.g. Material impact on bottom line Fit with existing business Investment requirements Speed to market How to take the agreed ideas forward Identifying measures of success

23. Measures should cover the short to the longer term Shorter term measures should be stitched into the annual business plan: Business Plan � one year horizon - examples Sales targets Cost reduction / efficiency targets met Key hires made Strategic Plan � two/three years horizon New channels to new markets opened Joint venture in place Acquisition made New products in the market

24. Evaluating the performance of the Board

25. Key elements need to be in place to be able to assess performance Strategy for the company Annual business plan Terms of reference for the Board Governance Framework Board workplan for the year to be assessed

26. What can be evaluated? Collective performance of the Board Individual performance of each Board member and the Chairperson

27. How can the Board be evaluated? Self assessment Questionnaire 360 degree feedback Interviews of the Board members Boardroom discussion led by the Chairperson or an independent facilitator Benchmarking �..or a combination of the above

28. Case Study

29. Background - Health services provider employing 4,500 plus staff across a range of disciplines Brief from the CE to us Management Team to set vision and direction very quickly Strategy must support national objectives Wants to use the process to build strategy development skills in his top 150 managers Process to be led by their own project manager and staff Focus to be on providing a management tool which can be used on a day to day basis Significant knowledge transfer component required

30. Our role Lead the facilitation process with the Management Team to establish the vision and set direction Play a back office role in supporting the project manager to develop the detail and manage the procees Train and support the project manager in structuring and leading the process and managing the 14 project teams (9 operational and 5 functions) Faciliate training sessions Quality assure interim and end products from each team Ensure all interdependencies are identified and integrated into the plans

31. Structure

32. Issues Learning curve was steep for many as they had never done this before Took some time to get common agreement and understanding on what key terms meant, e.g. objectives, goals, etc Keeping project teams at the appropriate level of detail was a challenge, comfortable with operational detail, but not at policy or strategy level Time of significant uncertainty in the health services which complicated matters

33. Benefits 150 managers bought into the process and the plan The strategic plan became a �Workbook� for year one and had immediate currrency Subsequently showcased as a model for a way of developing strategy Despite change in the healthcare sector it is being implemented

34. Questions

35. Justine McCarthy Justine is a Senior Manager with Prospectus. Before returning to Ireland to join Prospectus, she worked as a management consultant and project manager for System 21 Management Consultants in the UK. Prior to this Justine worked with the Jefferson Smurfit Group in four of their corrugated packaging and printing plants across Scotland, England and Wales. Justine has worked with companies developing and implementing strategies, reviewing organisation structures and governance arrangements, and working on strategic positioning pieces and business cases. Most recently, she has been working in the healthcare sector, last year working for Beaumont Hospital in writing their winning bid to become the Radiotherapy Treatment Centre in Dublin. Last year, Justine published a book on Corporate Governance with David Duffy called the Management of Management, a practical guide to corporate governance. It is a hand-book for anyone either on a Board or thinking about becoming a member of a Board giving practical advice on roles and responsibilities and providing checklists for Chairpersons and Chief Executives. Visit www.prospectus.ie