Introduction and Overview to Managing
Strategy Formulation and Implementation Risk
Michael Boland
Professor of Agricultural Economics
Arthur Capper Cooperative Center
Kansas State University
Farmer Cooperatives Program
St Paul, MN
November 18, 2008
Schedule
8:45 – 10:30 Managing strategy formulation and implementation risk
– Introduction and overview: Mike Boland, Professor, Kansas State
University
– Larry Swalheim , Landmark Cooperative, Cottage Grove, WI
– John Blaska, Chairman of the Board, Landmark Cooperative
– Tim Lindgren, Immediate Past President and CEO, Sunkist, Sherman
Oaks, CA
– Nicholas Bozick, Chairman of the Board, Sunkist, Sherman Oaks, CA
10:30 – 11:15 Break
11:15 – 12:00 Managing human resource risk: Attracting and
retaining leadership for the future (Boland moderator)
– Bob Brockelman, Farm Credit Services
Where does this information come from?
• Data from National Association of Corporate
Directors, 2007-08 Governance Survey
• Course materials from Arthur Capper
Cooperative Center director development
module on Strategic Thinking
• Our experiences with cooperatives
Farmers Cooperative Grain
What co-ops have we studied?
Tree Top
Midway Co-op
Productores Unidos
Cooperativa
Agraria Ltda.
(Uruguay)
Mountain View Coop
Colun Cooperativa (Chile)
Cooxupé (Brazil)
Overview
• Directors state that Strategic Planning and
Oversight are the most important topics for
2008
• 50% state that they are effective or highly
effective in this topic; 50% say they are
somewhat effective or below acceptable levels
on this topic.
What are the most important topics
for directors in 2008?
Strategic Planning and Oversight
22.8%
Corporate Performance and Valuation
16.1%
Board Leadership
8.5%
CEO Succession
7.6%
Board Effectiveness
7.1%
Board Culture
4.0%
CEO Evaluation
4.0%
Financial Oversight/ Internal Controls
4.0%
Director Recruitment
Information Management
3.6%
3.1%
How Important are these topics to directors?
Board Leadership
Board/CEO Relations
Board Culture
Board Effectiveness
CEO Succession
Strategic Planning and Oversight
Financial Oversight/ Internal Conrols
CEO Evaluation
Disclosure
Corporate Performance and Valuation
Federal and State Regulatory Compliance
Director Recruitment
Executive Talent Management and Leadership Development
Director Nomination/ Succesion
CEO Compensation
Risk and Crisis Oversight
Board Meeting Processes
Relations with Shareholders/Owners
Information Management
Committee Structure
Mergers/Acquisitons
Board and Director Evaluation
Restructuring
Director Education and Develpoment
Corporate Social Responsibility
Director Compensation
Critical
Important
Somewhat Important
Not Important
How effective are directors?
Disclosure
Board Culture
Financial Oversight/internal Controls
Federal and State Regulatory Compliance
Board/ CEO Relations
Board Leadership
Mergers/Acquisitons
CEO Evaluation
Board Effectiveness
Board Meeting Processes
CEO Comprensation
Director Recruitment
Corporate Performance and Valuation
Strategic Planning and Oversight
Committee Structure
Director Nomination/Succession
CEO Succession
Risk and Crisis Oversight
Board and Director Evaluation
Relations with Shareholders/Owners
Restructuring
Director Compensation
Information Management
Executive Talent Management and Leadership Development
Corporate Social Responsibility
Direction Education and Development
Highly Effective
Effective
Somewhat Effective
Below Acceptable Level
Effectiveness vs Importance
1Board Leadership
2Board/ CEO Relations
3Board Culture
4Board Effectiveness
5CEO Succession
6Strategic Planning and Oversight
Financial Oversight/Internal
7Controls
8CEO Evaluation
9Disclosure
10Corporate Performance and Valuation
18Relations with Shareholders/Owners
11Federal and State Regulatory Compliance
19Information Management
12Director Recruitment
20Mergers/ Acquisitions
13Executive Talent Management and Leadership Development
21Committee Structure
14Director Nomination/ Succession
22Board and Director Evaluation
15CEO Compensation
23Restrucutirng
16Risk and Crisis Oversight
24Director Education and Development
17Board Meeting Processes
25Corporate Social Responsibility
26Director Compensation
More Effective
9
7
3
11
2
21
1
4
17
8
15
C
12
10
20
26
6
Strategic Planning and Oversight
18
14
19
23
16
22
Less Efective
25
13
5
24
Less Important
More Important
Strategic Thinking Process: Strategic Questions
• Where Are We?
– Internal: Strengths and Weaknesses
– External: Opportunities and Threats
– Summary: Competencies, Success Factors and Strategic Issues
• Where Do We Want to Go?
– Vision
– Mission
– Strategies
• How Do We Get There?
– Action Plans
• Strategies
• Programs
– Performance Control
• Objectives and Policies
• Budgets
• What Decisions Need to Be Made Now?
Roles: Organizational Structure
and Management Team
Members/Producers
Board of Directors
Strategic
• Director Members
Management
• Officers
• Chief Board Officer
Operational
Chief Executive Officer
Management
Employees
Board
Committees
The Board’s Role in Strategy Development
All Respondents
Management develops the strategy with input from the
board
42%
Management develops the strategy and the board ratifies it.
32%
Management and broad work together to develop the
strategy.
The board develops the strategy with input from
management.
24%
2%
Family
Owned
Investor
Owned
42%
49%
31%
28%
20%
21%
5%
2%
Strategic Thinking Roles
Board:
1. Formulates strategy in concert with CEO so stay
aligned on customers, especially members.
2. Not just an “advisor” to the CEO, who is the
“chief strategist”.
3. Critically appraises and approves or disapproves
strategies and strategic action plans.
4. Evaluates CEO and senior management strategy
formulation and implementation.
Strategic Thinking Roles
CEO:
1. Formulates strategy in concert with the
board so keep people and operations aligned
on customers.
2. Proposes strategic action plans to the board.
3. Implements approved strategies and action
plans.
Strategic Thinking Roles
Facilitator of Retreats:
1. Provides a structured process and information
to achieve retreat objectives
2. Educates participants about elements of the
process
3. Manages the retreat discussion to achieve
retreat purposes including maintaining an
open, honest, balanced, objective, vigorous
and stimulating environment.
Why Strategic Thinking, not Strategic Planning?
• Strategy formation is a critical factor in future
success (Harvard Study and other studies).
• Strategy formation is most effective if based on
seeing the big picture, on synthesis.
• Strategic planning relies primarily on analysis of the
parts, on decomposing the business and its
environment into parts.
• Strategic thinking relies primarily on a process of
synthesis.
What is Planning?
(Strategic or Operational)
1. Planning is outlining a course of action
to achieve an objective.
2. Planning is a formalized procedure to
produce an articulated (specified)
result, in the form of an integrated
system of decisions.
What is Strategy?
Four Alternative Views:
Is a:
Which is a:
Such as:
Perspective
Vision or concept of
the business
To bring happiness
through creativity
Pattern
Consistent behavior over
time (realized)
High volume, low
margin
Position
Selection of customers,
products, partners and
markets in view of
competitors and SWOT
High oil corn marketing
program; strategic
alliance in feed for hog
and dairy producers
Plan
Course of action to achieve
an objective (intended)
Cutting costs by 5% to
increase ROE to 15%
Final Message
• We have found that the word “strategy” and a directors role in strategic
thinking confuses some directors.
• Many cooperatives are, in fact, practicing strategic thinking and their CEO
understands strategy.
• But there are examples of cooperatives that have not practiced strategic
thinking.
• Directors have a responsibility to be engaged in strategic thinking in
concert with the CEO and stay aligned on customers. But directors must
understand your co-op’s
–
–
–
–
Perspective
Pattern of behavior
Position
Plan
• And these relationship to your customers, members and employees.