This week, we’ll continue our discussion of strategic oversight by exploring the Purpose, which is the actual formulation, evaluation, and approval of your strategy. Today, we will discuss the first part of purpose—your values—and how they impact your strategic direction.
There is a lot of important information here and I’m condensing it drastically to fit in this newsletter. If you want more information on any of these topics, just let me know, and we can have a conversation about how this can help you grow your business.
Figure 129.1 Strategic Oversight Framework
Your business purpose is about your strategy. In other words, it’s about how you provide value to customers in a way that creates a long term, sustainable, differentiated, competitive advantage for your business. That’s an important definition and a good checklist for assessing the power of your strategy.
For this framework, I’m defining values as including three parts: your core values, the vision and mission of your company, and your risk appetite.
Core values – what are your core values?
Core values need to go beyond the basic values of honesty and integrity that everyone espouses. In a privately-held company, the values have likely been in existence for decades based on the founder’s actions of taking care of customers and employees.
What values make you unique and, well, valuable?
These values make you different and more attractive than your competitors.
For example: Do you guarantee the quality of your work? Are you highly responsive to your best customers? Do you travel for free to meet your clients so you’re as competitive as a local firm but provide a more international perspective? Do you advise your best customers on their future planning needs so you can guarantee them capacity and service in the future?
Your values will also help you to attract and retain talent. Do you support their continual career development? Do you have a family atmosphere and place the importance of family at the top of your list? Do you support your local communities where you employees and customers live?
Vision and Mission – where are we headed?
These aren’t just empty platitudes framed on the wall. They help all your employees to focus and align on serving your customers and building wealth for shareholders.
Here are some steps and questions:
- Describe what your company will look like in five or ten years when you’ve achieved your goals.
- What products and services will you offer?
- What industries will you operate in?
- What geographies will you serve?
- What will be your position in the market?
- What value will you provide?
- What will you be known for?
Risk Appetite – how much risk is too much?
This is the amount and type of risk that you are willing to undertake. As a board, formalizing the risk appetite is very important work.
Some questions to consider:
- Are you the industry leader or a follower?
- Do you spend the minimum on safety or are you an industry leader in safety performance?
- Are you willing to bet the company on a new initiative or do you require all new investments to meet internal hurdle rates?
- Are you slow and steady like a utility company or swinging for the fences like a high growth, high tech company?
- Are you willing to allow foreign business practices to override your core values?
Your values are a very important part of your business philosophy and your strategy.
By clarifying your core values, defining your vision and mission so your employees and your customers know where you’re heading, and describing your risk appetite so management knows what is and is not acceptable, you can provide a powerful strategic oversight framework for your business.
If you’d like help on enhancing the strategic oversight function of your board and executive team, give me a call or send me an email at [email protected].
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