Internal monitoring of the strategyHow robust is the strategy of your organization?
How do we determine whether the strategy of our organization still works and if we grab every possible opportunity? Where do we look at? How the strategy is formed? At the results? Or do we look at the diversity and strategic skills of the board? What circumstances determine our choices? When do we take a more active role towards the board? Supervisors ask themselves these questions. They deal with strategic control: monitoring strategy internally.
Internal supervision under the current Code
Almost every internal auditor thinks monitoring strategy is one of his main tasks. External supervisors put more emphasis on it. Governance codes require supervisory boards to decide about the sustainability of the strategy and the ability to provide long-term value creation. Yet it is often difficult to give substance to internal monitoring strategy.
Members of the supervisory board consider it a delicate issue. They would not always ‘bet their money’ on the long-term sustainability of the organization’s strategy. Business models quickly become obsolete. It is difficult to decide whether the organization can quickly and effectively anticipate change.
According to the Dutch Corporate Governance Code, Commissioners should monitor the strategy and the associated risks. The internal regulators themselves even see that as their main job. But monitoring strategy is not easy and the Code does not provide guidelines. It is the professional challenge and responsibility of each supervisor to give practical application to this.
The Strategic Control Lemniscate helps regulators give substance to internal monitoring strategy. Two intermeshed control cycles provide insight into the quality of the strategy. They also help to improve the learning and adaptive capacity of organization and board. The external cycle is aimed at identifying relevant external trends and developments. This also leads to a robust and future-oriented business model. The internal cycle concerns the implementation and execution of the strategy.
Internal control over content
Strategic Control enables a substantive conversation within and between strategic management and supervisory board. We support this strategic conversation about the organization’s own business model and the external environment with a business model and a scenario analysis.
The business model analysis maps out how the organization creates value. Implicit assumptions in the boardroom about value creation are thus made explicit. The analysis leads to a well-described business model and an open conversation about underlying assumptions.
A scenario analysis summarizes the unpredictable external environment in a limited number of scenarios. These scenarios are ‘real-life’ descriptions of possible futures based on current trends and uncertainties. A set of scenarios provides a powerful foundation for the strategic conversation about the future sustainability of (the business model of) the organization. This conversation makes implicit assumptions about the future explicit.
Internal monitoring of the strategic process
Internal and external supervisors have more and more need for insight into the qualityof the strategy process. The stakeholders are diverse and the stakes are high. Strategic Control provides an important reference for key questions like:
- Are all relevant parties involved enough?
- Are all assumptions clear and valid?
- Is sufficient use being made of external knowledge and insights?
- Is the decision making being done adequately?
- Are learning points being picked up sufficiently?
Strategic Control Scan: are you strategically in control?
The Strategic Control Scan gives supervisors more guidance on the subject of monitoring
strategy. The scan consists of 30 questions that the members of the supervisory board fill in. The scan provides insight for example into the following:
- The necessary degree of attention for strategic control
- The way (monitoring) strategy can be improved
- The optimal supervisory style for the supervisory board
The scan results help you determine how the supervisory board should be involved in the strategy. The scan also clearly shows where improvements can be made.