How Does a Board Direct?

TABS assumes that the process used by the Board is critical to a successful transition plan. The following is a summary of the different ways a Board directs according to TABS.

Approving and accepting plans. The Board first asks the owners for their plan, setting out the values, needs, and goals of the owners as a group. The Board reviews the owners’ plan with the owners. In evaluating the owners’ plan, the Board asks the following questions:

  • Does the owners’ plan reflect their values, needs, and goals as a group?
  • Is the plan complete?
  • Is the plan internally consistent?
  • Is the plan doable? In other words, is the plan clear and sufficiently detailed, and does the plan include the risk-reward ramifications for the company and the owners?

Once the Board answers the questions pertaining to the owners’ plan in the affirmative, the Board accepts the owners’ plan and then gives the owners’ plan to management, which prepares its strategic update and annual plan for the company. When management completes its plans, they are then presented to the Board. The Board evaluates each of management’s plans by asking the following questions:

  • Is management’s plan consistent with the owners’ plan?
  • Is the plan complete?
  • Is the plan internally consistent?
  • Is the plan doable? In other words, is the plan clear and sufficiently detailed, and does the plan include the risk-reward ramifications for the company and the owners?
  • Does the plan include an implementation plan?

Once the Board determines that management’s plan meets these criteria, the Board approves it. At the end of this process, the owners’ plan and management’s plans should be integrated. The managers should know what the owners want and what they as managers need to do. For their part, the owners should understand what they can expect from management. Finally, the Board should know what the owners want and how to evaluate management.

Owning the Board process. According to TABS, the Board does not create or develop either the owners’ plan or management’s plans. The owners create and maintain their plan, and the managers develop and maintain the strategic and annual plans for the company.

What this means in practice is that the Board does not tell the owners what they should have in their plan. The Board expects the owners to come up with a plan that addresses ownership issues, although the Board is available to help the owners think through their plan. Similarly, the Board does not tell management what the strategic plan or annual plan should be. The Board expects the managers to come up with these plans, and the directors use their experience and insight to make sure that management’s plans are well thought out, clear, detailed, and integrated with the owners’ plan, and that they include an implementation plan. Managers own their plans, and the Board makes sure that the managers understand their plans and the consequences before the Board approves them.

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