Board strategy and performance management at Swiss medium sized companies. A proposal for a stakeholder driven approach

Master's Thesis, 2016

90 Pages, Grade: Merit



1 Introduction
1.1 Rationale for the research
1.2 Board strategy and performance management in the context of corporate governance
1.3 Significance of topic
1.4 Aim of study
1.5 Research objectives
1.6 Research questions
1.7 Central question and review questions
1.8 Outline of the dissertation
1.9 Summary

2 Literature review
2.1 Introduction
2.2 Research into frameworks for board strategy and performance management
2.3 To what extend is the framework under investigation useful to develop a board strategy and why?
2.3.1 Relationships (cause-effect)
2.3.2 Various stakeholder interests
2.3.3 Voluntary action
2.4 How is board performance monitored and why is the described approach effective?
2.4.1 Multiple dimensions or perspectives
2.4.2 Leading and lagging, financial and non-financial
2.4.3 Self-assessment versus external assessment
2.4.4 Pre-determined versus individual measures or objectives
2.4.5 Stakeholder-driven performance management
2.5 The strengths and limitations of the evidence
2.5.1 Board performance management
2.5.2 Board strategy
2.6 Conclusion

3 Research methodology
3.1 Introduction
3.2 Research questions
3.3 Research onion
3.4 Research philosophies
3.4.1 Ontology
3.4.2 Epistemology
3.4.3 Axiology
3.4.4 Conclusion
3.5 Research paradigm
3.6 Research approach
3.7 Research design
3.8 Research strategy of grounded theory
3.9 Research methods
3.10 Data collection through semi-structured interviews
3.11 Data analysis according to grounded theory
3.11.1 Sensitising concepts and the initial conceptual framework
3.11.2 Theoretical sensitivity
3.11.3 Theoretical sampling and saturation
3.11.4 Research rigour, reliability and validity
3.11.5 Theoretical coding
3.11.6 Memo writing
3.11.7 Constant comparative method
3.11.8 Theoretical sorting, diagramming, and integrating
3.11.9 Theory generation
3.12 Ethical considerations
3.13 Limitations of research design
3.14 Summary

4 Findings and analysis
4.1 Introduction
4.2 Findings of initial and focused coding
4.2.1 No board strategy?
4.2.2 Strategic objectives of board do exist
4.2.3 Board strategy exists implicitly
4.2.4 Procedures and practices
4.2.5 Performance management
4.2.6 Stakeholder management
4.2.7 Board leadership
4.2.8 Summary
4.3 Theoretical saturation
4.4 Grouping and sorting
4.5 Integration
4.5.1 Coding schema
4.5.2 Integration and building of the grounded theory
4.5.3 Conceptual integration and explanation of the grounded theory
4.5.4 Why ‘Chairman’s willingness to develop' is a suitable attribute
4.6 Verification of the grounded theory
4.7 Answers to questions
4.7.1 How the results fit the findings of the literature review
4.7.2 Categories providing evidence for appropriateness of strategy-map and BSC
4.7.3 New grounded theory gives a reason for some literature review findings
4.7.4 Answers to the research questions in general
4.8 Impact of findings to the initial conceptual framework
4.9 Summary

5 Conclusion and recommendation
5.1 Conclusion
5.2 Overall success of research
5.3 Recommendations and impact of study
5.4 Degree of certainty and generalisation

6 Personal reflection and development
6.1 Introduction
6.2 What went well
6.3 What went badly
6.4 What would I do differently if I were to do it again
6.5 Frameworks learned for future use and professional development
6.5.1 Research Onion
6.5.2 Grounded theory
6.5.3 Coding paradigm and ‘dimensionalising’ model
6.5.4 Critical reading and writing
6.6 Conclusion

7 Appendix I
7.1 Initial interview questions
7.2 Final interview questions

8 Appendix II
8.1 Excerpt of initial codes

9 Appendix III
9.1 Sample participant invitation
9.2 Sample consent letter

10 Reference list

11 Bibliography
11.1 Additional literature of other background reading:
11.2 Literature equal to reference list:


This Dissertation is a product of my own work and includes nothing, which is the outcome of work done in collaboration with others. The author of this study has checked his Turnitin originality report. This work has never been submitted for marking before, neither by the author nor by somebody else.

I consent to the University’s free use of the whole or any part of this Dissertation, to include online or electronic reproduction and adaptation for teaching and education activities. I agree that this Dissertation may be available for reference and photocopying at the discretion of the University of Derby.


I would like to thank my wife Anabel Castro and my daughter Isabell Lückoff for allowing me to invest parts of our family time into my studies, but also for reviewing my work and challenging my thoughts. Further, I would like to thank Ute Feldmann for her proof reading and challenging my work. Finally, I would especially like to thank the interviewee participant’s for providing such detailed information.


The central question addressed is: How do boards plan and align their activities to fulfil stakeholder requirements? To answer this question the research investigated extant literature and conducted an interview based study to assess how boards of directors plan their board strategy and conduct performance management incorporating stakeholder requirements.

Answering this question entailed scrutinising Cornforth's (2001) work of ‘What makes boards effective?’, the work of Epstein et al. (2002) about ‘Measuring and Improving the Performance of Corporate Boards’, the work of Kaplan & Nagel (2003), named ‘Improving Corporate Governance with the Balanced Scorecard’, and the work of Northcott & Smith (2011), who studied the topic ‘Managing performance at the top: a balanced scorecard for boards of directors’.

The study was motivated by the need for improvement in boards, that is, by the need to improve both the way they plan a board strategy and the way they conduct an effective performance management that is closely linked to the satisfaction of stakeholder requirements. The purpose of this study was to assess how this is done today, to understand why it is done this way, and to propose how it can be done better in future.

This is a qualitative study based on the grounded theory methodology. Interviews were conducted with participants who chair a total of 36 boards and hold 65 seats as ordinary board members at Swiss medium sized companies in several sectors. The interviews were analysed to understand which methodology would be appropriate to plan a board strategy and to conduct board performance management. The analysis also revealed the phenomenon why chairmen usually do not plan a board strategy - even though they admitted that such a strategy might be useful. Further, a grounded theory was able to be developed.

The main claims based on the findings of this study are: a) The strategy-map and BSC are indeed appropriate to plan a board strategy and to conduct board performance management, and b) In this study a grounded theory was developed that explains why chairmen, being on top of the company, usually do not apply well-known methods to formally plan a board strategy. The cause of this behaviour seems to be founded in the chairman’s willingness to develop themselves or not.

From these results it can be inferred that the proposed methodology for planning a board strategy and conducting board performance management would also be appropriate for boards outside of Switzerland. However, it remains unclear if the grounded theory explaining why boards do not plan a board strategy would hold for boards of large and public listed Limited Corporations in the home country as well as abroad.

Keywords: board of directors, board strategy, board performance management, strategy-map, balanced scorecard, board scorecard, corporate governance, grounded theory


Figure 1: Input-Output conceptual framework, Dulewicz et al. (1995) & Cornforth (2001)

Figure 2: Conceptual framework extended through Epstein et al. (2002)

Figure 3: Research Onion, (Saunders et al., 2015)

Figure 4: Grounded theory process in dependence on Charmaz (2014), constructed by the author

Figure 5: Initial conceptual framework constructed by the author

Figure 6: Complementary information of initial conceptual framework

Figure 7: Initial sample

Figure 8: Final theoretical sample

Figure 9: Coding paradigm for social events (Strauss, 1990)

Figure 10: Process of Dimensionalising (Böhm, 1994, p. 129)

Figure 11: Multiple Concepts

Figure 12: Groups of Initial Coding

Figure 13: Integration into coding schema

Figure 14: Integration into coding paradigm and dimensionalising model

Figure 15: Grouping of multiple concepts

Figure 16: Excerpt of Initial Codes


illustration not visible in this excerpt


Codes, Categories and Concepts

In this thesis a code is a designator of some data that reflects an action or process, expressed in the gerund verb form. The term category or concept can be used interchangeably with the term code if not otherwise stated.

Corporate Governance

This document uses the definition from the Swiss code (Böckli et al., 2014):

‘Corporate governance encompasses all of the principles aimed at safeguarding sustainable company interests. While maintaining decision-making capability and efficiency at the highest level of a company, these principles are intended to guarantee transparency and a healthy balance of management and control’.


Since many interpretations of the term strategy are available, it is important to note that this paper relies on the definition given by Porter (1996), which is summarised in (Rothaermel, 2012) as follows:

“Strategy describes the goal-directed actions a firm intends to take in its quest to gain and sustain a competitive advantage”

Similarities between a board and a corporate strategy

A board may wants to gain as well as sustain a competitive advantage, however, it does not want to do so in a certain customer segment, but rather in a stakeholder environment, especially in the shareholder environment. To illustrate this point: when a company executes the wrong strategy a customer can choose a different company and buy their products or services instead. In the context of the board of directors, shareholders can appoint a different chairman if they are not satisfied with his or her performance within the board. Kaplan & Nagel (2003) define the overall performance of the board as: How the board contributes to the success of the company.

In the same way companies develop corporate strategies to achieve a certain performance, BoDs develop board strategies to fulfil stakeholder requirements, which will include the company's success as the measure of success for nearly every stakeholder. In other words, a Board Strategy is a collection of goal-directed actions the board wants to achieve to fulfil stakeholder requirements.

1 Introduction

1.1 Rationale for the research

The time is over, that board member can just mark time in boards but not contributing to company success - definitively. At least since several well-known companies in Switzerland (Ehrbar, 2011; Martin, 2012; Straumann, 2013; Seiler, 2016) and abroad (FAZ, 2015) among others went bankrupt or experienced significant problems due to fatal corporate governance mistakes of their boards. Since then many things have changed, like for example stricter corporate governance rules for Board of Directors (BoD) issued by the Swiss government (The federal Council, 2016), the Swiss stock exchange (Regulation, 2016) and the Swiss Business Federation (Böckli et al., 2014). This development strengthens the rights of shareholders as an important group of the companies’ stakeholders. However, since Corporate Social Responsibility (CSR) also became an increasingly important topic for organisations (Economie Suisse, 2015), the BoDs had to ensure the satisfaction of more stakeholder groups than ever before.

In addition to this the economical climate for Switzerland has become much tougher since the Swiss National Bank stopped defending the currency exchange rate as of the 15th of January 2015. From that date on Swiss products and services have become approximately 15 - 20 per cent more expensive in comparison to the same goods from other countries.

Thus, the competitive pressure for approximately 600’000 companies in Switzerland, of which 210’000 are Limited Companies, has been increased drastically.

The challenge for BoDs in this context is that they are able to assure the welfare of their company in the long run and within the boundaries of the different, sometimes competing, requirements of the different stakeholder groups.

To be able to encounter these challenges, a board has to have the right structure and processes in place, which most of them do not have. This claim, among others, is supported by literature based on empirical research like:

The top 10 mistakes most boards of Swiss SMEs make. (Hilb & Müller, 2008)

What makes boards effective?(Cornforth, 2001)

New corporate governance: Successful board management tools.(Hilb, 2012)

Strategische Führung auf VR- und GL-Ebene in KMU.(Lombriser, 2015)

Swiss Code of Best Practice for Corporate Governance.(Böckli et al., 2014)

Not only policies and codes of best practices with a prescriptive character explain which factors are important for a board in order to be effective. There is also a sufficient amount of normative literature available (e.g. Felder et al., 2014; Müller et al., 2014) that helps the astute board members to look up the components that are necessary for a board to perform well.

To summarise, it looks like it is obvious what a board has to do to become effective. However, as usual, it is much easier to prescribe what has to be done than to actually do it.

1.2 Board strategy and performance management in the context of corporate governance

As introduced in the chapter above, there is basically no research done in the field as to how boards do plan and decide what is important to become a high performance board satisfying different stakeholder requirements. As demonstrated above, most boards are still struggling with being one of the top performing boards. The ever changing environment with all the challenges of new stakeholder requirements, new policies, changing micro- and macro environment, and globalisation forces a board to adopt a change capability of a continuous self-development and continuously learning something new.

Kaplan & Nagel (2003) summarised this issue in a question, through which the board should get a clear idea of its own mission and which it should always asks themselves: How do we contribute to company success?

All to often the notion of corporate governance is supposed to be the Holy Grail, not only for ethical but also for effective boards.

However, in relation to ‘how’ to become effective, the swiss code of best practice for corporate governance only recommends that: a) “The Board of Directors should determine the procedures appropriate to perform its function” and that “The Board of Directors should self-evaluate its own performance and that of its committees annually”. That is all.

1.3 Significance of topic

This research topic is significant because it is more important than ever before that boards develop their own strategy. However, until now almost no research has been conducted concerning how BoDs do plan their own board strategy. The situation is different in the area of board performance management. This study will cover both the practices BoDs apply to plan a board strategy and the practices they apply for board performance management.

1.4 Aim of study

The aim of the study is to assess the usage of a board strategy and performance frameworks and to develop a method incorporating internal and external stakeholder requirements.

1.5 Research objectives

Since a master dissertation is quite a large piece of work it is useful to divide it into smaller objectives. These research objectives help to plan the dissertation project, because work is broken down into chunks that are easier to manage. Further, the objectives help to recognise the flow of the project and to realise if one forgot something. The major research objectives of this research study are listed below:

- To identify and secure physical access to board members and CEOs of medium sized Limited Companies in Switzerland that are not listed on a public exchange
- To conduct semi-structured interviews with these board members and CEOs
- To explore and understand the views and beliefs of the interviewees about stakeholder requirements
- To explore and understand the views and beliefs of the interviewees about board strategy and board performance management
- To explain the rationale of board members for developing or not developing a board strategy
- To explain the rationale of board members for executing or not executing board performance management
- To propose a holistic framework for the development of a board strategy and the management of board performance

1.6 Research questions

The research will be conducted in order to answer the following questions:

1) What practices do Boards of Directors (BoD) apply to ascertain the fulfilment of stakeholder requirements?
2) How do BoDs distinguish between Corporate and a Board strategy?
3) How do BoDs develop their own board strategy?
4) How do BoDs exercise board performance management?
5) To what extend and why is a stakeholder driven approach useful for board strategy and board performance management?

1.7 Central question and review questions

As recommended by Wallace & Wray (2016, p. 35) a broad central question has been defined to support the analysis of the texts used for the literature review. This question was formulated in more general terms and with the aid of the research aim as well as of the already existing research questions. The primary aim of the central question is to guide the development of the review questions that will be used to approach the literature for the purpose of directly contributing to answer this central question.

The central question is:

“How do boards plan and align their activities to fulfil stakeholder requirements?”

1.8 Outline of the dissertation

The dissertation will be structured as follows:

- Chapter 2- Literature review

This chapter will discuss research-based literature in the area of planning a board strategy and board performance management. The literature review investigates which gaps can be located at which parts of the present research and how well the claims are warranted by evidence. In addition the major concepts introduced are discussed.

- Chapter 3- Research methodology

This chapter starts with a discussion about different research philosophical research approaches and which position the author of this study occupies. Next, grounded theory is introduced as the research methodology that is used for this study. Further, this chapter also explains the setup and design of this research study.

- Chapter 4 - Findings and analysis

This chapter presents and discusses the findings of this study in reasonable detail and demonstrates how the findings have been transformed into a grounded theory. Further the findings will be reflected back to the literature review and research questions.

- Chapter 5 - Conclusion and recommendation

This chapter provides a summative claim about what has been found out and provides information about how far the research could answer the research question. Further the overall success of the work will be judged.

In addition this chapter provides information about the degree of certainty with which the findings can be generalised. Finally this chapter also provides recommendations and suggestions for future research, policies and practices.

- Chapter 6 - Personal reflection

This chapter highlights which aspects of the study went well and which did not and it discloses what the author learnt by conducting this research.

1.9 Summary

The idea of this research project originated in the professional experience of the author that he made during his consultancy work with boards, but also by being an active board member in various boards. The combination of this experience and his extant knowledge in the area of strategic management caused the desire to achieve a much better understanding of this. Against this background a study in this field seemed rather obvious and consequently led to the present concrete project of doing this research in the scope of a master’s thesis.

2 Literature review

2.1 Introduction

Conducting a literature review in a study that is based on Grounded Theory methodology has different aims. First, it delivers important information when done before starting the inductive research process. This approach is also known as ‘sensitizing concepts’ and it helps in becoming sensitive to certain concepts in order to develop a conceptual framework early in the research process (Bowen, 2006). Second, after the analysis has been developed the claims of the literature review can be compared with the results of the analysis. Further, the analysis can direct the way in which to criticise the investigated studies and theories (Charmaz, 2014, p. 305).

The substantive goal of this review is to highlight why the proposed frameworks are appropriate in order to develop a board strategy as well as to measure board performances and to investigate how the recommended practices can be improved.

Stricter rules of corporate governance, ever increasing stakeholder requirements, and a rougher economical climate increase the pressure on BoDs. They have to deliver a very high performance in order to maximise their contribution to a company's success. Although most BoDs do recognise that they have to adapt to these circumstances, they normally don’t approach the necessary task of continuous development with a strategic planning framework. In contrast, they expect the operational executive management of the company to plan and implement a corporate strategy as well as monitor the implementation progress and appreciate the usage of a formal strategic management process and framework for this task. However, that BoDs can apply a strategic planning framework themselves is not yet a widespread practice, neither in Switzerland nor abroad.

In order to get a better understanding of the proposed approaches that can be found in the literature, the review at hand explores the relevant published literature concerning two review questions:

1. To what extend is the framework under investigation useful to develop a board strategy and why?
2. How is board performance monitored and why is the described approach effective?

Although boards in Switzerland work slightly different when compared to most other countries - basically, Swiss boards have more duties - international literature was included in the review as well.

The reason for this is the very limited availability of appropriate literature about board strategies in general. However, given that the process of strategic planning for the board strategy is relevant and not the content or scope of that strategy, the findings should be transferable across countries. Nevertheless, even although the coverage has been extended to basically all countries available in the databases of the University of Derby, UK and Zurich, CH, and google scholar the results are scarce.

For clarity, first, the main texts under scrutiny are introduced and the basic claims about the planning of boards strategies and board performance management that are presented in them are being compared with each other. Next, the applied theoretical framework is investigated and the strengths and weaknesses of the main claims are discussed. A brief discussion about how to incorporate stakeholder perspectives into the Strategy-Map complements the review. Finally, a conclusion sums up the extent to which the reviewed texts provide insights in order to be able to answer the two review questions.

2.2 Research into frameworks for board strategy and performance management

Although having effective boards is more important than ever and also of national concern, not much research has been done on how boards plan their own strategies. The situation is slightly better concerning the area of board performance management. In contrast, much has been written about board governance, but most accounts focus either on governing the corporate as a whole or on what effective boards do, but not on how boards are planning their own activities.

The first comprehensive study about ‘board effectiveness’ worth mentioning was done by Cornforth (2001) who introduced an important conceptual framework. His aim was to understand what makes boards effective. For this purpose he analysed survey responses given by more then 700 non-profit organisations. Cornforth's work relies on insights and concepts from Bradshaw et al. (1992), Dulewicz et al. (1995), and Green & Griesinger (1996), which will be touched briefly. Although old, these studies provide an important input on a conceptual level.

In 2002, Epstein, Jones and Roy (2002) released a major work about ‘Measuring and improving the performance of corporate boards.’ They are the first who do recommend using the Strategy-Map as a separate strategic management system for the board. However, their work, which has been published as a Management Accounting Guideline in Canada, is based on theorising only and lacks empirical backing for their claims. In 2004 they basically published the same content again, but this time it was disguised as a research paper.

In the meantime Kaplan and Nagel (2003) published a working paper about ‘Improving Corporate Governance with the Balanced Scorecard’. They believe that due to the fact that independent board members have limited time and knowledge they need a three-part Balanced Scorecard program to use their time more effectively. One of the scorecards is the board Strategy-Map, which basically possesses the same features as the one from Epstein et al. (2002) does. The working paper of Kaplan and Nagel as well as the work of Epstein was based on conceptual thinking and logical conclusions only. However, Kaplan and Nagel delivered a more detailed use case in which they described the implementation of a board Strategy-Map at a financial corporation in the United States.

Another work is from Pointer et al. (2005) in which they explain why the Balanced Scorecard suits boards as a framework for governing the interests of stakeholders. Pointer's paper covers the health care sector. Their proposal is based on personal practical experience in working with health care boards over many years.

Four years later Ling et al. (2009) released a study that examined the use of the Balanced Scorecard by large corporations in the United States. They sent out questionnaires to the chairs of the boards of the top 662 public companies. The results were astounding.

Again, two years later, the last available work about this topic has been published by Northcott & Smith (2011). They interviewed 35 board members and top executives in New Zealand about what measures are most appropriate for judging board effectiveness. Based on their findings they theorised why the Balanced Scorecard seems to be appropriate for BoDs in order to monitor their board performance. Their proposal is based on the work of Epstein & Roy, (2004), in which they criticised their BSC structure and offered a revised version.

One more paper was found, but there are strong indications that the work of (Sankaran & Iyer, 2011) is a blatant case of plagiarism, since they copied large amounts of the work written by Northcott and Smith and claimed just it as their own. Additionally, they did not provide any empirical evidence for their claims and the paper contains many flaws.

2.3 To what extend is the framework under investigation useful to develop a board strategy and why?

The study of Cornforth (2001) lays the foundation for such a framework, which has been gradually developed further by Epstein et al. (2002), Kaplan & Nagel (2003), Pointer et al. (2005), and Northcott & Smith (2011). Their claims will be highlighted and discussed in the next few sub-chapters.

In contrast, the study of Ling et al. (2009) tried to find out how many boards of large US companies apply the Board Balanced Scorecard (BSC), which objectives and measures they have specified and why or why not they are using the Board BSC. Surprisingly, they received only 20 replies (a three per cent response rate!), in which ten respondents stated that they could not participate in the study due to company policies. Another eight indicated that they do not use the Board BSC whereas two replied that they are using it. Before their enquiry they did not find any study that examined the extent to which the boards of large public companies use the Board BSC.

Even though perhaps not representative, here a short summary of their findings:

The eight respondents who negated the usage of a Board BSC cited three reasons for not doing so: 1) the implementation of a BSC would require training, 2) questionnaires are a better method for evaluating board performance, and 3) peer evaluation is a better method of evaluating board performance.

The two Boards that use a BSC do it for following reasons: 1) to evaluate the company and CEO performance, and 2) to serve as a communication tool for focusing on Board activities.

Both reasons are consistent with two of the three aspects Kaplan & Nagel (2003) mention concerning the benefits that result in the usage of a Board Strategy-Map, but the most important benefit of identifying ‘how the Board contributes to company success’ is lacking.

2.3.1 Relationships (cause-effect)

Cornforth's (2001) study focuses on factors or activities that foster board effectiveness. However, the identification of certain variables that influence the board performance is not of much interest for this study. Instead the paper focuses on the conceptual framework he used to structure his research.

The conceptual framework Cornforth developed and which is based on the work of Dulewicz et al. (1995), who studied corporate boards, is basically a simple input-output model. Cornforth’s conceptualisation of the board structures & processes-element in this framework has been heavily influenced by Bradshaw et al. (1992). This is due to the fact that he researched the relationships among board structure, process, and effectiveness.

illustration not visible in this excerpt

Figure 1: Input-Output conceptual framework, Dulewicz et al. (1995) & Cornforth (2001)

Cornforth discovered that all input- and process-variables are significantly correlated with board effectiveness (outcomes) as well as with each other. This finding supports the theorised idea of Epstein et al. (2002), Kaplan & Nagel (2003) and Northcott & Smith (2011) that a Strategy-Map with objectives viewed from different perspectives might be suitable for a board in order to plan a board strategy. The findings about the correlations of board effectiveness variables further underpin that the cause-effect relationships between objectives (Kaplan & Norton, 2000) in a Strategy-Map can be re-used for this matter.

Later, this conceptual framework has been extended by a fourth element called outcomes by Epstein et al. in 2002.

illustration not visible in this excerpt

Figure 2: Conceptual framework extended through Epstein et al. (2002)

2.3.2 Various stakeholder interests

Stakeholder requirements are the key influencers of board objectives, hence, of the board strategy. Starting with Cornforth, he used a claim from Green & Griesinger (1996) who reported important findings in their studies: namely, they found out that it is difficult to define common goals for boards and that they are usually accompanied by a decision process. In turn, boards focus on internal processes in order to achieve their ends. This finding is a central argument for 'claiming' that the Strategy-Map - containing individual objectives – is the appropriate framework for strategic planning within boards, at least theoretically. This argument further implies that not a static solution with only a fixed set of measures is reasonable for measuring board performance, as in contrast, basically all authors (except two) of the reviewed literature proposed. One of the two is Epstein et al. (2002) who claims that boards do not only have to deal with a standard set of duties that might be derived from policies by laws and regulators and normative or prescriptive claims from best practice literature. Epstein et al. (2002) argue that each board might have individual duties depending on the context and actual situation of the company. However, their approach does not reflect this argument, since they only offer a fixed set of objectives and measures in their model.

The second exception represents Pointer et al. (2005), since they emphasised that a board should first identify their key stakeholders and determine their needs, wants, and expectations. Next, a board should be able to balance competing priorities of stakeholder issues to allocate the board’s resources and attention over time. They further claim that this may be different for each board, which is the case especially for one reason: it is not only sufficient to satisfy basic stakeholder requirements, like being compliant to government policies, but also to focus on what makes a difference to the organisation or to its key stakeholders.

Kaplan & Nagel (2003) are not as clearly supporting the idea of having different measures and hence different objectives per board. Although they expressed this to be one of three benefits of a Board Strategy-Map (It “defines the strategic contributions of the Board”), their final proposal seems to be a static solution with pre-determined objectives for the board.

This stance has already been claimed by Green & Griesinger in 1996, who, in their study, found out that is basically not possible to define common goals for boards.

2.3.3 Voluntary action

The concept of ‘voluntary action’ as the main force for developing an individual board strategy is central in the work of Pointer et al. (2005) even though it is named differently. But also Kaplan & Nagel (2003) emphasise the point that a strategy does more than to fulfil duties that are required by law. This insight is backed up by the major work of Porter (1996) who makes it very clear that operational excellence is simply not a strategy. These arguments, one more time, support a framework for strategic planning that does not rely on a set of predetermined measures but rather possesses the flexibility of identifying strategic objectives that are connected due to a meaningful cause-and-effect relationship and are balanced as well as aligned to different stakeholder requirements.

On the contrary, Cornforth (2001), Epstein et al. (2002) and Northcott & Smith (2011) focus on board performance measures or factors at a very early point in their work and hence do not think much of the concept of voluntary action, which would require an individual set of strategic objectives.

2.4 How is board performance monitored and why is the described approach effective?

We now turn to the monitoring of board performance and compare the different claims of why the described approach might be effective. Note: The scope of board performance is set to the whole board performance and not to individual board members.

2.4.1 Multiple dimensions or perspectives

Basically all authors whose work has been investigated (except Ling et al. in 2009 whose study was different in nature) propose to monitor board performance with measures which are either grouped within the structure of the simple Input-Output model introduced by Dulewicz et al. (1995), first extended by Cornforth (2001) and later by Epstein et al. (2002):

Input -> Processes -> Output -> Outcomes

or grouped into the structure of the Balanced Scorecard with its four board perspectives:

Learn & Growth -> Internal Processes -> Stakeholders -> Financials.

2.4.2 Leading and lagging, financial and non-financial

Another aspect, which all authors also share, is that measures of board performance should contain leading and lagging indicators as well as financial and non-financial indicators. However, this has been expressed explicitly only in the work of Epstein et al. (2002, Kaplan & Nagel (2003), Pointer et al. (2005), and Northcott & Smith (2011), since they relied on the Balanced Scorecard framework. Former recommendations from Bradshaw et al. (1992), Dulewicz et al. (1995), Green & Griesinger (1996), and Cornforth (2001) describe this feature implicitly, given that they still based their work on the simple Input-Output model.

2.4.3 Self-assessment versus external assessment

Cornforth (2001) reviewed several studies to better understand the variety of different approaches in order to assess or measure board performance. Based on this analysis he distinguishes between self-assessment questionnaires that can be used by boards to help them in reviewing their performance on the one hand and external assessment that is conducted by stakeholders on the other. His findings further suggest that the board should review their self-assessment and the assessment of the management together, since this appeared to be a key indicator of effectiveness (Cornforth & Edwards, 1997).

Epstein et al. (2002) also claim that boards should do assessments. They cite a study of Conger & Lawlor III (2002) in which the authors claim that only 40% of all major North American companies conduct formal evaluations of their boards. In this context, Epstein et al. (2002) criticise the weakness of only doing self-evaluations and rather recommend establishing a ‘performance evaluation system that uses self-assessments, external assessments, and various other data sources and includes both objective and subjective evaluations’.

Kaplan & Nagel (2003, 2005) go a step further and not only prescribe that the board should assess their own performance but also implement the above described mechanism as in the use case of their financial corporation.

In contrast Pointer et al. (2005) criticise how boards do performance management and recommend, based on experience and as Kaplan & Nagel and Epstein et al. do, that board performance management should be done per objective within a Strategy-Map. Further, they emphasise the stakeholder perspective and the importance to assess performance against obligations to key stakeholders.

The two respondents of Ling's et al. (2009) study have claimed to use the Balanced Scorecard to evaluate the company and CEO performance, but not to assess the board performance. Whereupon Northcott & Smith (2011) note the potential benefits of board evaluations by referring to several studies (Epstein & Roy, 2004b; Kiel & Nicholson, 2005; Minichilli et al., 2007). However, based on findings from Conger et al. (1998), they also argue that self-evaluation is more effective, since the board is often best placed to evaluate its own performance.

In Switzerland the association economiesuisse published the ‘swiss code of best practice for corporate governance’ (Böckli et al., 2014), which in short is also called: Swiss code. The Swiss code only recommends that public limited companies in Switzerland should self-evaluate their own performance and that of their committees annually. If this is not done, that organization has to report the reason for not doing so. This is in compliance with the Swiss code principle ‘comply or explain’, but is contrary to, for example with what Northcott & Smith (2011) report of New Zealand, where boards must follow a formal procedure for evaluating their performance and can not just explain why they did not do it.

2.4.4 Pre-determined versus individual measures or objectives

Most of the works examined in the context of this study focused on finding out what measures, factors, variables or objectives make boards effective, hence, they tried to recommend to define a fixed set of measures or objectives. In contrast Green & Griesinger (1996) made clear that it is quite difficult to define common goals for boards. Also Pointer et al. (2005) supports the idea of identifying individual objectives per board, since each might be in a different situation, especially concerning the requirements of the respective stakeholders.

Beside the authors (Cornforth, 2001; Epstein et al., 2002; Kaplan & Nagel, 2003) who favour a pre-determined set of measures or objectives, the work of Northcott & Smith (2011) is standing out because they formally criticise the set of measures proposed by Epstein & Roy (2004b) and offer a revised set of measures to better fit the needs of boards in New Zealand. Interestingly, they only note on the brink that: “The implementation of the proposed BSC would require careful selection from, and additions to, the menu of suggested KPIs, therefore.”

2.4.5 Stakeholder-driven performance management

This section starts with looking at Northcott & Smith (2011) who put forward a very clear argument as to why the performance should be considered from a stakeholder’s perspective. Based on the work by Fitzgerald (2007) they reflected on the key theoretical perspectives on performance management from a stakeholder’s perspective. Fitzgerald categorised performance measurement into shareholder and stakeholder perspectives. Based on this Northcott and Smith emphasised that the stakeholder’s perspective “argues that companies compete on many dimensions whose evaluation cannot be confined to narrow financial indicators” (Fitzgerald, 2007, p. 224). From that argument on they mention several well-known examples of stakeholder-based performance management frameworks and decided to focus on the Balanced Scorecard model (Kaplan & Norton, 1992), since this is the most well known.

Both the boards that responded to the questionnaire of Ling et al. (2009) also identified some objectives that satisfy stakeholders in the domain of ethical behaviour and in holding the board accountable for corporate governance.

For Pointer et al. (2005) ‘understanding key stakeholder’s is the main force for establishing the Balanced Scorecard in boards, since they suggests that boards ask themselves: “On whose behalf are we governing?” They further emphasise that boards need such a framework to understand how key stakeholder needs and governance responsibilities interrelate.

A somewhat limited approach has been chosen in a use case of Kaplan & Nagel (2005). This paper identifies only shareholders, regulators and communities as stakeholders. Interestingly, they use a strategic board objective that is supposed to strengthen and monitor the executive performance but does not even see the CEO as a stakeholder group. The same conspicuousness can be found in the working paper of Kaplan & Nagel (2003).

A more comprehensive view has been expressed by Epstein et al. (2002) and by Epstein & Roy (2004b). They claim that a high performance board must achieve the core objective of ensuring accountability of the board to its stakeholders, including shareholders, employees, customers, suppliers, regulators, and the community, among others. Further, they state that large companies require large boards in order to reflect a more diverse level of knowledge and that many stakeholder groups need to be represented by the board.

Like Epstein, Cornforth (2001) emphasises that the board is responsible for external accountability and the relations with stakeholders, but it is also responsible for representing their interests within the organisation. He discusses the different approaches for measuring the board performances from a stakeholder’s perspective and concludes by measuring the performances. One will always have to face a trade off between the complexity, expenses, and scope and the depth of results that are to be gained from multiple stakeholders.


Excerpt out of 90 pages


Board strategy and performance management at Swiss medium sized companies. A proposal for a stakeholder driven approach
University of Derby
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
3305 KB
board of directors, board strategy, board performance management, strategy-map, balanced scorecard, board scorecard, corporate governance, grounded theory
Quote paper
Mike Portworsnick (Author), 2016, Board strategy and performance management at Swiss medium sized companies. A proposal for a stakeholder driven approach, Munich, GRIN Verlag,


  • No comments yet.
Look inside the ebook
Title: Board strategy and performance management at Swiss medium sized companies. A proposal for a stakeholder driven approach

Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free