Is a futures committee in your future?

• Author: Blackwell, Roger D.
• Position: Corporate Strategy

A futures committee shines the spotlight on the question of whether the strategies that made a company successful in the past will continue to do so in the future.

Help Wanted: Join the audit committee of a public corporation. Long working hours with minimal pay. Substantial opportunity for involvement with regulators, lawyers and perhaps the media.

IF THIS HELP-WANTED AD doesn't attract members to your board, maybe another assignment would be more welcome--the futures committee. It's rare and rather recent, but it's a committee proving useful at Applied Industrial Technologies (ALT), a Cleveland-based distributor of industrial products with about $1.5 billion in revenues. Formerly known as Bearings Inc., the NYSE-listed company changed its name to reflect its mission of distributing a range of products and services involving engineered systems and fluid power, as well as its core product lines--bearings, conveyor belts, and related products that keep plants, distribution centers, and many other workplaces moving.

AIT has the normal board committees--audit, organization & compensation, and governance (with nominating as a subcommittee), and an executive committee. But it also has a futures committee, initiated by AIT's former chairman and CEO, Jack Dannemiller, and adopted by the board in 1998. It has received strong support and involvement from AIT'S current chairman and CEO, David Pugh.

Who needs a futures committee?

A futures committee is probably needed more in companies with an extensive past than a recent beginning. Young corporations typically are building their future focused on what must be done to thrive or, perhaps, even to survive. These emerging companies may need strategy changes also, but that's often urgently apparent to management and the board. Companies around for decades or, in the case of AIT, more than three-quarters of a century, have a different problem. They continually face the need to reinvent their future, often before any problem is apparent. To paraphrase Jack Welch, "When the external environment is changing faster than the internal organization, the end is near." The futures committee is designed to prevent the end from happening.

Studying corporate strategy, as I have done for more than 30 years, reveals a basic principle: Unless management acts, the more successful a company has been in the past, the more likely it is to fail in the future. The key words are "unless management acts." In today's hyper-competitive, rapidly changing environment, it may not be sufficient to assume management will act. The board needs to monitor and encourage management's actions in preparing the firm for the future.

The futures committee functions much like the audit committee, except that it is the corporation's understanding of the future and strategy that is being "audited." An audit committee is expected not to "do" accounting but to be sure that reported financial results reflect reality. External audit firms are hired to help, but as Corporate America has learned so painfully, the audit committee needs to audit the auditors. Similarly, the futures committee does not "do" the firm's strategy, and external consulting firms may be employed to help. The function of the committee is to ask the same type of questions of strategic management that the audit committee asks of financial management.

Proxy materials reveal that futures committees are rare among public corporations. Some functions are similar to those of a strategy committee, which several boards--including the world's largest corporation, Wal-Mart--have. A corporate development committee may consider...