Chief strategists should coordinate their work across divisions to a greater extent and be more transparent in communications
Munich/St. Gallen, January 14, 2016
- New study by Roland Berger and the University of St.Gallen (HSG) finds that 44 percent of European firms involve different departments in formulating their corporate strategy
- New job profile of Chief Strategy Officers (CSOs) is not fully taken into account in performance measurement
- "CSO Value Cockpit" creates transparency and makes it easier for CEOs to manage their chief strategists
Uncertain economic and political developments and constantly changing circumstances conspire to bring ever-growing complexity to the work of strategy departments. Tough spending cuts implemented by many companies add to the pressure facing Chief Strategy Officers (CSOs). Such conditions make it all the more important to meaningfully measure the work done by strategy teams and to communicate it clearly both within the company and to external stakeholders. These are some of the findings of the new study, "Revealing the chief strategist's hidden value", by Roland Berger and the University of St.Gallen (HSG). The study is based on a survey of 109 CSOs from European companies operating across a range of industry sectors.
Involve different divisions to produce a successful strategy
Even though 94 percent of the companies surveyed have a central strategy department at corporate headquarters, it does not carry sole responsibility for formulating and implementing the company's overall strategy. In fact, 44 percent of firms also have strategy teams in other divisions or national subsidiaries. M&A departments in particular do a great deal of work on formulating and refining strategies (54%). And 70 percent of survey respondents also call in outside support on special strategy projects.
There is good reason for involving other divisions or local subsidiaries: Globally operating enterprises need to have a thorough overview of what's going on throughout the company and require input from all concerned parties if they want to be fast and flexible in reacting to new customer needs and market trends. Added to that, as Dr. Tim Zimmermann, Partner at Roland Berger, explains, "Staff are more motivated and more willing to accept the new strategy and actually put it into practice if it has not simply been imposed from above."
CSOs are increasingly coordinators and communicators
What the job of chief strategist is principally about, therefore, is bringing together and coordinating the individual strategies pursued in different parts of the company and translating them into one overarching strategy. "That's what makes the CSO's job profile so demanding. Not only do they need to have an aptitude for quantitative analysis, they must also possess excellent communication skills and act as moderators, reconciling all of the different interests," explained Prof. Markus Menz from the University of Geneva's Institute of Management.
Just how important the chief strategist is can therefore be seen in companies' staffing structures: more than 70 percent of the CSOs interviewed report direct to the CEO. "Being a member of the C-suite puts chief strategists in a position to make difficult decisions quicker since they know that top bosses will support them," explained Prof. Günter Müller-Stewens from HSG's Institute of Management. But all the coordination still takes up an incredible amount of time. Many CSOs spend more than half of their working day on coordinating and monitoring the strategy process. "The role of a chief strategist has changed immensely in recent years. They now need to be much more than a 'collaboration hub manager' if they want to get a strategy implemented successfully," said Roland Berger expert Tim Zimmermann.
Chief strategists need the right system of performance measurement
Many companies and their CEOs still have trouble measuring the performance of their chief strategists. CSOs are normally judged against conventional financial indicators such as revenue or EBITDA growth. Alternatively, the focus may be on the company's strategic performance in terms of market share or customer satisfaction. Then there are individual assessments that consider the number of projects successfully completed or the results of feedback. Even so, 70 percent of survey respondents say that CSO-specific evaluation criteria are used irregularly or not at all in their companies. "This is partly because it takes between two and five years for a strategy to be implemented, with success only measurable after that point in time," explained Markus Menz. "But many CSOs aren't around to see that, being already in a new role or with another company."
In addition to the above, the work of the CSO should not be considered in isolation but always in the context of the company's overall development. Which makes it all the more important for the CEO to set clear evaluation criteria. The CSO's job profile should be grouped into individual task clusters and turned into measurable key performance indicators (KPIs). "You need to do this if you want to come up with a multidimensional evaluation system in the form of a 'CSO Value Cockpit' to make the CSO's broad task spectrum measurable for top management in a way they can really see and understand," said Roland Berger Partner Tim Zimmermann in summary.
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