Perusing the CFO Research Services site, I came across the Corporate Performance Management: How Committed Leaders Drive Results Report, consisting of conclusions papers from the CFO executive conference held earlier this year in New York, New York.
The second mini-paper in the report was Aligning the finance function to strategy execution based on a presentation by Robert Kaplan, co-developer of the balanced scorecard and a Professor at Harvard Business School. In this presentation, Robert Kaplan discussed various approaches for aligning the finance function more strategically with the goals of business units and corporate leaders, including:
- the use of balanced scorecards as a shared framework to run the business, guide the operating agenda, and evaluate progress against strategy;
- the use of activity-based budgeting to link the strategic planning capability of Balanced Scorecards with the operational budgeting mechanism of a time-driven ABC (activity-based costing) model; and
- Establishing a new Office of Strategy Management to help execute strategy more effectively.
These are all fantastic recommendations, after all, scorecarding is something I recommend you use in your sourcing organization as it is one of the few mechanisms for addressing operations as a whole, activity-based budgeting makes more sense to me than silo-based budgeting since most activities today cut across traditional organizational boundaries, and the key to the development of a first-class supply chain is a good strategy.
My question is whether or not you really need an Office of Strategy Management and a Chief Strategy Management Officer. I whole-heartedly agree on the paramount importance of good business strategy and the need to elevate strategy at the senior executive level, definately agree that you should have a strategy team, and see the importance of good execution and communication of strategy throughout the organization, but am curious as to why this function cannot be appropriately handled by the CEO, CFO, COO, CPO, and CCO. (Chief Executive Officer, Chief Finance Officer, Chief Operations Officer, Chief Procurement Officer, and Chief Communications Officer.)
According to the mini-paper, Kaplan advocates the adoption of a new two-to-six person Office of Strategy Management to be led by a Chief Strategy Management Officer (CSMO). This CSMO would ideally report to the CEO or COO but could also report to the CFO, especially at companies where the planning chief already reports to the CFO. The CSMO’s job would be to formulate and communicate strategy and to oversee its execution. He would help breach silos by coordinating strategy across functions. He would make sure that all business and support groups were aligned with the enterprise strategy and that strategy remained a high management and board priority.
I don’t know about you, but this sounds like a CPO role description to me. After all, with procurement about to become the center of tomorrow’s organization (as per my eSourcingForum Purchasing Innovation series, including my post on Sourcing the New Organization), it is going to be the CPO’s job to breach silos, align business groups, and lead strategic initiatives on a daily basis. Thus, I believe that strategy should be led by the CPO, with appropriate input and support from the rest of the CXO team, especially the CCO who will need to help communicate the corporate strategies to the rest of the organization.
But the role of executive leadership is critical to sustain the focus in people’s busy lives, Robert Kaplan is not just any bloke, I was not fortunate enought to attend the talk and had to settle for the summary, and this topic certainly deserves some very deep thought. Strategy is critical. Maybe you need a separate unit and a new CXO, maybe the CPO can handle it appropriately backed by the rest of the executive team, and maybe you need a strategy coordinator that reports to the COO or CPO. It’s a tough question. Anyone have any additional thoughts or comments on the matter? Any fellow bloggers want to chime in?