True value of Chief Strategy Officers often out of sight

03 March 2016

The value added by the Chief Strategy Officers is by no means easy to track. According to a survey of CSOs and their departments, many believe that their operations are adding value to businesses along a number of key indicators. However, the difficulty of performing quantitative KPIs, improving transparency and regular audits means that the perceived value is not being benchmarked against actual value.

The value of the Chief Strategy Officer in large organisations remains difficult to plum. Recent years have seen considerable changes to the business environment that have made strategy more important, but also harder to achieve. Even strategy consulting firms are sometimes at odds about how best to approach the new environment, with some suggesting agility in the face of uncertainty while others vouch long term strategy as safe. Belt tightening at corporates is, however, placing further constraint on strategy departments; forcing many departments to become transparent about the value that their planning brings to the business.

Identifying that value, however, is by no means an easy task. A recent Roland Berger survey seeks to identify the potential value that strategy departments add to business outcomes, as well as how best to measure the success of strategies in today’s environment. The survey, titled ‘Revealing the Chief Strategist’s Hidden Value’, involved a survey of 600 companies in 16 countries on the work of CSOs and strategy departments. 109 chief strategy officers/strategists completed the questionnaire, and of the companies represented, 64% employ between 2,500 and 25,000 people. The survey's results were deepened with interviews of select CSOs.

CSO fit and skills

CSOs and their departments
The survey highlights that the CSO position remains relatively important at the organisations surveyed, with 94% having such a department. The size of these departments has remained relatively stable over the past five years. The median number that work in strategy departments is six, with two thirds noting that they employ less than ten people. Large companies have 11 people working in such departments on average. Of those surveyed, 44% also have strategy departments as part of company divisions, while 70% is open to using temporary external support for strategy planning.

In terms of the background that CFOs bring to the table, 39.2% are pure strategists, while 19.7% have a general management background. Interestingly, the results show that general management skills have increased in value for the role since 2014, when 15.9% had such a background while 44.4% had a strategy background. The survey also found that most (78%) CSOs report directly to the CEO, while 27% also reported to other CxOs. 8% reported directly to the board, while 21% did so indirectly.

Activities of CSOs and their self-perception

CSO Direction
CSOs, according to their self-perception, provide a number of key strategy directions for businesses. Of those surveyed, >75% believe that it is important or very important for them to provide: strategic direction and formulation, strategic initiatives and programmes, a sounding board for CEO/board of directors. On the other hand, 60%-75% believe it is important or very important for them to provide: new business model development, M&A, strategic implementation, and competitive analysis/market research. The least important activities (<51%) were cited as divestments, investor relations, functional strategies, and non-strategic assistance to the C-suite.

In terms of their self-perceived optimal contribution and self-perceived current contribution, on a scale of 1-5 (Mean values; 1=to no extent; 5=to a very great extent), the perception is that, for the most part, CSOs and their departments are meeting, or are close to meeting, expectations. Providing strategic direction scores a 4.3 on self-perception and a 4.7 on ambition, while ensuring corporate strategy scores a 4.0 on self-perception and a 4.4 on ambition. Managing the business portfolio scores a 3.7 on self-perception and a 4.0 on ambition, while enabling global collaboration scores a 3.3 on self-perception and a 3.4 on ambition.

Value creation

Added value
While self-perception suggests that CSOs and their departments believe that they are generally doing what they are setting out to do, within the bounds of their remit, assessing their performance is by no means an easy task. The metrics used for CSO appraisals split roughly into key performance indicators (KPIs) and alternative formats. In the former category, respondents primarily mentioned traditional financial ratios that apply to the entire company, such as EBITDA growth and return on equity. In the latter, criteria include strategic performance in general, such as the “number of innovations”, "third-party recognition of strategy" and the "number of targets acquired".

In terms of numbers (average; 1= not at all; 5 = to a very great extent), few CSO departments see a strong quantitative basis for their operation, with a score of 1.91, while transparency about measuring criteria too remains low at 2.02. Value creation by the strategy department is also not measured regularly, at 2.14. Yet the respondents highlight that they believe it is important to measure the performance of the departments, with an average score of 3.55, while they too admit it is difficult, at 3.96. The survey finds, however, that 70% of respondents admit that CSO-specific criteria are used to measure value added either irregularly or not at all. Clearly, there is a lack of suitable methods to quantify performance in this domain.

According to the consultancy, “If CSOs are to add value in their strategy work, CEOs must spell out their expectations as clearly as possible. The more concrete the expectations, the easier it is to piece together an evaluation system that creates transparency. We have seen that the decentralized structure of strategy work itself raises new challenges and focal areas for CSOs. And it is reasonable to question whether their function as collaboration hub managers can still be reconciled to the traditional CSO profile. Therefore, now would seem the ideal time to think again about the value added by CSOs – and to develop a multidimensional approach to assessing their work in the form of a CSO value cockpit.”


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