Do We Need Chief Strategy Officers?

The Chief Strategy Officer (CSO) is a curious position. Some companies have them, while in other companies, such a position does not exist. In the latter, when you enquire why there is no Chief Strategy Officer in the organization, the CEO will dismiss the idea that such a position would add any value. As one CEO observed, if there is a Chief Strategy Officer, then what do I do? As a result, many CEOs are ambivalent, and some even downright hostile, to having a CSO.

Most CEOs see, and should see, themselves as having the responsibility for formulating the organization’s strategy. In fact, it is central to the role definition. Some CEOs feel that having a strategy head would compromise their position in the eyes of the stakeholders. If a strategy was presented by the Chief Strategy Officer, then observers, especially the board of directors, may question whose strategy is this – the CEO or the CSO?

Many CEOs can think strategically about their industry, critically understand their firm’s capabilities, as well as keep on top of the changes unfolding in important related domains such as competitors, technology, environment, and public policy that will impact the firm’s future fortunes. Some of these CEOs are also disciplined enough to devote the needed time to developing and updating strategy in between fighting the inevitable daily fires that occur in any organization which demand immediate attention. But after applying these two filters, probably only a minority of CEOs have both the ability and motivation to continuously engage in the time consuming process of formulating strategy and keeping it updated.

On the other hand, by and large, CEOs are great executors. They have consistently delivered results previously since this is how they rose into their current position. But, how much experience they have had in formulating strategy depends on their experience prior to becoming CEO. Did they have to formulate strategy or just execute a given strategy?

Recognizing their limitations, especially with respect to the time available, many CEOs outsource strategy to the thriving profession of strategy consultants. However, can one really outsource making strategy? While accepting that in some circumstances there may not be another good option, there are at least two reasons why outsourcing strategy making to consultants is a bad idea.

First, strategy is the essential conversation among the top management team (TMT). It is how the TMT develops a shared view of what are the firms’ strengths and weaknesses, competitor strategies, where the opportunities and threats exist, and how the social, political, and technological environment is evolving. As reasonable people can, and often do, disagree, strategy making is a messy process. But it is through these intense and continuous conversations that a common understanding emerges within the TMT. The outcome of this should be a strategy that will deploy the organizations resources towards a mutually agreed goal (vision) in a pre-defined pattern.

Second, implementing strategy requires that the TMT “own” the strategy and are the shills for it. To effectively explain, and convince the organization to execute, the strategy, the TMT must believe that it is their strategy or they will not be effective promoters of it. The responsibility for selling the strategy to the entire organization so that each employee understands their role cannot be abdicated.

Being an Effective CSO

Being a CSO is testing for a number of reasons, but primarily because it is hard to demonstrate differential competence vis-à-vis other members of the TMT, especially the CEO. This is in contrast to those who head specialized functions such as finance (CFO), technology (CTO), information (CIO), operations (COO), or even marketing (CMO). Therefore, to be effective, the CSO must bring some unique experiences, skills, opinions, and/or ability to the table. And hopefully, these are acknowledged by the CEO and the other members of the TMT.

As I have often observed the CEO is a lonely position. An effective CSO will have built a reservoir of trust with the CEO. To have this trust, the CSO must be honest broker of information and not be seen as seeking the CEO’s job. The CEO must never feel under threat from the CSO.

A major role of the CSO is to be a sparring partner to the CEO with respect to formulating strategy. By contesting the CEO’s thinking, the probability of developing a sound organizational strategy increases. My own observation, especially in India, is that being an effective CSO is challenging:

• How do you add value to the organization and the CEO without taking away the limelight from the CEO?
• How to be adequately deferential to the CEO, yet to push the CEO’s thinking on strategy?

Failing the above, the CSO ends up simply being an expensive resource making power point slides for the CEO. In which case, it is better to replace the CSO with an Executive Assistant.