Why is that some companies have great heads of strategy who make an outstanding contribution to their companies while others don’t? To answer this question, we evaluated a sample of 55 different heads of strategy and looked more closely at 11 who were particularly successful and 10 who were at the other end of the spectrum. Here’s what we learned.
The person’s capabilities should fit the challenges facing the organization at the time. Consider Staples, the office-supplies retailer, which had tumbled from being the market leader to being a third of the new leader’s size by 1992. The existing management team had not addressed a range of issues, including required changes to store sizes, the product range, and which geographies the company focused on.
So founder and CEO Tom Stemberg hired John Wilson as head of strategy and chief financial officer. Wilson was an industry outsider (he had previously worked as a management consultant and the head of corporate planning at an airline), whom Stemberg described as a “provocateur” and an “in-your-face kind of guy.” Wilson was exactly what the business needed. He rammed through required changes in strategy such as building bigger and brighter stores, which helped the company nearly quadruple its revenues over the next four years. Wilson went on to be COO of The Gap Inc. and is currently president of Staples Europe.
As corporate priorities change, so should the head of strategy. Staples continued to grow, but profitability fell. There was a need to refocus the management team on reducing costs, targeting opportunities based on their profit rather than their growth potential, and systematically reviewing all parts of the business for any other opportunities to improve profitability. Stemberg turned to Basil Anderson, who had tackled similar challenges as CFO of Campbell Soup and Scott Paper. Like Wilson, Anderson was able to lead the senior team. But Anderson, who had served as an independent director on the company’s board for several years, did this through having “tremendous relationships and credibility with the operating executives.” With Anderson’s help, Staples’ net profits grew more than tenfold over the next five years.
In some cases, it pays to tailor the job to the candidate’s unique capabilities. If the candidate has a particular set of capabilities of great value to the company, it can be worth the company’s while to fit the role to the candidate. Walgreens Boots Alliance’s Rick Mills has been the group strategy officer for 20 years. He has accumulated a unique mix of deep knowledge of the organization, the industry, and how to work with Stefano Pessina, the company’s executive chairman. These attributes have allowed Mills to evolve from an initial strategy staff role into becoming a critical member of the senior team. He has worked closely with Pessina to identify and execute deals that have propelled Walgreens Boots Alliance forward on both sides of the Atlantic.
Make sure the critical skills don’t already exist in-house. This means considering whether you can use other members of the senior team to do all or parts of the strategy role. Doing so not only reduces costs but avoids the potential frictions that come from adding a new member to a team (e.g., the danger that the newcomer will clash for political or personality reasons with members of the leadership team).
For example, the CEO of a communications company we interviewed initially hired a capable, senior individual to head strategy, but he didn’t contribute many insights beyond those that the CEO was already getting from the chief information officer. The latter was a capable strategist with relevant insight into digital technologies — the most pressing strategic issue for the company at that time. The CEO ended up getting rid of the head of strategy, continuing to use the CIO to provide him with strategic advice, and hiring a strong but relatively junior analyst to provide support to the senior team.
Don’t underestimate the importance of cultural fit. When the head of strategy at a large European chemicals company was retiring, the capabilities that his successor needed to have seemed to be pretty clear: the ability to structure a strategic process that helped and challenged the company’s business units to review their current competitive positions, project how the future might evolve, and develop plans that strengthened their short-terms position and developed options for future changes.
The best fit seemed to be an experienced individual from a major consulting company who had also served in an executive position at another multinational firm. Within a few months the CEO decided that the decision had been a mistake because the personal style of the individual in question did not fit in with the company’s culture, which generated several conflicts over a short period of time. A senior executive described to us what he termed the “rules of engagement.” This included building a strong social network and working as a team with a shared stewardship of the organization. He said while his successor had considerable talents, he failed to conform to these social rules.
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In summary, success comes from there being a good fit between the capabilities of the head of strategy and the ongoing stream of corporate strategy work to be done, the capabilities of the rest of the senior team, and the broader context. Thinking this through should occur when a new hire is being considered and periodically thereafter.
Since this observation isn’t exactly rocket science, why do so many companies seem to break this rule? A central reason is it is hard to identify and recruit good candidates who fit on all dimensions.
To increase the chance of hitting the head of strategy jackpot, CEOs should avoid creating an all-encompassing wish list and focus on the most important capabilities they really need from a head of strategy. They should take the time to ensure that short-listed candidates will complement the senior team and fit in with the organization. They should be willing to customize the job to capitalize on the strengths and minimize the weaknesses of the best candidate.
Yes, this entails a lot of the CEO’s time. But the prize is a head of strategy who will be highly effective.
from HBR.org http://ift.tt/2DsuyXJ
