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Business Framework: Office of Strategy Management

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PROJECT DESCRIPTION

What is the Office of Strategy Management?

In an article in the Harvard Business Review of October 2005, Robert S. Kaplan and David P. Norton state that their research reveals that on average 95% of a company's employees are unaware of its strategy or do not understand it. They conclude that there still exists a gap in many large organizations between strategy formulation and strategy execution, between ambition and performance. Despite the famous two tools which Kaplan and Norton introduced for this same purpose: the Balanced Scorecard ('92) and Strategy Maps ('92 and '01). Therefore the authors now introduce a third important tool: "The Office of Strategy Management". Its main purpose is to coordinate strategy and execution. 

Origin of the Office of Strategy Management

Earlier, the same authors introduced the Balanced Scorecard ('92) and Strategy Maps ('92 and '01). In 2000, Bill Russo, VP of business strategy at DaimlerChrysler, headed a strategic unit that already had the facilitating functions as described below. The authors also mention The U.S. Army's Balanced Scorecard project (RSS) as an early example.

Activities of the Office of Strategy Management. Functions
  1. Create and manage the scorecard. Ensure that the strategy gets translated into the corporate Strategy Map and into the corporate Balanced Scorecard.
    • Standardize terminology and measurements definitions.
    • Select and manage the reporting system of the scorecard.
    • Ensure the data integrity of the scorecard.
    • Offer training and consultancy about the scorecard to the business units.
  2. Align the organization.
    • Oversee the scorecard process.
    • Cascade the scorecards.
    • Define and ensure synergies.
  3. Review strategy. Manage monthly performance review meetings.
    • Brief CEO before these meetings about identified strategic issues.
    • Determine action plans and follow ups.
    • Prepare adequate information for the Board of Directors.
  4. Develop strategy.
    • Integrate strategic planning unit into the OSM.
      • External and internal competitive analysis.
      • Perform Scenario Planning.
      • Organize and run strategy meetings.
      • Coach the Executive Board on strategic options.
    • To filter strategic ideas that originate from within the organization.
  5. Communicate strategy.
    • Review messages from internal communications department.
    • Review messages from corporate communications department.
    • Cooperate with Human Resources on scorecard education.
  6. Manage strategic initiatives.
    • Assess and reprioritize strategic programs.
    • Monitor strategic programs within each unit.
    • Manage cross-unit initiatives and cross-function initiatives.
  7. Integrate strategic priorities with other support functions. Consult and integrate the following functions / departments into the strategy:
    • Planning and budgeting
    • Human resources alignment.
    • Knowledge management.
Strengths of the Office of Strategy Management
  • Improved strategy execution.
  • Improved communication about the strategy.
Limitations of the Office of Strategy Management
  • An OSM requires staff and resources. According to a graph in the article, typically 6 - 8,5 FTE will suffice for a typical large company. Note that "large" here is defined elsewhere in the article as only 1.000 to 10.000 employees! Overlooking the intended functions of the Office of Strategy Management, this estimation seems extremely low for a large corporation.
  • Can lead to an additional layer of bureaucracy.
  • Centralizing the responsibility for strategy execution / communication may lead to "not invented here behavior" in business units (line) and organizational functions (staff).
  • Focus on strategy execution and managing the strategy may demoralize or hinder creative strategy formulation (an art).
Assumptions of the Office of Strategy Management
  • Strategy execution is poor without an Office of Strategy Management.
  • Communication about the strategy is poor without an OSM.

Source: Robert S. Kaplan and David P. Norton - To be expected?

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