The Trap of Presiding Over Strategy
Two long term business trends, the rise of managerialism and the intensification of specialization, have conspired to create a strategy trap by encouraging general managers — whether CEOs, business unit Presidents, or product/brand/geography managers — to preside over rather than lead the creation of strategy. In my 14th Playing to Win/Practitioner Insights (PTW/PI) piece, I will argue that presiding over strategy is a dangerous trap, which general managers and their organizations need to avoid. (Links for the rest of the PTW/PI series can be found here.)
The Rise of Managerialism
The concept of management has been around for a long time. Greek philosopher Socrates discussed it extensively in the 4th century BC and even declared it to be a respectable calling in a departure from his usual distain for things economic! But for most of history, businesses were small, and most managers split their time between managing and delivering the product/service, which is still the case for today’s small businesses. But over time, businesses grew to great size, especially when the Industrial Revolution opened the doors for large-scale manufacturing. The sprawling companies that have emerged since have needed more coordination and control, augmenting the importance of management, and creating ever larger cadres of managers who don’t produce the product/service but supervise others who do so.
This trend accelerated in the 20th century as companies got bigger and bigger. Management also became more codified as scholars including Max Weber, Peter Drucker and Henry Fayol studied and wrote about the practice. In his 1916 classic General and Industrial Management, Fayol described the five functions of management: planning, organizing, commanding, coordinating, and controlling. Harvard Business School (HBS) opened its doors in 1908 and taught business administration, playing a leading role in making management an academic discipline. A key aspect of the advance in business thinking during the 20th century was the codification of the legitimate role for presiding over and organizing the work of others.
The Intensification of Specialization
At the same time that managerialism was rising, specialization within the business domain was intensifying. In the early 20th century, companies tended to be functionally organized and business schools mirrored their structure in teaching business. MBA students could expect their core courses to have names like: Marketing, Finance, Production, Human Resources, and Accounting. Interestingly that particular structure of business education continued even after the vast majority of large companies switched from functional organizations to business unit structures organized around product/service lines. Even though business schools like Harvard Business School claimed from its outset to teach ‘general management,’ a quick look it its first-year core curriculum reveals that even today only two of the ten required courses (one on entrepreneurship and one on ethics) plus a required field study deviate from the teaching of a narrow functional specialty.
Moreover, the entire business school academy is organized around the narrow functional specialties with its referred journals encouraging research and writing within the functional disciplines. After a century of such academic work within functions, the knowledge domains are deep, making it hard to be considered an expert without focusing entirely on mastering the knowledge within one functional domain.
As a result, general managers are encouraged to believe that they don’t know enough about the narrow and deep specialist domains to make decisions in them. That is, the CFO has far superior subject matter expertise in finance decisions, the CHRO in human resources decisions, the CTO in technology decisions, the CLO in legal decisions, etc.
Presiding, not Engaging
When the rise of managerialism and the intensification of specialization are combined, it is no surprise to see general managers tempted to conceive of their job as presiding over the organization rather than engaging in its daily life, with an emphasis on the commanding, coordinating, and controlling parts of Fayol’s list. The general manager tells the functional specialists what output is required — I need a compensation plan, I need a budget, etc. — and then monitors to make sure the output is produced as ordered.
The Coming of Strategy
Fayol’s 1916 list included planning, but that was long before the coming of strategy to business. Fayol saw planning as the key managerial function, without which the other four functions would be largely unguided. He saw planning as centrally concerned with considering alternative courses of action and choosing the best one, a worthy antecedent to the concept of business strategy.
After strategy became a business phenomenon outside the business school establishment with Bruce Henderson’s creation of Boston Consulting Group in 1963 and the subsequent massive success and growth of the nascent strategy consulting industry in the 1960s and 1970s, it became a legitimate subject of study within business schools as exemplified by Michael Porter’s wildly successful HBS second year elective Industry & Competitive Analysis based on his 1980 best seller Competitive Strategy. It was by far and away the most popular elective during my second year at HBS (1980–1981), but not yet a part of the core required curriculum because new subjects from the real world tend to take a decade or two to achieve legitimacy in the business academic world.
In an important respect, strategy was a threat to the other disciplines because it began its life as a horizontal overlay on top of the vertical functional slices — i.e., how one might bring together marketing, finance, operations, etc. to make general management decisions. The response of the business academy over the past forty years has been, slowly but surely, to rotate strategy ninety degrees to make it yet another vertical discipline with a deep body of specialist knowledge and analytical techniques, written about in refereed A-journals like Strategic Management Journal (which commenced publication in 1980, nearly two decades after the foundation of the strategy consulting industry).
Unsurprisingly, this verticalization has been mirrored in the corporate world where strategy has become just another function like Finance, HR, IT, and Legal. In the early days, firms had a Vice-President of Strategy, but now the position has been elevated to the C-suite with most big companies featuring a Chief Strategy Officer (CSO). Because of their newfound prominence, lots is written about CSOs, like this good piece by Deloitte describing the six most common roles of a CSO.
Presiding Over Strategy
The functionalization of strategy has had the predictable effect of causing many general managers to add strategy to the list of functions over which they preside. Just as they ask their CFO for a budget and their CIO for an IT plan and their CHRO for a compensation plan, they ask their CSO for a strategy because, they believe, as with the other functional specialists, the CSO has proprietary subject matter expertise that a general manager cannot hope to master in the modern era of specialization. Of course, this is not universally the case; but it happens far too frequently in my view.
To me, presiding not engaging is a general management mistake across the board. It allows controlling CXOs to use the bafflegab of specialized language systems to push for decisions in their domains that make them happy but aren’t in the interests of the whole company — with CIOs/CTOs as the most frequent abusers on this front. General managers need to suck it up and learn enough of the specialized language systems and analytical tools to engage in, not just preside over, the work of these functional heads.
But is even more critical in the case of strategy. Strategy is the integrative discipline — it is general management itself, despite the position into which it has been pushed by the jealous functional disciplines. To me, presiding over strategy instead of engaging directly in it represents the abdication of general management responsibility. If I was a board member and our CEO informed us that the CSO had created our strategy, I would lose all faith in the CEO and believe that we didn’t actually have a real CEO.
This is not to say that the CSO can’t or shouldn’t play a significant role in the development of the strategy. I particularly like combination of two of Deloitte’s ‘six faces of the CSO:’ the engineer who designs and runs the strategic planning process; and the advisor who helps shape the strategy. In my experience, a great CSO/strategy organization can provide invaluable help to an engaged CEO or business-unit general manager. But no matter how good they are, they can’t save a general manager who chooses to simply preside over the production of strategy. Sadly, that ‘general manager,’ whether lower-level or CEO, is actually a bureaucrat not a general manager!
If you are a general manager, don’t follow the trend toward managerialism over the precipice of ubiquitous presiding. And don’t be intimidated by the intense specialization within functions into believing that you don’t have the requisite subject matter expertise to engage in strategy development. Not only can you do it, but you must in order to lead on the most general managerial of tasks. Use your CSO for help: lean on him/her for process and content expertise. But don’t abdicate. Strategy is a line responsibility, and you are the line person in charge.
If you are a strategy function specialist, don’t let your boss abdicate strategy responsibility. Resist the temptation to do what the worst functional CXO’s do and attempt to make your domain intimidating and impenetrable. Your job is to help your general manager boss to get better at strategy, to engage in it with you, and to add value to it. If you do so, you will reap three benefits: 1) your business will have better strategy; 2) you will have helped your general manager became a more valuable executive; and 3) by osmosis, you will have learned valuable lessons in general management.