Research shows that CEOs use three very different designs for executing corporate programs, depending on the purpose of the program and how involved the CEO plans to be.
CEOs of large companies introduce corporate programs to foster strategic renewal. Renewal goals might include boosting profitability, improving business models or establishing new directions for growth. Whatever the end game a CEO has in mind, it’s important that the design of the program matches the desired outcomes.
In the recent article “Driving Change Through Corporate Programs” from the Fall 2013 issue of MIT Sloan Management Review, researchers Michael Boppel, Sven Kunisch, Thomas Keil and Christoph Lechner note that “CEOs use such corporate programs as tools to communicate internally with their employees and to communicate externally with analysts or shareholders. They also employ them to introduce significant changes in their organizations and to foster changes in key dimensions of their businesses.”
But how do CEOs deliver on these programs? To find out, the authors studied 125 corporate programs at large European organizations, including Allianz, Daimler, Nokia, SABMiller, Telefónica and UBS.
What they discovered is that CEOs use three main designs for corporate programs. The authors call those designs goal splitting, task force and overlay.
Option 1: In goal splitting, the program’s objectives are broken into specific goals and delegated to business-unit managers. Managers take on these assignments in addition to their main roles and “devote part of their time to contributing to the program and trying to realize its objectives,” write the authors. This approach is often used to implement emerging programs such as efficiency improvements.
Goal splitting works best “when the task involves optimizing activities within the existing strategy framework and business model,” the researchers say. Its key challenges: maintaining the change momentum, avoiding distraction from the daily business and holding managers accountable.
Option 2: A task force team becomes the “extended arm” of the CEO and is given responsibility for realizing the program objectives. This option, the authors write, “allows for the infusion of specialized skills that are not available in the line organization” and “is beneficial when individual businesses are unable or reluctant to bear certain risks on their own.”
Using a task force works best when a CEO wants to drive one or two corporate topics and “when the task is distinct from — but adjacent to — the existing strategy framework.” Its key challenges: enforcing corporate-program activities, combining business and program knowledge and ensuring the buy-in of business-unit managers and line managers.
Option 3: The overlay option is like the task force option, but with a broader staff that can “cut across existing organizational structures.” This organizational unit is charged with engaging the entire organization and mandated even to override line management. In the overlay option, the CEO is closely involved with strategy execution. The main purpose of this design is to implement radical change, such as a corporate turnaround.
The overlay option is the best choice for fostering “cross-unit integration in a highly divided organization,” write the authors. Its key challenges: maintaining flexibility of the corporate program, avoiding burdening the organization and preventing the initiatives from becoming silos.
“Approaches need to be carefully matched with the strategy task at hand,” conclude the authors. “For CEOs, the first and most important step in ensuring that corporate programs deliver promised results is deciding which of the three distinct program approaches is best suited for their organization’s distinct challenges.”
This article draws from “Driving Change Through Corporate Programs,” by Michael Boppel (University of St. Gallen in Switzerland), Sven Kunisch (St. Gallen), Thomas Keil (University of Zurich) and Christoph Lechner (St. Gallen).