Strategic planning: what does the department of the same name do?

“What does the strategic planning department do?”

Each reader will have an answer to this question spontaneously, just as in the case of the answer to the question about the most famous Russian poet… It is suggested to compare your first spontaneous answer with the options that we will consider later in the article… It is possible to think that such departments deal with issues that are not very clear, which is partly true… For example, Jack Welch at one time simply dispersed the strategic planning departments at GE when he was CEO… Another opinion is possible, that such departments are needed to the extent that they help the management build the necessary management system, etc. … How is the functionality of the strategic planning department determined? – Just as in the case of any other department – from the goals and objectives set, from the organizational context (such as a holding company), the scale of the business, the “maturity” of management practice, corporate culture, etc.

The article proposes to study just one facet of this “polyhedron” – to look at the evolution of the views of the classics of the “SSP genre”, D. Norton and R. Kaplan, and to correlate their ideas with the realities of our market:

• the views of D. Norton and R. Kaplan on the functionality of the OSM in 2006 and 2010,
• analysis through the prism of the classics of “the role of the OSM – the processes of the OSM” of a small fragment of the domestic market in 2010 from two sides (let’s assume that this fragment is a kind of “fractal” of the market, holistically reflecting the market):
•    from companies looking for heads of strategic planning departments and presenting certain (symptomatic) functional requirements to them,
•    from employees who held these positions and who report their functional experience in this area in open Internet sources.

About the name…

The question seems to be not very important, but it is symptomatic and adds a bit of color…

In different companies, departments are called differently:

• Strategic Planning Department,
• strategic management office,
• Department of Strategic Development,
• management of strategic planning and business analysis, etc.

The article will use the abbreviation OSM for one of the listed name options, even if only because this is what the classics have been saying lately. The name of the department, of course, reflects with some conventionality the substantive aspect of its activities. If the classics of the BSC suggest that the head of the department be responsible not only for the development, but also for the implementation of the strategy, then the name of the department (OSM) proposed by them does not contain an emphasis only on strategic planning, as is often the case with us, but reflects the entire system of strategic management as a whole, as its area of ​​responsibility. At the moment, in the name of the department we often hear the functionality of strategic planning, analysis and development, so far without claims to the implementation of the strategy.

So what is the functionality of the OSM and what is the OSM – is it more of a staff function “under the general”, a real strategist, or a source of development ideas, change management in accordance with strategic priorities, or something else…?

In the article “Strategy Management Department” (in an old issue of Harvard Business Review for 2006), R. Kaplan and D. Norton revealed their understanding of the functionality at that time (for the sake of consistency of terminology in this article, the name “strategy management department”, SMD, has been replaced by SMD):

1. Development and maintenance of indicator maps

1.1. annual changes to strategic plans should be generally aligned with the corporate strategy and indicator maps
1.2. detailing the annual business plan downwards based on the BSC
1.3. standardization of terminology and the system of measuring indicators
1.4. selection of software for reporting on the BSC
1.5. correct use of software for the BSC
1.6. supervision of maintaining the consistency of data in the BSC system
1.7. control over the processes of collecting and verifying data, preparing reports
1.8. control over the processes of developing indicator maps
1.9. should be the main information resource for the BSC and a training center

2. Coordination of strategy in the organization

2.1. a common understanding of corporate strategy
2.2. systematic management of coordination
2.3. alignment of strategy with divisions
2.4. alignment of strategy with external partners
2.5. coordination of strategic priorities with the activities of support services
2.5.1. planning and budgeting
2.5.2. allocation of human resources
2.5.3. knowledge management

3. Revision of strategy

3.1. holding meetings to review and correct the strategy
3.1.1. preparation, – identification of strategic problems using the BSC

4. Developing a strategy

4.1. analysis of the competitive environment
4.2. scenario planning
4.3. strategy meetings, organization and holding
4.4. information and consulting support on strategy issues
4.5. budgeting (OSM only coordinates, participates)

5. Implementation of the strategy

5.1. Preparation of performance reports according to the Balanced Scorecard
5.2. Management of strategic initiatives (OSM only participates)
5.3. Informing about the strategy (about its essence, goals, methods of implementation)
5.4. Maintenance of personal indicator cards (OSM only participates)

6. Gaining new knowledge about strategy

6.1. comparative assessment
6.2. knowledge sharing on best practices
6.3. training and change management
6.3.1. training the Company’s personnel in the basics of the BSC

In the latest book, published in 2010, “The Strategy Excellence Award,” the classics have already presented the functionality – roles, processes and responsibilities of the OSM – in a slightly different way, where a large role is given to the integrative functions of the OSM:

Table 1. Roles, processes and responsibilities of the strategic planning department

Role of the department	Strategic Management Processes	Department Responsibility
Architect	Definition of the strategic management model and rules	Manages the process
	Developing a Strategy Management Process
The “owner” of the process	Strategy development	Manages the process
	Planning a strategy
	Aligning the organization with strategy
	Analysis and adjustment of strategy
Integrator	Providing links with operational planning and budgeting	Integration with CFO processes
	Providing connection to key operational processes	Integration with the processes of the director of production, logistics, etc. operations
	Providing communication with the HR department, IT department	Integration with the processes of the HR Director, IT technologies
	Communication strategy	Integration with corporate communications department processes
	Managing Strategic Initiatives	Integration with program management department processes
	Sharing best practices	Integration with Director of Knowledge Management processes

Next, we will take the next step – we will take three prominent companies from open Internet sources and examine the functional requirements for the head of the strategic management system through the prism of “roles – processes of the OSM”. Of course, it is not a fact that the specified functional requirements exhaustively reflect the existing strategic management system in these companies, but, nevertheless, directly or indirectly, the accents are placed and some general idea can be formed.

Next, we will similarly try to analyze the functional experience of three OSM managers offering their competencies on the labor market, based on the same open sources.

And, finally, comparing the opinion of the classics and the harsh reality of our market (or rather, its small fragment), we will try to formulate a “test” conclusion, even at the level of risky assumptions.

An example of functional requirements for managers/key employees of OSM departments in the labor market in 2010 (from open Internet sources).

Below is an example of the competencies and functionality of OSM managers in the labor market in 2010 (from open Internet sources).

Table 3. Supply on the labor market – functionality of the heads of the OSM.

ROLES\  OSM processes	Head of Strategic Planning Department	Head of Strategy Department	Director of the Strategic Planning Department
ARCHITECT: Defining the strategic management model and rules	Organization of the department of strategic planning and development (regulations, methodology, structure, interaction processes) Implementation of the strategic management system in the holding	formation of a corporate strategic planning system	Management of the Strategic Planning Department, planning of activities and reporting on completed work; Management of employees of the Strategic Planning Department, training, rotation and hiring of employees; Implementation of a unified methodology of strategic planning in subsidiaries and affiliates
ARCHITECT: Developing a Strategy Management Process	Development of recommendations for the implementation of the strategic planning process in the company, corporate strategy, business strategy and formats	Development of normative and methodological documentation for planning	—
PROCESS OWNER: Strategy Development	Strategic analysis, Competitive analysis, business intelligence Preparation of strategic development documents for the Board of Directors	conducting strategic analysis (PEST, SWOT, etc.); determining strategic risks	Analysis of changes in the macroenvironment (including: macroeconomic statistics, administrative and political activities, changes in the legislative and regulatory framework); Consolidated analysis of external opportunities and threats; Assessment of engineering, design, construction, commercial and other competencies of the company in terms of entering new markets, expanding and improving the quality of services provided; Identification and analysis of the company’s competitors (including: market position, competencies, statistical information, strategy, strengths and weaknesses in relation to the company); Formation of an up-to-date database and analysis of the company’s potential clients (including: market position, investment plans, development plans, internal decision-making procedure); Conducting economic modeling of the company’s activities; Determination of scenario conditions for the business planning process of the company and its subsidiaries. Determination of possible target values ​​​​for contracting, revenue and other performance indicators of the company and subsidiaries depending on market trends;
PROCESS OWNER: Strategy Planning	strategic planning, organizational and financial modeling, Management of the corporate strategy development process	—	Participation in the formation of medium-term Key Performance Indicators (KPIs) for functional areas of activity, taking into account scenario conditions and the company’s development strategy; Provision of information to subsidiaries and affiliates from the Department’s databases necessary for developing strategies. Support for the development and coordination of subsidiaries and affiliates’ strategies;
PROCESS OWNER: Aligning the organization with strategy	Development of an organizational and structural solution and a holding model Development of new structural and process solutions at all levels of holding management	participation in the company restructuring project; optimization of functionality (within the company, with factories); increasing the efficiency of the management model	Determining the need, assessing the possibilities and effectiveness of alliances with the company’s partners; Analysis of the effectiveness of the company’s business processes;
PROCESS OWNER: Analysis and adjustment of strategy	—	monitoring strategic risks, updating and monitoring the implementation of corporate strategy; establishing a system for monitoring the implementation of plans	Monitoring the status and forecasting changes in traditional and prospective markets of the company’s presence, as well as in related markets. Monitoring and organizing the assessment of technological innovations and scientific trends; Monitoring and adjusting the scenario conditions of the company’s and subsidiaries’ activities taking into account changes in the market situation; Monitoring the performance indicators of the company and business units. Conducting an analysis of the causes of deviations of actual activities from strategic goals and initiating corrective actions on the activities or adjustments to the strategy of the company and/or subsidiaries’ and subsidiaries’; Collecting information and preparing reports on the implementation of the strategy of the company and subsidiaries’ and subsidiaries’. Conducting benchmarking, comparative analysis of the company with the leaders of the engineering services market;
INTEGRATOR: Providing links to operational planning and budgeting	—	—	—
INTEGRATOR: Providing connection with key operational processes		—	—
INTEGRATOR: Providing communication with HR departments, IT departments	—	—	—
INTEGRATOR: Communication of strategy	IR and Shareholder Relations Management	—	Ensuring coordination of the company’s strategy and subsidiaries and affiliates. Development and communication to subsidiaries and affiliates of agreed terms of joint development; Coordination of information exchange between subsidiaries and affiliates in the process of strategic planning
INTEGRATOR: Management of strategic initiatives	—	management of internal corporate projects; participation in the project of setting up serial production	Research and evaluation of potential partners of the company (suppliers of equipment and services, design and engineering organizations) Change in the efficiency of the company’s business processes;
INTEGRATOR: Sharing best practices	—	—	—

The review clearly shows that not all roles and processes of the OSM reflect the corresponding functionality. There is a lack of attention to the roles of the integrator, management of strategic initiatives, which, in general, corresponds to the demand at the moment. Traditionally, much attention is paid to analytical functions.

To summarize…

The customer for the formation of a strategic management system is the guarantor of its efficiency and effectiveness, accordingly, the strategic management system built by the OSM division is efficient and effective to the extent that its customer “lives” in the system built for him, observes the rules of the system and “conducts” other top managers to observe these rules. From observations, there are often cases when the customer “bypasses” the system in one way or another, positions himself “above the system”. Or another option, the customer shows such great “strategic” flexibility that he thereby excludes the possibility of sustainable existence of the system. And the more often the customer “bypasses” the system in one way or another, the more it discredits the system in the eyes of the company’s management team to the level of a set of conventions, a ritual. In this case, top managers will also not resist the temptation to bypass the system, copying not the words, but the actions of the customer of the system. Therefore, building a strategic management system is a delicate matter, you can’t get by with regulations and rules, and the motivation system will not always help …