SMO 101: Learn How to Design and Implement a Strategic Management Office

Executing strategy the right way is not everyone’s business. The reported failure rates for strategy execution stand at 60% to 90%. A study of large organizations in 8 industrialized countries by Bain and Company revealed that 7 out of 8 companies failed to achieve profitable growth from 1988 to 1998, and very few achieved their strategic objectives and targets.

The reason for such astronomical failure rates for Strategy Execution are, primarily, fragmented and cumbersome strategy management processes. Typically, the Strategic Planning process commences by organizing a one- to two-day retreat at an off-site location, and concludes after performing a SWOT analysis, comparing numbers with previous year’s performance, and reviewing the changing market dynamics.

Specific units draft their own annual strategic plans, which are rarely communicated with the other units. For instance, the Finance department’s annual budgeting is typically not linked to strategic priorities. There is lack of alignment between the different units. Senior leadership spends too little a time (some spend zero hours) on corporate and business units’ strategy discussions per month. They are mostly engrossed in tactical issues and fire-fighting.

To manage such high failure rates, many organizations have experimented with utilizing the Balanced Scorecard as the focus of their strategy management approach and aligning their critical management processes. These dynamic companies transform their core management processes to integrate with strategy execution, by creating a dedicated corporate level office, called the Strategy Management Office (SMO). The line managers and employees have the ultimate responsibility to implement strategy, however, SMO — as a central command and coordination center — ensures that strategy is neither skipped from key processes nor the processes are ineffectual across the different business units.

The SMO and senior management interpret the strategy into a Balanced Scorecard (BSC), assist business units in creating their specific scorecards, and aligning those with the corporate objectives. The Office gathers data and outlines reporting processes for the BSC, shares the new strategy across the board, and keeps the top management updated on any issues (revealed by the scorecard) necessitating action.

To effectively implement the BSC, the Strategy Management Office should lead 9 key Strategy Management Processes under 3 distinct process groups:

• Core Processes
• Desirable SMO Processes
• Integrative Processes

Let’s take a deeper look at the 3 process groups and the 9 processes under them.

Core Processes

The SMO is responsible for managing the core processes as it is the natural owner for the Balanced Scorecard, and can initiate these processes without interfering with other departments’ work. The SMO ensures that all management processes are cohesive, and are in perfect alignment with the strategy. The core processes include the following processes:

• Scorecard Management
• Organization Alignment
• Strategy Reviews

The SMO facilitates in translating the updated strategy into the scorecard map and objectives during the annual strategy meeting. The Office guides the management team in identifying targets and strategic initiatives required to achieve targets, holds periodic trainings on the BSC management system; and coaches project leaders about the BSC tools, terminologies, and measurement definitions. The SMO supervises the data collection and reporting process, selects the BSC software system to draw data automatically from various databases, and ensures the integrity of the reported BSC data.

The SMO also aids the organization in developing a consistent view of strategy, coordinating between complex business units, and communicating the BSC across the entire organization. The SMO also facilitates in undertaking strategy reviews, evaluating the Balanced Scorecard performance, monitoring progress on plans, and tweaking strategic interventions.

Desirable Processes

The desirable SMO processes are already being performed in the organization by the existing organizational units. These processes should eventually be incorporated into a central organization with strategic focus, i.e., the SMO. By augmenting the role of the SMO, the desirable processes can become more closely linked to strategy execution. The three processes that fall under the desirable processes group include:

• Strategy Planning
• Strategy Communication
• Initiative Management

The strategic planning function performs external and internal competitive analysis, conducts scenario planning, organizes and runs the annual strategy meeting, and educates the executive team on strategic options. Likewise, effective communication of strategy and the Balanced Scorecard measures, targets, and initiatives to all employees is vital for their contribution to the strategy. The SMO should serve in a coordinating role — reviewing the content and frequency of messages to ensure these correctly communicate the strategy — as a trainer to ensure that sufficient knowledge of BSC is included in employee education programs, and help in crafting the strategy message delivered by the CEO. During the year, the SMO needs to monitor all strategic initiatives to ensure that they are being actively managed.

Integrative Processes

Existing departments retain the prime responsibility for the integrative processes so as to benefit from the discipline knowledge and professional expertise of the concerned department. The SMO ensures the alignment of these critical processes with the strategy. The processes that fall under the integrative processes group include:

• Planning & Budgeting
• Workforce Alignment
• Best Practice Sharing

Without a dedicated SMO, functional plans are too narrow and tactical, making it difficult for an integrated strategy to be executed. The office should coordinate with the finance unit to ensure that budget targets are consistent with those set during the strategic planning process, and that the financial plans and budgets incorporate funding and personnel resources for strategic initiatives. Similarly, the SMO helps in augmenting the human capital processes and linking employee development to strategy. Likewise, the SMO should facilitate the identification and communication of best practices and ideas across departmental, functional, and business unit boundaries.

Strategic Management Office (SMO) Implementation

For organizations aspiring to implement the SMO should focus on the following 2 key aspects:

1. Transforming the Organizational Model
2. Fulfilling Resource Requirements

Transforming the Organizational Model

There are 4 different organizational models that have been found to be working at organizations striving to implement the strategy management office, including:

1. Direct to CEO
2. Direct to CFO (with direct access to CEO)
3. Indirect to CEO (minus 1 level)
4. Indirect to CEO (minus 2 levels)

Fulfilling Resource Requirements

In evaluating SMO resourcing requirements, take a look at the slide below, which maps the 9 Strategy Management Processes to their respective SMO roles.

Interested in gaining more understanding on how to effectively execute the Strategy Management Office? On the Flevy marketplace, we have a series of 3 editable PowerPoint presentations on the SMO:

• Strategic Management Office (SMO) Primer
• Strategy Management Processes
• Strategic Management Office (SMO) Implementation

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“As a small business owner, the resource material available from FlevyPro has proven to be invaluable. The ability to search for material on demand based our project events and client requirements was great for me and proved very beneficial to my clients. Importantly, being able to easily edit and tailor the material for specific purposes helped us to make presentations, knowledge sharing, and toolkit development, which formed part of the overall program collateral. While FlevyPro contains resource material that any consultancy, project or delivery firm must have, it is an essential part of a small firm or independent consultant’s toolbox.”

– Michael Duff, Managing Director at Change Strategy (UK)

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight — it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

“Several times a month, I browse FlevyPro for presentations relevant to the job challenge I have (I am a consultant). When the subject requires it, I explore further and buy from the Flevy Marketplace. On all occasions, I read them, analyze them. I take the most relevant and applicable ideas for my work; and, of course, all this translates to my and my clients’ benefits.”

– Omar Hernán Montes Parra, CEO at Quantum SFE