Corporate support functions like IT, HR, Finance, Administration have generally looked to carry out their respective functions in an efficient and organised manner trying to ensure that the line management is able to function effectively and that they are able to achieve the objectives set for the organisation – short term & long term. The support function role is generally more transactional than strategic. In other words
“They fulfill day-to-day needs, meet legal and regulatory requirements, accommodate requests from business units, and put out the inevitable fires that erupted when there was a conflict or urgency. When functional leaders were asked to make improvements, it meant doing the same things more efficiently and at a greater cost savings.”
Can functional leaders act strategically too? Is it required?
“Over the past few years, CEOs, business unit leaders, and functional leaders themselves have been asking support functions to deliver more value to the organization at large. Instead of balancing services among all business units equally, or striving to be best in class in everything, support functions such as HR, IT, and finance are asked to be “fit for purpose”: more closely aligned to the enterprise strategy. Functions that are more directly related to individual brands and business units—which may include operations, sourcing, marketing, sales, and R&D—have also been affected, though not always in the same way as their counterparts at corporate headquarters.”
“How, then, can you take on this new strategic role, maximizing your effectiveness, without being torn into pieces? You can accomplish it only by changing the way your function conducts business, overcoming the inertia of embedded habits and practices, and putting strategic activities first, before the usual long list of critical tasks and service requests. That is the purpose of the new functional agenda.”
What is that being said is simply this:
“Strategy is about making choices. Without the metrics to provide a clear view on what good looks like it is hard to make those choices objectively. This has two consequences.
First, it encourages a focus on cost rather than value. How many times have you seen a ‘strategic review’ of a support function being simply another exercise in cost reduction? Costs are easier to measure and therefore something on which managers can show demonstrable progress.
Second, it tends to discourage leading edge innovation. For a market-facing unit there may be huge rewards in being first to market with an untried business model if it proves successful. But for a support function, without the value metrics which enable it to articulate a compelling business case, the risks rarely seem worth it. In short, functional strategy is more about being a fast follower than a market leader. Hence, often, the emphasis is on benchmarking, on understanding what existing best practice is, rather than on breaking new ground. This supports some types of change, for example following a well-proven outsourcing model for financial accounting. But it can prevent more ambitious strategic change that lacks an obvious cost justification, for example a new approach to managing talent.”
“The accompanying diagram shows that value creation has three levels of execution, of which the transaction is only the first level. The other two, service execution and strategy execution, both promise higher rewards but also involve higher risks. They require that support functions share the risks of customer-focused performance targets.”
Figure Source: Iveybusinessjournal.com
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Source: Strategy+Business, iveybusinessjournal.com, berkeleypartnership.com
GR Advisory & Training 