A recent survey of leading European companies, conducted by the Ashridge Business School and University of St. Gallen and reported in the MIT Sloan Management Review (Spring 2012), suggests that links between corporate functions and the CEO could be stronger.
Some of the reported consequences of these weak links include: mixed performance, more bureaucracy, a sense of C-Suite interference, lack of cooperation from operating managers, and a focus on transactional issues as opposed to value-added ones.
The Sloan article, written by Andrew Campbell, Sven Kunisch, and Gunter Muller-Stewens and titled, “Are CEOs Getting the Best from Corporate Functions?” states, “At too many large companies, corporate functions like HR and IT don’t get enough strategic direction from the CEO.” I’d add EHS, sustainability and risk management functions to this list.
More than 50 function heads of leading companies in Europe reported that “few CEOs give enough direction to the heads of their corporate-level functions,” and that “fewer than one in 10 function heads felt they had received sufficient guidance on how their function should contribute to the company’s overall strategy.” The findings also indicate that while company functions had KPIs, they “rarely assessed the overall contributions of their function,” or “addressed the function’s overall performance by, for example, asking the operating division managers whether the function is adding value.”
The authors suggest four “basic—but vital—changes to their normal management process”:
- Define three to seven major sources of corporate-level added value. Expand the strategy process to include corporate functions that add the greatest value. I suggest that EHS/S and the risk management functions should be among these.
- Review the strategies of corporate functions annually. While this seems obvious, it’s not done with regularity. EHS/S and risk management executives can help by making sure their functional strategies align with the company’s. I urge clients to be proactive with this and seek guidance from the C-Suite early in their function’s strategic planning cycle.
- Develop a corporate initiatives matrix. Of the four items identified, this is the one I’ve seen done best in companies I work with.
- Break out shared services. Request that shared services be managed differently than other corporate functions, with a focus on service activities rather than control. I’ve observed this cut both ways and am not sure this is always sound for EHS/S and risk management functions. I’ve seen shared services models in which EHS/S and risk management were lost within the larger shared services structure and weakened visibility to the C-Suite.
At numerous company engagements, I’ve observed EHS and sustainability vice presidents and directors wrestle with some of these challenges. Redinger 360’s Risk Management Check-Up for EHS and Sustainability can strengthen the CEO link and help EHS/S and risk management functions demonstrate value to the C-Suite. The 360 Check-Up is a high-level diagnostic that provides the needed KPI suggested by Campbell et al, and helps CEOs, CFOs, and the EHS/S and risk management functions reduce non-financial risk and insurance and operational costs, while ensuring business continuity—and peace of mind.
© Redinger EHS, Inc. (2010)