An increasing number of firms are employing a Chief Strategy Officer (CSO).  Generally the CSO’s duties include strategy formulation, strategy implementation, and strategy evaluation. In an article published in 2014, Menz and Sheef used a sample of 200 S&P 500 firms over a five year period to determine what factors contribute to firms hiring a CSO and what factors contribute to a CSO affecting a firm’s financial performance.  Of the sampled firms, on average (during the study) 42 percent employed a CSO. The number of firms employing a CSO in the study increased from 34 percent in 2004 to 49 percent in 2008.

While many factors may lead to a firm’s decision to appoint a CSO, the authors focused on five key areas that prior researched suggested as most important and most likely to lead to a CSO appointment.

1)      As the business portfolio increases (the firm is more diversified)

2)      As acquisition activity increases

3)      As alliance activity increases

4)      As a firm’s size increases

5)      As top management team (TMT) interdependence increases.

Results of the study revealed that increased TMT role interdependence and increased acquisition activity were most commonly associated with hiring a new CSO.  As the business portfolio increased, firms also increasingly hired (or appointed) a CSO, but the relationship is mild.  The authors found no statistical evidence to conclude that either firm size or increased alliance activity led to hiring new CSOs.

Interestingly enough, there was also no statistical relationship between firms having a CSO and firm performance, even after controlling for additional variables.   However, the authors concluded that the CSO to performance relationship needs to be researched further before any bold conclusions can be drawn.

Source:  Markus Menz and Christine Sheef. “Chief Strategy Officers: Contingency Analysis of their Presence in Top Management Teams.” Strategic Management Journal. March 2014.  Vol. 35  Issue 3, 461-471.