Succeeding with corporate sustainability strategies in multi-business organizations

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Succeeding with corporate sustainability

strategies in multi-business organizations

Drivers and challenges in strategy formulation and implementation

Amanda Thorén

Industrial and Management Engineering, master's level 2021

Luleå University of Technology

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ACKNOWLEDGEMENT

The current report is written by me, Amanda Thorén, and constitutes the final project of my master’s degree in Industrial Engineering and Management, with a specialization in Innovation and Strategic Business Development.

I would like to make this section a contribution to all who have helped and supported me during this exciting and challenging project. I would like to thank my supervisor at the university, Mats Westerberg. Thank you for all the encouragement, knowledge and feedback you have given me. I would also like to thank my supervisor at the case company. Thank you for giving me truly valuable guidance and support along the way, I am forever grateful for having the opportunity to write my thesis at the organization. Further, I would also like to give a big thank you to each and every one of the respondents, thank you for your commitment and time. And lastly, I would also like to give a special thank you to my family and friends for giving me invaluable love and support during this project, and throughout my education. Thank you for always being there for me.

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ABSTRACT

Purpose - The purpose of the current study was to gain a broader understanding of corporate sustainability strategy formulation and implementation in multi-business organizations. Specifically, regarding how to succeed with efficiency, alignment and consensus across strategic levels.

Method - The study was conducted through a single case study in a multi-business organization operating in the defense sector globally. A qualitative method with 18 semi-structured interviews to collect data was used to gain a broad contextual understanding of the research questions. The data was inductively analyzed through thematic analysis.

Findings - The primary findings of the study are 18 themes of drivers and challenges for successfully formulating and implementing corporate sustainability strategies in multi-business organizations. Considering the drivers and challenges, distinctions between the strategic levels were outlined, and predominantly indicated that the role of the corporate level enables the success. Additionally, a visual understanding of four contradictions that needs to be managed by the corporate level was provided - autonomy and compliance, cooperation and competition, exploitation and exploration, communication bottom-up and top-down.

Theoretical and practical implications - The study has contributed theoretically by increasing the knowledge regarding drivers and challenges for formulation and implementation of corporate sustainability strategies in multi-business organizations. Further, the study contributes with managerial support by illustrating distinctions of the key drivers and challenges between the strategic levels, and by visualizing the strategic contradictions that needs to be balanced by the corporate level, to manage corporate sustainability strategies in multi-business organizations successfully.

Limitations & Future research - The research concerned the strategic management process, with a focus on the internal organization, whereas the findings revealed the significance of incorporating an external perspective. Thus, future research could further investigate the exchange with external stakeholders. Moreover, this research was limited by being a single case study, and in future research it would be interesting to investigate other industries.

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1 INTRODUCTION

In the following chapter the background of the research problem will be discussed, as well as the theoretical and practical gap. Then the purpose of the current study will be presented together with the research questions.

1.1 Background

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The purpose of dividing an organization into strategic levels with several SBUs, as opposed to having a single business, lies in taking advantage of the diversity of the organization (Misangyi, Elms, Greckhamer, & Lepine, 2006). Galunic & Eisenhardt (2001) explains how separation of business areas within an organization creates benefits to specialize, compete and sharpen the different businesses within the business. Moreover, it gives the ability to reallocate resources between the SBUs and OUs where needed, since the cash-flow and profits inherently returns to the corporate center (Goold & Campbell, 2002). The corporate level have the possibility to disperse decisions and responsibilites, to minimize conflicts of interests between SBUs and OUs. According to Shahri (2011), the role of top management is to unify the SBUs and OUs, by creating a joint purpose and direction for the entire organization.

1.2 Problem discussion

According to Seifzadeh & Rowe (2019), a major challenge for MBOs is the divergence between interests across the organization. This is further acknowledged by Goold and Campbell (2002), which states that MBOs struggle with orientation of the overall corporate strategy. Both the strengths and challenges of the MBO lies in the organizational decentralization of responsibilites (Dellestrand, Kappen, & Lindahl, 2020; Goold & Campbell, 2002).

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Many MBOs fail with their strategies due to trouble in the implementation phase (Desmidt & George, 2016; Hrebiniak, 2006). A reason for strategic failure is, according to Hrebiniak (2006), the deficiency of efficiency. The definition of Efficiency that will be used in this research is in accordance with Wilson, Wnuk, Silvander, & Gorschek (2018), which explains it as “the relation between (1) the accuracy and completeness with which users achieve certain goals and (2) the resources expended in achieving them” (p. 267). A definition of efficiency which takes the synonym effectiveness into consideration. Strategic efficiency is all about doing the right things, the right way (Hrebiniak, 2006). According to Baskarada and Hanlon (2017), efficient strategies are all about supporting the internal resources and abilities to fit the external requirements. The authors further argue that traditional approaches to manage MBOs are too simplistic in nature, not capturing the entire reality such organization faces today, in terms of “external opportunities and threats and internal strengths and weaknesses” (p. 468).

Another challenge is, according to Reynolds and Yetton (2015), the lack of alignment, which is attained through coordination and cooperation between the corporate-, business and functional level strategies. In other words, the creation of confluence and synergies between the top management, SBUs and OUs. The definition of strategic Alignment can be viewed as the “synergies between strategy, units, processes, organizational resources and technological capabilities” (Ghonim, Khashaba, Al-Najaar, & Khashan, 2020, p. 3), together with the consideration of the external and internal business environment. Alignment is a dynamic concept, which adapts as the business environment changes (Reynolds & Yetton, 2015). Additionally, Desmidt and George (2016), explains another factor for strategic shortcomings to be that, ”appropriate implementation of strategic activities is predicated on the actions of lower-level organizational members […], there is often a lack of knowledge regarding the organizations priorities at these levels” (p.4). This is in line with the viewpoint of Kellermanns et al. (2005), which states that organizational strategies are rarely understood and accepted by all managerial levels of MBOs, due to that the strategic priorities of the organization are often a fuzzy question mark lacking consensus (Kellermans, Walter, Floyd, Lechner, & Shaw, 2011). The definition of Consensusthat will be used in this study is in accordance to Kellermanns, Lechner, Walter, and Floyd (2005): “Strategic consensus is the shared understanding of strategic priorities among managers at the top, middle and operating levels of the organization” (p.721).

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strategies (CSS) into their businesses (Kunisch, Menz, & Collis, 2020; Meuer, Koelbel, & Hoffmann, 2020; Kantabutra & Ketprapakorn, 2020). The incorporation of sustainability strategies has, however, been proven to be challenging in practice (Kantabutra & Ketprapakorn, 2020; Meuer et al., 2020), and this is especially true in MBOs which is currently the leading organizational structure for large companies (Reynolds & Yetton, 2015; Kunisch et al., 2020). The expression Sustainable development was first founded by the Brundtland commission (1987) in the UN report Our common future, where they defined that “sustainable development is the kind of development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (p. 15). This quote laid as a foundation when sustainability was taken into a corporate context, to take actions and build operations towards sustainable development (Rauter, Engert, & Baumgartner, 2016). There have been many definitions created based on this, but perhaps the most common is the Triple bottom line by Elkington (1998). He states that there are three dimensions to consider simultaneously to successfully manage corporate sustainability; the environment, social responsibility and economic performance. In addition, according to Kitsios et al. (2020), corporate sustainability represents the alignment between the three dimensions together with the modules of corporate strategy; formulation and implementation. The goal of a CSS is to increase the positive impact a company has on the environment and society, and by that gain a greater competitive advantage and increase the economic performance of the company (Engert & Baumgartner, 2016).

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term company performance. Unfortunately, the main difficulty of this is that managers seem to ignore the importance of incorporating the business strategy into the development of sustainability (Rauter, Engert, & Baumgartner, 2016; Bonn & Fisher, 2011). This shows that there is a mismatch between the formulation (intentions) and implementation (actions) of CSS. The decisions that are made for the development of corporate sustainability are located at the strategic levels of a company (Kitsios et al., 2020; Engert et al., 2015). Thus, the strategic formulation and implementation play a significant role in the implementation of CSS. Salzmann, Ionescu-Somer and Steger (2005), argues that the difficulty lies in the many factors to simultanously take into account (e.g. industry, products, serices, processes), and for success it is critical to make the strategy customized, with a perfect fit to each company. Arguably, making it challenging for MBOs wich have many factors to orchestrate and fit together. Furthermore, according to Figge, Hahn, Schaltegger and Wagner (2002), another challenge for succeeding with corporate susatinability strategies is the difficulty in integration across the company. This is especially challenging in MBOs, since the purpose of the SBUs is to be autonomous and decentralized, and CSS demands a certain need for compliance to unify the overall strategy (Kellermanns, Lechner, Walter, & Floyd, 2005).

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Additionally, many scholars acknowledge that existing research on CSS are limited in terms of how managers can execute them in practice (Gupta & Gupta, 2020; Kantabutra & Ketprapakorn, 2020). In earlier studies, few have focused on CSS in the aspect of how to implement it (Kitsos et al., 2020). Moreover, the vast majority of corporate sustainability studies have had a focus from a sustainability perspective, and not from the perspective of business strategy (Kitsios et al., 2020; Rauter et al., 2016). Hence, missing many aspects of management strategy, e.g. internal stakeholder involvement, market demands, communication, and organizational culture. To fill the gap, this study will come from a perspective of strategic management, to research the integration of corporate sustainability across strategic levels of MBO. Contributing to existing literature in the domains of strategic management in MBOs, and CSS formulation and implementation, with additional knowledge about the drivers and challenges of merging the topics.

1.2.1 Purpose

The purpose of the current study is to gain a broader understanding of CSS formulation and implementation in the context of MBOs. Specifically, concerning how to succeed with the strategic management process in regard to the characteristics of efficiency, alignment and consensus, across strategic levels. The study will be conducted as a single case study in a multi-business company based in Sweden, operating in the defense sector globally.

Research Questions

RQ1: What are the key drivers for successful formulation and implementation of corporate sustainability strategies in MBOs?

RQ2: What are the key challenges for successful formulation and implementation of corporate sustainability strategies in MBOs?

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2 THEORETICAL BACKGROUND

In this chapter, theories and concepts of corporate sustainability, levels of strategy, and the strategic management process in multi-business organizations, will be defined and linked to drivers and challenges within the field.

2.1 Corporate sustainability

Integrating and achieving corporate sustainability (CS) in strategies of all organizational levels requires a managerial understanding of what sustainability actually incorporates (Epstein & Roy, 2003; Rauter et al., 2016). Today, one specific definition of corporate sustainability does not exist (Radomska, 2015; Engert & Baumgartner, 2016; Bonn & Fisher, 2011). Hence, interpretations as to what needs to be incorporated does occur, and many frameworks only includes parts of what needs to be incorporated in CS (Epstein & Roy, 2003). According to Bonn and Fisher (2011), being able to attain organizational sustainability requires “addressing the different aspects of sustainability during the strategic decision-making process and incorporate them into their corporate, business, and functional levels of strategy” (p. 5). In moving towards formulating and implementing corporate sustainable strategies, Epstein and Roy (2003) argue that the starting point is to create an understanding of CS. They have developed a framework introducing the key characteristics that need to be considered, called “The nine principles of Corporate sustainability”(see Appendix) (Epstein & Roy, 2003).

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Organizational structure: The sustainable strategy formulation and implementation requires confluence and coordination between and across different organizational levels (Engert & Baumgartner, 2016). According to Rauter et al. (2016), the organizational structure are influenced by internal (e.g. company size and processes) and external factors (e.g. market position and industry).

Organizational culture: The beliefs, attitudes and values which impacts thought and action of the individual and the organization, can be known as the culture of a company (Engert & Baumgartner, 2016). The organizational culture is according to Bonn and Fisher (2011), one of the main aspects in successful formulation and implementation of sustainable strategies. This, since the organizational culture directs the viewpoint of sustainability through the entire company, creating an opportunity to foster priority and engagement around sustainability (Rauter et al., 2016).

Leadership: Managerial values and attitudes highly impact the sustainability perspective through the organization (Engert and Baumgartner, 2016). According to (Radomska, 2016), management commitment affects employee motivation and organizational capabilities and resources, which is critical for succeeding with formulation and implementation of sustainability strategies.

Management control: In order for management to distinguish how the sustainability strategies performs, they need to use measurable evaluation indicators and routines (e.g. both financial and non-monetary) (Engert & Baumgartner, 2016). Rauter et al. (2016) explains how the Balanced scorecard is one of the most common for integrating sustainability within strategic management. According to Radomska (2016), management control supports the ability to adjust and improve the performance of the strategy formulation and implementation (e.g. resource allocation, change management etc).

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Communication: Communication both top-down and bottom-up, plays major roles in sustainable strategy formulation and implementation (Engert & Baumgartner, 2016 (Kellermans et al., 2011). According to Epstein and Roy (2003), two-way communication plays a significant role in enabling stakeholder relationships. Further, Rauter et al. (2016), argues that transparency through the organization supports the understanding of the overall sustainability goals and objectives. Thus, “communication reduces complexity and makes it manageable” (Engert & Baumgartner, 2016, p.2841).

2.2 Levels of Strategy

An MBO is a complex organizational form which formulates strategies at several levels (Paroutis & Pettigrew, 2007). They usually require several key managers from different strategic levels, that may have large geographical distances between them, with the needs to evaluate significant amounts of information. Thus, requiring a formal planning setting for the strategy (Vancil & Lorange, 1990).

This research will study the three organizational levels; corporate, business and functional. The strategy formulation and implementation take place at each of these levels, and the MBO relies on each level to get involved and cooperate to be able to formally coordinate the strategy planning and implementation (Vancil & Lorange, 1990; Martin & Eisenhardt, 2010). Thus, all levels play an important role for strategic success.

2.2.1 The role of the corporate level

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At the corporate level the strategy formulation entails; vision, objectives and goals to be decided for the entire organization (Vancil & Lorange, 1990). The strategic decisions the corporate level deals with concerns the relations between the organization and the business environment (Beard & Dess, 1981). Hence, the corporate level chooses the organizational design; in terms of which markets, products and services to establish in, and also the acquirement and distribution of resources to meet the goals of the strategy (Porter, 1987). In short, the corporate level selects which business the organization should enter in to.

2.2.2 The role of the business level

The business level represents the SBUs (Vancil & Lorange, 1990). The business level strategy focuses on how to compete in the business areas predominantly decided by the corporate level (Porter, 1987). The strategic decisions the business level manages are of structural character, where the essence lies in how to succeed with the execution of the strategies

The business formulation is the process of planning and deciding the scope of its operations within each SBU, to satisfy stakeholders both internally and externally (Beard & Dess, 1981). Furthermore, it is about defining the SBUs own objectives and create policies in relation the determined activities, to obtain the goals. To do this, the business level managers, need to turn to the corporate executives to justify decisions and ask for investments (Porter, 1987). This requires thorough analysis and planning, to be able to defend and persuade the top management (Roberto, 2004).

2.2.3 The role of the functional level

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2.2.4 Interrelations between the levels of strategy

The strategic levels obviously affect each other top down, but also bottom up (Altuntaş et al., 2014; Beard & Dess, 1981). The functional strategy relates to the outcomes of the organizational performance, since the decisions made in this level highly affects how the resources of the organization are used to achieve the organizational objectives and goals (Altuntas et al., 2014). Moreover, the difference between corporate and business formulation is the scope of perspective. The corporate level assesses the whole organization so all SBUs confluence together (Vancil & Lorange, 1990). The corporate level considers how changes in one SBU eventuate in another and as a whole, while the business level focuses on its own objectives and operations. Further, the business level emanates its objectives and goals to coordinate the functional level activities (Paroutis & Pettigrew, 2007). Thus, the business level orchestrates the functional level.

2.3 Strategic management process

The strategic management process consists of two parts; formulation and implementation (Rauter et al., 2016). The natural order of all strategies is to first formulate and then implement them (Gębczyńska, 2016). In the formulation phase the strategy is analyzed, developed, decided and planned (Cater & Pucko, 2010). In the implementation phase the strategy chosen is executed and taken into action (Radomska, 2014). Strategy formulation and implementation occur at every level of the MBO (Gupta & Govindarajan, 1984), and research have long proven that there are no “one-fits-all” strategy, instead each organization must make their own strategy customized for their needs (Rauter et al., 2016). Cater and Pucko (2010) states that the formulation and implementation phases are to be seen as continuous cycles, where you move iteratively between improving and adjusting to meet the ever-changing business environment. It is a dynamic process (Hrebiniak, 2006). Thus, both parts are highly interrelated, critical for the success of the strategy, and affects the outcome of one another.

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external environment in the formulation phase, challenges the strategy implemenation. Furthermore, how the strategy is defined and designed in the formulation phase, also affects the execution (Cater & Pucko, 2010). Thus, indicating that the formulation phase plays an immense role to the strategic success as well.

2.3.1 Drivers and Challenges in Multi-business unit organizations

This study will consider the corporate sustainability success factors into strategic management, and specifically regarding the three prominent aspects to succeeding with strategy formulation and implementation in MBOs; efficiency, alignment, and consensus. Drivers and challenges towards these three viewpoints across organizational levels will be described below.

Efficiency

For a company to be efficient, they need to be able to stay competitive by being able to adapt their organizational structure quickly to the rapidly changing markets (e.g. change management) (Baskarada & Hanlon, 2017; Engert & Baumgartner, 2016). According to Radomska (2014), formal systems and processes in the organization are drivers for efficient strategy formulation and implementation. Making it feasible to track and measure the success of the implementation, also gives the opportunity to improve and be more efficient in the future (Radomska, Model of successful strategy execution: Revising the Concept, 2014). For an MBO, this means being able to adapt in several markets with different customers, and products and/or services. According to Baskarada and Hanlon (2017), this is done mainly in the formulation phase, where effective planning is all about handling the identification and analysis of the external factors efficiently, to match them to the internal resources in the organization. This is supported by Engert et al. (2016), who also explains the importance of mapping the internal capabilities to the strategy. Resources are the assets a firm has to create for example, products, service or people, and capabilities are the ability to use the resources, e.g. processes, knowledge, skills and methods (Baskarada & Hanlon, 2017).

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levels of strategy. However, this has shown be challenging since one of the greatest obstacles in efficent strategy implementation is to sustainably distribute the strategy into the different organizational levels (Cater & Pucko, 2010; Gębczyńska, 2016; Radomska, Model of successful strategy execution: Revising the Concept, 2014). According to Hrebiniak (2006), sharing knowledge between SBUs and OUs is critical for achieveing efficency through the entire organization. The efficiency of the implementation impinge on how well the strategy is decomposed into comprehensible information and operations through each of the strategic levels of an MBO (Gębczyńska, 2016; Radomska, Model of successful strategy execution: Revising the Concept, 2014). The obstacle in doing so lies both in “individual components and systemic conformity between them, so that they can complement one another and trigger the synergy effects” (Gębczyńska, 2016, p. 1082). This to avoid conflict and missunderstandings leading to inefficiency.

Furthermore, involvement and communication with the stakeholders in this stage is, according to Engert and Baumgartner (2016), crucial for gaining an understanding of what is important in the formulation stage, to plan the use of internal resources and capabilities (Baskarada & Hanlon, 2017; Hrebiniak, 2006). According to Ghonim et al. (2020), “the existence of any organization stems from the value it provides to its customers” (p. 4). Stakeholder involvement is crucial early in the formulation process, engaging both external and internal stakeholders (Baskarada & Hanlon, 2017). Hence, managers and executives should include relevant stakeholders in the formulation process sooner than later, to find what is truly of value to them.

Alignment

Aligning strategies through an entire organization is a challenge, and especially when you have several interlinked businesses, with different systems and processes (Baskarada & Hanlon, 2017). It is critical to align the resources, capabilities, processes and market factors in line with the priorities and goals of the organization, to create competitive advantages (Radomska, Model of successful strategy execution: Revising the Concept, 2014). According to Reynolds and Yetton (2015), strategic alignment is about where to focus the allocations in the organization to utilize most of the capabilities, and how the prior decisions and strategies limits the options obtainable in the future.

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employee commitment plays a big role in aligning strategy formulation and implementation in MBOs. Succeeding with strategic alignment entails coordination and engaging in synergies between the top level, SBUs and OUs (Hrebiniak, 2006; Reynolds & Yetton, 2015). Paroutis and Pettigrew (2007) explains the need for organizational involvement, by stating that the execution phase should happen simultaneously with the formulation phase. This is in accordance to Hrebiniak (2006), who also states that the formulation and implementation phases are interrelated and argues that the lower levels of the organization primarily are implementing the strategies, and thus play a critical role in the formulation phase. The strategic success “demands a simultaneous view of planning and doing (Hrebiniak, 2006, p. 14).

Top management do not have all required knowledge to set specific strategies in the lower levels of the company, it takes involvement by all stakeholders to realize what is necessary to execute them (Paroutis & Pettigrew, 2007). Nevertheless, although top management cannot do it all, leadership commitment and communication are crucial drivers for successful formulation and implementation (Baskarada & Hanlon, 2017). It is important with top management commitment, but it is not the whole story. According to Frost et al. (2016), aligned coordination between SBUs happens when management control systems which promote collaboration between them are created. The purpose of management control systems is to engage the employees towards fulfilling the predominantly decided, overall strategy objectives (Gupta & Govindarajan, 1984). However, a challenge for most organizations is that the lower levels are not usually involved in the corporate strategy, making them ignore the holistic objetives of the organization as a whole (Hrebiniak, 2006). Thus, decreasing the alignment of the implementation.

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et al. (2020), the strategic priorities need to be reviewed, hence going back to the formulation phase to adapt the strategy to fit the current situation. Thus, cross-communication to understand the differences is needed to reduce divergence and increase consensus. According to Ghonim et al. (2020), digitalization is an enabler for this, where information systems can be of positive support in the implementation phase of strategies (e.g. spread information, decrease costs, place resources). According to Ghonim et al. (2020), the idea of alignment does not just apply in the beginning stages of strategic management but are the basis of following through the entire process seeking out adjustments along the way and secure strategy achievement. This can be viewed as a dynamic process where the importance lies in continuously improving the formulation and implementation of the strategy and being flexible.

Consensus

When consensus, shared views and beliefs occur in an organization, the organizational culture fosters decisions and perceptions that align to what is relevant towards the corporate strategy (Ghonim et al., 2020). Each manager and employee then have similar perceptions of the strategy formulation, and how to implement it. According to Ghonim et al. (2020), consensus is equally important during the formulation and implementation phase of the strategic process. This since achieving consensus concerning strategic priorities are crucial in gaining a common purpose in the organization (Baskarada & Hanlon, 2017). According to Desmidt and George (2016), strategic priorities “refer to the perceived relative importance of specific organizational-level initiatives or issues by the members of the organization” (p. 4).

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both be a limiting and driving factor in terms of creating competitive advantage, since it is the hardest thing for another firm to copy. Hence, employee motivation and satisfaction highly influence the success of the strategic process (Ghonim et al., 2020). In addition, incentives seem to be of help in increasing motivation during the implementation, in all levels of the MBO (Cater & Pucko, 2010). This since it creates encouragement and inspiration to attain the corporate objectives and goals.

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agreements could lead to less success in the strategic implementation, due to insufficient comprehension of the entirety of the issue (Scott, Cavana, & Cameron, 2015). Desmidt and George (2016) argue that an organizations strategic performance relies on internal communication and transparency. Communication effectiveness, in terms of information sharing and interactions fostering relationships, are key drivers for reaching understanding and appreciation of the strategic priorities (Desmidt & George, 2016). Thus, communication is the basis for attaining strategic consensus in the formulation and implementation phase.

2.4 Summary of theoretical background

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3 METHODOLOGY

In this chapter the method of the current research will be described, including the research approach, as well as the data collection and analysis. Additionally, at the end of the chapter measures for ensuring the quality of the study are presented.

3.1 Research approach

The research was conducted with a qualitative approach, where the opportunity of the exploratory character made it possible to analyze the data through an aspect of deeper appreciation of the subject (Leech & Onwuegbuzie, 2008). This was desirable since the study’s objective was to obtain a broader understanding of the already explored topic of strategy formulation and implementation, in the relatively unexplored subject of CSS in MBOs. Furthermore, the research problems focused on truly understanding various perspectives and alternative explanations of the drivers and challenges, making the approach of the study inductive in nature (Saunders, Lewis, & Thornhill, 2016). According to Thomas (2006), an inductive analysis indicates the “use of detailed readings of raw data to derive concepts, themes, or a model through interpretations made from the raw data by an evaluator or researcher (p. 238). Thus, the purpose is to let the theories of the collected data navigate the findings of the study (ibid). Moreover, a single-case study was chosen because it provides the ability to dive deep into the subject, and thoroughly describe the area of research in one specific context (Baxter & Jack, 2008). This was deemed necessary in the current research, since the purpose and creation of understanding where dependent on data from several strategic organizational levels. Thus, making it feasible to study a single case company.

3.1.1 Case selection

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BSEK during 2020. The organization consists of six SBUs, which all operates as individual companies to a large extent, all containing multiple OUs within them. In the current research 4 SBUs has been studied, and will hereby be referred to as alpha, beta, gamma, and delta.

The organization was chosen to be a good fit for the study since it is a large established MBO located in Sweden, which operates with its SBUs across the whole world. Additionally, the defense sector has known challenges regarding sustainability making it interesting to investigate such company. The organization has an outspoken sustainability commitment and follows the voluntary initiative Global Reporting Initiative (GRI). GRI is an international organization supporting companies throughout the world with sustainability reporting and communication (Our mission and history, 2020).

3.2 Data collection

The raw data collected in this research where made in two phases; the first phase included 18 semi-structured interviews across the strategic levels of the case company, and the second phase the evaluation and analysis of documents (e.g. website, yearly reports, internal processes/routines). Both phases where conducted with the purpose of answering all three research questions.

The first phase

The first phase includes the interviews, and was conducted in three stages, where the first stage

was about achieving an initial understanding of the case organization. These open-ended interviews where held at three separate times with one contact person at the case organization. The interviews where held with the purpose of achieving an understanding and context of the case company. Notes where taken during the conversations, but not recorded.

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commitment, to succeed with CSS. Moreover, roles responsible for the dimensions of sustainability are appointed at the highest strategic level. No such roles exist for the business or functional level. Hence, to ensure symmetry in the current research, managers within the SBUs and OUs where chosen by similar areas of operations. The areas selected where predominantly; strategy and development, sourcing and supply, environment and general managers of departments, see Table 2. Furthermore, the interviews were conducted with pre-made interview guidelines, constructed from the theoretical framework, and guidelines for each strategic level where created, see Appendix B. The questions where chosen to be both open and directed in nature due to the inductive nature of the study, and structured into four sections; (1) introduction and background of the respondent, (2) sustainability goals and vision, (3) drivers and challenges of strategy formulation and implementation, and (4) sustainability in the future.

Lastly, the third stage of the interviews were conducted with the purpose of confirming the generated results of the study. One confirmational interview was held at the case company, with a respondent carefully selected based on expertise from stage two. Correspondingly, all respondents where given the choice to individually review the results before finishing the report.

The second phase

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3.3 Data analysis

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The fifth step incorporated defining and naming the final themes, where representative quotes also was chosen and translated, with the purpose of being used in the presentation of the themes. For example, 2 themes relating to drivers of consensus where “employees” and “organizational culture”, while challenges where “common purpose” and “responsiveness”. And lastly, the sixth step was about the continuation of producing the report, developing the thematic frameworks, and formulating conclusions.

Figure 2: The process of thematic analysis by Braun and Clarke (2006).

3.4 Quality assuring measures

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4 FINDINGS & ANALYSIS

In this chapter the collected empirical data is analyzed, and each theme will be presented with representational quotes. Lastly, two thematic frameworks derived from the data analysis will be described.

The purpose of the current study was to gain a broader understanding of drivers and challenges regarding CSS formulation and implementation in MBOs. Specifically, concerning how to succeed with the strategic management process in regard to the characteristics of alignment, efficiency and consensus, across strategic levels. The themes derived from the analysis of empirical data are structured under research question one and two; key drivers and challenges, summarized in Table 3. The third research question is answered by the first associated thematic framework where distinctions between strategic levels are presented, see Figure 3. In addition, a second thematic framework is provided for the corporate level, where strategic contradictions that needs to be considered to successfully formulate and implement CSS in MBOs, is illustrated, see Figure 4.

4.1 Drivers for successful formulation and implementation of CSS

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4.1.1 Drivers for efficiency

Organizational autonomy across SBUs and OUs have shown to be a driver for efficiency. This is expressed by a respondent from the corporate level:

“It does exist a challenge and a tradition in that the business areas are pretty independent, and it is difficult to formulate the type of strategies that span the corporate group, but I still think

this is what you have to do. There exists a challenge in, and a tension between formulating goals centrally, and the principle that business areas are pretty independent and have functions

of their own that want to formulate this on their own.” – R4C

It is critical for the diverse organizations within the MBO, to have the possibility to be operationally flexible and have the ability to strategically adapt based on the nature of organization they run and their prerequisites. The possibility for flexibility provides improved conditions for the whole organization, creating possibilities to increase resource efficiencies while meeting external and internal requirements. Thus, the organizational autonomy facilitates the need for competitiveness in order for each unit to excel.

The empirical analysis highlighted that organizational compliance is a key driver for efficiency in the MBO. This is explained by a respondent from the business level:

“What gets measured is what primarily gets managed, if we can measure more things, we get more clarity, and get people that actually take action on things, and get things done. That is

the human factor, if you show that something matters people take action.” – R10B

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The collected data shows that having a holistic approach and systems thinking are essential for making continuous improvements in regards of CSS. This is emphasized by an interviewee from the corporate level:

“For us it is about innovation and being able to use the drivers and competencies that reside within the company, to use these to make our products more sustainable, but still bring forward clean tech – products, and solutions to create a more sustainable society.” – R2C

This, by understanding the complex organizational settings and how the parts interconnect to the whole. The respondents underlined communication as a key driver, where both internal and external stakeholder dialogue enabled proactive work, in terms of attracting competence, meeting requirements and cooperation. Moreover, both technical and organizational innovation are crucial for development and long-term improvement, to be able to grow and stay competitive on the market. Correspondingly, the utilization of digital solutions is a key factor.

Summary of drivers for efficiency

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4.1.2 Drivers for alignment

Organizational cooperation has shown to be a key driver for successful alignment in MBOs. This is expressed by a respondent from the corporate level:

“Sustainability has a wide span of interest, and there is a certain delight in the fact that we span large areas, and I believe in networking and communicating a united strategy going forward.”

– R5C

Cooperation in terms of collaborations and exchange of knowledge and resources across SBU and OU boarders. This, to find synergies and enable relationships beneficial for the overall company success, face-to-face meetings are necessary. Additionally, the concept of sustainability needs to be an integrated part throughout the whole organization, where it is a natural theme on the agenda. It is imperative that sustainability isn’t separated from the ordinary operations, but instead a part of it.

The data signifies that corporate vision alignment which presents a distinct direction with clear definitions is critical for achieving strategic alignment. As a respondent from the business level phrased it:

“The corporate group consists of many different companies with many different corporate cultures, and in a way, the sustainability vision should permeate the whole business. If everyone had built their own visions within the business level, many versions of visions would

exist, and all may not have been in line with each other. Even though, hopefully, they approximately would have gone in the same direction.” – R12B

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The empirical findings emphasize system thinking as the basis of CSS, referring to the consciousness that everything connects and interrelates. This is explained by a respondent from the functional level:

“To deliver we must have a focus on sustainability as well. It is not just about delivering tomorrow and then we are done. This is needed over extended periods of time, for example,

working conditions that are good, and a sustainable way of working that is successful over time.” – R17F

The data strongly indicates that digital solutions are playing and will play an even greater role for this, in terms of internal and external communication, educational forms, managerial compliance, and follow-ups. This, by making the information more shareable, and reaching far more internal and external stakeholders. Thus, an ecosystem thinking, where the product life cycle and resources in terms of knowledge are imperative. The long-term perspective is essential and are integrated in this industry, where the business and projects could go on for 40 to 50 years. Hence, extended thinking in terms of time do exist operationally and strategically.

Summary of drivers for alignment

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4.1.3 Drivers for consensus

The data indicates the theme employees as a driver for the success of CSS in MBOs. The respondents particularly expressed the possibilities to use digital solutions to fit education to specific roles within the MBO.As a respondent from the corporate level phrased it:

“...that we should continue in our ability to attract the sharpest employees, and that is needed in order for us to produce these super – complex technical systems, then we must have a

business that they feel that they want to work in, and be associated with.” – R3C

The employees are a major part of the organizational resources in this industry, primarily due to the need of high technological competencies. Thus, it is of prominence to take care of and retain employees, while continuously attracting new workforce to grow the organizational capabilities and stay competitive on the market. Supporting and nourishing employees incorporates both official and unofficial education, where growth, development and the creation of an atmosphere facilitating continuous discussion is encouraged.

The data shows that the organizational culture needs to foster transparency throughout every strategic level, making room for freedom of speech and raising opinions both horizontally and vertically. As a respondent from the corporate level phrased it:

“...physically coming out is also needed. Doing face-to-face education, classroom education, where one can discuss different situations and scenarios. Everyone thinks differently and act

differently.” – R5C

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The collected data points towards the importance of managerial routing as a driver for achieving consensus. A respondent from the corporate level states:

“But if we take the implementation of strategies for example, here I think you need to send signals from the absolute top, the board and corporate leadership must send clear signals and

showcase the importance of this. That, I think, is the foundation.” – R4C

It is necessary to have a distinct and well-defined managerial direction, with clear core values. The respondents expressed that clear leadership enables freedom for the organization and fosters an organization with a common purpose which intuitively knows not only what to do but how it will affect others internally and externally. Furthermore, the data shows that designing incentives are a complex task, and the reviewed organization does not currently offer any rewards for the sustainability work they implement. However, they did implicate that it could affect the CSS in a positive way, if carried out properly. An example is to make the managerial degree of compensation partly based on sustainability issues. In addition, several respondents expressed the critical factor of making the CSSs unique and genuine for their organization, and this in turn could affect the engagement and motivation for the strategic levels to participate and feel involved without incentives.

Summary of drivers for consensus

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4.2 Challenges for successful formulation and implementation of CSS

The empirical data concerning key challenges for successful formulation and implementation of CSS in MBOs, have been analyzed and aggregated into three themes contained in each category (e.g. efficiency, alignment and consensus) with associated sub-themes, see Table 3. Respectively, quotes for each category has been summarized in Table 7, 8 and 9.

4.2.1 Challenges for efficiency

The data indicates the theme measuring criteria as a challenge for the success of CSS in MBOs. This is expressed by a respondent from the corporate level:

“...even if it is hard you have to find KPIs, things to measure, for the different areas. This so that you can see how the company and the business practice develops, and you can actually

calibrate whether you are moving in the right direction.” – R3C

The data shows that it is challenging to create one clear strategy, vision and mission, for the whole MBO. However, the interviewees emphasized that homogeneous definitions of terms and concepts throughout the organization would be beneficial for the appreciations of the subject. The common identification could however be difficult, mainly because of the differences between organizations, locations and cultures. Furthermore, it is challenging to find accurate KPIs and measurables. This, since everything needs to interconnect throughout the MBO to minimize contradictions, and it is difficult to find objective metrics for the soft dimensions of CSS.

Organizational exploitation has shown to be a key challenge for successful alignment in MBOs. A respondent from the corporate level states the following:

“Another challenge is time. Line managers are very burdened with work, and sustainability will compete with other things and I sort of think that is something we have wrestled with. In that case we need to try to make it easier for managers to make the right call in different ways.

For example, by digitalization.” – R8C

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natural and consistent dialogue is difficult to have. The respondents emphasized that the lower level’s priorities are primarily on daily operations and tasks, rather than a subsequent long-term perspective. Correspondingly, there are unclear prioritization in terms of decisions; should the own project or department’s profitability be favorable over the best interest of the MBO? The daily decisions are challenging since managers in the lower levels are under pressure from many directions and are directly affected by their own fruitfulness. Thus, making decisions with short-term profits tempting.

The data collected shows that being explorative is essential for making continuous improvements in regards of CSS. This is stated by a respondent from the functional level:

“And that we do it right, that we move and develop the product in the correct manner, that we manage obsolete components that are on the brink of old age, in that case there should be

new components according to the requirements of today. Above all, if one is able to look at the long-term, you should try to take that into consideration as well. What you know about

certain dangerous substances in the future you should try to manage today.” – R18F

Growth and development are necessary for successful CSSs. Yet, it comes with challenges. The empirical data suggests that long-term sustainable improvements require organizational changes and are expensive in resources. Also, the transformations can be puzzling to manage in the lower managerial levels, where changes and requirements in regards of competence, digital solutions, and other resources may occur. Furthermore, continuous external and internal changes in goals and prerequisites, for example laws and political changes, heavily challenges the organization, and especially if the organization is a global actor.

Summary of challenges for efficiency

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4.2.2 Challenges for alignment

The empirical data shows that ambiguity is a challenge for organizational alignment. As a respondent from the functional level phrased it:

“Variation in understanding and interpretation of the sustainable strategy is something that I absolutely think exists. Even if we just talk briefly about what sustainability means for you, you will receive almost as many answers as there are employees. And getting that co-understanding of what it entails, and what part of that we can focus on, and work towards, is probably very

challenging.” – R16F

The pronunciation of CSS work in the organization could affect the outcome of the internal work, and also affect the external communication outside of the organization. Moreover, a diverse strategic and operational understanding of the CSS is a challenge for achieving alignment in the MBO. If the corporate level is unclear, it could create misinterpretations in the entire MBO, leading to a variety in strategic decisions by the SBUs and operational decisions by OUs. Hence, creating a risk of the business- and functional levels to go in different directions in the MBO. Not supporting one another.

The data shows that cross-functional involvement is not only a driver but also a challenge. This is expressed by a respondent from the corporate level:

“...the biggest challenges reside in getting everyone to take part in the cost, in different parts of the organization take part in cost and inconveniences, to push the changes and the way of

working that benefits everyone else in the company.” – R1C

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The data shows that disparity in terms of organizational diversification is a challenge for alignment in the MBO. As a respondent from the functional level phrased it:

“Something we have seen during the pandemic is that we live in different IT-environments [...] That has been the challenge during the latest year, that we have different infrastructures,

communication to the fullest has not been very easy.” – R18F

All units are different in terms of operational activities and digital systems. The risk of sub-optimization is high when the organizations have diverse strategic and operational focus, different goals to achieve, and does not communicate. Thus, a lack of information and dialogue adds to the risk of sub-optimization. Furthermore, divided responsibilities for the dimensions of CSS between different functions, could affect the clarity of the overall sustainability strategy. The respondents expressed that adding a juncture may act as a possibility to unify various strategic and operational priorities.

Summary of challenges for alignment

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4.2.3 Challenges for consensus

The empirical findings indicate that the external perception is challenging for consensus within an MBO. This is expressed by a respondent from the corporate level:

“Another challenge is that, sometimes, there can exist certain despair, that you feel we have a negative outlook, or that there exist a negative outlook of [The company] and it does not matter how much we try to work on these questions, because we still won’t be able to get away from those things. The problem resides in what we do, and you cannot create a positive

outlook on [the company] from a sustainability perspective.” – R4C

The respondents expressed that there exists an external pressure from stakeholders and society in general, where the external view on the organization sometimes sets a negative tone and could possibly preset and determine the narrative for its sustainability work. Correspondingly, making external transparency challenging due to the risk of exposing the organization in a harsh environment. However, the perception does not have to be justified since organizations in this industry are benefited by CSS both internally and externally, to be able to deliver their products. The empirical data shows that achieving a common purpose is challenging due to the diverseness of the organization. A respondent from the corporate level states the following:

“The rewards system is somewhat difficult, this because it tends become discretionary pretty easily. That it becomes subjective, and difficult to measure in a way. […] it can be hard to find those objective goals that are actually verifiable. Instead, it can become somewhat arbitrary.” –

R3C

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The data collected shows that responsiveness is a key challenge for achieving consensus for CSS in MBOs. As a respondent from the business level phrased it:

“...a complex corporation. Lots of people want to be heard and seen. It’s not always easy for these issues to be put on the agenda.” – R12B

The data shows that the size of an SBU or OU could affect the operational success of CSS in MBOs. An example is that the size could affect ways of communication, a smaller unit can gather and talk simultaneously to everyone, while a larger unit must find other ways of communication to reach every employee. Furthermore, there are challenges regarding information overload. It could be difficult for managers and employees to assimilate the information they need to consider for their role and what to prioritize. MBOs are large and complex, which makes it challenging to be heard and highlighted sometimes.

Summary of challenges for consensus

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4.3 Distinctions between the strategic levels

Based on the empirical data analysis, themes of key drivers and challenges have been derived for successful CSS in MBOs, and an empirical framework has been formed for explicating distinctions between the strategic levels. These are presented in Figure 3. The framework is constructed by the key drivers and challenges found for efficiency, alignment and consensus, see Table 3. Further, the strategic levels are located in the center of the framework, with lines connecting to both sides with the themes they relate to. Illustrative differentiations of the lines simply highlight the strategic levels. In addition, the lines are primarily based on replies and context from the interviews conducted at each level.

Figure 3: Distinctions between the strategic levels.

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deviations may be devastating (Engert & Buamgartner, 2016), e.g. Holistic approach, system thinking, Organizational compliance, Guidelines and Common Purpose. Hence, the corporate level enables and facilitates the key aspects to consider for CSS in MBOs.

The framework confirms that the business level, i.e. SBUs, primarily need to focus on how to thrive in their business predominantly decided by the corporate level, e.g. Organizational autonomy and Cooperation (Porter, 1987). Hence, decisions of structural character, where the essence lies in how to succeed with the execution of the CSSs, and satisfying internal and external stakeholders, e.g. Employees and Organizational culture. Furthermore, the business level needs to facilitate the corporate objectives and policies, in relation the CSS activities to obtain the common goals of the MBO, e.g. Common purpose and Holistic approach. This, since the CSSs requires unity throughout the MBO (Radomska, 2016).

Furthermore, the framework also confirms that the functional level, i.e. OUs, primarily needs to focus on how to implement the business strategy through decisions and actions plans, which is communicated by the business level, e.g. Holistic approach, Employees and Responsiveness

(Altuntaş et al., 2014). Hence, decisions which confluence activities to collaboratively reach the set goals of the SBU. Furthermore, the functional level needs to contribute to a transparent and involving Organizational culture, which is one of the main aspects in successful CSS (Bonn & Fisher, 2011). This, since the OUs can contribute to the unified perspective and understanding of sustainability through the MBO, creating an opportunity to foster priority and engagement around sustainability, e.g. Holistic approach (Rauter et al., 2016).

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4.4 Discussion

The empirical findings indicate that a clear leadership is critical for the success of efficiency, alignment and consensus, when managing CSS in MBOs. This correlates to Cater & Pucko (2010), which states that efficient strategy implementation happens when there is confluence between the leadership, the organizational culture, change management and organizational structure. Hence, efficiency happens when there are alignment and consensus in the strategy formulation and implementation. Furthermore, the findings show that an open-minded organization with disitinct leadership and clear core values enables a common purpose and engagement, where a unique and genuine CSS is the foundation. This is in line with Desmidt & George (2016), which explains that in order for a strategy formulation and implementation to be efficient, there must be a “organization-wide shared understanding of the organization’s strategic priorities” (p. 3). Hence, strategic consensus needs to happen for the MBO to be truly efficient.

The result from the data collection appreciates that a common understanding and agreement of everyone is not always desirable for achieveing efficiency and alignment, pointing towards the importance of guidelines and routing. However, the findings also suggests that free speech and the opinion of employees are key drivers for succeess with sustainable development and innovation. This inconsistency can also be found by Roberto (2004), where he argues that there is a contradiction between achieveing efficiency and consensus simultaneously, where one inhibits the other. For example, participation increases strategic consensus whilst it may decrease efficiency, and efficency through quick decisions may be necessary to adapt in the sustainable business environment, but will limit consensus in terms of long-term learning and development of the organization.

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similarly requires a degree of operational freedom. Hence, a balance between autonomy and compliance is crucial for succeeding with CSS in MBOs.

Moreover, the strategy formulation at different organizational levels needs to be coordinated through a balance of both bottom-up and top-down communication, to create strategic alignment and consensus about sustainability in the entire MBO (Hrebiniak, 2006; Kellermans et al., 2011). The empirical findings indicate that all levels should communicate to be able to enhance and support one another, to be even greater together than apart. This enables synergies and cooperation, which in turn could minimize sub-optimization across the MBO. Both strategic effectiveness and efficiency are, according to Wilson et al. (2018) subjective, and thus dependent on a common understanding. Hence, making communication a critical factor in creating strategic efficiency, alignment and consensus to formulate and implement CSS in MBOs.

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overall alignment and efficiency. Hence, improving the strategy formulation and implementation regarding CSS.

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4.5 Towards a framework for successful formulation and implementation of CSS

Based on the theoretical and empirical findings the study indicates that the role of the corporate level is not only significant, but also enables the success of formulation and implementation in CSS (Paroutis & Pettigrew, 2007). Furthermore, the corporate level acts as a conductor for enabling the drivers and handling challenges through the strategic levels of the MBO (Vancil & Lorange, 1990). Thus, a second thematic framework has been derived, see Figure 4. The framework presents a visual understanding of the strategic contradictions that need to be considered by the corporate level, to manage CSS successfully in MBOs. The ambidextrous aspects are illustrated balancing at each end of a scale, where both sides are needed to an extent. Hence, it highlights the strategic balancing act the corporate level needs to deal with when successfully formulating and implementing CSS in MBOs:

Figure 4: A visual understanding of strategic contradictions.

First, the recognition of autonomy and flexibility for the SBUs and OUs to make adjustments to their own organization, while a clear leadership and compliance is critical for facilitating an understanding of which priorities are key for the CSS. Second, the significance of cooperation in terms of collaborations and exchange of knowledge and resources across SBUs and OUs boarders to reach joint sustainable beneficence, while by organizational design being diverse and

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corporate communication top-down in terms of information and guidelines, while all levels should create a dialogue to enhance synergies and a common understanding of the CSS by an open-minded communication bottom-up.

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5 CONCLUSIONS

This chapter presents the final conclusions, which comprises the managerial- and theoretical implications , as well as the limitations of the study.

This study has increased the existing knowledge of what key drivers and challenges there are for successful formulation and implementation of CSS in MBOs. Specifically, concerning how to succeed with the strategic management process in regard of the characteristics of alignment, efficiency and consensus, and what distinctions there are between the strategic levels. Since the societal and market demands of sustainability are stronger than ever before (Kitsios et al., 2019; Koijer et al., 2019), the integration of CSS is regarded as prominent to stay competitive (Meuer et al., 2020). This, in conjunction with the fact that MBOs are struggling with the implementation of CSS (Kunisch et al., 2020), has resulted in a demand for broader understanding within the topic among academics and practitioners.

5.1 Theoretical implications

In response of the lacking literary knowledge within the area of CSS and MBOs, the current study contributes in three ways. First, the present study has contributed theoretically by increasing the knowledge regarding drivers and challenges of formulation and implementation for CSS in MBOs. An area which requires further research since MBOs currently are the most common organizational forms for large companies (Kunisch et al., 2020). Furthermore, specifically the implementation phase has been deficient in earlier studies (Kitsos et al., 2020). In this study, both the formulation and implementation phases where chosen to be incorporated, since they heavily interrelate and they are to be seen as a continuous cycle to adjust the strategy to meet the ever-changing business environment (Cater & Pucko, 2010). Second, the research had a focus of strategic management into corporate sustainability, whereas the vast majority of studies in this topic have had the standpoint from a sustainability perspective (Kitsios et al., 2020; Rauter et al., 2016). This focus has enabled the study to capture other aspects concerning the business perspective, e.g. internal stakeholder involvement, market demands, communication, and organizational culture.

Succeeding with corporate sustainability strategies in multi-business organizations