The purpose of measures

Leading a company requires a lot of courage. It also requires the ability and willingness to engage in conceptual thinking. Something I learned a long time ago was that no matter how many designations follow a persons name, no one has all the answers. Selecting the right measures and getting full value from them is a great way of going about creating information to support decision making. While it’s an important part of the accountability structure, many organizations use measures only to justify past performance to governing bodies like boards. When you stop recognizing the real opportunity of connecting your strategy to your measures to get real-time feedback, you forfeit some of the best information an executive can have at their finger tips.

Trap 1 – Keeping measures that have outlived their time
Measures are useful so long as they represent a gap. It tells people what we have to solve to move the business ahead. When year-over-year improvements are no longer being targeted, you may be losing sight of how to improve your business or you may need to challenge yourself to avoid complacency. Employees will lose touch with the momentum for change you are trying to create within your organization and that hard work ends up being at risk.

Trap 2 – Not going into depth to understand WHY
When performance trends shift, or don’t shift, there’s a story there. Even in an environment where you example: track turnover rates and you don’t see a shift this may not represent stability. This may in fact occur when more than one factor has changed and they are resulting in no visible shift. Example: employee satisfaction goes down but job market dries up so people hold off until things start to change and resolve to bail at the first opportunity they get. Unseen risks can emerge. The solution here is to engage subject matter experts semi-regularly to understand what is happening. This can easily be done by a research function and integrated into their regular updates on what internal/external factors are emerging with the potential to impact your strategy.

While people are naturally proud of the achievements they make, you have to be wise enough to identify new gaps once you’ve closed the ones in front of you. That’s creating change.

The world revolves around planning

Okay so for those of you who do planning for a living, you quickly realize that most people don’t believe this statement is true. I say this jokingly but I also believe that planning is the path to create greater levels of cooperation toward common goals within your organization. It’s actually the only function capable (in most organizational structures) of doing that. Until it becomes a cultural feature of your organization, people tend to avoid planning like the plague. If you stand in the hallways of most companies, it’s pretty common to hear people go on about “silos.” This is true because most companies haven’t figured out how to leverage planning to create common purpose that people are compelled by. Silos exist for a reason, but they become a barrier when purpose becomes attached to the silo itself because people don’t have line of sight to the corporate direction. However, once your planning system is matured the concept of silos fall by the wayside.

The planning function exists to strengthen integration within an organization.
When teams don’t understand how their individual function plays a role in the ultimate customer experience your company exists to create, you have a problem. It’s an incredibly common problem unfortunately. A non-constructive culture can make creating integration almost impossible, but if you’re beyond that point, planning is the key. People naturally want to contribute to the success of a company with momentum. The only way to make that happen is to create crystal clear direction. Then you move into engaging employees to make it happen. Companies that do incredible things only do so by harnessing the energy of the majority of their work-force. Once you’ve created common purpose, people will be able to start putting the pieces together and start removing barriers to success. Going back to culture, trust is one of the most critical components of what leaders need to create to make it all come together. Be the catalyst for change within your organization by pulling people into the room and getting your core strategy leads excited about the change.

Excess detail in plans is what stands in your way
Operational thinkers are easily frustrated by planning. You get around that by substituting detail of planning for frequency of discussion. When you start defining all kinds of things that sound like you’re wasting people’s time, you’ve immediately lost half the room or more. Make sure that every plan is filled ONLY with things that people are going to want to talk about every month for an entire year. It’s a simple but effective check-point to ensure you’re focused on relevant things. A plan can consist of nothing more than context, desired state (what you’re changing) and a simple action plan. When people are focused on what you’re working to change to strengthen your business and you talk about it all the time, you don’t need detail. The biggest challenge is to keep people thinking about the change all year long and to make sure the change you’ve defined is connected to corporate direction.

Focus the plan on change
When every member of your team knows what you’re working to change to make you more relevant to your customers tomorrow than you are today, you are set. Plans have to define change. Strategy is change, and change creates future relevance when focused and implemented well. Relevance is fleeting and so you need to constantly be recapturing it.

Be prepared to accept iterative improvement
People get better at planning over time and clarity for how best to achieve your goals always sharpen over time. The more you spend focusing on the results you want, the more ideas you have, the more people start to gain ownership and the greater the acuity of where your next change should be.

Clarity of purpose creates a focal point for activity that supports your goals. People want to be part of something successful. When you show people a path for how to be a part of this, you can start to harness more of their energy and ideas for making that change happen. Give people a reason to come out of their silos by creating something for them to cooperative through. It makes all the difference in the world.

Taking your company to the next level

If you’re chugging away as an organization and are either leveling off in overall performance or sensing things starting to slip, chances are there are a few things you can tighten up in the strategy department. For many leaders, strategy is a nebulous concept that they can’t correlate to improvement in financial performance. This is unfortunate because it’s the only way you can actually bring it to pass in an organization of any size. Many leaders focus only on financial metrics, while not acknowledging the fact that it is only a lagging indicator of the areas that actually need your attention.

The various components of an overall corporate strategy need to be sequenced in the correct order as there’s a contextual relationship. Some of these things sound like work you may not benefit from, but if they’re not done well, every piece below it (hierarchically speaking) will under-perform their potential. Here’s an approach that works well:

Generate executive support
It’s more common that you might think for executive to so distracted with “the business” to be keenly focused on the actual strategy. Unfortunately, most executives spend less than a few hours a month talking about the strategy. What this means is that in many cases, no one is talking about the strategy. This IS a big deal because the strategy is how you’re 1) progressing toward your long-term end state and 2) strengthening your core business today.

Vision, mission, values
Vision is a more important piece of the puzzle than most people realize. It’s often used as a motherhood statement and quite often is barely understood across most of the company. As the highest piece of directional context, it’s worth every second you spend to clarify this and have every employee understand it. Lots of people are operationally focused, even at the higher levels of the org chart. Their natural tendency is to move beyond planning and get into the “meat” (operational discussions). This probably happens because that’s how they were successful in jobs leading up to the one they now hold.

Companies that lead their industry are relentless about aligning business model and understanding what is transformational about their business. This all stems from the clarity that is created through well defined direction.

Long term direction

Knowing what your organization is moving toward helps all of your resources prepare your organization for success. A business plan without the context of long-term direction and short-term business improvements is a scary thing. Primarily because it leaves such a large gap and secondly because no one noticed. Long-term direction should consider strategic positioning and how to achieve a form of competitive advantage.

Build and maintain a strategy map

Many companies don’t understand to a great deal of specificity what they exist to create. This is a common symptom of companies that have been in existence for a long period of time. Build a strategy map. It not only defines what the company is there to build, but it also allows you to theorize then understand what linked chain of improvements actually drive your business. This comes in particularly handy when you’re building metrics or even more so when investing/divesting, making structural changes by determining what the linkage between the various components of your business model are. Always tie decisions back to “how is this going to impact our ability to achieve the outcomes we exist to achieve.” If you can’t make something fit on the strategy map, you need to question why you’re doing it.

A strategy map will help you identify and remove things your business is currently focusing on that are less relevant to your success. Something that is only 50% relevant to your outcomes is a distraction.

Establish the mechanisms that enable strategy
All of the direction in the world won’t help you if there’s no internal accountability to talk about it. Build simple plans across that organization that include the context for the plan, the desired state (what you’re working to change or achieve by year end) and a simple action plan. People readily understand and can act on this. Require every team to talk about their progress toward the desired state regularly. When people are constantly focused on the change they’re working to create, it starts to happen. It sounds simple, but is incredibly powerful.

Establish strategy review meetings where you share emerging factors in your business environment that have the potential to support or resist your ability to be successful. Require updates from core strategy leads. Talk about what your measures are telling you. Identify barriers and task people with removing them.

For larger companies, maintain an environmental analysis system where you identify +/- factors across all focus areas and then constantly mature them. Use them as both input and output of every planning discussion within the company. Rate them for potential impact and your ability to control them. Develop a predictive component to this and involve subject matter experts from across your company. You’ll walk into every planning session already working with the collective knowledge of the company, and the extent to which every factor with the potential to impact your business is moving.

Definition of a value discipline
Many business plans focus on things that have to be done, but they don’t directly describe HOW you’re strengthening your core business. A huge gap in many business plans is the lack of a defined value discipline. If your organization hasn’t gone here… go here. The value discipline is your competitive strategy. It’s the form of value you are competing on in your market. Without an understanding of this, all internally focused strategies are suspect. There are three value disciplines, all of which require such completely different technology, culture, processes and systems to support that if you have a culture that supports a different value discipline, it resists yours. An allocation system that drives the right behaviors in an operational excellence focused company could form a huge barrier in a customer intimate organization.

Class leading companies align absolutely every dimension of their business and operations to support a single value discipline. I’ll use the term relentless one more time. Without defining this, people will make decisions that just make sense to them. It happens every day in your company. This is a huge opportunity for strengthening your business, by removing aspects of your business that are resisting your success from within. Lack of consistency in form of value makes it very hard for your potential customers to understand why they should deal with you.

Define the customer experience
Based on your value discipline, break it down, involve employees, tie it back to best practice around value disciplines. Write a set of statements that define the attributes of the desired customer experience. Every customer facing team needs to align what they do to make this happen. Internally focused teams need to ensure they enable this and create processes that drive behaviors that support this. You now have a focal point for the people that work in your company to connect to.

Aligning the culture
Once you have a defined customer experience, it’s much easier to connect your culture to that. At this point, competency frameworks can be built if you so choose. At the very least, you can define the type of culture that your supervisors can foster and you can hire to enable. Competency frameworks fail when they’re not closely tied to a strategy. People don’t understand why they’re relevant. There’s a short distance between competency frameworks and enabling the strategy, but you have to first make the connection.

Balanced scorecard alignment
At this point, you can align your balanced scorecard. Measurement drives behavior, and creates decision making information. If your measures are safe and have no real stretch, this doesn’t do either of those things. Employees should be able to read your scorecard and be able to tell you what your value discipline is and what some parts of your strategy map might look like. If it doesn’t, you haven’t dialed the measures in to motivate the right things.

Aligning the core strategies
I have long recommended the use of core strategies in a business plan. A core strategy is a major functional area that HAS to align to enable your business to succeed. Marketing, HR, Technology, Sales, etc… By requiring each of these teams to demonstrate understanding of how they’re going to align their functions to enable the strategy (as part of every business plan) and then holding them accountable all year long, you have much more control over the progression of the company. Assuming this is happening without managing it is dangerous.

Take it down to the personal level
Once you have all of this in place, teams can be building plans that both position you to be able to achieve the long-term direction as well as strengthen the core business today. Integrate this into performance plans, motivate with variable comp and you are on your way.

Eliminate corporate distraction – find and kill
Corporate distraction comes in many forms. Too many committees, too great a focus on something that doesn’t drive your business, building excess equity in some aspect of your brand, being distracted with things outside your company. If you aren’t treating your business with an intensity of focus, you’re taking your customers for granted.

The bottom line with strategy is that people cannot support what is not defined. The more clearly you define your objectives, the more of your corporate resources will be aligned to make this happen.

Measures that actually tell you something

A lot of corporate measures exist to justify past behavior. They don’t speak to HOW your business intends to differentiate or compete. If they’re not linked to the value discipline, the desired customer experience or competencies that are built to enable the value discipline, you don’t really know why you’re getting the results you’re getting. It’s the difference between knowing your customers are happy, versus why they’re happy. Better still is understanding that you’re competing on and measuring the aspects of your 1) external customer experience that related to the attributes of your desired customer experience and 2) the effectiveness of your internal systems to enable that customer experience.

Cross your strategy map with your value discipline and start replacing measures that might be tried and true with something that will motivate behavior.

Implementing a value discipline – Part 5

Where people feel this gap internally:

Any time internal processes are being built, people stop to think about the gaps they are closing. Without the context of direction, a lot of generic processes are built that don’t strongly connect with what your executive think the organization is moving toward achieving.

Internal teams need to be furnished with several pieces of direction in order to be able to do this:

2) What does the strategy map look like?

Specifically, what does the organization exist to accomplish? What are the top line outcomes you are working to achieve and the transformational areas of focus that enable that?

2) What is the value discipline?

As previously stated, people need to understand what the organization is working to achieve and be known for, otherwise counterproductive behavior will ensue.

3) How does the organization internalize that discipline – what are the specific attributes of the customer experience that need to drive their behavior

Create a defined customer experience based on the value discipline that acts like principles for your brand.

4) What are the competencies and skills that your people need to be able to make this work?

Each value discipline is enabled by different cultural attributes, which ones are you hiring and developing toward?

Customer intimacy: Relationship focused, empathetic, flexible, great communication
Product leadership: Creative, research, change sensitive, quality, innovation
Operational excellence: Logical, analytical, systematic, detail oriented

Plans need to be build to ensure both long-term positioning, but we can’t forget about managing the customer experience also. It’s the bread and butter of your company that will determine whether you are in business long enough to make the long-term plan happen. Recognize the validity of the S-curve theory where relevance is temporary. Because of that, maintaining clear focus on the strategy is your way to ensure you are always prepared and positioned for success.

Implementing a value discipline – Part 4

Can we choose a value discipline, but not go very far down that path?

The further you go down that path, the more clarity there is for customers and employees? Greater alignment equals more of your resources and processes supporting your goals. You can choose a course and only partially align, but that means that aspects of your business will be resisting your success. This isn’t something that you can dip your toes in and be successful with.

It’s not like a continuum where there’s value in doing the “light” version – it’s a business model. The better you do this, the more of the form of value we exist to create gets created.

Implementing a value discipline – Part 3

Because of the strong difference in the value disciplines (competitive strategies), activity that supports one discipline usually doesn’t support others. Therefore, areas that lack alignment become a barrier to your success. The resources within your organization exist to enable corporate success, but when people are focused on the wrong things it’s common to have your resources working against you. Most often it’s not the fault of the employee, it’s the organization that didn’t communicate expectations originally. On the flip side of that, aligning your resources behind the strategy gives it more power. There’s no better use of your time than removing obstacles that quietly resisting your own success. The thing to take away is that if you don’t manage the alignment, it doesn’t happen automatically. Counterproductive functional strategy is inefficient at best, and a barrier to success at the least.

Implementing a value discipline – Part 2

A value discipline is more than pretty words. It’s also a business model, hence requires different operational strategies, processes, technology, principles of customer interaction/experience to enable it. Assuming that externally focused groups will instinctively and consistently deliver an undefined form of value to your customers, or internally focused group will structure processes in ways that enable that is ridiculous.

The reason why this doesn’t work is that there is more than one form of value that customers associate with, and they require very different internal systems, processes, cultural attributes and approaches to business to be effective.

It’s critical to understand what form of value your desired customers want, because choosing a segment of a market and your value discipline are the same thing. When your operations stand in the way of your ability to consistently deliver on that value, the customers will grow confused with how you are relevant to them. When this happens, your position in your market is put at risk.

Example: Customers go to Walmart because they can be guaranteed that their products are extremely competitive across the board. If they lost their focus on that and began sporadically replacing product lines with mid-market brands of a more expensive nature, they would stop standing out as being clearly the best place to shop for the millions of customers who clearly understand their position in the market. Consistency is the key to making this work.

Established businesses often become strategically complacent, and over time they lose touch with the form of value they exist to create. Metrics and strategies begin to focus on maintenance and less on strengthening core business performance.

Implementing a value discipline – Part 1

People often think of long-term strategy as where you steer an organization, but that’s not completely true. We steer an organization by aligning it to create specific customer experiences, which creates a brand. We propel an organization by aligning its resources to the plan. This removes silent internal barriers to success.

Too many business plans are focused on reacting to external forces and operational needs, and don’t include what is being done to strengthen the core business. An even greater challenge for most organizations is creating some central piece of context for HOW to strengthen the business.

Because of this, functional strategy groups build processes, programs and systems to close identified gaps, but it’s not completely obvious how they should be structured or what problems to solve by them.

It is impossible for an organization to be fully effective without a clearly defined value discipline. Functional strategies and systems will always exist that create barriers to your success. They won’t always present themselves as anything more than just “normal frustrations of having a bunch of different groups or people involved” but it all stems from the need for contextual direction. People can’t support what you haven’t defined.

Quietly resisting your own success

To what degree are your teams aligned to your direction? I’m not certain that most people in your organization really know what that means. How can you tell?

I call this a quiet resistance because unless you know what you’re looking for, it’s completely invisible. People will go through entire corporate careers and this may not cross their mind in a clearly defined way. Everyone feels this though. When internal processes run as an obstacle to what you intuitively know to be the objectives of your organization, you just ran into the problem. #1 your organization hasn’t clearly defined it’s direction and #2) the people accountable for process design (like an internal allocation system) haven’t retooled those processes to support the outcomes the organization wants to achieve.

Once every team knows their role in ensuring the organization is able to deliver the desired customer experience (internally and externally) driven by the value discipline, you can say you’re getting there. People often think of long-term strategy as where you steer an organization strategically, but that’s not true.

We steer an organization by aligning it to create specific customer experiences, which creates a brand. We propel an organization by aligning it’s resources to the plan. This removes silent internal barriers to success. It’s the same thing as increasing the RPM of your corporate engine.

So when you think about aligning your organization to the direction, don’t just focus only whether your people can vividly see the future state. What you do in the mean time determines your options for the future state and how long it will take to get there.