Developing corporate projects for use in your business plan is a truly important process. If you don’t maintain a criteria for what lands in your business plan, there is no way to determine the strategic value of what comes forward at the decision making table. Typically speaking, projects with strategic value are best managed at a corporate level, and that with an operationally driven focus are best managed at levels below.
Once you have set your criteria for what qualifies as a strategic initiative, it is very important that the right questions are asked in the scoping process. This allows for good decision making information and secondly, if performance management plans are tied to this process, you can achieve corporate approval on the “meet” or “exceed” statements up front. This results in a great deal of clarity, which translates into accountability later. It’s also worth placing a stage gate once the directional dimension has been defined, prior to detailed resource scoping and action planning.
Here are some topics that are typically worth including in your standardized scoping template:
• How will this reposition the organization to succeed within the context of the strategy? (strategic value)
• What are all the specific outcomes being targeted?
• What would exceeding board expectations look like?
• At a high level, how will this be accomplished?
• Who is leading and supporting?
• Potential impacts to culture, internal business processes, client perception, financial performance?
Once you generate solid information up front, the decisions that need to be made later won’t be put at risk.
There are many factors that play into how corporate targets are set. These are the metrics that generate accountability and transparency for results. Regardless of what you’re accountable to whom for, you may have a lot to think about.
First and foremost, ensure that your targets tell a story as whole. The scorecard is the translation of the strategy, and it’s one of your most powerful levers for change, provided that you have the processes and leaders to close the loop.
Look at your scorecard overall (it helps to build a strategy map style dashboard) and consider what improvements your strategy requires progress in to keep moving ahead. Consider the metrics individually, and then holistically as a group. You may want to focus effort in a few key areas to concentrate effort. Also think about what teams are connected to each measure, and the extent of resource capacity each has.
Create performance gaps that are as bold as your strategy. If there isn’t a real gap, no real adaptation will occur. What gets measured gets done. If there is no performance gaps present, then you need to question whether you have a strategy.
Fight back against fear based tendencies. There is wisdom in not overcommitting to things you can’t deliver on, especially when employee variable compensation is attached to the outcome. However, don’t cripple the organization’s ability to move ahead by setting CYA targets.
Finally, ensure you have adequate accountability linkages between leaders, teams and employees for driving progress once you do set a target.
Some of the greatest flaws organizations have in their management of corporate strategy pertain to usage of accountability frameworks like the balanced scorecard. Of course the philosophy dimensions of direction need to precede this, leadership, but the application and integration process level is where things often fly or die right up front.
The first huge error would be using the scorecard only at a surface level. It creates the illusion of being strategic. You identify this tendency by whether anyone below top management is connected and have line of sight to metrics and strategy. Ask these questions:
– Would employees at all levels understand that the scorecard translates the strategy into outcomes they should contribute to?
– Does the organization explicitly define what teams are accountable for contributing to each measure AND provide feedback data?
– Has anyone gone through the scorecard to list out any of the ways those results could translate down into performance management objectives?
– Is standardized performance management process based on linking teams to the measures they should contribute to?
– Do employees see the scorecard as an executive responsibility primarily?
– Does the organization have mechanisms for targeting and shifting progress? (Such as standardizing executive performance management to include divisional improvement objectives for any deficient areas where divisional data is available)
What would happen if everyone saw it as part of their job to contribute to areas of the scorecard that they have impact? It would harness the creative energy of all those minds. It would get your resources lined up behind what you’re working to accomplish. It would increase the responsibility of leadership because it would take strategy out from behind the curtain and require a higher level of transparency.
At many levels within an organization, corporate strategy often feels like the domain of someone that makes twice as much money as they do. For this reason, true engagement is a discretionary item that many employees can fulfill their job without giving you. You need to inspire this commitment by engaging people at a different level.
Making the strategy everyone’s job doesn’t happen by accident.
My first strategy mentor always talked about clarity and alignment. At the time I didn’t realize the extent to which these two concepts impacted the success of a strategy. Clarity is about a lot of things, but one of the biggest challenges in that realm is line of sight.
Line of sight means: do people understand where you’re trying to go and what their role is in helping you get there. You can’t care about something to the point that you’re willing to contribute discretionary effort if you don’t know what the goal is.
This one is worth not rushing past. A sobering thought is the statistic that 95% of employees don’t understand the strategy of their organization. Even if you’re further ahead than most companies, chances are that a significant percentage of your employee base still don’t know what it is, let alone how you expect them to contribute. It’s no wonder that strategies fail! So where do we go wrong?
First, communicating your BHAG has to be more than an intellectual exercise, it has to capture people at a mental AND emotional level to generate real engagement. A couple of basic business case objectives isn’t going to cut it. Next it involves whether people can see a role for themselves in making that happen. If people are excited about where you’re going, and you’ve made space for them to play an important part, then they can visualize themselves being part of the journey.
So how do you go about creating line of sight? There’s no one correct answer to this question, but it’s worth considering whether your processes are lined up to support this process of engagement:
Vision, BHAG, big visionary idea: Do people understand where you’re trying to go? Is it compelling?
Strategy map: Do people understand the improvements that drive the strategy?
Balanced scorecard: Do people understand the measures, and exactly what success looks like?
Teams plans: Do people understand which measures they are supposed to support?
Personal plans: Do people understand exactly how they can have an impact? Do you celebrate and reward based on success in supporting the stategy?
The clearer you can make the big, visionary idea…
The clearer you can make the path…
The clearer you can show a person their role in helping you get there…
The clearer you can align rewards with supporting the strategy…
The more likely you’ll get there because you’ll have the best of what all your resources have to offer.
When is long-term thinking a problem? It becomes a problem if no one is thinking about the short-term execution of the strategy.
When is thinking about today a problem? Likewise, it becomes a problem when no one is thinking about long-term positioning or tomorrow.
You only win in the “now”, but you position yourself to win in the “now” that happens tomorrow by thinking strategically. By aligning today’s actions to control tomorrow’s outcome, you create the potential for a future.
If you have a leader that fixates on one or the other, that’s okay as long as you have other leaders balancing them off presuming that everyone is in the right positions or seats on the bus (see: Jim Collins). The problem comes when no one has the wheel OR the binoculars.
The correlation between how often people tout expertise in strategy and the performance of the vast majority of companies in this area shows a staggering disconnect. One of the reasons for this being that the definition of strategy is understood in so many ways. The most broad or surface level of strategy interaction such as being in charge of an area that accomplished something can be referenced in ways that are still defensible. And yet, the skills required to manage the ongoing evolution of a strategy process corporately is something different altogether. I’m just saying… let’s recognize these as potentially different things.
Being a strategy management practitioner requires the ability to design and manage a complete corporate process that turns boardroom strategy into customer experiences by organizing the resources of the entire organization behind the strategy. Your job is often not to lead but to design, educate and reinforce. This means the ability to design processes, interactions, communication flow, structures and accountability structures. It means knowing the models and tools that are required to provide adequate structure and reflect industry best thinking so you’re not reinventing the wheel. Here are the often quoted stats that Dr. Kaplan and Norton use to demonstrate the performance gap I’m referencing:
• 95% of a typical workforce does not understand its organizations’ strategy
• 90% of organizations fail to execute their strategies successfully
• 86% of executive teams spend less than one hour per month discussing strategy
• 70% of organizations do not link middle management incentives to strategy
• 60% of organizations do not link strategy to budgeting
For these reasons alone, it makes sense to stop looking to peers and our own past history on how to manage strategy. The stats are pretty clear that what most of us learned in the 90’s doesn’t cut it. On the positive side, the models that are emerging from thought leaders are taking this field to a place where a complete methodology is now understood. Reach upward as you redesign your own strategy management methods, not across. You’ll probably end up with a much better result.
This is not an unusual challenge… you have a big visionary idea, you have a strategy map that shows you what improvements are most pivotal, you have lined up your balanced scorecard metrics 1:1 with the strategy map… now what?
It’s important that you close the loop and be intentional about how you want employees to support the strategy. The moment you allow your performance management objectives to be driven by nebulous priorities, or ask people to figure out which scorecard measures they think they can contribute to… you’ve demonstrated that you don’t know, and that you’re not willing to put the work in to figure it out. Tell people what you want from them, tie everything back to the central and easily articulated strategy.
If the strategy map truly describes what drives your strategy, then that should be the focal point of where everyone invests effort. Specify for each measure which teams should be accountable for driving results. Include this in performance plan standards, provide people with team specific results, make people accountable.
When everyone knows what you want from them, how they’re performing against it, and that they’ll be rewarded for taking things to the next level… you just might get there.
Let’s take a minute to think about the concept of focus. Focus is a core concept within the management of strategy.
Successful companies don’t necessarily work harder, but they have the ability to focus their resources on the things that matter most. They invest their effort in areas that create greater competitive advantage, create stronger loyalty, move more products and build up their brand.
Tightening focus isn’t easy: In order to tighten focus…
You need to tighten clarity
You need to be willing to say no
You need to be willing to lead
You need to deeply understand your visionary idea
You need to be compelling about it
WHY? Because resources are finite.
When your effort is invested 100% on the things that drive real progress, that’s what you’ll get.
… strategy practitioners make is working with or defining content when the level of direction (above) that should act as context for those decisions has not been adequately defined. Every component of direction requires alignment to the level above or things quite simply fall apart.
• Building any kind of a plan without defining your BHAG or big visionary idea is a terrible idea: strategy is about creating change to reposition yourself for greater advantage. Without this context, people start guessing… or lose confidence in the leaders.
• Creating corporate accountability for metrics without defining what drives your business will almost certainly result in people focusing on the wrong things … or being distracted by things that aren’t material to your success.
Confusion is the first symptom that something was missed. Start by understanding the relationship between all levels of direction. Then work your way down from the top. There is no way to short cut this and not cause fundamental problems.
Philosophy: BHAG, mission, values
Marketing objectives: value discipline, desired market position
Operational alignment: workforce, operations, communication, product management
Financial decisions: budget is driven by the strategy, not the other way around
Contingency planning: risk management, strategic alternatives discussions
You quite simply can’t make a good decision without understanding the context within which that decision should be made.
There is a difference between creating accountability for generalized business metrics and knowing the few transformational measures that drive your strategy. The difference in how this is applied in management is significant. IF you have described the strategy already, and you have aligned your measures, then you’re ready to have a different kind of target setting conversation:
What you may have done in the past:
• Discussed: What is a realistic target that we could hit (without tying the reason for the progress or extent of progress to the strategy).
• Attempted to maintain current levels of performance year over year: Feeling like you’re already in the end-zone.
What you should be talking about:
• What degree of progress does the strategy require to be successful?
• What is the absolute ideal, what does success look like?
• How quickly can we close the gap between current and ideal?
• What are the dynamics that determine how quickly we can progress?
• What impact does our performance in this area have on the strategy?
• What will “end-zone” progress do for our relationship with clients?
Knowing the reasons why progress is important is an essential part of the equation. If you focus on the reasons why current progress is good enough, that’s all you’ll ever have. If you understand the relationship between your metrics and your strategy, you’ll begin to move beyond good enough into the realm of greater possibilities.