Strategists cannot see around corners, but most of them will tell you that the best way to predict your organization’s future is to invent it. Innovative products and exceptional service offerings come as a bi-product of having the right business strategy and executing it well. The truth is, no business ever makes deliberate plans to fail, but inventing the future requires strategy and execution to come together and work in synchronistic harmony – and that’s where the trouble waits.
In fact, in any situation where a company is performing poorly, one of the first worthwhile diagnostic steps to perform is an assessment of the quality of the strategy and its execution. By isolating strategy as the first part of the analysis, one can determine if all of the assumptions upon which the strategy was formed are valid. If the strategy accounts for relevant global trends, current industry / market information and feasible competitor reactions, it passes the first test of legitimacy. If the strategic plan accounts for the organizational model (e.g. strategies defined around lines of business or diverse operating units as opposed to a “one size fits all” approach) and addresses other internal factors that effect the acceptance of change and ability to transition (such as core values, culture and core competencies), then the strategy passes the next test. If problems are discovered with the strategy, those must be addressed before anything else. If problems with the strategy have been ruled out, it is safe to assume that the problems lie within the execution of the strategy and the focus can be placed operationally on where and why execution is failing.
Execution of strategy can go off track for a variety of reasons, but more often than not, it is the fundamentals of good execution that trip companies up. A McKinsey survey conducted several years ago helped prove that point, with more than a quarter of the respondents saying that their companies had plans but no execution path. Forty-five percent reported that planning processes failed to track the execution of strategic initiatives. It doesn’t get more basic than that.
The Fundamentals of Strategy Execution
So what are the fundamental building blocks needed to have good strategy execution?
The Right People:
For successful strategy execution to occur, organizations must have the right people involved and serving as change agents. Generally, change is difficult for people and strategy execution calls for it in many ways, including: transitions in roles, increased responsibilities, the way performance is measured and sometimes changes to process affecting how work gets done.
The Right Linkages:
The organization’s planning process must form operational budgetary linkages to connect strategy with execution within the business units of the organization. Strategic initiatives impact operating budgets and they will stall if funding does not exist to support them.
Another critical link involves integrating performance management with execution. The strategic plan must link performance management to the overall strategic planning process, specifically to strategic goal achievement. Managers will attempt to translate the decisions made during the planning process into budget targets or other financial goals, but that is not enough. Execution of strategy must be measured in more structured terms. Linking strategy to performance management involves translating goals into a standardized controlled vocabulary that represents measurable objectives. Standardization allows for consolidating measurement data relevant to an organization’s progress against the goals. It is also important to have a defined system of interventions to be made by managers in light of the performance management information, with the intent being to remove impediments to execution and to improve future performance against these goals.
Likewise, strategy execution must be linked to job descriptions, necessitating the involvement of Human Resource Management. Job descriptions that align to the organization’s strategy enable accountability to be instilled in the execution model. With accountability defined, performance can not only be measured, but can be used as input for compensation purposes or to address lack of performance relative to plan execution.
The Right Governance
Strategy governance is critical to the execution side of the strategic planning process. Governance plays a role in prioritization, measurement, managing to the measurements and reporting.
A word of caution is warranted regarding metrics and measurements. KPIs and dashboards are great tools to help executives peek into business performance and see status on goals and initiatives at a glance, but they are only a part of the performance equation. If dashboard tools are not linked to a comprehensive set of underlying metric data and then are over relied upon, they may actually obfuscate some of the underlying issues taking place in strategy execution. This is because dashboards are often a disconnected component to an incomplete overall execution process, so they can lead executives astray with a false sense of well-being that strategies are being executed according to plan.
A well-designed plan governance model will harvest metrics and status reporting from across the portfolio of strategic programs and their underlying projects, down-through the tactical layers of the organization. When this is done, the information provided is useful in managing the current as well as measuring continual improvement to the planning cycle. If the linkages discussed above have not all been established, proper governance will be harder to implement and the data less valuable.
Governance also involves refreshing the strategic and supporting operational plans to reflect changes as a result of completing plan goals and taking on new ones. This structure allows for strategic and operational planning to become much more actively managed and based on a shorter time horizons.
Summary
Inventing the future starts with planning and ends with execution. Innovative and exceptional products and services are the result of maintaining a laser-beam focus on execution.
Comments