This is Part 4 of the series 'Managing a Strategy into Reality'. The objective of this series is to help organizations execute their strategies for success. It documents what I have learned from implementing and managing Strategy Management processes at international and national companies for over a decade, on 3 different continents. It focuses in particular on the 'soft side' – the 'Art' – of Strategy Management: how to engage an organization in strategy and induce it to support the change it entails. It is not intended as a summary of academic literature on the subject, therefore, but as a 'practitioner’s guide' covering what I’ve seen work well and not so well.
The previous Part 3 of the series discussed the objectives of the Strategic Planning phase of Strategy Management, who should be engaged during this phase and how they should be engaged by the Strategy Management Team (SMT). The following Part 4 will focus on Strategy Execution.
Strategy Execution is about ensuring actual progress is made towards the organization’s objectives to achieve its aspirations. It should motivate the organization to move forward by holding people accountable. At the same time, it should also facilitate continuous learning and keep the organization strategically agile, i.e. able to optimize its strategy in response to changes in circumstances.
SMT task 1: Ensuring transparency and accountability
To ensure progress towards the organization’s objectives, actual performance needs to be monitored and tracked. The Strategic Performance Management (SPM) process is designed to link actual performance with the objectives developed during Strategy Formulation and the strategic plan developed during Strategic Planning, to answer the question "Have we achieved what we wanted to achieve?'.
SPM will serve as a motivator for action only if the performance reports are developed by the functions whose performance are monitored and tracked. Otherwise much of the sense of personal responsibility for performance will be lost. Another requirement for SPM to actually serve as a motivator for action is that the performance reports coming from senior- and middle managers – Mid-Management (MM) – get reviewed by the C-suite.
The SMT needs to be engaged in this process, not only to see to it
the necessary performance reviews are scheduled and take place, but also
to ensure the 'rules of the game' are abided by throughout the process.
This latter task means (amongst other things):
- Ensuring that performance reporting is based on the KPI pyramid that was developed during Strategy Formulation and Strategic Planning.
Other KPIs might make the managers’ performance look better, but the
established KPI pyramid ensures the organization remains focused on what
(really) matters for top-level performance.
- Ensuring that performance reporting is done timely.The
larger the gap between the period under review and the submission of
the performance report, the more difficult it becomes to correct any
deficiency in progress towards the organization’s objectives.
- Ensuring that performance reporting uses accurate data. This
requires agreeing with the C-suite and MM the KPI calculation formulas
and the data sources to be used, before the start of the SPM.
- Ensuring that performance reports include root cause analyses. KPIs by themselves can only indicate the existence of a problem. They can not explain that problem – why is it there? Corrective actions, however, need to address the root of the problem. Hence the performance reports must include KPIs with explanations (“commentary”) to facilitate decision making around corrective actions.
SMT task 2: Ensuring learning, not blaming
SPM helps an organization achieve its objectives if it is undertaken with the objective of learning from actual performance. That is why root cause analysis must be a key component of the process, as it enables the organization to answer the questions “Have we achieved what we wanted to achieve?”, “If not, why not?” and “If not, what can we do about it?”.
Despite this noble goal, however, the SPM process can degenerate into
a blaming contest. This is because most activities undertaken by an
organization require cross-functional cooperation. Consequently,
deficiencies in progress often have a cross-functional root cause.
Because the focus of managers in MM is on their own function, it is in a
way natural for them to see such cross-functional issues as problems
caused by others – “I can’t do what I had to do because he …”. There are
a number of things the SMT can do to prevent this from occurring:
- Communicate the learning-goal of SPM.This
message should not just be communicated to MM, but also to the C-suite
that is being reported to – hold them off from judging too harshly,
especially in the initial stages following SPM process implementation.
- Establish examples of success. Nothing is
more convincing than a practical example. Therefore, in the initial
stages following implementation of the SPM process the SMT should focus
attention of the C-suite and MM on some cases of deficiency in progress
towards the objectives that can be addressed relatively easy, and see to
it that the necessary cross-functional response is agreed and executed.
In other words, prove that SPM is a help for everyone, not just a pain
- Organize cross-functional performance review meetings,
rather than just 'one-on-ones' between a manager and the C-suite. This
not only limits the incentive for individual managers to use SPM for
complaining and blaming, but also facilitates cross-functional review of
the key challenges highlighted and cross-functional decision making on
solutions for these challenges.
- Focus on the cross-functional, rather than the individual. The SMT needs to ensure the SPM process identifies and highlights the cross-functional root causes of deficiencies in progress. This requires the SMT to do their own analysis of the MM performance reports on the basis of a comprehensive, organization-wide perspective. These 'corporate performance reports' should be the real focus of the cross-functional review meetings, rather than the reports coming from MM. This changes the tone of the review meetings from a negative 'How are you performing?' to a positive 'What can we all do to help the company improve performance?'.
SMT task 3: Ensuring learning for optimization
The goal of all learning should be the application of lessons learned. In the case of Strategy Management this effectively means using past experiences to optimize the strategy and/or the strategic plan.
It is not uncommon, however, for organizations to develop 'tunnel-vision' after having developed a strategic plan. That is, they become overly focused on executing the strategic plan developed during Strategic Planning – everything has to make way for maintaining the course originally plotted, no matter what. During SPM it needs to be remembered, therefore, that if the data shows the plan was not executed, or if it shows that the plan was executed but did not bring the organization closer to its objectives, this could indeed mean a lack of performance by the organization, but it could also mean that something in the strategy or strategic plan was not accurate or realistic and needs to be adjusted!
The SMT needs to ensure that when the C-suite reviews actual performance during strategy execution, it remains focused on the objectives for which the strategy, and by extension the strategic plan, were developed. Such that it remains willing and able to change the strategy and/or strategic plan if anything with regard to actual performance forces a need for such a change.
If, as recommended earlier, the KPI pyramid is developed top-down during strategy formulation and strategic planning, the link between the KPIs used in SPM and the overarching strategic objectives should be clear to and understood by all concerned. This is the best guarantee for focus on the objectives for which the strategy and strategic plan were developed during SPM, and thus for optimization of the strategy and strategic plan whenever actual performance requires it.
However, it is not just actual performance that can force a need to optimize the strategy and/or strategic plan. Organizations also have to deal with the tendency of the world to develop and evolve in unforeseen ways, as a consequence of which what seemed like the right thing to do yesterday, no longer might be the right thing to do today or tomorrow. In order to be successful an organization has to be able to optimize its strategy and/or strategic plan in response to such events. The next article in this series, Part 5, will therefore discuss Strategic Risk Management as a tool for Strategy Execution and explain how exactly an organization can identify these events and deal with them on a strategic level.
The “Managing a Strategy into Reality”-series
- Part 1 discussed the necessity of establishing a Strategy Management Team (SMT).
- Part 2 reviewed the Strategy Formulation phase of Strategy Management.
- Part 3 reviewed the Strategic Planning phase of Strategy Management.
- Part 4 reviewed the Strategy Execution phase of Strategy Management, focusing in the Strategic Performance Management process.
- Part 5 will continue the review of the Strategy Execution phase of Strategy Management, focusing on the Strategic Risk Management process.
- Part 6 will discuss the key competencies required for effective Strategy Management.
- Part 7 will review the relationship between Strategy and Corporate Culture and explain how Corporate Culture can be managed to supporting the Strategy.
- Part 8 will review whether Strategy Management remains relevant in today’s volatile, uncertain, complex, and ambiguous world.
If you have any kind of feedback, feel free to leave a comment or connect with me on LinkedIn.