Tag: strategic alignment

Strategy planning is all about setting targets and key performance indicators, right? If your planning process is primarily a financial exercise, you may be missing the greatest leverage to be derived from planning — that is, building a culture of team effectiveness.
Today, much of strategy planning is about conversations and choices that will guide the firm’s focus for the next one to three years. It may result in spreadsheets with target performance indicators or objectives for divisions, teams and individuals. These are all important items for driving clarity about business direction and focus, but they will not deliver results by themselves.
Equally important, the planning process can be used to drive the right mindsets and behaviors that support real-world business objectives and outcomes. The right targets and performance indicators alone do not ensure that people will collaborate effectively to achieve them. When planning strategy, collaboration takes the form of various discussions.
Strategy planning is about conversations — or a series of conversations — and viewing the business through different lenses to define areas of opportunity for growth. Discussions, debates and choices need to occur along the way. How do we analyze the current business situation? What are the implications of today’s market for our business? Additionally, talks are needed to define risks and to assign responsibilities and timing of tasks.
Conversations shed light on how people work together. As such, the process of strategy planning can be a great way to work on behaviors that can improve the effectiveness of individuals and teams. In a word, planning strategy is a reflection of an organization’s culture.
As an example, we recently worked with the senior leadership team of a global retail product manufacturer. We observed that their meetings consisted of each individual speaking their opinion about a topic but with no questions being asked of one another. It was as though each person put forth their belief as fact and spoke at each other rather than with each another. We shared this observation about their heavy attachment to their points of view and the obstacle it was creating in their ability to move forward, craft a direction and make choices concerning future strategy. We introduced the idea of asking more questions of one another rather than only speaking one’s opinion. With this approach, they immediately started to see possibilities that did not exist previously. The result was improved collaboration and creativity as they built on one another’s ideas. They arrived at answers in minutes that the previous six months of conversations were not able to provide.
Culture can simply be defined as how one perceives the need to act in order to be accepted and successful within the organization, division and/or team. It’s about how people come to share common modes of behavior and perspectives in the workplace.
Teams share organizational culture norms and tend to develop additional characteristics as a team, often driven by the leader’s beliefs and behaviors. Oftentimes, the culture is not something consciously developed; therefore, bad habits can go unchecked, lessening the impact of individuals, teams and the organization.
For example, as new ideas were introduced during a meeting with a worldwide consulting firm, the common response was that these ideas were not the way they usually did things. This exhibited a mindset that they were heavily biased to the ways of their past, even when those ways were no longer producing results.

 
Three pitfalls to planning strategy
Here are three common behaviors that become pitfalls to planning strategy. They often go unchecked, as teams focus only on the culture or the content of their conversations and not on how they have them.
1. Focus on assigning blame to what’s not working.
Strategy planning requires confronting issues that may hold risk for the business. When confronting risk, people often revert to explaining situations using factors outside of their control. This allows people to be innocent when facing the consequences of risk but also leaves them powerless to address it.
When people perceive a risky outcome, they will look to the economy, the infrastructure of their company, decisions made by others, the wrong product at the wrong time, poor execution, etc., to explain their situation. All may be issues easily understood, as they may indeed exist. However, if blaming any of the aforementioned issues becomes the lens through which a team plans strategy, then in order for them to be successful, the team requires that these same issues do not exist. As such, the team becomes a victim of circumstances beyond their control and is limited in their ability to respond.
While working with a global software company, the leadership team became focused on how they were unable to overcome disrupting forces in the marketplace that were threatening their ability to grow. This dialogue went on for some time without any investigation as to what was really holding them back from responding more successfully to the issue. We made the leaders aware that their mindset was focused on external factors beyond their control versus any consideration of what they may need to learn as a team to address disruption. As soon as the discussion shifted to focusing on their ability to respond, possibilities began to flood the conversation. They prioritized them based on time and resources, and they crafted a new strategy based on becoming a stronger learning organization. The result was proactive approaches to identifying what they most needed to learn and to then deploy new tactics based on these learnings.
The alternative to this victim mindset is to instead focus on how the team will respond in relation to the challenges they are facing, even when the challenges are outside of their control. This requires recognizing what individuals, teams and the organization may need to learn in order to confront their challenges. Through this empowered lens, teams will become aware of opportunities that could not be seen from within their victimhood.
For instance, team members may discuss their situation and determine that they do not have the necessary resources or budget to achieve their desired goals. An alternative is to face the truth that the team may not know how to do it given the resources and budget they have. With this latter mindset, teams avail themselves to what is within their control. They can then focus their time and attention on seeking out the information and learning required to achieve their goals instead of the impotence that remains when only focusing on what’s outside of their control.
 
2. Conversations that spiral and go nowhere.
Teams often place their emphasis and energy on the content of their discussions without considering the efficacy of how they are having them. A common result is that teams begin conversations without a plan for how to effectively have them and consequently have deliberations that go on and on without resolve.
We recently worked with the leadership team of a Fortune 100 company that needed to restructure its business to focus on the key areas that would create growth. In doing so, they needed to choose which parts of the business to divest. Many long-standing parts of the business had provided growth in the past but weren’t any longer. Instead, the company was using valuable resources and capital that could have been spread to new areas.
The back-and-forth between them was endless. People would defend one business area over another, share the reasons why each unit should be preserved, or why another new area of business should be pursued more heavily with investment. The team was unable to stop the exchange and move on to making important choices about where to invest and divest moving forward.
These never-ending conversations led to frustration among team members. They felt their input was not getting them anywhere. People stated their beliefs about an issue but did not know how or when to stop debating so they could move into decision-making mode.
All conversations in strategy planning can fall into one of the following three categories:

  • Inform — The purpose is to inform people about something. No decision, discussion or debate is required. It’s about making sure people understand the topic being presented and are aligned with their understanding.
  • Discuss and debate — The purpose is to gather input and perspectives from participants to enrich understanding and potential responses.
  • Decide — Once a topic has been presented and discussed, options become clear and a decision can be made regarding which option is best for the situation.

If a team can define the type of conversation they are about to have, they can more easily respond accordingly (i.e., check understanding, gather input, debate solutions and ultimately decide between two or more options).
Without this clarity, a number of participants can be in different conversation modes at the same time. While one person believes the purpose is to receive information, another believes a debate is supposed to occur, while yet another believes a decision needs to be made. This creates confusion and frustration, which impacts the effectiveness of how teams plan strategy.
It may indeed be the case that all three modes need to occur, but all three should never occur at the same time. Awareness of their sequence and conscious participation in line with the appropriate mode can make planning conversations more effective and easier to manage.
 
3. Difficulty making decisions.
Just as teams can get stuck in conversations that seem to have no end, they can also become paralyzed with the need to make decisions. This most often occurs when teams have not thought about how they will make a decision.
Returning to the example of the company that needed to restructure its business to focus on the key areas that would create growth, we intervened with a meeting discussion and decision-making model that allowed the team a structured way to share opinions and then to create clear options between which decisions could be made. Because there was now a clear method for making a decision, the team was able to decide and commit to a direction that had eluded them for the past two years. Their choices led to investments in new areas while preserving income from more mature areas of the business. The result has been a return to growth that matches their competitors and has even put them in the leadership position in their key area of focus.
Decision-making requires a clear and agreed upon method or roadmap. All decisions are a choice between two or more options. However, if decision-making rights are not made explicit from the beginning, then teams may struggle to make important decisions because no one is clear on who has decision-making rights and how they will be deployed.
For example, decision-making can occur through different ways. It may be as simple as the team leader making the final decision. Or perhaps the leader wants the team to discuss and the leader will then decide. Or maybe the team discusses and the team decides, which then requires the use of consensus-building techniques or other modes of group decision-making, such as voting. Still further, a leader may decide that the team is to discuss the issue, but a single member of the team is to decide, as the issue pertains to their area of expertise. And finally, the leader may simply ask another team member to decide.
Any of these methods bring clarity to how decisions will be made, and if one of these is chosen at the beginning of the conversation, then decision-making can occur more rapidly, preventing the team from becoming crippled by the process.
How teams respond to their situation, where they choose to focus, and how they have conversations and make decisions are all a reflection of cultural norms within a team and/or organization.
By bringing awareness to these areas, teams can consciously participate in the planning process and yield more effective outcomes. As such, the planning process becomes the perfect opportunity to reflect on the “how” we do things as much as the “what” we are trying to achieve. By proactively focusing on the “how,” teams and organizations can build more effective cultures of collaboration.

Strategy execution is a central issue for companies and their directors. Academics and executives have long been researching for the best theories, practices and effectiveness. Studies have found that two-thirds to three-quarters of large organizations struggle to implement their strategies[1]. Figure 1 shows the average performance loss (by importance ratings) that managers gave to specific breakdowns in the planning and execution process[2]

Figure 1 – average performance loss in specific breakdowns in the planning and execution process

All but one of the factors presented in Figure 1 is controlled by the leadership. In addition, the reasons for this high failure rate can be traced to both hard and soft skills. By hard skills, we mean the processes and methods to organize ideas and to establish indicators, among other management tools, that are taught at most business schools. On the other hand, strategic execution soft skills are the intra and interpersonal attitudes and behaviors that engage people to deliver the processes
The hard side: the strategic execution and alignment process and tools
The term “strategic administration” (and, further, “strategic management”) comes from the 1960’s, when academics, especially Igor Ansoff, questioned the efficacy of performing the strategic planning process once a year. As a result, several models and theories were developed over time. One of the most popular of these models was introduced by Kaplan & Norton, and is illustrated on Figure 2. By management system, the authors refer to the integrated set of processes and tools that a company uses to develop its strategy, translate it into operational actions, and monitor and improve the effectiveness of both.
The model includes five stages, beginning with the strategy development stage, which involves applying tools, processes, and concepts such as mission, vision, and value statements, SWOT analysis, shareholder value management, competitive positioning, core competencies, etc. to formulate a strategy statement. That statement is then translated (Stage 2) into specific objectives and initiatives, using other tools and processes, including strategy maps and balanced scorecards.
Strategy implementation (Stage 3), in turn, links strategy to operations with a third set of tools and processes, including quality and process management, reengineering, process dashboards, rolling forecasts, activity-based costing, resource capacity planning, and dynamic budgeting.
As implementation progresses, managers continually review internal operational data and external data on competitors and the business environment. Finally, managers periodically assess the strategy, updating it when they learn that the assumptions underlying it are obsolete or faulty, which starts another loop around the system[3].

Figure 2 – Kaplan & Norton Closed-Loop Management System

Level order planning is a planning model based on the formal logic of cascading goals and strategies throughout an organization to drive action towards the creation of a future desired business state. In Figure 3, the formal logic of goal oriented planning is illustrated. Goals and strategies are cascaded throughout the organization based on the transfer of strategies from one level to the goals of the next level. This simple model describes how alignment of direction is achieved throughout different levels of an organization.
As you begin the planning process throughout the levels, it is important to understand the definitions of goals, strategies and tactics. First and foremost, the definition of a goal, strategy or tactic can be answered best in the context of the level within which it is being defined. One level’s goals may be another level’s strategies. For example, in the chart below, a second level’s goals are derived directly from the first level’s strategies and so on.
Goals define a future desired business state relative to the part of the organization that is defining the goal. Goals can be stated as measurement and this is often a clear way to define their intended purpose. Strategies are a statement of “how to” accomplish a goal. Strategies further define action for the organization. Tactics are most important at the level of planning closest to the customer. Although tactics can exist at each level within the enterprise, tactics always describe “what” actions need to be taken to fulfill a particular strategy[4].

Figure 3 – Strategic Alignment and Level Order Planning

The soft side: conscious business, alignment and coordination
Hard tools and processes are a necessary but insufficient condition for impeccable execution. Statistics show that alignment is not a problem. Coordination and collaboration are. A recent study showed that 84% of managers can rely all or most of the time on their bosses or their direct reports. However, when this question is about colleagues in other departments and external partners, positive answers drop to 59% and 56%, respectively.  What it comes down to is that most executives are just not used to coordinate and collaborate
To increase execution effectiveness, then, we need to look at the “who”. The “who” refers to the people that control the tactics, that manage the systems and processes and that insure the execution of the strategy. No matter what type of business or situation, the only way to guarantee effective execution is through talented, motivated and conscious employees, led by conscious leaders in a conscious business context.
By conscious employees and leaders, we mean those that demonstrate seven qualities, as defined by Fred Kofman (Figure 4)[5]. The first three are character attributes: unconditional responsibility, essential integrity, and ontological humility. The next three are interpersonal skills: authentic communication, constructive negotiation, and impeccable coordination. These qualities seem obvious but they challenge deep-seated assumptions we hold about ourselves, other people, and the world.

Figure 4 – Conscious Business Principles

In addition, every organization has three dimensions, as shown in Figure 5: the impersonal, task, or “It;” the interpersonal, relationship, or “We;” and the personal, self, or “I.” The impersonal realm includes technical aspects. It considers the effectiveness, efficiency, and reliability of the organization. The interpersonal realm comprises relational aspects. It considers the solidarity, trust, and respect of the relationships between organizational stakeholders. The personal realm comprises psychological and behavioral aspects. It considers the health, happiness, and need for meaning of each stakeholder[6].
Over the long term, the “It”, “We”, and “I” aspects of this system must operate in concert.  Execution (the “It”) will not be effective without equally strong interpersonal solidarity (“We”) and personal well-being (“I”).

Figure 5 – Integral Approach: Three Dimensions

Finally, as shown in Figure 6, our attention is normally drawn to that which we can see (the effect), which obscures the importance of what remains hidden (the cause). We focus on results (the having) and forget the process (the doing) necessary to achieve those results. We are even less aware of the infrastructure (the being) that underlies processes and provides the necessary capabilities for their functioning. Achieving specific results requires behaving in the way that produces such results, and behaving in such a way requires being the type of person or organization capable of such behavior[7].
Thus, the highest leverage comes from becoming the person or organization capable of behaving in the way that produces the desired results.

Figure 6 – Integral Approach: Three Levels

The path to impeccable execution
The path to impeccable execution is presented in Figure 7, where we compare and contrast the hard and soft skills, and how they interact with each other[8]. The worst-case scenario is in the lower left-hand quadrant, with low soft and hard skills. This situation is very rare, since companies in this condition would not be sustainable in a competitive world over the long haul.
The most common case we see is in the upper left-hand quadrant, the one we call “Mechanical Process” (high hard, low soft skills). For example, we worked with a mid-sized service company facing this problem. One senior manager was consistently getting negative feedback from the CEO in every strategy execution meeting (stage 4, in Figure 2). However, he didn’t seem to care, didn’t seem to change his behavior and consistently failed to deliver on his commitments. After several attempts to identify the root cause of the problem, he finally confessed that he didn’t know how to coordinate his team.
The lower right-hand side (low hard, high soft skills), the situation we call “Unleveraged Energy”, is a strange case, but it also is present in a variety of companies. An example is a large telecom company we worked with, that had 10 regional units. In one case, they tried to develop an inventory of projects, integrating all the projects from all the units into a single plan. At the time, they had more than 300 initiatives, and many of these were identical to others in other units. Because of the work, they were able to reduce their investments by $6 million just by identifying repeated projects among the units and joining them.
Finally, in the upper right-hand corner (high hard and soft skills), we find the situation we call “Impeccable Execution”. In our experience, we don’t see many companies in this space, but we are encouraged to note some positive growing trends here.

Figure 7 – The Path to Impeccable Execution

One important case in this space was the successful design and implementation of a Strategic Alignment project (Figure 8) in our client, Microsoft LatAm[9].
Through a focused plan of alignment and coordination at all levels, that included more than 350 managers from across the region, all teams became aligned with common goals, interdependent strategies and detailed action plans.  The employees’ individual commitments also were tied to the company’s strategic direction. The process created strong organizational alignment and a culture of accountability throughout the region, from the Leadership Team to individual contributors.
The results were nothing short of spectacular: The region’s revenues grew 49.7% in four years while the region scored the highest rating in the company’s internal organizational climate survey. The planning process itself became a company best practice.

Figure 8 – Strategic Alignment Process

As the Microsoft example shows, Impeccable Execution is possible when you have the right balance between hard tools and soft skills.  All else depends on luck!  It is time that more companies recognize the importance of these soft skills and move towards an execution mindset in addition to their tools and KPIs.  In addition to alignment, this will foster coordination and collaboration, which will increase execution effectiveness.

[1] Source: Sull, Homkes & Sull, 2015.
[2] Source: Mankins & Steele, 2005.
[3] Source: Kaplan & Norton, 2008
[4] Source: Durig, 2010
[5] Fred Kofman, 2006
[6] Ibid.
[7] Fred Kofman, 2004
[8] Altaffer & Kallás, 2017
[9] Axialent