|
Kaplan
and Norton (authors of The Balanced Scorecard, The Strategy
Focused Organization, and Strategy Maps: Converting Intangible
Assets into Tangible Outcomes) provide an addendum to the
traditional definition of strategy. First, the traditional: A
hypothesis that proposes the direction a company or agency
should go to fulfill its vision and maximize the possibility
of its future success. Their addendum is: Unique and
sustainable ways by which organizations create value. The
Strategy Focused Organization says a reasonable
expectation for a strategic discussion should answer the
question, "Are we doing the right things?"
Similarly, ISO 9000 has evolved to address the same questions:
"Are we doing things as we planned, and are we realizing
the results we expected?"
Both
of these examples point out the importance of successfully
translating plans (strategies) into actions (implementations)
that result in success (sustainability). Unfortunately, this
seems to be difficult for a lot of organizations. A recent
Booz Allen Hamilton analysis of 1,200 firms with market
capitalizations of more than $1 billion found that the poorest
performers -- the 360 companies that trailed the S&P 500
between 1999 and 2003 -- destroyed almost seven times more
value through strategic missteps than by compliance failures.
Fully 87 percent of value destruction was attributable to such
failures as management ineffectiveness in reacting to
competitive pressures or forecasting customer demand, or
operational blunders, such as cost overruns and M&A
integration problems (Strategy+Management, December 15,
2004, "It's Time to Take Your SOX Off", Kocoureck,
Newfrock, Van Lee).
The
Enron scandal pales in comparison to the assessment of the
damage done by management ineffectiveness. While the tone of
the article weighed into the Sorbanes-Oxley issue, it points
out the difficulty management faces in effectively
implementing a strategy that sustains, as well as adds to,
shareholder value.
It's
not to say some aren't successful. Every management How-To
book lists examples of its particular method's ability to
support management in efforts to improve the bottom line.
Though Booz Allen describes management ineffectiveness as a
leading cause of shareholder value deterioration, the
assessment may be unduly harsh. Granted, management's
inability to effectively connect where they want to go with
where they're actually going is the basis for the development
of tools such as Lean, Six Sigma, Balanced Scorecards,
strategy maps, and cascading objectives. However, before these
tools were invented we used TQM, Policy Deployment, MBO, and
Zero-based budgeting. It's when the aggregate totals are
examined that the serious "underbelly" is exposed: a
large number of near-complete failures along with countless
other outcomes whose results didn't meet expectations. One
study showed that over 75% of implementations related to
fulfilling some component of strategic intent had either no
effect, or actually a negative effect, on the bottom-line.
Despite this, management keeps trying and shareholders keep
hoping.
Though
the tools may differ, successful implementations of strategy
share a few characteristics, including some that have been
previously described in this monthly newsletter. However, for
those of you contemplating a major effort to restore your
bottom-line's black ink, perhaps it will be helpful to keep
these characteristics in mind.
1.
Management is totally committed, not only to the outcome, but
to the process as well. It used to be that functional
disciplines in an organization were in competition with each
other and had an attitude that prevented honest, open
cooperation. Senior leadership has to make sure that the same
"fiefdom" mentality doesn't still linger in their
organization. In addition, the senior person must not delegate
responsibility for conveying direction and priority.
Otherwise, power struggles among otherwise committed senior
team members will be just as divisive as if the commitment was
missing.
2.
A common understanding of the end point, including the
benefits EVERYONE should expect is known. Several studies
have shown that the success rates of implementations go up
when process knowledge is well understood and broadly
relevant. In addition, the knowledge must be clearly
disseminated throughout the organization. Having led nearly a
dozen turnaround efforts, I have found that resistance melted
away when everyone understood three things: (1) What was in it
for them on a personal level; (2) Exactly what was expected of
them; and (3) Exactly how to meet those expectations.
3.
Everyone knows why the implementation effort is important. Not
only that, but also knows how his/her role is important to the
outcome. People need to know why the outcome is important.
If the company is in so much trouble that the reasons are
clear (survival) that's fine, but there are all sorts of
reasons that people will support. Don't assume that they do
understand why it's important or that you have their support.
You might find your reasons aren't compelling enough.
4.
Everyone is involved. Two benefits can be realized by
involving everyone: better ownership and faster results. As a
test, count the number of people who have at least weekly
requirements to contribute to the final outcome and divide
that number by the total number of employees. The further away
from 100%, the longer it will take and the more you'll have to
struggle to get people to buy in to the process.
5.
The Camp is Burned. Sun Tzu wrote, in The Art of War, that
a general who is preparing for battle must burn his own camp
first, thereby sending a clear message to his troops that if
they are to sleep in tents again, it will be in those taken
from their enemy. Too many strategic implementations fail
because of the pull of "The way its always been".
There are long-standing practices in any organization that can
subvert the best of intents: a standard costing process using
work center efficiency, an out-of-date MRP system, a poorly
structured compensation program, a seniority-based promotion
policy, or an accounting-driven performance measurement
philosophy. Don't think you can be successful if you are not
prepared to strip away anything that gets in the way. Burning
the camp is when senior leadership's commitment to the process
really gets tested.
It
isn't whose tools you use or what consultant you hire that
makes the difference in a successful strategy implementation.
What makes it successful is how you do it. It might help if
you remember this. Strategy delivers promises; people and
processes deliver results. Good luck.
|
