What Would The Ideal Strategy Execution Look Like?

What Would The Ideal Strategy Execution Look Like?

By Anton Sirik

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What Would The Ideal Strategy Execution Look Like?

A Model Organizational Structure

Strategy touches everybody in the organization. The strategy process is as much about changing the culture of the organization as it is about the management systems. For the purpose of discussion, it would be convenient to have a generic view of the ‘average’ organizational structure but, of course, defining ‘average’ is always difficult. In an attempt to keep the thinking simple enough to be generic, we’ll start with the simplest possible view of an organization:

Simple organizational structure
The highest organizational level is, of course, the ‘C-Level’ where the Chief Executive and his/her top level staff reside (we’ll call it a ‘CxO’ role for short, i.e. a role whose title has ‘Director’ or ‘Vice-President’ or ‘Chief’ somewhere in the label). In the level below the ‘C-Level’, there is an interesting division of senior management into two categories:

  1. Business Unit Managers – those that head up the operational units of the organizations. In a commercial organization, they sit at the top of product or regional divisions that deliver customer facing product or services and generate revenue. In a government/non-profit organization, they are the managers of the delivery system (i.e. the operational system by which the organization delivers the services it is responsible for).
  2. Functional Managers – those that head up functional areas of the organization. Typically this area has activities such as:
    i) Finance and Accounting;
    ii) Human Resources;
    iii) New Product Introduction/New Product Development;
    iv) Quality Assurance/Process Excellence;
    v) Performance Improvement (Lean, Six Sigma);
    vi) IT.

In terms of the organization, Functional Managers and Business Unit Managers are generally peers in the same management team. However, as soon as we drill below these managers, their staff and subordinates can largely be divided between two sides:

  1. An operational side of the organization which is mainly concerned with the day-to-day activities of running the business (‘Run the Business’ activities). They are the ‘operators’ of the organization’s business processes – geographical sales teams and branch offices, production plants etc. Of course, staff falling into this category do not all report to the Business Unit leaders. Some staff reporting to the Functional leadership may also have a role in ‘turning the handle’ on business processes (e.g. the HR processes or IT support).
  2. A project activity side of the business run by managers of individual project-based programs. They are the ‘detail designers’ of the organization’s future. We can see their role as managing the ‘Change the Business’ activities, even though – in many cases- the mechanisms by which they Change the Business involve indirect influence over the ‘Run the Business’ staff, rather than a direct reporting line. To add to the complexity, the staff falling into this category do not all report to a Functional Leader, though they usually have at least a dotted line relationship to them. For example, process improvement projects initiated by a Deployment Leader or Six Sigma Black Belt, may involve team members (and even project leaders) who have a ‘day’ job in the ‘Run the
    Business’ side of the organization. Their ‘real’ boss sits firmly on the operational side.

This brings us to a key point. In any organization, there is a fundamental tension between the ‘Run the Business’ activities and ‘Change the Business’ activities. This tension exists both as conflict between staff that find themselves on opposite sides of the divide, and within individuals who find themselves balancing their own competing priorities. The varying sources of this tension will become clearer as we try to superimpose a strategy on the organizational model.

In our experience, many organizations fail to address this tension. They do not consider it during strategic planning and they fail to manage it during strategy execution. As a result, the organization becomes paralyzed, and even ‘Run the Business’ activity is damaged.

 

What Would The Ideal Strategy Execution Look Like?

Now we have a generic view of the organization, we can imagine how activity in the ideal Strategy Execution System would overlap into this structure:

Phase One: Define The Strategy
Specifying and placing the first phase of the cycle is the easiest. Strategy starts at the top. The high-level strategic plan is formed by the C-level executives. We might hope and believe that they will consult the experts at lower levels of the organization to gain insight into both the capabilities of their own organization and the competitive landscape in which it operates, but there’s no doubt it’s a room full of C-Level executives that sends up the white smoke and emerges triumphantly holding the high-level strategic plan.

Define strategy

The actual definition process they have followed may use one or many of the strategy formation methods that have been put forward in the last twenty years. For now, it is sufficient to say that the output of this phase is not yet an executable plan, but a distillation of the vision, values and mission of the organization into a set of aims.

Phase Two: Translate the objectives
The process of translation begins when the high-level plan starts to be discussed with operational and functional managers.

Translate objectives

These are not the only people involved, of course. Translating down to a level at which ‘action’ can be taken is a multi-stage process that can involve many iterations. The operational and functional managers will discuss and agree sub-objectives with their teams, and those teams will repeat the process with their own subordinates until a complete cascade is formed (the translated plan).

The translated plan – captured within our ideal Strategy Execution System – has to connect directly with activity in two other phases of the cycle:

a) The ‘Act’ Phase. The plan provides the programs of action that are to be managed by functional managers (the ‘Change the Business’ activities).
b) The ‘Measure’ Phase. The plan defines objectives (usually expressed and tracked on scorecards) for the operational managers and departments

Phase Three: Act on the Plan
The top level objectives have been translated into a plan of many hundreds – if not thousands – of projects and actions, mainly falling on the ‘Change the Business’ side of our organization (even if the projects are run and executed by staff whose normal day-job is ‘running the business’).

Act on strategic plan

In a fully developed ‘Act’ phase, many different programs of change may all be driven from a translation of the high-level objectives. Typical types of program include:
i) Product or service development;
ii) Process improvement;
iii) Mergers and Acquisitions;
iv) Marketing;
v) IT development.

Strategy – particularly if it implies major change – also drives an increasing demand for resources with particular skills within certain programs. These skills may be new to the organization or in short supply. Therefore, objective translation often creates a need to reassess the resource pools attached to various project programs and for new employee training courses. Within our Act phase, there will be a need to control and manage a training agenda, tracking both the required skilled resources and increasing capability by making specific training investments.

Phase Four: Embed New Processes & Resources
The ‘Embed’ phase sits squarely on the border between the ‘Change the Business’ and ‘Run the Business’ activities. It is the primary link between the two.

Embed new strategic processes and change

It is not enough to design new products and services, or to redesign or define new business processes. The ‘Embed’ phase gets them into the fabric of the business.
Our perfect organization operates a three-phase process for embedding anything new into its operations:
• Transfer of knowledge (training);
• Transfer of ownership (from project leader to process owner);
• Formal documentation of the change.

Phase Five: Operate
The ‘Operate’ phase could easily be defined as everything that sits in the ‘Run the Business’ box in our pyramid of organizational structure.

Operate business after strategic change

The way an organization operates is what its customers, clients and external stakeholders experience. It’s the revenue and profit generation engine in the case of a Private Sector company; the engine by which it delivers its primary services in the case of a Public Sector organization. As such, it concerns the most important thing any organization has to do. However, in terms of the ideal Strategy Execution System, it is not necessary or possible for senior executives to micromanage every transaction on the ‘Run The Business’ side of the organization. Our perfect organization has a tricky balance to strike within its management philosophy, but the truth is that strategy aims to affect the way the organization operates, not to manage its operations.

Phase Six: Measure
Measure, the sixth phase, pulls the data collected from the ‘Operate’ phase together with the objective trees we defined in the ‘Translate’ phase (Phase Two). The primary purpose of the ‘Measure’ phase is to relate actual performance to the targets and provide some analysis that shows whether or not we are heading for success. If we are not, it should indicate where the performance gaps are and help us decide what to do about it.

Strategy cycle - measure

Sounds good! Once we’ve connected Phases One to Six of the ideal Strategy Execution System, the data we get allows us to review the performance of the organization against the objectives set at all levels.

We can step around the cycle and answer all the key questions:

  • We can capture and communicate vision, mission and the causal logic of our strategic plan (the ‘Define’ phase);
  • We can translate the plan and flow down objectives in a systematic way, clarifying responsibility (the ‘Translate’ phase);
  • We can define actions to change what we do, how we do it, and choose method/approach (the ‘Act’ phase);
  • We can update our processes and systems and roles so that they support the changed business model and become the new ‘business as usual’ (the ‘Embed’ phase);
  • We can monitor the new business-operating model (the ‘Operate’ phase);
  • We can use the interconnection of the phases to measure operational performance & flow up through cascade to assess if:

a) we are executing our strategy, b) our strategy is delivering on the targets we have set, and c) if we need to change any of our objectives or modify the action plan.

Senior executives can now feel confident that strategy is going to be delivered, because they know that the required resources are deployed and the required actions are in progress. If things start going wrong, they are no longer in the dark. A simple look at the latest progress and performance reports pinpoints the problems and suggests where to apply solutions.

Business Unit and Functional Leaders have clear objectives for both the short and long term, which they have had input into setting through the Translate process. For them, the scorecards that monitor performance at all levels provide a balanced view of how to take priority decisions.

Staff at operational levels are no longer caught between their line managers who are worried about today’s outputs, and strategists and improvement leaders who want them to work on change projects. Time management stops being their greatest nightmare.

 

Practical Hurdles To Ideal Strategy Execution

Before this begins to sound too easy, we need to acknowledge some of the practical hurdles and challenges that we need to overcome, so that we are ready to define feature in our Strategy Execution System that mitigate the problems and allow us to add on any extra features that might be necessary as our system matures.

As practitioners, we think there are four problems we need to discuss at this point:

1. The Broken cycle challenge;
2. The Coherent Cascade Challenge;
3. The Need to Connect to Finance Systems;
4. The Cultural challenge.

In the following sections, we will give some detail to each of these issues.

 

The Broken Cycle Challenge

Earlier, we discussed the idea that most real organizations develop triangular cycles that we characterized as the Planning and Execution Cycles. We also said that these cycles were often not joined.
We need to acknowledge that the reason for this is the difficulty of making these two cycles compatible. There are good reasons why they tend to remain stubbornly independent:

  1. The Execution Cycle works on the real life processes as they are used inside the business, but the Planning Cycle works on a model of the organization. Models don’t always relate well to reality, and unless the model is an accurate interpretation of the cause-effect linkages in the real business, the model will be quickly rejected by the operational levels of the organization;
  2. There is an organizational divide just where you’d like the two cycles to come together, as we can see by positioning the cycles in our generic diagram of the organization.

The break between cycles tends to explain why so much measurement activity drives dysfunctional behavior in organizations. When the cycle is broken, the senior levels of the organization soon realize that they have no levers to turn objectives into action. Worse still, the operational staff soon lose faith in the planning process, and make every attempt to undermine the results shown in scorecards and scorecard reports.

Run the business and change the business

The Coherent Cascade Challenge

In most organizations, employees involved in either the Planning Cycle or the Execution Cycle are familiar with measurements. Whether they are called metrics, criteria or Key Performance Indicators, or any of the other names we have heard in use, is not relevant. What is important is the recognition that the nature of these measurements (let’s call them KPIs for short) are not necessarily the same. They are not the same because:

a) Just because they reflect performance, it doesn’t mean everyone regards ‘performance’ in the same terms.
b) The approach to measurement may be different.

This has big implications for any cascade of measurements. It affects the ‘Translate’ phase and the way it connects to the ‘Act’ phase, and for the ‘Measure’ phase and the way it connects to the Operate phase.

 

The Need to Connect to Finance Systems

We have talked about the need for the Strategy Execution System to draw data from the operations of the organization. However, there is another important connection that needs to exist between the Strategy Execution System and the finance systems of the organization.

In the end, the outcomes of business activity for any organization are reported in financial terms (return on investment for a private company; delivery versus cost for a public organization), and the business will have systems of budgeting, forecasting and accounting for activities that cannot be ignored.

Commonly, organizations seem to duck the issue when in the depths of forming strategy, but planning a strategy that isn’t supported by the finance system usually creates paralysis.

One former executive told us, “Every year, we would explain the new strategy to the business unit heads and ask them to go and draft their next year’s plan. They would come back with OPEX budgets that spent money to implement all the new initiatives we’d discussed, but with no benefits forecast into the sales or cost lines. The CFO would tell them to cut all that money out because the profit numbers didn’t work. As a result, we perpetually approved business plans in which the narrative talked about executing bold new strategic initiatives, but with financial budgets that allowed for no resources to get them done.” Solving this problem within our Strategy Execution System is a must.

 

The Cultural Challenge

By now, the need for a Strategy Execution System probably seems so obvious that you’re wondering why most organizations don’t already have such a thing. We have mentioned some problems, but these are surmountable. The real issue is overcoming the cultural inertia – actually getting the necessary actions onto the ‘To-Do Lists’ of the builders and architects of the management practices and systems.

Time management has a lot to do with what actually gets done in any large organization. As we have said earlier, the organization is in constant motion, and changes that drive strategy and daily operations are happening simultaneously. The two activities often involve exactly the same people, desperately trying to juggle their own time management.

Urgent activities swallow time and urgent activities are predominantly to do with operational priorities, because the consequences of failure have significant short term impact. A survey carried out at a large telecommunications organization during one of our consulting engagements showed the following split in executive time between urgent, non-urgent, important and non-important activities. It is not untypical.

Culture change - urgent vs important

We can see that 85% of their time is consumed on today’s issues. The time remaining to talk about important long term issues (i.e. strategy) or to contemplate building a better strategic execution system is squeezed into a very small space. This finding is in line with a Kaplan and Norton surveyv which found that vast majority of senior executive teams spent less than 5% of their time (one day in a month) on strategy, and presumably even less on building a strategy execution capability.

 

Summary

In the long run, the formal management systems and the way they are applied and reinforced by the actions and behavior of managers are what determine culture. It is important to understand, not just the management system by which strategy is executed, but also the way in which the stages of planning and execution are conducted within the organizational structure (i.e. how many people and departments are involved and when? In which parts of the process do they make their input?).

In defining the specification for an ideal Strategy Execution System, it is useful to adopt a simple model of organizational structure and superimpose the six phases of strategy upon it:

Organizational structure and strategy cycle

The points we have identified can be written as a ‘specification’ for both the management activities within the Strategy Execution System and the intelligent infrastructure that supports it.





Original: https://www.i-nexus.com/stratex-hub/what-would-the-ideal-strategy-execution-look-like/
By: Paul Docherty
Posted: October 23, 2017, 11:05 am

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Anton Sirik

Proven success in Strategy Execution, Operational Excellence, Business Transformation, Digital Marketing @ i-nexus

i-nexus Strategy Execution Software helps Global 5000 organizations achieve more goals, faster with less effort

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