Month: September 2014

Making Strategy Happen….in spite of the crisis!

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During times of crisis, organisations often set aside their strategy to focus on short-term actions. Such is the case amid the current “perfect storm”—the environment created in the aftermath of the global financial crisis, and the fragile economic situation plaguing much of the world- affecting organisations all over the world. In this article I analyse the reasons why some organisations become paralysed during a crisis, offering a set of pragmatic recommendations that can provide shelter from the storm. Those organisations that take the necessary steps to integrate their planning and budgeting processes will not only survive the crisis, but will also emerge stronger once the global economy stabilizes.

The creation of the perfect storm

Although difficult to put the finger in one particular date, today most experts agree that one of the most notorious incidents that triggered the financial crisis happened on August 9 2007 when BNP Paribas ceased trading activity on a couple of hedge funds that specialized on US mortgage debt. One year later the US government allowed the investment bank Lehman Brothers to go bankrupt and from then on, we all know the story.

History has taught us that no one escapes a crisis unscathed. But there are always winners and losers. At some point, this perfect-storm crisis will come to an end. Those organisations that are able to adapt to the uncertainties of turbulent times—those that reshuffle their priorities and realign their resources quickly—will emerge strengthened. The rest will have to sit back and learn from them—the hard way.

Getting out of the storm: four imperatives for integrating planning and budgeting

When long-term sustainability is jeopardized by tactical, sometimes short-sighted decisions, skilled leaders realize the importance of linking performance management to budgeting. What do best-practice organisations do to make these two processes “talk” to each other? Consider these four practices, used successfully in both private- and public-sector organisations.

1. Make your strategy talk to your budget.

In the current environment, CFOs are increasingly called on to weigh in on strategy—as strategy heads are called on to offer more than their usual input into budgeting. In other words, the strategy and budget conversation is more essential now than ever before.

Accepted management theory says strategy planning should precede budgeting. That’s not always true, especially during a crisis, when change is the norm. Organisations need to look more closely at where they plan to spend their money and why. This is where the CFO’s role as a strategy adviser becomes critical.

2. Improve cost/benefit analysis and project management capabilities.

Don’t take your current project management system for granted. In times of crisis, when cash flow is unpredictable, it’s crucial that your project expenditure system balances short- and long-term priorities. Conducting a rigorous cost-benefit analysis of each initiative should be on your action-item list for the next project meeting. Merely claiming that a particular initiative will have a big impact on a given strategic objective is not enough.

Every initiative must be staffed with the right people, and the leadership team must be confident that the project manager has the necessary skills to avoid the risk that a poorly executed project will consume valuable resources. Once any initiative is launched, its associated expenditures should be scrutinized and its assumptions constantly challenged against the original business case.

3. Link employees’ individual goals to your performance and rewards system.

Regardless of the operating environment, there are three critical pieces of information that your people must be aware of: (1) your organisation’s purpose, (2) how it plans to achieve it, and (3) each individual’s role in contributing to it. As Dick Clark, the former CEO of Merck, once said, “Culture eats strategy for lunch every day.” To that I would add, “and crisis eats it for breakfast.” If your people are not engaged, the most perfectly formulated strategy and the most rigorously defined processes will fail.

First, your management team must be able to define a clear set of objectives that can be cascaded all the way down to the individual level. Having your employees aligned to the strategy is the best way to ensure that budgetary realities don’t undermine your HR goals—in other words, that your HR planning process is integrated with your budgeting process.

During a crisis it’s common practice for organisations to institute across-the-board headcount reductions. They do so because they have no way to differentiate between employees that they can afford to let go and those they cannot. If instead these organisations had in place a system that showed which employees were most critical to strategy execution, they wouldn’t engage in such an arbitrary, if not foolhardy, practice.

Engaging and motivating employees to foster an execution spirit is no easy task. Approach engagement as a marathon, not as a sprint.

4. Monitor what matters—and do it more often.

Don’t expect your old reporting system to tell you what you need to know during a crisis. Who needs those hundreds of pages of reports that provide nothing but unnecessary details during a crisis? Monitor your progress against strategic objectives and the financial plan in one unified reporting system.

During a crisis, you should focus your attention on answering four questions: (1) Which projects are performing well? (2) Which areas of the organisation are not adding sufficient value? (3) Which activities are you performing today that you could do without? and, conversely, (4) Are there any activities that you are not carrying out today that you should be? Your reporting system should answer these questions.

Flexibility in the ability to shift priorities and to report more frequently is vital. During crisis periods, monitoring cycles should be shortened. In normal times, performance results can remain stable for three months, whereas in crisis, results can fluctuate on a monthly, even weekly, basis. Create multidisciplinary task forces to prepare what-if scenarios and analyse possible outcomes, and distribute this information to managers so that everybody can see what is happening—and will be on the same page.

Concluding…

Not every organisation will survive the crisis. But those that take the necessary steps to support sound, proactive decision making—decision making that doesn’t compromise long-term strategy—will not only survive the crisis, but will also emerge stronger as the economy stabilizes. As master Sun Tzu wrote, “In peace prepare for war; in war prepare for peace.”

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Carlos Guevara – Partner at ShiftIN Partners and Triber

6 ways successful leaders reinvent their Balanced Scorecard

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YOUR BSC
Jeroen De Flander is a globally recognized strategy execution expert and a highly regarded keynote speaker. He lectures at several business schools including London Business School and is co-founder of the performance factory. His first book Strategy Execution Heroes reached the Amazon bestseller list in 5 countries and was nominated for Management Book of the Year 2012 in the Netherlands. His second book, The Execution Shortcut, reach the #3 spot in its category on Amazon.

His strategy articles 7 things every leader should know about strategy and 8 strategy questions every CEO should ask, created a solid strategy debate on LinkedIn, with close to 500 Likes and 75 Comments.

Now it’s time for the next step – cascading your strategy.

The most popular strategy cascade framework is the Balanced Scorecard. According to research by Bain in 2010, the Balanced Scorecard is the sixth most used management instrument in today’s organisations, with around 50 percent of all 11,000 survey participants making use of it.

Want to be in the top 1% of Balanced Scorecard users?

Keep improving what you have!

Here are 6 ways to reinvent your current Balanced Scorecard:

1. Re-think your starting point

A well-designed Balanced Scorecard reflects your company’s strategy − so make sure your strategy is clear at the start. If it isn’t, take the necessary time to clarify. The quality of the strategy cascade can only be as good as the quality of the strategy it starts from. Challenge your strategy for inconsistencies and loopholes. Use these 8 questions every CEO should ask to spark your thinking process.

2. Re-think your strategy map approach

‘We have a strategy map’ is not the same as ‘We have a strategy’ Just because you have a strategy map, doesn’t mean that you have a strategy.

It’s a lot of ‘map’ and very little ‘strategy’.

I believe each strategy map should include a written two or three-page Word document with all the hypotheses clearly explained. A document that captures the choices that you have made.

So if you don’t have those three pages that match your strategy map, why not try writing them?

3. Think made-to-measure

The Balanced Scorecard should be adapted to the size of the user group.

You don’t need a cannon to kill a fly.

Smaller units don’t have – or need – the resources to handle a complex Scorecard. If you use Scorecards for large and small units, you need two different approaches – a basic and a more detailed way of working. If you don’t, you will overshoot for the smaller units and create frustration. So adopt according to size – a bare version for the smaller units, a standard version for mid-sized teams and a full-size version for big units.

4. Re-think the finish line

The Balanced Scorecard is not the end station… so don’t stop!

Strategy Execution is a continuous process. The Scorecard is one technique for cascading strategy to the next level. But cascading strategy to the next level down is just the first step in the cascading process. If you stop there, your strategy will never end up in all the hands, hearts and heads of your employees. Make sure you continue to translate the Scorecard output to a solid project and program portfolio, small choices and individual objectives for all employees.

5. Re-think your budget process

What is the most important process in an organization?

Based on the amount of attention it receives, I would say the budgeting process. In many organisations, budget is king.

Many see the budgeting process as the trigger (because they are forced to do so) of a limited reflection process to identify (read justify) how much more money they will need the following year. They get into a battle with those at the top and after some struggle and cutbacks, return to business as usual. Many companies would make a big leap forwards if the strategy cascade process received the same attention as the budgeting process. Ideally, the cascading process should lead and the budget process follow.

A solid strategy cascading process with the BSC is a great counterbalance for an out of control budget approach – a situation prevalent in many organizations. Do you need to shift the ‘budget – strategy’ balance in your organization?

6. Re-think your KPI approach

Be careful with the slogan ‘What gets measured gets done.’ Many companies lose valuable time playing around with performance measures in their organization, debating the bells and whistles of their flashing traffic lights, measuring things because someone repeated the famous quote ‘What gets measured gets done’. I’m not against measuring, but it needs to become part of the overall execution framework and aimed at the strategy. It cannot be a stand-alone process.

Think about this, ‘What’s the value of measuring speed if you are driving in the wrong direction?’

Strategy Execution Ambassador I Best Selling Author I Key-note Speaker on Strategy & Strategy Execution

The Secret of Big Data Adoption

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Despite the conceptual understanding of Big Data, many people are still trying to figure out how to put the concept in practice. There is no doubt that data is spreading quickly and sources are many. Also, proper usage of all data available can help organisations to stay ahead of competition, however making the case to include Big Data as part of the strategic investments needs a bit more consistency.

I have written before about how How Big Data can help Strategy Management, now let’s see how Strategy Management can help unleash Big Data investments.

If data is really valuable, what defines its value is definitively the Enterprise Strategy.

Whatever long-term aspirations of achievements will establish the sources for Use Cases so much required for the implementation of relevant, sustainable Big Data solutions.

“In order to demonstrate true business value of Big Data, you will need to make a pitstop at the strategy management model to understand what exactly is required in terms of improvements of Operational Efficiency and to be able to quickly and easily drive competitive innovation that translates immediately into some sort of advantages that benefits your organisation”.

So based on the formal strategy definition: You want to gather information and insights from all of your data to be able to pull it together to be able to quickly and easily drive business value that translates immediately into some sort of advantages that benefits your organisation.

For instance, by following the well-known methodology of the Balanced Scorecard, created by Drs. Kaplan-Norton in early 90s, you will find significant information at the core of the enterprise strategy regarding tangible and intangible assets translated into a measurable framework of Goals and Key Performance Indicators (KPIs)that comprise in a holistic way, at least the four perspectives of businesses: financial, market & customers, internal processes and enablers of learning and growth – All business perspectives are driven by valuable data analysis and strategic initiatives.

Each business perspective along with its challenging strategic objectives, may uncover precious use cases for Big Data Analytics, which certainly will benefit the organisation from using Real-Time, Predictive Applications now available throughout a wide range of new technologies such as the Hadoop ecosystem, machine learning, graph databases etc..

My suggested approach is to leverage more on the expertise of Strategy Management to promote solutions of Big Data Analytics for dramatically improve operational efficiency as well as to drive competitive innovation, in perfect harmony with the current organisational strategy execution model.

This way, it will give technology a “business touch” required for making the Big Data investment meaningful for the enterprise. You can simultaneously speak both languages of IT, when it comes to modern infrastructure to tackle the new challenges of a data-driven society, and BUSINESS MANAGEMENT that is always hungry for continuos improvements.

Next time you think about Big Data, try to start figuring out what is your current enterprise strategy and what are the imposed challenges in it that can be solved with Data Analytics. I’m sure you will see how everything make sense.

  Head of Big Data Sales for UAE and Gulf at SAP

Let’s engage together in discussions about Big Data Use Cases originated from enterprise’s Strategy Management Models.

The challenge of executing the strategy in the day to day

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“The challenge of executing strategy requires both developing the right strategy execution tools and implementing the right strategy execution processes.

SMIT Amandla Marine developed more than one year ago a strategy map, creating a key framework to manage and monitor its strategy. In addition, a strategic Scorecard (known as Balanced Scorecard) has been implemented to monitor each strategic objective, and a set of strategic initiatives has been identified and prioritised, clarifying the strategic road-map going forward.
In order to ensure a strong alignment and commitment of first and second level management, the company created a specific Personal Scorecard Model that link the contribution of each one to the strategy execution and achievement.
This solid set of monitoring and management tools allowed SMIT Amandla to excel in the science of Strategy execution and Balanced Scorecard.
But in order to fully internalise the process and ensure the key executioners’ “buy-in, SMIT developed also the art of Strategy execution, through continuous and solid change management and strategy communication.
The result has been outstanding, and the organisation is now 100% focused on monitoring, managing and executing the strategy …”

Clare Gomes
Strategic Planning & Communications Manager at SMIT Amandla Marine