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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.
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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Aside Posted onJeroen 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?’
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The 4 common pitfalls 90% of organizations make, and what you can do to avoid them
By Fares Hillo – Consulting Manager – at ShiftIN Partners.
This article is an abstract from the whitepaper ‘How to bring HR to the Strategy Table’ co-authored with Carlos Guevara, Partner at ShiftIN Partners that will be published in June 2014.
We’ve all either heard this complaint before, or said it ourselves; “HR isn’t supporting the strategic growth of our organisation”.
In fact, the very first line on Wikipedia’s page for Human Resource Management is: “…a function in organizations designed to maximize employee performance in service of their employer’s strategic objectives”! Isn’t it strange then that so many organizations and the people within them feel the same about their HR function? We’ve all become accustomed to playing our role and almost working in silos. Your average employee rarely gets a chance to see the bigger picture, even if they ARE part of the ‘core business’. Imagine this problem in a government entity where bureaucracy rules supreme…
HR is no different. Actually, it may be worse. As a support function, they are expected to deal with ‘managing’ the employees and not interfere with their ability to carry out their responsibilities. But in the dynamic landscape of 21st century business, a function – certainly one as critical as HR – can’t afford to turn its cogs without realizing that the machine it’s turning is an uncoordinated mess.
Yet HR doesn’t sit on the strategy table.
Your typical well rounded strategy includes a neat section about ‘organisational enablers’ – nice and clear somewhere at the bottom of your strategy, ‘driving’ the core business above it. The problem with this is that it still keeps HR at arm’s length. The organisation see’s that HR has its part to play, and HR sees the same thing, and everyone understands what they have to achieve.
But what about truly embedding HR in the heart of executing the strategy?
This has been a common failure in most organizations, and while many have mature and ‘evolved’ strategy know-how and capabilities – they still struggle with bringing HR onto the strategy table. Many of the fixes require a deep analysis into the culture and operations of the organisation in question, but there are some pitfalls that can be easily avoided with a little careful planning and approach. So consider the following:
PITFALL # 1: Is your HR planning calendar synchronised with the Strategy Calendar?
The other day when I was discussing the strategy with one of our clients, we finished the discussion agreeing that we needed to invest in growing the sales force in order to tackle some of the untapped opportunities. After reaching this conclusion we felt relaxed, until somebody raised her hand and said: ‘but we have already defined our manpower plan for next year, 2 months ago!!
How do you know that something is not working well? Look for the following symptoms:
HR asks departments to define their manpower needs for next year before these departments have had the chance to review their departmental strategies.
The strategy department doesn’t involve HR during the strategy formulation process.
Similarly, HR doesn’t involve Strategy Department when updating their HR plans.
PITFALL #.2: Competency management is not aligned towards the strategic outcomes
Let’s say that you have a successful restaurant and, after a strategy session with your shareholders, you have envisioned transforming your restaurant into a franchise that offers a brand new value proposition to its customers. Do you think your future company will require the same competencies that you see now in your staff, or will different capabilities be needed to deliver this value?
You know that you have this problem if you perceive the following symptoms:
You have a competency framework but it reflects the competencies needed in the past but not those needed in the future.
You have a competency framework but you lack the tools to measure the proficiency levels and accurately identify the competency gaps.
You are able to measure the competency gaps but your training plan is unable to address them.
Or, you don’t know which competencies your strategy will need at all!
PITFALL # 3: Personal Objectives not connected to Organizational Objectives
Research shows that the vast majority of managers believe that individual objectives are helpful to determine task importance, yet how many times have we heard managers complain about the bureaucratic, template-filling exercise that objectives setting has become? Their solution is to simply recreate the basic core responsibilities of their employees, based on the job descriptions, as their personal objectives without any kind of alignment with the corporate and function strategies.
How do you know if you have this problem? Look for the following symptoms:
Personal goals are not aligned, and sometimes contradictory, to the organisational strategy.
Managers are not required to provide justification (in the form of strategic contribution) when setting personal objectives.
There is low level of engagement from managers while setting objectives and providing coaching and appraisal. They don’t seem to see the value in doing it…
PITFALL #4. Rewards system doesn’t incentivise the right behaviours
Last but not least. HC frameworks should foster the right organisational culture to enable the strategy. One of the key aspects of shaping the right culture is the incentives. The way an organisation rewards its employees has a tremendous effect on driving behaviors, and ultimately performance.
How do you know you have a misalignment between culture and strategy?
You strategy says one thing but your culture says another (Nokia disease).
HR doesn’t have a proactive process to incentivise the right behaviors.
Culture is an intangible that nobody actually manage.
The Values in my organisation are nice words on a wall but I don’t feel that the majority actually.
So what can you do differently tomorrow? Where should you begin?
Start by breaking down the walls separating HR from the rest of the business, and bring them closer to the heart of your strategy planning. Don’t let them be the afterthought, which you expect to ‘react’ to solve the business’ challenges once all has been said and done… Instead make them a proactive part of your core team of strategic thinkers.
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In this article, Jeroen de Flander explains how strategy execution is helping people make small choices in line with a big choice. The idea is to change the way we look at strategy execution; that as leaders we should imagine a decision tree instead of an action plan. Don´t waste time asking people for action plans, but help them make better decisions.
Then, he talks about The Mintzberg Pattern, when all small choices in your execution journey are in line with the big choice. And ends with an experiment made by a high school student Britney Gallivan of Pomona, California where if you fold a piece of paper in half 50 times, how thick would the end result be? She decided to test it and in the end, she was able to fold the paper 12 times and also to explain the phenomenal exponential force of repetitive small actions!!!
So, successful strategists have SMALL decisions on their radar. Are your SMALL choices in line with the BIG choice?
Read the article here: https://madmimi.com/p/c524d4?fe=1&pact=22551778446
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The fifth and last article from 2013 brings “a culture that throws out the misconception of strategy planning and execution as two different things”. We hope you found value in each of these article choices and let us know your thoughts related to these topics. Please go to the article, to leave a comment.
Closing the Chasm between Strategy and Execution
The chasm between strategy and execution is one that has typically come about due to the traditional segregation between those with the big ideas who come up with the plans, and those on the ground who experience the real world. Leadership and strategy consultant, Doug Sundheim, proposes in his article some solutions for what can help bridge the divide between the strategists and executors based on his extensive experience.
While some easy solutions can help to narrow this gap, mostly through better process alignment, a better and more powerful solution would be to address the problem at its root; by embodying a culture that throws out the misconception of strategy planning and execution as two different things.
With this common sense solution in mind, and through their belief in a core set of principles, both the best strategists and the best executors meet in a middle ground, where each recognizes at the core that they are willing to take responsibility for a task, even if its “not-given” and isn’t directly their responsibility.
Our question is:
How should strategy planners get involved in the execution of strategy?
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The second article from 2013 brings an emotional approach to strategy execution.
We hope that you will find value in each of these article choices. Here comes the second one:
An Emotional Approach to Strategy Execution
This article talks about collective emotions and how leaders should deal with this. At INSEAD´s strategy execution program they teach executives “emotional capital” skills. They think that leaders, who are able to identify and manage patterns of emotions in a collective, are better able to make their ambitious strategies a reality.
As research in neurology and psychology has shown, emotions can influence human thinking and behaviors in powerful ways and impact performance in organizations. Studies show that emotions that are driven underground tend to incubate and surface later.
To manage collective emotions you first have to understand their nature and differentiate collective emotions from personal emotions, then actively encourage the expression of emotions and their causes at work – in a climate of relative psychological safety. So, taking appropriate emotion management action is a key role for executives who want to successfully make strategy execution happen.
Their conclusion is that leaders will have greater chance of identifying and channeling negative emotions toward constructive ends by perceiving the patterns of emotions in their organizations.
And our question is:
Can we create a more practical way to assess real live emotions rather than “after the fact” surveys and assessments?
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A research project based on the first strategy execution survey in the Middle East, to be launched by our Tribers in the region.
Strategy Execution has been slowly and steadily strengthening as an emerging discipline over the years. A large amount of knowledge, research and academic papers have been written on the subject, not to mention the large number of conferences and presentations. Nevertheless, this information has some pitfalls. The first is that it relies on outdated data, take for example the saying used by so many consultants, subject matter experts and enthusiast practitioners, regarding the “golden rule of execution” which states that companies lose a big percentage of their Strategy (intent) during its implementation (around 60%). This “rule” (with all its different versions) relies solely on a Harvard Business Review article published in 2004, using a data set (prior to 2004) for drawing its conclusions which is not necessarily up-to-date data. Moreover, the study was conducted in the ‘West’, and extrapolating its findings to organizations across the world (whether public or private) seems somehow quite challenging.
The Middle East in general and the countries of the Gulf Cooperation Council in particular, have shown impressive growth over the past few years. However, little has been done to identify what the specific details of organizations in this region are when it comes to definition and execution of their strategies, nor what is the state of these practices and the sophistication of the management tools employed. In this regard, a research project has been launched: “The State of Strategy Execution in the Middle East” (SOS-E). The objective of which is to contribute in generating data and knowledge specific for the Middle East, on the strategic capabilities of organizations in this particular region.
Results of this survey will have multiple benefits. First, it will help organizations to benchmark themselves against best practices, both in the region as well as globally (thanks to its comparability with the largest strategy execution related research in the world, the Strategy Execution Barometer). Secondly, the data generated will contribute towards strengthening the knowledge available about this region, which will help to tackle problems and challenges with a tailor-made approach, avoiding generalizations with other studies.
SOS-E is a not for profit effort that is being conducted by the Strategy Tribe partners in the Middle East (ShiftIN Partners), in cooperation with one of the world’s a top 20 Business School (SP Jain), and Jeroen de Flander. Participating in this survey is completely free of cost, and all participants will receive a free copy of the results at the end of the survey.
All data follows strict confidentiality protocols. We invite all readers to support this initiative and take the survey at www.stateofstrategy.org.