What’s the best way to drive individual performance?
How does a leader assure enterprise success?
Is it possible to close performance gaps to improve execution?
Making Strategy Work
In Execution Excellence: Making Strategy Work Using the Balanced Scorecard Sanjiv Anand answers these and other questions.
Sanjiv Anand has 30 years of global experience in consulting, helping CEOs and boards develop transformational strategies. Currently the Chairman of Cedar Management Consulting International, his book is full of his operational and strategic insight on how to manage human capital. He is an expert on the Balanced Scorecard.
I recently asked Sanjiv to share some of his experience about what does and doesn’t work in implementing strategy.
“If you can’t execute the strategy, it’s not worth having.” –Sanjiv Anand
Why is strategy more relevant than ever before?
While the world continues to provide opportunities to grow, it is not without challenges. First, customer expectations around product, relationship, and brand have risen over years driven by extremely high levels of competitiveness. This has resulted in the need for firms to develop multiple strategies that address different customer segments. Additionally, competition is now local, regional, national, and global. This requires a more nuanced and complex competitive strategy. All of this also drives complexity in process and people. Global organizations or markets require processes to work well in a centralized and decentralized manner. Lastly organizations have become complex as even medium-sized enterprises can have employees across the world. All of this has made strategy, and more importantly the execution of strategy, more relevant than ever before.
What are the elements of a strategy that works?
Never build a strategy that can’t be executed. The problem starts there. Most organizations build strategies that are complex, difficult to understand, and hard to execute. A strategy that works needs to be balanced. It needs to focus on the drivers of financial performance rather than just the financial outcome. People and technology help drive process excellence. Process excellence helps meet or exceed customer expectations. And meeting customer expectations delivers financial performance. Therefore, all of these elements are critical for strategy that works—combined with a clear sense of ownership across the leadership team, a set of performance measures that are lead indicators to performance, and a set of targets that focus performance and don’t overwhelm. Focus, balance, ownership, measurement, and the right targets are the elements that make strategy work.
Understand Cultural Differences
What are the cultural differences to be aware of in terms of measurement?
In the U.S., measurement motivates. In many parts of the world, measurement scares. Why? The U.S. has a culture that celebrates individual performance. This is also reflected in how organizations assess and reward people. Drive individual performance to drive enterprise performance is the typical formula; therefore, most executives in U.S. corporations are used to the idea of being measured and being held accountable individually.
Many parts of the world are different. In Japan it’s about team performance, and therefore team measurement is more important. In many parts of Asia, especially India, measurement is generally not part of the culture. Individual performance, or rather lack of it, is not something for public display or discussion. In Europe, the role of the corporation transcends the objective of only meeting shareholder expectations to also focusing on the greater good of society, so measurement of individual performance gets more complicated.
The broader point here is not to suggest that measurement should not be attempted, but the approach to measurement needs to be customized to motivate, not demotivate’ which is the objective in the first place.
Don’t Make these Mistakes In Setting Targets
When setting targets, how do corporate leaders balance between the actionable and the aspirational?
Organizations often make the following mistakes in setting targets: either they only focus on financial targets, or they tend to set too many aggressive targets. If one looks at an organization’s strategy, one will find in an average year that out of the 20-25 key targets to set, only 4 or 5 need to be aspirational; the rest can be realistic and easy. Too many stretch targets break an organization’s back and results in an accelerated depletion of its people, financial and other resources, with no real guarantees of benefits. For example, if the strategic theme for the year is customer excellence, then the 4 or 5 areas that drive customer excellence should carry the aspirational targets. A different example is that if the organization is going through a re-organization, and headcount is being reduced, that’s not the time to set an aspirational target for employee satisfaction.
Create a Positive Business Strategy
Business strategy should be positive. Would you share why and how to insure that happens?
My biggest complaint against CEOs of U.S. and European corporations is that they have made the fact that they operate in low-growth markets an excuse to not focus on positive aspects of business strategy, but instead focus on ones that I consider negative, such as cost and head count reduction as the primary way of delivering profits. Positive strategy is about driving enterprise growth and delivering profits at the same time. Sure some of that is attempted by M&A, but that too ultimately has a negative agenda by right sizing the organizations and shutting down plants to justify the cost of the transaction, the investment banker’s fee, and the cost of the excessive debt. A positive strategy should focus on innovation, and innovation can be over various types – technology, product, channels, markets, processes and so on. Opportunities to grow through innovation are available in the various markets that people say offer no growth. The same markets where Kodak and many others found opportunities to sink provided opportunities for growth creating the Facebooks and Apples of the world.
How do you know a project management office (PMO) is effective? What are the characteristics of a high-functioning, successful PMO?
Companies spend tons of money every year on strategic or operational initiatives. Most don’t complete on time or do not deliver the value they promised. Most organizations at any given time do not even know how many initiatives are running and what human and capital resources are being consumed. Besides bad leadership governance on projects, the lack of an effective PMO is the main cause. An effective PMO needs to come together first with a clear charter – what its role is, what its authorities are, what its main deliverables are, and what will be the balance of roles between the PMO team and the operational team for whom a project is being done. For example, the ownership of a project gets dominated by the PMO team rather than the management team for whom the work is being done. When the time comes for the project to be completed and handed over, there is nobody to hand it over to, as the operational team feels no sense of ownership. A strong executive sponsor is another aspect of an effective PMO. And lastly, members of a PMO are not to be selected because they are available (generally the underperformers are the ones available) but because they are high performers. And the successful delivery of a strategy initiative should be a career path for accelerated growth within the firm.
When to Revisit Your Strategy
When do you reopen the strategy and make a change? How do you balance between staying on course and reopening a decision?
Since Brexit just happened, it’s an excellent example of a scenario to relook at strategy. The UK has decided to walk away from the EU. Currency markets have moved, equities are down, trade agreements will be torn up and redone, new tariffs will become applicable, the logic of where one manufactures and where one sells – all of this will now need to be reexamined. Something like this, an M&A event (in your own firm, or your competitor), and in the worst case – an act of God – are the only reasons I would recommend a drastic relook at the strategy. Otherwise it’s better to keep the strategy focused and consistent and use the target to fine-tune some of the intensity and directional change that may be needed for other events. Too much movement of strategy and targets all the time is like a compass with no direction.
“Too much movement of strategy is like a compass with no direction.” –Sanjiv Anand
Execution Excellence: Making Strategy Work Using the Balanced Scorecard