Performance Management & Strategy Execution Blog: The Glue

De-mystifying Strategic Planning, Part 1

Clearly, a solid strategic plan must be at the heart of any strategy execution or performance excellence effort, but I find that people are often confused or even intimidated by the strategic planning process, so I thought I'd take a step back and go over some fundamentals to help those of you who feel this way.

I'll start by giving you my definition of a strategic plan. To me, it's a set of short- and long-term goals that, if deployed over the next 3 to 5 years (with some possible adjustment along the way) will guide the organization toward its desired future state. The goals should include strategic objectives, outcome measures, short- and long-term targets for the measures, and improvement initiatives (i.e., projects with action plans).

Sounds simple enough, but as mentioned, how to get to this point can be mystifying to many people, so I'll break it down into its most fundamental parts.

The process is comprised of the following components:

1. Gather a series of inputs that are both internal and external to the organization
2. Hold a forum to discuss and understand those inputs (the planning session)
3. Determine a method to choose which are the most important inputs to address in the strategic plan
4. Create a few key outputs that will be part of the plan

So what inputs should you consider? They fall into three categories:

• Stakeholder feedback on their requirements and your performance on those requirements
• External input from a variety of sources and
• Internal input from employees by department or business unit 

Stakeholder feedback should consider customers, Boards of Directors, employees, regulatory agencies, and other partners and can come in the form of surveys, focus groups, regulations, guidelines, and interviews.

External input should consider macro-environmental factors including Political, Economic, Social, Technological, Environmental, and Legal (PESTEL). The organization should solicit information on only the PESTEL areas that apply to it and the information can come from research, consultants, lobbyists, knowledgeable employees, or experts.

Finally, internal input is usually solicited using a departmental or business unit SWOT Analysis, where the strengths and weaknesses are internal to the organization and the opportunities and threats are external. As you may have surmised, much of the PESTEL analysis also addresses potential opportunities and threats.

Now that we have introduced a great deal of data and information, what do we do with it? How do we use it to prepare for the actual planning session (step 2 in the process above)?

Each member of the strategic planning session should receive all of the information in advance and study it to begin to understand the key themes that it highlights. At the session, the information should be presented by different individuals, both as a whole and, importantly, highlighting the few most important issues from each information source. Then, it should be discussed as a group and the key issues based on the group’s decisions are moved to an organizational SWOT Analysis that is being built as you go (on a white board, projected on a screen, or in another very visible location in the room).

At this point, based on the filtering that has already occurred, there should be somewhat less information than when the strategic planning session began, but it is still far too much to address as an organization. So, it is time to begin focusing and prioritizing the key themes, objectives, breakthrough improvement areas, and initiatives (step 3 in the process above). At this stage, the group is attempting to identify strategic challenges to address and strategic advantages and core competencies to leverage or strengthen. More on how this is done will be discussed in part 2 of this article.

The key outputs from the planning session (step 4 in the process above) should be:

1. A confirmed or refined set of Mission, Vision, and Values
2. A strategy map
3. A preliminary scorecard
4. Identified breakthrough improvement areas 
5. Preliminary initiatives 

The strategy map is merely a pictorial view of the 3 – 5 year strategy, containing perspectives or strategic areas to ensure a balanced approach to setting goals, themes, strategic objectives, plus arrows showing the relationships among the various objectives. The scorecard takes the items on the strategy map and "operationalizes" them for deployment by adding measures and targets for tracking progress, along with key initiatives.

If you're new to scorecard development and measure creation, you might find it helpful to view our recorded webinar, "Balanced Scorecard Fundamentals" available through this link.

And stay tuned for part 2 in my series that will get deeper into how you prioritize during planning. In the meantime, I'm happy to answer any questions and would love to hear about strategic planning approaches that have worked for you.

Strategy Management: Broken Leg or Gym Membership?

On my long flight back from the recent Gartner BI Summit in London, I realized that Strategy Management is more like a regular exercise regime than it is like a broken leg. Make sense? If not, stay with me for a few minutes and I'll explain.

Gartner views Strategy Management (which we at The Glue often refer to as Strategy Execution or Performance Management) as one of the five components of Corporate Performance Management (CPM). During a presentation by one analyst, I noticed that the overall cost, time to implement, and return on investment was more attractive for Strategy Management than it is for the other components of CPM. 

So you would think that companies all over are rushing to implement Strategy Management, especially when research shows that managing with leading measures brings huge financial gains (one HBR article found that 23% of companies that manage with leading indicators did 3% better in return on assets and 5.1% better in return on equity than those that didn’t). But in so thinking, you would be wrong. 

In fact, Gartner reports that Strategy Management is the LEAST implemented of the components of CPM. It is on its way up Gartner's “hype cycle” and looks like it will become more widespread in the next few years, but for right now most companies are focusing on financial consolidation, planning and budgeting, or other CPM components.

So this got me thinking: Why would organizations not focus on the least costly, quickest to implement area of CPM that also provides the best return on investment?

This is when I realized that Strategy Management, like exercise, is the absolute best way to deal with chronic problems and overall systemic improvement, whereas many other parts of CPM address more acute problems, like a broken brone.

Consider what happens if I break my leg. It hurts a lot, it's obvious that it’s broken, and it clearly needs to be fixed right away. If I had a broken leg I would get it fixed as quickly as my access to medical care allows. After my leg heals, I would go on with my life. Getting my broken leg fixed won’t make the rest of my life better, help me live longer, or make me feel better overall than I did before it was broken, but it does take away an immediate pain that would certainly lead to more severe problems if not fixed.

If I am a CFO trying to do financial consolidation with Excel spreadsheets and it is taking my entire accounting staff a month of 60-hour weeks, I have an immediate pain that I need to fix.

On the other hand, take exercise. Research shows it will make you stronger, improve your mood and attitude, help you live longer, and provide a host of other benefits. But it takes discipline and hard work to get into a habit so that it becomes part of your lifestyle. Sometimes it takes evidence like less-than-great bloodwork or declining annual phsyical results to convince a person to hit the gym and get into better habits. An enthusiastic physician, personal trainer, or vocal spouse might also help.

Strategy Management also requires hard work, discipline, and long-term dedication to make it part of the culture of the organization and, like exercise, there is not typically a single acute emergency that it is brought in to address.

Just as an individual often needs to hear a convincing argument to sign up for that gym membership, organizations often need evidence of expected benefits and some enthusiastic encouragement to get into a Strategy Management routine.

The benefits are proven (who wouldn’t like to get an additional 3% return on assets?) Look to Gartner, Harvard Business Review, as well as many other sources for proof.

And, like exercise, most organizations find that a few months of dedicated Strategy Management efforts produce enough tangible results to get you hooked for a lifetime.

 

How Will Renewed GPRA Legislation Affect Federal Agencies? Find Out on Wednesday

Just a few weeks ago, the 2010 GPRA Modernization Act was signed into law, which requires that agencies work with the Office of Management and Budget to establish and make measurable progress on Priority Performance Goals. The legislation emphasizes the use of “performance information to lead, learn and improve outcomes; communicate performance coherently and concisely; and strengthen problem-solving networks to improve performance management practices.”

How will the renewed legislation, coupled with ever-increasing public demands for better outcomes and greater transparency, affect your agency's current performance management efforts? Will you be able to demonstrate that you are spending your budget in a cost-effective manner, exhibiting inter-agency cooperation, and effectively meeting your performance goals by the time the first progress report is due in early 2012?

We can provide you with some answers during a free webinar on Wednesday, February 9th, jointly presented by ActiveStrategy and The Performance Institute.

In addition to hearing insights from the Performance Institute's Senior Policy Director, Jon Desenberg, you’ll also hear from an Acting Deputy Director at the U.S. Department of Veterans Affairs on how they have gotten a “jump start” on this effort and are already using a combination of leadership, change management, and technology to effectively manage program performance.

Register online or by calling 877-992-9521. Hope you can make it!