The Glue

Strategy Execution is a Change Process - Part II

In this series of posts, I am viewing a Strategy Execution implementation through a Change Management lens.

For those needing a review, I'm comparing the ESE concepts against Kotter's latest installment, where he outlined the eight "Stages of Change."  They include:

1. - Sense of Urgency
2. - Guiding Coalition
3. - Developing a Vision
4. - Communicating the Vision
5. - Empowering Employees
6. - Short Term Wins
7. - Consolidating Wins
8. - Anchoring in the Culture

In my last post (part 1) I wrote about Sense of Urgency. So now let's discuss the Guiding Coalition. It represents the vertically integrated people who will ensure that the project succeeds, even in the tougher times. First let's talk about 'who.'

At the top, the Coalition needs a top-echelon senior executive who thoroughly understands the journey, possesses the credibility to lead the team, and has budgetary control.  This is frequently labeled the Sponsor. Often, senior executives without the requisite power base lead coalitions to an unsuccessful ending, as their perceived power and influence prove limited and insufficient to overcome the obstacles. The Sponsor doesn't need to be that involved, but they do need to be the lead 'general' constantly clearing battlefield for the team.

The Engine That Powers Balanced Scorecards

Ever wonder why some organizations are so excited about the results of their Balanced Scorecards and others decry the tool as ineffective?

Clearly, there are a number of reasons why scorecards fail, such as not having senior management buy-in, not having the top-level scorecard aligned to the strategic plan, not deploying the scorecards to all key departments, and not performing scorecard reviews on a monthly basis to drive accountability for the proper actions.

However, even when an organization avoids all of the above pitfalls,they must have the right "engine" in place, or Balanced Scorecards still won't work.

The engine behind the scorecard framework is a well-designed system of correlated, cascaded measures. These begin with top-level lagging (or outcome) measures that track performance of the strategic plan. They cascade through to mid-level measures, on to lower-level measures, and even all the way to identified root causes of under-performing measures.

If You Really Want to Execute Strategy, Improve Your Business Reviews

I wrote a couple of blog posts last year about what a good structured Business Review should be (and what it should not be). Now I want to delve a bit deeper into why good Business Reviews are so critical to achieving your desired strategic business outcomes.

To move an organization from an under-performing one to an overachieving one, the culture of the organization must change. The behaviors that occur today in the organization (possibly including chaotic fire-fighting, working on low-priority issues, poor cross-functional communication, etc.) must evolve into more performance-based, strategically-aligned behaviors. Otherwise results will remain the same...mediocre.

So how do you change a culture? There is a four-step model for doing that, as follows:

Step 1: Identify the new behaviors that the new culture must have to drive improved results

Step 2: Establish processes, systems, and structures that, if followed, will drive those new behaviors

Step 3: Train, coach, and mentor employees on the proper use of those new processes, systems, and structures

Step 4: Reward and reinforce the new behaviors on an ongoing basis

Leadership Buy-In & Strategy Execution

When studying what makes or breaks an Enterprise Strategy Execution effort, it initially appears to come down to two factors:

1. the need for a sound and compelling strategy that differentiates an organization
2. the right mix of execution methodologies, performance reviews, and accountability 

However, upon further scrutiny, it becomes clear that leadership buy-in is really the essential piece. Without it, nothing within a culture will truly change. And "Business As Usual" is the antithesis of Enterprise Strategy Execution.

Since I've seen plenty of leaders who don't step up to drive Strategy Execution, let’s discuss why this happens. Why don't they "buy-in" to this proven performance-driving methodology, when they are the ones charged with ensuring that the organization improves results?

I know there may be many reasons, but let’s talk about the top three, as I see it:

1. They DON’T personally feel the pain from the company's “burning platform” (i.e. a lingering high-level organizational problem that significantly hinders current or future performance)
2. They DO feel the pain of a burning platform, but don’t understand that Strategy Execution is the solution 
3. They DO feel the pain of the burning platform and realize they need to execute strategy better, but just don’t know how to do that

Your Top 2 Strategy Execution Challenges for 2008

Thanks to those of you who voted in our first poll, which asked "What is the single biggest challenge that impacts your organization's ability to execute strategy effectively?"

The results (shown below), indicate that the 2 biggest problems are:

1. A lack of focus (too many competing objectives, initiatives, projects)
2. Too much "fire fighting” to rise above the chaos

In my opinion, these two issues are different sides of the same problem, which is the lack of a disciplined management framework that prioritizes and focuses on the critical few objectives and initiatives in order to make progress toward your long term vision (which, in turn reduces inefficiencies, chaos, and stress.)

Book Review of "Executing Your Strategy"

As anyone who works on strategy execution knows, there are a host of books (some scholarly and some not so much) on the topic of Strategy Execution. Just this past month, Harvard Business School Press released a new book entitled, “Executing Your Strategy” co-written by Mark Morgan, Raymond Elliot Levitt, and William Malek (who has been a guest contributor to The Glue).

With all of the titles focused on better strategy execution, it’s easy to wonder if there is anything new left to be written that is worthy of close study. In this case, I found it to contain some true insights in its focus and message.

How to Measure the Hard to Measure: Part 1 - Project-based Objectives

If you are a frequent reader of The Glue, you know that we constantly espouse the importance of linking and monitoring strategic projects to the business objectives they support.  So, to "Improve Claims Resolution" we might link the "Implement Automatic Claims Adjudication System" project and include a review of its status in our business reviews.  Straightforward, makes sense, and gets results.

Typically in this situation one would have the accountable owner of the project make frequent, brief, and to-the-point status reports. Ideally, their reports would consist of:

• the timing, budget, and quality status of the project (red=late, over budget, below quality, etc.)
• Highlights of milestones completed on time
• What is late, why, and what we are doing about it
• Potential upcoming problems

There are times, however, when completing the project is really viewed as a business objective in and of itself.  One example of a project as a business objective is when a project is so big and strategic to an organization across so many different levels, that its completion is viewed as a top level strategic objective.  A huge, transformational, IT project that touches many parts of operations might be an example.  Completion of a integration plan after a merger might be another.

How a Balanced Scorecard Changes as You Move Down in the Organization

A Balanced Scorecard is a great tool to communicate the strategic objectives, measures, and initiatives throughout an organization. It assists in providing focus and alignment at all levels and even facilitates daily decision making.

However, the definition of an effective scorecard changes slightly as it is deployed downward, to meet the needs of the individual scorecard owners and the organization.

The reasons and ways that the scorecards change are as follows:

Where's the Strategy?

I just turned 40 last week and since I spent much of my birthday thinking about today's blog, it dawned on me that I need a social life.  Nevertheless, here we go...

The most common problem I find with strategy execution after the first few months of implementation is: the organization’s balanced scorecard loses its strategic focus and turns into mere reporting.

The ripple effects are these:

1. Extra work for front line staff without the payoff of executive review
2. Executive staff dissatisfaction with the results their scorecard is achieving
3. Diminished alignment of projects to strategic objectives

By making sure you do the following on your balanced scorecard framework, you can prevent these from happening to your organization:

Setting Effective Targets - the Two Best Ways

Setting good targets for strategic measures is a critical part of designing an effective strategy execution or performance excellence framework. These targets (along with your actual performance data, of course), trigger the red, yellow, and green stoplight indicators on Balanced Scorecards. These stoplights determine where you focus your improvement efforts, so bad targets can mean you're allocating critical resources to the wrong areas.

Too often, I find that organizations simply don't know how to set good targets. There are five ways that I have used and some are better than others.

If you consult the Malcolm Baldrige National Quality Award or any state quality award criteria, you will find the two best ways to set targets: benchmarking (or industry comparisons) and customer valid requirements.

We'll start with these two. I'll cover the other three in my next post.

Benchmarking is effective because you are attempting to find the best industry performer in whatever outcome you are measuring and meet or beat their performance. Dr. W. Edwards Deming, the noted quality and productivity guru, was not a big fan of benchmarking because he thought one might be limiting their improvement potential in some way by focusing on what others have achieved.

Three More Ways to Set Targets

Earlier this week I wrote about the two best ways to set targets for performance measures (Benchmarking and using Customer Valid Requirements). As promised, here are three more ways to do it.

The third way to set targets is to look back historically at your performance. If you used to perform better than you do now, strive for that historical target and try to determine what has changed to cause your deteriorated performance and turn it around.

A fourth way to set a target is to determine “what the data shows is possible.” Let me cite an example to help illustrate this method:

Executing Strategy When You're Stuck in the Middle

I recently had a meeting with the CIO of a major IT organization.  Her situation and challenges were very illuminating to me in that she wants to execute her own departmental strategy, yet she is completely dependent upon the strategies of others.  Adding to this challenge, she answers to two separate 'bosses' -- one on a dotted line and one on a hard line basis.

Here's a visual that depicts the basic organizational structure:

The following outlines her challenge and how we proposed to solve it to make headway:

Boss #1: The CIO reports to the head of the functional division that she supports -- on a dotted line basis.

This "Boss #1" is directly responsible for providing services to the organization's external customers. Naturally, the CIO views these as her customers as well and sees her main role, therefore, as serving the needs of this functional division (this division is her internal customer).

BUT (there's always a 'but'), none of the divisional units have clearly outlined objectives or measures.  They typically have long lists of initiatives or action item lists, which might be OK if it weren't for the fact that these lists constantly change and shift in priority levels.

In addition, the top-level division executive does not possess a clear strategic plan with objectives and measures. 

So, at the current juncture, our CIO is left:

    a) guessing at the real needs of her internal customers and

    b) constantly chasing the ever-changing priorities that are communicated from these internal customers. 

Why Top-Down Scorecard Cascading Doesn't Work

Does this sound familiar?
Management thinks of top-down scorecard cascading as a carrot and a stick.
They know best what’s really driving performance and they want accountability for results.

The front line thinks of top-down cascading as just the stick.
It’s another chance for the big brother to watch over their shoulder and they don’t even know what’s really driving performance.

A Balanced Scorecard framework can only deliver results when there’s two-way communication.

During Scorecard cascading (see more on this here), you utilize the top-down process matrix approach as well as the bottom-up SWOT analysis from the individual departments.  I’m not just talking about picking scorecard-level objectives and measures for the front line; I’m also talking about building the leading measures beneath the lagging measures.  This means the leading measures are not prescribed up-front by top management, but created from the bottom up.

Here’s what this gives your organization:

1. The front line can lobby for resources to fix root cause problems using data to prove their story.  This removes the emotional and political influences on resource allocation.
2. The front line is engaged in the routine performance review process.  This is very different than most front line scorecard teams I see that view the Scorecard as a project owned by someone else (the quality department, top management).
3. Top management allows its strategy to become more complete by listening to the voice of the front line, who usually have a good idea of the true drivers of performance.
4. Everyone from the front line to top management can tell you readily what piece of the strategy they own and how that impacts achievement of the top level vision.

Clockwork Strategy Execution

This past summer, I started working with a client where the project sponsorship for Balanced Scorecards/Strategy Execution resides within the strategic planning function. In this instance, we started our initial discussions around how to provide a better strategic planning automation system.

I’ve been down this path before, and I’ve built and seen just how work-flow intensive and complicated the automation of the planning process can be. Furthermore, I’m convinced that the automation of the planning cycle is somewhat of a low value-add. Planning is about communication, discussion, analysis, disagreement, and hard choices. Applying a coat of technological asphalt over the process isn’t necessarily a good thing.

So, the conversation morphed into one that crossed their functional boundary into that of strategy execution –- which meant we were really talking about the emerging idea of an Office of Strategy Execution. This label hasn’t been openly applied at this client as of yet, but the planning folks are already way down the path of thinking about how to ensure execution occurs (which is clearly beyond their existing functional definition, but the realization of the gap makes it now impossible to ignore). The key is that planners want to see and ensure the results of their plans.

The realization and point I want to make in this posting is that organizations work in clockwork cycles. Appreciating the nuances of these cycles and their inter-related timing is crucial to better strategy execution, wherever it gets its start.

Getting Results Fast – An Action-Oriented Balanced Scorecard

Building a Balanced Scorecard framework is tough work. Identifying and gaining agreement on key strategic objectives, measures, and initiatives, and then linking them all together in a meaningful way across an enterprise requires a major effort.

Despite all this expended energy, we sometimes come to the end of a scorecard-building project with a client and feel like the effort has been mostly academic. Yes, it might have provided some new strategic clarity and generated some enthusiasm. But every so often, these efforts stop short of addressing the key things that we know are broken in an organization.  We haven’t managed to address the “elephant in the room,” i.e., the one big, high-priority issue in the organization that everyone knows needs to be fixed, but can't figure how to tackle.

So we ask "why not?"  Why not create a set of initiatives that address that big, overwhelming problem?  Why not link these initiatives to the top-level scorecard?  Why not tackle the root of the most important issue troubling the organization?

Most often, it seems that the "elephant" doesn't get addressed because client teams see the scorecard as a tool for long-term strategic alignment and synchronization (which it is, of course), but do not see how to use it to fix more immediate pressing issues (the elephant).

How do you use the scorecard to both ensure strategic alignment and long-term results and also to attack the primary problem(s) confronting the organization right now?

Getting Executives Involved & Enthusiastic About Strategy Execution

If you're driving toward Strategy Execution or Performance Excellence within your organization, you know how critical it is to get the executive team to be as passionate as you are about this effort. If you're having trouble building this enthusiasm among members of your senior management team, perhaps the following approach can assist you. I've seen it work wonders.

Once you've held a strategy session to develop your key strategic objectives for the coming year that will live on your scorecard, assign each top level objective to one of the executives on the senior team, making it clear that they will be responsible for identifying and managing the right measures, stretch targets, and cross-functional initiatives to achieve their objective across the organization.

They will be the “Executive Sponsor” for deploying and achieving that objective for the entire organization. Use an Objective Charter to help the executive identify the business case for the objective (why it is important and what problem it is addressing), the measures and targets, the potential initiatives, and the individuals who will lead the initiatives.

The Valley of Despair: Avoiding a Strategy Execution Pitfall

When I read Crossing the Chasm, by Geoffrey Moore 15 years ago, it had a big impact on my understanding of how people accept technology.  Though it is a bit dated, it still rings true today. 

What stuck with me most is the concept of the technology adoption curve.  Basically, this states that your techies lead (or bleed) the way with new technology and visionaries/early adopters follow closely behind.  Things don't get really fun until the pragmatists and conservatives get on board (like my 92-year-old Grandmother who just started using CDs to listen to books on tape). At that point a technology is mainstream and society really begins to benefit.

So what does this have to do with getting better business results?  Good question.  There are two factors at work here:

Finding the Data You Need for Your Scorecards

I’ve seen balanced scorecards with as few as nine measures and monster scorecard hierarchies that eventually drill into thousands of measures. Whether yours is large or small, you'll run into questions about where to find the data you want to track on scorecards. Across industries and even in government, a "rule of thirds" seems to hold: you are already reporting 1/3 of the data you need, another 1/3 is “around here somewhere,” and you can’t get at the last third — yet.

• The first third. Most of this data already exists in reports or dashboards currently being produced. Often, you will only need a level or two of summary from a given report. Unfortunately, there can be A LOT of reports where you need only a few data elements. 
• The second third. These are measures that can exist in lots of forms: scribbled on a post-it in someone’s cube, on the excel spreadsheet that Jane in marketing keeps, on reports from external vendors or partners, or inside that rickety old legacy system everyone is afraid to touch. Tracking down all of this data can be a lot of work but it is also a relatively quick win when you start managing performance with it.
• The last third.  This is the "Boy, it would be great to measure this" stuff. I tell executives (note: only the executives) to leave these on a scorecard (as place keepers) if they really think the organization can get around to measuring them in the coming year*. Then, it's up to the executive to push and prioritize people to come up with a plan to actually measure these. Lots of these don’t end up getting measured, but some do and they can actually have a huge impact.

This "data audit" process can take up a chunk of time in a Balanced Scorecard/Strategy Execution implementation, so plan accordingly in your project plan.

 

Wherever you end up getting your measure data, make sure you come up with good, clean definitions. The definition should explain exactly what the data element is, where it comes from, and give an example calculation if applicable. If there are ten definitions of revenue in a company and your scorecard doesn’t explicitly call out which one you're measuring, you are going to create more questions than you answer.

* So actually, the rule of thirds can be self limiting: if you eliminate a lot of the measures you won’t be able to get to, you will end up with less than a third in the category.

Balanced Scorecard-Based Business Reviews - What To Look For

As discussed in Building Accountability into a Balanced Scorecard Framework, scorecard-based business reviews are an absolutely essential part of Enterprise Strategy Execution or any meaningful performance framework, for that matter. These monthly “events” keep the attention and focus on performance like nothing else can.

Business reviews definitely evolve and mature as an organization runs them for several months or years. Their content, the depth of analysis, and the amount of improvement they deliver all grow with time and experience. Here are some guidelines for what you should aim to achieve at each level of “business review maturity.”

A good initial business review should focus on the following fundamental areas:

1. Are the right objectives, measures, and targets on the scorecard?
2. Do you have data and, if not, when will you have it?
3. If you do have data and it is trending poorly or missing targets, what are you doing about it?
4. What action items can we capture from this review to make the next one better?

 

Scorecards vs. Dashboards: Why Terminology Matters

It’s amazing how much has been written about the differences between scorecards and dashboards. It’s also amazing how much confusion still remains. I googled “scorecard vs. dashboard” and looked at the top three results:

• The Data Management Group talks about dashboards being used for real-time operational data and scorecards being used for aligned goals as part of a corporate management system.
• Manage by Walking Around has an entry on the difference between the two and points to the excellent definitions by Tom Gonzalez. Basically scorecard=strategic goals and results, dashboard=operational data and reports=raw data.
• The ActiveStrategy website has a page talking about what a Balanced Scorecard is, what a dashboard might be, and how you can link them. It also defines elements of a Balanced Scorecard.

There is general agreement among those who ponder these things on what the terms should mean and I doubt that anyone would argue with the Gonzalez definitions. But within any given company starting their own  "Strategy Execution journey" (or scorecard/dashboard implementation), there is usually little common terminology and lots of confusion.

Building Accountability into a Balanced Scorecard Framework

The keys to driving improved business results in any organization are:

1. Having a strategy that has laser-like focus
2. Aligning all employees’ to that focus
3. Improving the business processes that specifically target high-impact areas of the strategy
4. Having a way to make employees do what they said they would do

Another word for "making employees do what they said they would do” is accountability, which can be elusive. What I have found is that holding people accountable requires clear expectations, strong leadership, and an event where they must discuss their performance with their boss. This event is a monthly scorecard-based business review and it should be held at all levels. Since this event (a scorecard-based business review) can lead to either positive recognition for a job well done or embarrassment for lack of performance, people usually opt for the first option. In order to be prepared for and look good in this monthly meeting, people focus on improving their performance (as shown on their scorecards). 

Getting Executive "Buy In" for Strategy Execution

At the heart of it, Enterprise Strategy Execution (ESE) means managing an organization differently. In most businesses, "strategy" is owned by and almost protected by the C-suite. It is rarely well communicated to the masses, let alone deployed. By contrast, ESE is about enabling people at all levels to take ownership for their piece of the strategy. For many executives, this requires a pretty big leap of faith. They must trust that letting go of some of the control (or at least the perception of control) will pay back dividends.

If your executive team is not fully bought into the idea of ESE, how can you help them make the leap? (Just as importantly, how do you keep them engaged and supportive of ESE for years to come -- especially given the fact that a fairly high proportion of executives seem to have at least a little ADHD? Keeping them bought in is another topic entirely. Watch for more on that.) To get other players on board, here are some ideas.

Can Large Organizations Successfully Implement Balanced Scorecards?

Can large organizations be successful with a BSC? Yes. Absolutely. I've seen success at complex organizations that employ tens of thousands of people. But large organizations, even more so than others, must remember to continually go back to five basic building blocks that make a Balanced Scorecard (BSC) framework successful.

1. Executive Engagement
2. Focus
3. Support
4. Alignment
5. Sustained Results

Regardless if your organization is just starting or has traveled far down its strategy execution journey, if you don’t have all five of these building blocks, your BSC framework will come to a grinding halt. The true measure of success, of course, is contained within that fifth building block, SUSTAINED RESULTS. This is both a building block (you need to show results to maintain momentum) and a measure of the entire framework's effectiveness.  Here is what you should look for in each building block:

Tips on Cascading Scorecards (Remember to Stay Hydrated)

Building your company's top-level Balanced Scorecard (BSC) can be exhausting. Seriously. After standing in front of various opinionated, often distracted groups of executives and managers for hours or days, your feet will hurt, your back will be sore, the smell of whiteboard markers will make you ill, and the effort of forcing a smile and staying ultra-energized will have taken a toll.

And this top-level BSC is just the start. You still have to cascade scorecards down through multiple levels of your complex organizational hierarchy. Facilitating this process is not for wimps. Especially if your organization has a low tolerance for exhaustion. Most do, which is why so many companies fail to execute strategy successfully. It's hard work. It's basically never-ending. And the execution parts are not as engaging for most executives as strategy development is.

So what are some ways that you – the internal evangelist for Strategy Execution – can thwart organizational exhaustion? Create and sustain scorecard momentum? Here are some tips that should help.