Performance Management & Strategy Execution Blog: The Glue

Keep Your Strategy from Becoming a "Dusty Deliverable"

The slightly warmer weather here in Denver has me thinking of spring...and spring cleaning.  Ever do any “spring cleaning” in your office? Well, here's something to think about when you're taking a critical look at the contents of your bookshelves or filing cabinets: do you have any "Dusty Deliverables?"

This rather colorful phrase was mentioned by Anne McCune, SVP at Ingenix Consulting, when she and I were recently discussing  strategy execution.

I bet you have at least one Dusty Deliverable (DD) within eyesight right now. It could be an impressive 3-ring binder you brought home from a leadership retreat or strategic planning session, or maybe it's a glossy multi-page recommended action plan you received from a consultant. At the time, it held so much promise, but now it's just sitting there. Taking up space on your shelf.

So what turned yesterday's gem into today's DD? Did it contain bad ideas?  Was it foiled by bad timing? Probably not. Failed strategic efforts can almost never be blamed on a lack of creativity, energy, intentions, or insight. Time and again these efforts fail because of poor execution and little or no accountability  (read about the biggest culprits in my previous post: Top 10 Reasons Strategies Fail to be Executed).

What steps have you taken to make sure that this year's plans don’t become Dusty Deliverables? If the answer is "nothing," you might as well save yourself the time and skip the planning from now on!!

A Common Line of Sight

Why do some companies struggle to keep their associates engaged? Why do some associates lose momentum with their initiatives? Many times, it's because they lacked what Root Learning calls a “common line of sight." Jim Haudan, CEO of Root Learning and author of “The Art of Engagement” states:

A line of sight is all about creating a clear, consistent business language that everyone can understand, think in, and speak. The issue of language is extremely important…A true line of sight is a simplified translation of the business strategy into a language that is relevant to everyone.

How do you create a common line of sight for your staff? What tools do you use? Along with strong leadership, effective communication, and scorecards, associates who understand where they are going and why will be more engaged. Associates who see how their contributions and initiatives impact the company's scorecards will be better able to describe and discuss your company's strategy.

The folks from Root Learning will be presenting at the upcoming ActiveStrategy Client Conference at the end of April. To learn more about why you should attend, check out our previous blog entry. Click here for more information about our conference agenda.

Hope to see you there!

Why is Executing Strategy So Hard?

Please note: this is a special guest post by Brian Lassiter, President of the Minnesota Council for Quality, a state-level Baldrige program.

Given today’s economic challenges, strategy is critical.  But in various surveys by various experts, it is claimed that as many as 70-90% of business strategies fail.  According to a recent study, we may now know why…

I’ll define “strategy” as simply an organization’s approach (formal and informal) to preparing for the future.  Creating strategy is relatively easy: you gather some information, you conduct some sort of leadership retreat to sort through things, and then you set goals and maybe even create some action plans. But then you go back to the office (the plant, the shop, the bank, the school, the hospital, the whatever) and you work on more urgent things (notice I didn’t say more “important” things?). Why? Because executing strategy is hard, and there is always something more urgent that comes up in daily operations.

“Companies often manage strategy in fits and starts,” says Robert Kaplan, Harvard professor and co-author of several books on the Balanced Scorecard and strategy execution. “Though executives may formulate an excellent strategy, it easily fades from memory as the organization tackles day-to-day operations issues” – doing what Kaplan calls “fighting fires.”  I think we can relate: sometimes we all must react to issues within the business rather than managing the business itself.

Maybe it’s just how we’re wired as humans. Think about it: we set New Year’s resolutions, only to have 60% of them fail by late January (the average date of failure, interestingly enough is January 22 – tomorrow).  Or we get our annual physical and find that we need to exercise more, cut down on unhealthy foods, and quit smoking.  So we try for a few weeks (or months), but then eventually those entrenched habits start to creep back into our daily routes (the fast food, the shorter or skipped workouts, etc.).  So, in our Darwinian nature, maybe humans are just wired to react to problems rather than proactively set – and take – new direction. After all, we’re creatures of habit that settle into natural patterns, rather than true change agents that set, implement, and sustain new courses of action that may, in fact, be healthier, more productive, and just better for our overall outlooks.

So why should organizations (made up of humans) be any different?

A recent study by Minnesota-based Digineer (conducted by Pat Salaski, a management consultant and a 2009 Minnesota Quality Award Evaluator), set out to answer the fundamental question: Why is executing strategy so difficult – especially during today’s tough economic conditions, when strategy is really so paramount to long-term success?

They surveyed 65 leaders from various industries in the Twin Cities, representing a mix of industries and diversity of organizational levels (34% senior executives and other high level leaders, 30% middle level leaders, and 36% lower level managers). The findings were actually quite interesting (for a report on the findings, visit http://www.councilforquality.org/improve_documents.cfm and enter the word strategy in the search box).

Take, for example, the fundamental notion that 69% of these leaders are NOT confident in their organization’s ability to execute strategy. Wow – that is as disturbing as it probably is accurate: leaders at various levels in the organization fully recognize and are realistic about the challenges in implementing strategic actions within their organizations. The more interesting question, however, had to do with why…

When responding to the question of what was the number one barrier to effectively executing their strategy, what would you predict? The economy and constrained financial resources perhaps?  Increasing competition, which causes priorities to shift? Maybe rapidly changing market dynamics and customer needs? Game-changing regulations? No, no, no, and no.  In fact, most of the barriers reported by these leaders were INTERNAL issues, not external factors. In ascending order, they were:

•     Company reputation, mentioned by 4% of respondents
•     Customers, 10% (those darn customers)
•     Lack of confidence, 16%
•     Technology, 18%
•     Competitive Environment, 24%
•     Government Regulations, 26%
•     Employees, 30%
•     Way We Work Together, 34%
•     Budget, 40%
•     Economic Conditions, 44%
•     Middle Management, 46%
•     CEO/President, 50%
•     Senior Management, 52%
•     Company Culture, 64% -- and the number one reason strategies fail to be fully executed:
•     Past Habits, 66%

Wow – I never saw that coming. In fact, look at the top two vote-getters: company culture and past habits. There are those habits again – organizational inertia, inability to take action on new initiatives, slow or indecisive decision making, lack of accountability, short-term focus (“chasing rabbits” or finding the next big fad) – who knows the real reason(s), but interestingly enough: these leaders believe their strategies are not executed because of the organization’s tendencies itself. (Economic conditions, despite the depth and length of this recession, came in sixth. And, along with Government Regulations, were the ONLY TWO external factors listed in the top 10!)

I find it also fairly interesting that these conclusions were very similar to a University of Michigan study in 2005, which also found that internal barriers were more constraining in general than external (“Leaders Talk About Executing Strategy,” Michigan Ross School of Business, Theresa Welbourne, March 2005). So these tendencies seem to exist in good times and in bad (and maybe they have for decades or generations, which might explain why 70-90% of strategies are said to fail).

But why? The Digineer study found several possible contributing reasons as to why internal dynamics and past habits get in the way of strategy implementation. Of those nearly 70% who were not confident in their organization’s ability to execute strategy, here were the top reasons for that lack of confidence:

•     Unclear accountability for execution, 52%
•     Internal resistance to change, 48% (“we’ve always done it that way”)
•     Buy-in or agreement on critical execution steps or actions, 40% (perhaps because the right people were not involved in setting direction or action plans)
•     Employees’ lack of ownership, 38% (involvement, again)
•     Lack of a model to guide strategy execution, 27%
•     Organizational structure, 23%
•     Inappropriate incentives to support execution objectives, 21%
•     Poor or inadequate information sharing, 19% (which surprised me that it was this low, as poor communication, including action plan and results tracking, to me at least usually contributes to execution challenges).

This is quite similar to a list presented in an issue of Quality Digest last summer (“Enterprise Performance: The New Quality Goal,” David Boghossian, August 2009 – find it at http://www.councilforquality.org/improve_documents.cfm).  Boghossian recognizes the age-old challenge of implementing strategy: “Strategy into action.  It remains at the leading edge of management science.  Very few organizations do it well, and even those that do often get there more through art than through science.  Extremely rare are organizations that have a well defined, documented, trainable, continuously improvable process for executing strategy.”

He goes on to state that all contemporary methodologies for implementing strategy – Balanced Scorecard, Hoshin Planning, and others – really have five common elements, that wrap nicely into a process sequence (with my commentary in parenthesis):

1. Focus on a few critical strategic goals.  (My sense is you identify these critical goals through traditional environmental scans, SWOT analysis, and other data sources.)
2. Identify key prformance indicators that measure progress toward those goals.  (One of the themes that emanates from the Digineer study is the lack of data in strategy execution – measures to help leaders monitor progress of plans, communicate plans, reinforce accountability, serve as a basis for reward, and so forth.  Without measures, you simply cannot expect action to take place…or take hold.  And you certainly won’t know if you ever “got there.”)
3. Assess initiatives against a screen of strategic effect and cost benefit.  (This speaks to prioritization – of selecting the RIGHT strategic initiatives, given your desired direction and the expected return on investment of your actions.)
4. Execute programs that deliver the benefits.  (Simply put: do something.  Take action.  Eliminate other work if you need to create capacity, but organizations have to allow – and require – actions by various contributors in the organization – to move the enterprise closer to its desired destination.)
5. Review progress against Key Performance Indicator targets in real time and adjust course quickly when necessary.  (This part is hard, but critical. Use the data and measures you’ve selected to monitor progress and make mid-course corrections. If the actions are not moving the organization closer to the desire end-state, then either the measures and hypotheses were wrong, or the actions were wrong. Either way, make adjustments and measure the effectiveness in your new set of actions.  This is the classic closed-loop process of strategy – design, test, do, measure, adjust.  Sound familiar? It should: it’s the basis of PDSA (Plan-Do-Study-Act) and Six Sigma’s DMAIC (Design-Measure-Analyze-Implement-Control)).

In challenging times (and really in ALL times) a key role for leaders is to set and execute strategy – to set a vision for the future and align organizational resources to move (and adjust) toward that vision.  Strategy is critical to helping organizations address their environmental challenges; leverage their core competencies and strategic advantages; address their marketplace and stakeholder needs; recognize and respond to risks, competitive pressures, internal weaknesses, shifts in technology or regulations; and – in essence – prepare for the future and sustain the enterprise.

The Digneer study asked leaders their opinion on the consequences of poor strategy execution. The top responses included:

•    Decreased employee commitment, 67% (more on that in next month’s newsletter)
•    Lost Market Opportunities, 53%
•    Decreased Revenue, 53%
•    Increased Costs, 39%
•    Increased Cycle Times, 28%
•    Decreased Customer Loyalty, 28%
•    Lost Market Share, 28%.

Sounds like a case for action to me.

“These findings represent both good news and bad news,” says Pat Salaksi of Digneer and author of the study.  “The good news is that these internal factors should be able to be addressed by senior leaders. The bad news is that they are the same internal factors that have been identified in multiple other studies on this topic for years.”

In other words: we haven’t learned how to break through the strategy execution barrier, in good times or in bad. But maybe we’ll have better results this time, as companies get serious in taking action to emerge from this economic downtown. We can only hope.

Yours in Improvement,

Brian S. Lassiter

President, Minnesota Council for Quality
www.councilforquality.org

What’s Cool About Scorecards?

Today I was reminded what the coolest thing is about Balanced Scorecards: THE CONVERSATION

 

The point of a scorecard is to force "the conversation" about the most important “red” measures (those not hitting targets). Sure there are other benefits of scorecards, like communication of strategy and transparency, but for me I’m most excited to see my client have an honest conversation about what they can do to turn “reds” to “greens.” The real reason to develop a scorecard, after all, is that it's not just a report. Reports don’t relieve stress in the organization. The conversation that occurs during a Scorecard Business Review does.

As many of you can appreciate, there are no guarantees that you’ll get to the conversation.

But after the strategic planning, the scorecard cascading, the cultural resistance to “more work,” the gathering of the data, the setting of targets…today we made it!

 

I felt truly happy to listen to a cross-functional conversation about a “red” measure in the purchasing area. At the beginning you could feel the tension in the room.  This measure symbolized the stress behind the process.  But the conversation forced the participants to truly understand the current process and to brainstorm how they could improve it.  Once that happened, the scorecard participants could see the light at the end of the tunnel.  This will be a "green" measure soon.  Their lives will be so much less hectic next year. They finally saw the value that the CEO promised would be there.

 

That's cool.

The Differences Between Functional or Departmental Scorecard Reviews and Breakthrough Scorecard Reviews

Recently I posted an article about the use of cross-functional breakthrough improvement scorecards to drive dramatic results in an organization. Breakthrough improvement scorecards exist in parallel with functional or departmental scorecards, but have slightly different purposes, which affects the skill levels required of the reviewers and reviewees, as well as the content of the monthly performance reviews of these scorecards.

Each breakthrough improvement scorecard is focused on dramatically improving one high level outcome measure, whereas functional scorecards exist to track a functional or departmental list of objectives, measures, targets, and initiatives that should be aligned to the strategic plan and that could be either breakthrough improvement focused, incremental improvement focused, or even daily control in nature. Also, no matter what is shown on the breakthrough scorecards, it must also exist on various functional scorecards because that is where it actually gets functionally reviewed, owned, and executed.

Because of these differences, the monthly reviews are slightly different for each type of scorecard and some of the required skills are different.

First, with functional scorecards one must ensure that the scorecard actually aligns upward to the scorecard at the next higher level. The real question here is “for all of the objectives, measures, targets, and initiatives on the boss’s scorecard, is the lower scorecard contributing to the ones that the boss thinks it should be contributing to?” Once that is agreed upon, then the monthly questions are:

• Is the data up to date?
• Are the targets stretch enough?
• Has the owner explained for any measures that are red; why they are red, what will be done about them, who owns those actions and when they will be completed?
• For any improvement initiatives, are they on schedule, on budget and really getting to the root cause?

For the breakthrough improvement scorecard, the questions are similar, but are more advanced and will require more data stratification and root cause analysis skills either known by both the reviewers and reviewees or, at least, available to them through process analysis experts. The questions now become:

• Has the senior team defined only 3 – 5 breakthrough improvement scorecards? (Any more at one time will dilute the focus and minimize the results)
• For each breakthrough improvement scorecard, has the data been properly stratified into the vital few drivers, thus identifying the most important underperforming leading measures that will be addressed with multiple improvement initiative teams?
• Is the data up to date?
• Are the targets stretch enough?
• Are there enough initiatives targeting this outcome measure to drive significant improvement in the aggregate?
•  For those improvement initiatives, are they on schedule and on budget
•  Which proven improvement initiative methodology will be used to identify, verify and eliminate the root causes?
•  During each monthly review, a review in detail of two or more of the process improvement initiatives should occur.

Finally, the breakthrough improvement scorecards are usually reviewed by the senior management team at their monthly meetings, while the functional reviews occur throughout the organization on a monthly basis prior to the breakthrough improvement scorecard reviews. This sequence ensures timely execution of the initiatives on the functional scorecards, which roll up to the breakthrough improvement scorecard.

Are you using any Breakthrough Improvement scorecards now? Tell me about how they're working (or let me know if you'd like some help getting one started).

           

When the Emperor Doesn’t Want to Listen

In all of my experience implementing Strategy Execution frameworks, the most perplexing and frustrating challenge is when someone that I'll call an ‘Emperor’ within an organization doesn’t want to listen.

Though I call them Emperors, these individuals are often not the very top leaders; in fact, they are usually one or two levels down, but they hold tremendous power over critical operations.  They tend to be highly intelligent and generally 'know a bit’ about every management methodology ever devised.

Often, others in the organization fear these people, which creates a vicious cycle where direct information flow slows down or ceases, which leads to more misunderstandings, distance, and fear.

These problems reveal themselves to me when such individuals refuse to support a Strategy Execution change process that I'm trying to help drive. Their refusal is almost never due to not being able to appreciate the methodology or a failure to understand its benefits. What I typically see is that because of the fear and poor communication, these Emperors have become insulated from the Strategy Execution effort's ‘guiding coalition.’ They haven't take part in the educational process, and those around them have a hard time telling the Emperor, "You need to take the time to understand this process." This reinforces the insulation. The longer this goes on, the more the Emperor fights or disrupts the change effort, the more distorted the perception becomes of what the methodology is doing, and the more challenging the overall implementation becomes.

So, what to do? It's simple...and yet challenging.

Have courage.

You have to walk in and tell the Emperor that someone forgot to "dress him," metaphorically speaking. Focus on the educational aspects of what you are trying to achieve. Insist that he take the time.

When I’ve summoned my courage and taken these plunges, something positive has almost always happened. The disruptive Emperor has become my biggest ally. What I find interesting is that people like this tend to appreciate the display of courage and respond well to straight talk.

When this doesn’t work, that’s when I talk to the top leader. Sometimes, a change in the team is required. But it’s always better to try to get everyone on the train than to start off by throwing people under it. It's only through a change coalition and united leadership that Strategy Execution can be realized.

The Quest for Best Practices in Hospitals: Top-Level Measures

I recently read a great article by the AMR Research's Healthcare Exchange entitled "A Hippocratic Oath for the Healthcare Supply Chain".  The article suggests actions for creating a more efficient value chain for hospital patients based on best practices learned in sectors outside healthcare.  In this blog, I'm extrapolating how to take those lessons learned and apply them toward any top-level measure on your hospital scorecard.

The most common roadblocks in reaching targets on a top-level scorecard measure are:

1. The top-level measure is focused internally, not on patients' needs
2. There is no drill down from the top-level measure into the contributing departments/silos that are part of the process
3. There is a fundamental lack of understanding from each silo as to what their process is
4. Performance reviews that cut across silos from an executive champion of the top-level measure are seldom (if ever) conducted

These roadblocks result in a lack of trust between silos and poor planning within the silos.  Furthermore, we see incredible amount of waste in terms of time, money, and inventory due to the poor planning, which in turn leaves less time and money for making improvements.

So what are the best approaches for overcoming those roadblocks?

1. Think about the patient -- pick the top-level measure (and target) with patient needs in mind, not department needs.
2. Think lean -- develop a process flow (value chain) that starts with the patient and maps back to the beginning.  This will help you cut across the silos.
3. Get representatives of all the silos in a room and have them identify waste and engineer it out of the process.
4. Offer drill down from the top-level measure into process measures from each silo that will track reduction in the waste.
5. Hold consistent performance reviews -- data doesn't change behavior; good questions on a regular basis from the executive champion does.

As the AMR article discussed, results that arise from adopting these best practices include better planning, lower costs, and more time to make improvement.

Strategy Execution is a Change Process - Part III

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 2) I wrote about the Guiding Coalition. So now let's discuss the Vision and how to Communicate it. This is all about defining where you're going, and then telling everyone, many, many times in multiple different ways how you're going to get there.

The first piece, in my humble opinion, is deceptively easy.  The Vision is the strategy execution journey.  The challenge is identifying where your organization currently sits in this long trek, what it's doing well, where the gaps reside, and how you're going to progress down the path.

The Overthinking Paradox

I was sitting with a senior executive the other day who has been quite opposed to the implementation of a strategy execution system, when I suddenly realized why she has been so reluctant.

First, let me explain that she's incredibly brilliant, very experienced, and tempered by the realities of her industry. So, when we sat down to start brainstorming potential measures for their top-level scorecard, she became very twisted in mental conundrums and frustrated when asked to identify possible customer-focused measurements.

Here are the issues she was struggling with:

1. We should be defining the actual outcomes to which their organization contributes. But they only play a contributing role to the outcomes -- so why measure them? Most will remain unachieved, making them meaningless.
2. We should be defining key outputs. But, again, many needed outputs were not capable of being measured due to external forces resisting such measurement (think of this organization as an internal support/staff division with a line division that won't cooperate).
3. The top-level strategic goals are illogical and thus impossible to align to. They produce products and services that individually impact all of the strategic goals, so artificially categorizing them is only for external political/public consumption and not helpful to her.
4. Management 'knows' how things are going, so why waste time counting things when that time could be spent on producing products.

Top 10 Reasons Strategies Fail To Be Executed

Why do our best laid plans so often go awry?

Turning strategy into reality is never easy -- which is compounded when that strategy is up against an existing, strong culture or status quo. While there is no perfect, fool-proof model for implementing strategy effectively, there are some common pitfalls that can be avoided to get yourself on the right path.

Here are the top reasons why strategic implementations fail:

1. The goal is not clear
High-level, "pie in the sky" goals won't resonate with staff. Goals need to connect staff and leaders to their “purpose.”  To do so, look at the F.O.R. --  what is the “frame of reference” for your team, department, and overall organization? For the teams, remember that one person’s ceiling is another person’s floor, so goals must always be communicated in a way that accommodates each individual's F.O.R. Can the staff understand the “why” behind its pursuit?

2. The goal doesn’t create a “call to action”
Does the stated goal create yawns? Or is it something that staff and leaders can rally behind? Top-level goals need be aligned with the mission, vision, and values of the organization and should provoke passion, as well as a common belief that reaching the goal will create tremendous value for the organization, the community, and/or the staff.

3. The so-called "strategic" goals turn into a long grocery list
Years ago, I was the director of business development for a rehab hospital. The CEO had me assemble a “book” of all of our goals and initiatives. Unfortunately, we had way too many goals, no true focus, and we stumbled trying to do it all. Prioritizing is the key -- focus on a select few and tackle them really well. Then, and only then, move the next most important goals onto your list.

4. The plan does not "tune into" WIIFM
I once worked with a physician executive consultant who told me that physicians’ favorite radio station is WIIFM  -- “what’s in it for me?”  If a strategic plan does not connect to personal/professional goals and have meaning to the work-lives of the staff, they won’t commit. Be sure to "tune in to the station" and be able to tell everyone what is in it for them.