Change is a given. Most of us accept that we have little control of forces and pressures that impact our organizations, our executive leaders, the managers we report to and ultimately ourselves. Fighting or resisting change can be a fools errand in many situations often you have to go with the flow. What are the conditions where the magnitude of the change is tsunami-like rather than a wave? How does an organization survive unusually large pressures? What role can the performance management framework play to engineer the change and result afterwards in a stronger organization?
An example that a large force can be an aggressive competitor is the U.S. company NetFlixs mailbox approach to renting movie DVDs effect on Blockbusters drive-to store business. Another example might be a substantial technology shift, such as when recorded music CDs and movie DVDs replaced tapes. Regardless of the change stimulant, the required reaction by executives, managers and employees is often extraordinary compared to what they have coped with earlier in their careers.
The Larger the Change, the Greater the Risk of Failure
According to a 2006 survey by McKinsey & Company cited in the winter 2007 issue of The McKinsey Quarterly, only 38 percent of the global executives who responded claimed the largest organizational transformation that they experienced was mostly successful. Around 10 percent said it was mostly unsuccessful.1
The articles authors referenced their study to determine what makes the difference between big changes that work and those that dont. From their findings, the two most critical success factors are:
- For the executives to describe their vision of the new direction for the organization to head toward and inspire their work force to go there; and
- To generate the ideas and motivation in my words, the traction to gain speed for the journey.
How can we place these prerequisites into the context and language of performance management? Competence in using strategy maps and balanced scorecards helps prepare an organization to quickly shift gears, turn the organizational steering wheel and step on the fuel pedal. But the executives cant do it alone. Many hands are needed namely, the managers and workforce. Executives who are reluctant to communicate their vision and the strategic objectives needed to achieve their vision will likely fail or fall short. As evidence, a March 2006 survey by the Balanced Scorecard Collaborative first asked the respondents whether they had a formal strategy execution process in place. Of the yes respondents, 70 percent described their organizations current performance as breakthrough results or better than our peers. In stark contrast, 73 percent of the no respondents described their performance in same as or below our peers.2 This provides proof that formally managing the strategy is superior to a laissez-faire approach.
Producing and monitoring a balanced scorecard is not enough. Far more important is for the executives to clearly communicate their strategy in a way that managers and employee teams can understand it with the strategy map. My conversations with external consultants and internal scorecard project champions has unscientifically lead me to conclude that despite relatively high interest by executives in developing and reporting scorecard key performance indicators (KPIs), relatively few bother to invest energy in first creating their strategy map to derive their KPIs from. Why is this?
Arrogance, Ignorance, Delusion or Something Else?
The strategy map has progressed from an art form to a craft. It may never be a science, but its becoming a craft, like carpentry, is a good thing. Executives who practice the craft of strategy mapping can move well past the stick-and-rudder approach to navigating their organizations toward higher economic value. For example, the traditional design of strategy maps with their displays of connected strategic objectives as bubbles and traditional four-layer perspectives is evolving into occasional five or more layers, such as an improve safety perspective layer for chemical companies. More notably, the vertically connected strategic objectives in the map are naturally appearing in the linked form of streams representing strategic themes, such as customer revenue growth or cost productivity.
My intent in this article is not to describe the good progress being made in strategy map design. You can research that on the Internet. My intent is to discuss the reasons why so few organizations deploy a strategy map at the onset of their journey to more formally manage the execution of their executives strategy. The larger the change, the more important it is to take a formal approach. Strategy maps support the McKinsey & Company critical success factors of describing the executives vision and stimulating ideas and initiatives to realize the vision. Organizational surgery is needed; not just an examination.
One reason I have heard for not applying strategy map is they tried it, and it didnt work. To me, thats an excuse. My take on this explanation is that the consultant or designer did not have sufficient experience to develop an effective strategy map from which the identified projects, core processes to excel at and associated KPIs can all be derived.
Another reason I have heard is that the executives simply do not believe the strategy they have in their heads can be drawn on paper. I say rubbish to this - another excuse. Beethoven had the notes in his head and not only did they get onto paper (i.e., sheet music), generations of people marvel at the collective sounds executed by the string, wind and other instruments Beethoven wrote those notes for.
I did challenge a CEOs rationale for not using the strategy map from which to derive the scorecard and its KPIs. He scolded me for being insubordinate. (Note to self: Be more careful asking CEOs strategy map questions.) I do not know whether the reluctance by executives to formally map their strategy is due to arrogance, ignorance or delusion that that they have a better way - such as the management by objectives (MBOs) approach, where the objectives are typically not linked.
Urgency Means Now
If your organization is drifting sideways or not living up to what you believe is its full potential, then maybe your executive teams seat-of-the-pants style, planning spreadsheets-on-steroids and death-by-PowerPoint approach to strategy management is insufficient. Those approaches do not have enough discipline or rigor. Urgency means now where I come from. Delaying the adoption of performance management methodologies may lead to a worsening condition.
Research conducted by me and my colleague Bob Paladino shows that the companies with the best performance management practices are those with a corporate performance management (CPM) office and officer. Strategy execution is too important to be a part-time job of the COO, CFO or a strategic planning vice president. It needs a formally dedicated manager with strategy execution competence. When that tsunami-like radical change requirement eventually comes, one should want its managers to transform in an organized, not chaotic, way.
- McKinsey Quarterly. "Organizing for Successful Change Management: A McKinsey Global Survey." The McKinsey Quarterly, Web Exclusive, July 2006.
- BSCol Research. "Balanced Scorecard Collaborative Survey." BSCol Online Community, March 2006.