From the top desk to the desk top. In many organizations there can be a wide divide and disconnect between the executives in their large corner offices and the managers and employees. The separation disconnect that I am referring to is between the strategy that is formulated by the executive team and the employees tasked to implement it. It is rare that there is a good connection between the two.
Executives exhibit this disconnect by being frustrated that their well formulated strategies are falling short of being implemented. Worse yet, the shortening tenure of CEOs with an increasing rate of their terminations is evidence that boards of directors are less patient if the financial results from the strategy are below their shareholder expectations.
As evidence of this disconnect, at a conference I attended involving the balanced scorecard, which was originally developed and written about in books and articles by Harvard Business School Professor Robert S. Kaplan and Dr. David Norton, in Dr. Norton’s keynote presentation he stated that seven out of ten organizations fail to successfully execute their strategy designed by its executives.
What explains this? Advocates of applying a strategy map and its companion balanced scorecard believe the explanation is in large part because most managers and employees do not adequately know what their organization’s strategy is. For example, if I randomly interviewed 15 of your organization’s employees in a hallway and asked them, “Quick. Explain your executive team’s strategy?” how many of your employees could describe it well? Maybe none.
What’s the consequence of this? If employees and managers do not understand the executive team’s strategy, then how do we expect them to understand what they do each week and month contributes to achieving that strategy?
Communicating strategy to employees in a simple way
The sad part is that workers are much more capable than I believe executive teams give them credit. Most organizations do not get the full potential that their employees can offer. If managers and employees were provided business analytics tools they could investigate and explore problems and opportunities to gain insights and make better decisions. They can get more from their enterprise and corporate performance management (EPM/CPM) methods if they were implemented and ideally seamlessly integrated. “We’re down here” is a silent cry from employees. What does this mean?
When employees shout, “We’re down here!” it implies that if they could have the executive team’s strategy communicated to them in a way that they can understand it then their behavior can align with the strategy. In addition they could be involved with determining the actions, projects, and processes to initiate or improve so that they can better achieve the strategy. Of course, accountability and responsibility must be part of this arrangement. Performance needs to be measured and monitored. You get what you measure.
When this approach to strategy execution using a strategy map is pursued, it is effective. As evidence, at the conference I earlier referred to a revealing survey was cited. It compared two groups of companies, one with and one without a formal strategy execution process in place. A formal process means strategy maps, derived projects and process improvements from it and associated strategic key performance indicators (KPIs). Further, each KPI will have a target amount that are reported in the balanced scorecard.
Operational dashboards are used to cascade down into the organization the KPIs into operational metrics. The survey reported that 70% of organizations with the formal process were exceeding the performance of their peers in their same industry while in contrast only 27% of those without a formal process were.
Stages of performance measurement maturity
A traditional approach like management by objectives (MBOs) is just not sufficient to align employees with the executive’s strategy. A higher stage of maturity of performance alignment is needed than the 1980s MBO method of having individual managers list at the beginning of the year their objectives and then periodically meeting individually with their supervisor and check-list style answering, “How are you doing?” With MBOs there is little formal coordination with the enterprise’s objectives among its managers and employees. MBOs are used more for individual employee performance appraisals than for strategy execution.
Some organizations go a stage higher than MBOs using a method called “objectives and key results (OKRs)” to motivate their employees. An even higher stage of maturity is now evolving. It is based on gamification, similar to how Fitbit users compare their number of daily steps with others they know. Gamification can involve earning badges for good performance. Perform an Internet search with “gamification” and “objectives” and you will see software vendors providing tools for this.
The key conclusions I take away are for executives to communicate the strategy to its workforce in a way they can understand it (e.g., a visual strategy diagram), and also to involve the employees in identifying the actions and projects while also holding them accountable with appropriate measures and targets for those measures. The executives’ primary role is to set direction – leadership. They must answer the question, “Where do we want to go?” After that is done managers and employees can then answer a very different but related question, “How are we going to get there?” Employees are down there for a reason. To get the job done – to implement the strategy.
(About the author: Gary Cokins is the founder of Analytics-Based Performance Management LLC, an advisory firm. He is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems; previously a principal consultant with SAS. You can contact him at firstname.lastname@example.org. For more of Cokins' unique look at the world, visit his website at www.garycokins.com .)
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