Operationalizing Your Strategy: Part 2 of 2

Is your organization’s strategy delivering on its promises? For most organization’s, the answer is no. The cause for the unfulfilled promise is not usually the fault of the strategy however. Ask yourself, if your strategic planning process and results were put in front of a panel of experts, would it be ridiculed or praised?  It takes a very good process to result in a strategic plan that is realistic and can be executed. Too many plans end up full of content that is cerebral and fluff, ultimately adding little or no value to the organization.

That is why companies are failing in at strategy execution at alarming rates.

In the article “Operationalizing Your Strategy: Part 1”, we examined the operational level of strategic planning. We began exploring 10 practices of operational planning that will vastly improve strategy execution. This article looks at operational planning further and completes the exploration of 10 practical steps that businesses should follow to enact execution of their strategies.

The Numbers Don’t Lie

Businesses are not getting the full value they should from their strategic planning efforts. Most have only themselves to blame and they know it. Clearly, strategic plans without follow-through will collect dust and never be executed as intended.

The Strategy Institute for Thought Leadership (SITL) is the research arm of Method Frameworks, surveying and interviewing top executives from leading companies around the world to consolidate meaningful analysis for businesses. Over the past 18 months, SITL collected data from a sample of more than 5,000 executives, managers and planning practitioners as an ongoing part of our research program focused on learning the approach organizations were taking in strategic planning, the extent to which they were positioned to execute on strategies once plans were developed and the results they felt they were achieving. Below are a few of the telling statistics uncovered ¹:

–  54% of executives surveyed said their organizations perform operational planning

–  47% of executives surveyed said their organizations had defined accountabilities for execution below the executive level

–  37% of executives surveyed said their organization’s major initiatives were aligned with their strategy’s plan goals

–  35% of executives surveyed said their organization’s their strategic plans where producing the desired outcomes

^{1 – More of the report findings can be read in the article “Research Findings: Why Strategies Miss The Mark In Execution”.}

Let’s look at the 10 basics of operational planning, step by step.

Topics Covered In Part 1:

Part one of this article addressed the first five operational planning practices:

–  1. Define the Strategic Portfolio

–  2. Translate Goals Down Into Major Programs

–  3. Map Programs To Organizational Structure

–  4. Define Accountabilities For Programs

–   5. Break Programs Down Into Projects

This second-half of the article will address the second five operational planning practices that businesses should implement to improve strategy execution, beginning with #6.

6. Define Accountabilities for Projects

Common wisdom tells us that achieving strategic planning and management goals requires an actionable plan that considers the people required to bring the plan to fruition. A plan is worthless without the staff accountability to bring that plan to life.

Sounds simple enough – yet, in practice both components (plan and people) have intricacies and uncertainties that must be carefully managed. People, in particular, must have accountability to accomplish the individual tasks that are required to achieve the overarching organizational goals. Projects that have been identified earlier in the process must be planned for at the detailed level. Operational planning is tactical and must assign accountabilities at the project level and delineate to the maximum extent possible the timelines, dependency relationships, resource allocations and costs relative to the allocated budgets across operational areas to avoid as many collisions and conflicts as possible.

For accountability to exist, the team and all who are affected by the plan must understand what is to be accomplished and within what timeframe. After all, it is impossible to hold people accountable for accomplishing a key outcome if there no basis to measure. Similarly, an objective that is not bound by time can never be considered to be complete or have insufficient progress because the team working on it has unlimited time in which to complete it.

7.  Define Metrics and Measurements

Metrics and measurements can apply to two groups:

–  measurements and metrics related to strategic goal effectiveness (plan performance)

–  measurements and metrics related to managing execution of the strategic plan (execution performance)

Measuring Plan Performance:

As with the development of strategy, the relationship of strategic goals to metrics and measures can be tricky. For instance, a strategy might have a strategic goal related to “increasing productivity by X% over X quarters” and another related to “increasing profitability by X% over X quarters”. Setting the wrong metrics might help accomplish one goal, but simultaneously compromise the other. How?

Assume the following:

• Volume metrics for production are encouraging managers to seek higher labor productivity
• The contribution of labor to profitability is 10%
• The contribution of materials to profitability is 60%

In this case, a 10% increase in labor productivity will create a decrease in material management efficiency – as inventory levels must increase to address the volume change. That could easily translate to a materials efficiency decrease of 2% or more to support the 10% labor efficiency increase.

Give the profit contribution assumptions above, the net result is as follows:

• a 10% labor productivity improvement times 10% profit contribution equals a 1% profitability increase
• a 2% materials productivity decrease times 60% profit contribution equals a 1.2% profitability decrease

As you can see, net profitability actually decreases when high volume production is encouraged by metrics misalignment – compromising the strategic goal of “increasing profitability by X% over X quarters”.

Care must be taken to set metrics that actually drive the desired behaviors and do not risk undermining the intent of the strategy.

Measuring Execution Performance:

Operational planning is all about reality, accountability and execution, so estimating work effort and time-to-complete correctly is important to get right up front. To estimate effort as accurately as possible, past metrics are essential to help answer questions such as:

–  How well can resource horsepower be utilized?

–  How much resource horsepower is at our disposal?

–  What is the expected productivity of their horsepower?

With realistic timeframes and accountabilities in place, measuring execution performance is much simpler and managing the strategic portfolio can be accomplished effectively at each organizational level.

8. Plan Change Management

Implementing corporate strategy is dependent upon the energy, dedication, hard work and faith of the organization’s employees. Motivating employees to act decisively in the face of uncertainty is a challenge where many an organization have failed miserably.

Employees are often starved of adequate information related to strategy. Quite often, employees one or two levels down from the CEO have little knowledge about the strategy or what they can do to help with its successful execution.

In order to convince employees that change is necessary, the organization’s leadership must communicate about the strategy and develop a sense of urgency around the need for a shift. The urgency becomes the catalyst for change that is needed for employees to rally behind.  It becomes the “cause”.

The sense of urgency must be real.  Change management is never to be about deception.  Effective change requires an open and honest dialogue between leadership, management and employees so that each person in the organization understands the change imperative – whether it is changes in competitive marketplace conditions or an economic downturn. You must let your staff feel that they are part of the process in helping the change come to fruition.

The change program must be treated as any other large initiative. It must be managed and measured to know if goals are being reached or might be in danger of being missed. Governance of such a program through a PMO or planning office is the most effective way to administer the long-term transformation.

See these articles for more information:

–  Stra-munication

–  Corporate Strategy: Batteries Not Included

9. Governance

Plan governance is the essential “follow-through ingredient” to set the wheels in motion for strategy execution. Organizational performance indicators and metrics help provide the ability to control and manage, as they signal the need for evaluation and analysis early when corrections to implementation tactics can be made more easily with fewer cost implications.

Plan governance, whether implemented as a formal Plan Management Office or administered through a less formalized committee structure, should be responsible for the functions of selecting, managing and measuring of everything entering or within the plan portfolio.  The plan portfolio is the overall macroscopic view of all programs (related groupings of initiatives) and projects within initiatives that are involved with strategy implementation.

With proper management controls in place, this approach allows those closest to the action to respond quickly and appropriately when it is needed – always operating within predefined spheres of control and in concert with the strategic goals. The goals are well known and understood by empowered employees, as their direct managers will have effectively communicated these goals to them, accompanied by the expectations for how they can directly contribute – allowing them to embrace the vision and fully participate in the tactical execution.

10.  Sustain •Rejuvenate

As a function of the ongoing management of the plan portfolio, plan governance also involves refreshing the strategic and supporting operational plans to reflect changes as a result of completing plan goals and taking on new ones.  A plan governance structure allows for strategic and operational planning to become much more actively managed and based on a shorter time horizons.  Shorter time horizons for plans lead to more focus on execution and results in better outcomes.  As we’ve discussed in previous articles, a rolling 12-month plan that is refreshed quarterly is best suited for achieving optimal results in execution. See “Mapping Strategy Execution” for more detail.

Summary

The overall strategic plan must be thought of as a portfolio to be managed. The strategic plan portfolio represents the overall macroscopic view of all programs and initiatives involved with strategy implementation.

During the operational planning stage of strategic planning, initiatives get defined that support the strategy’s outcomes. Those initiatives can then be broken down into bite-size projects so that they can be estimated, understood, and eventually – managed. To manage the overall strategic plan, however, we must have some different views of the work to be completed in order to successfully manage it. Grouping projects into programs provides a big-picture way of tracking, managing, and reporting on the tens, hundreds, or in the most extreme cases – thousands of projects that can arise from a corporate strategic plan.  Projects can be grouped into programs in terms of how they support the overarching strategy and goals or along budgetary lines. The overall group of programs is the portfolio. Plan governance then becomes the vehicle to manage the plan portfolio and ensure the of operational initiatives with plan goals and track progress of plan-supporting strategic initiatives through effective oversight at the corporate and operational levels.

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