Today’s session is about how performance management consultants work. I am going to talk about some really commonsense things today. There is nothing that is rocket science. It's really an integrated framework in how I approach working with organizations when it comes to trying to improve their performance, trying to improve their processes, whatever it may be where they feel their pain.
When we look into organizations, what really are organizations? Well you have people. You have a plan that may be a strategic plan, a business plan. You have got policies. You have got processes. You have got procedures, and why are you doing all that?
Well, to achieve a certain performance to meet the vision of the organization. So, if you read the fine print, it's really people that use a plan, use policies, processes and procedures to achieve the desired performance.
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Linkage Between Strategy And Execution
Why is strategy important, and what’s the linkage between strategy and execution? I am going to be focusing on a lot, on execution, not so much on strategy. Well, if you are looking into the business world, you are going to know that most organizations have a very sound strategy, have worked diligently on defining a strategy. But in the majority of cases when they fail, it's not because a strategy was faulty, it's because they didn’t execute against that strategy.
And here are some stats from why CEOs fail. 70% it was estimated of companies, the problem was not bad strategy, it was really bad execution, and in other cases, less than 10% of strategies were effectively formulated and effectively executed. So, what are some of the reasons why these companies fail?
Well, there are barriers to strategic success and achieving high performance levels. You have your vision barriers up there, and one of the things that you can notice is that less than 1/10th of the workforce in an organization usually understands what the organization’s strategy is. Now they are just like a parrot. Usually if it's written on the back of the business card, they can all document it. They can all speak what the strategy should be, but they don’t truly understand it.
There is a people barrier. Less than 1/3rd of managers in organizations have their incentives actually linked to the strategy. So there is a complete disconnect between the performance evaluation process and the actual strategy in the organization.
There is a management barrier. Almost all executives nowadays are really in a firefighting mode. They run from one fire to another. Really they don’t take the time to do what they should be doing which is really being strategic, being a leader, focusing on the people, focusing on the process in the organization.
And then there is a resource barrier. I work primarily with companies that use a large installed base of assets to derive revenue. In many cases, there is a regulatory process, rates approved by the regulators. You can’t just have the resources that you want to, that you feel are right, often times you have resource constraints. But more importantly, in almost all of these organizations, the budgeting process is completely separate from the resource analysis or resource requirement analysis process.
Make Strategy Part of Everyone’s Job
So there is no connection between what budget do we need next year and what is really the work that we have got to get done next year. So when you put these things together, you can pretty much count it up that nearly 9 out of 10 companies fail to execute their strategy. Great strategy, lousy execution.
So what do we have to do? Well, we have to make strategy and performance thinking part of everyone’s job. The ideal case is that you get to your desk in the morning, and the first thing that you do is you focus, hey, what do I have to get done today? How does it link to the strategy? How does it link to the business plan, and what is the impact if I cannot get all of these things done?
So, the other thing that you have to do is you have to align the organization to the corporate strategy. Many organizations that I have seen, they are not organized in order to succeed against their strategy. They have organizations that are all silos. They don’t match the strategy. They don’t match the goals that are outlined in the strategy.
You have to create the chance for the executive leadership. It has to be sponsored by the top level. If you have grassroots efforts that are going on, they can succeed, but they will not be sustainable, and eventually they will falter when that person at the lower level moves on, gets promoted or takes another job because they got too frustrated.
And most importantly, you have to create a culture where strategy is really a continuous process, where people accept strategic planning and business planning not as a necessary evil that’s done once a year in the October-November timeframe, but it is something that’s supported by a continuous process. It's a high visibility process. It is something that comes from the top-down as well as from the bottom-up, and where there is a process to reconcile any differences between the plans of the two stakeholder groups.