Wednesday, June 22, 2011

Strategic Planning Analogy #398: Strategy Trees

Back in the 1960s, the Smothers Brothers had a comedy show on TV. On one episode, they were talking about the problems of a population explosion. Dick Smothers was lamenting the fact that the global population was growing too quickly and was causing all sorts of problems.

Tom Smothers said he didn’t even think there was as population explosion. When Dick asked why he believed this, Tom replied with the following logic:

I am one person. I have two parents, four grandparents, eight great-grandparents, and so on. As you go back in time, my family tree keeps expanding. So, as you can see, my family population is actually shrinking from what it used to be. Therefore, the population isn’t exploding. If anything, it is shrinking.

Tom Smothers had faulty logic when looking at his family tree. Because he did not understand the complete picture, he came to an inaccurate conclusion.

Family trees are a lot like corporate organization charts. We need to make sure that we understand the complete picture of how the organization chart works. Otherwise, we may be like Tom Smothers and reach the wrong conclusion.

In particular, as strategists, we need to understand how strategy filters through an organization. Just as Tom Smothers mistakenly thought that population was shrinking as one moved down the family tree, we can mistakenly believe that a strategy’s relevance shrinks as we move down the organization chart.

Just keep in mind that the people further down in the organization chart are often closer to where the customers are and where the production is and where transactions take place. And if a strategy isn’t relevant where the customers are and where the production/transactions take place, then is it really relevant at all?

The principle here is that strategy needs to be seen as a key role for everyone in the organization, from top to bottom. It is not just a play thing for leaders at the top.

Linked In Discussion
I was reminded of this when looking at a discussion thread on Linked In. The discussion topic was about why it is so difficult to convert strategy ideas into execution. I posted a comment which referred to an earlier blog. In this blog, I compared strategy to a basketball game.

In basketball, you win by scoring more points than the opposition. This becomes the over-arching strategy. However, if all you do as a basketball coach is yell at the players to “go get more points than the opposition” you really haven’t done much.

No, basketball games are won based on the types of plays executed by the players. Although the scoreboard may tell you whether or not you won, it is the game plan—those Xs and Os drawn on the clipboard—which create the ability to win. So, if you want great execution of your strategy, quit focusing so much on the scoreboard and spend more time focusing on the clipboard.

The response I got on the Linked In discussion surprised me. I was told that the clipboard is mere tactics. This response implied that strategists should be concerned with strategy execution, not tactical execution. Therefore my comment was useless.

At this point, the thought going through my head was this: If tactics are not relevant to strategy execution, then why are you doing those tactics? No wonder these people were having trouble executing a strategy—they are disconnecting them from tactics. Just as yelling at a scoreboard does not change the score, yelling about the overarching strategy does not tell people how to make the strategy real.

Actions Have Many Roles
In a family tree, an individual may have many roles, depending on who is looking at them. For example, an individual can be seen as a Father, a Son, a Brother, an Uncle, a Nephew, and so on, depending upon who is looking at them. The same thing can happen for business activities within an organization chart. At the top of the organization, a particular action may appear to be a tactic. However, further down in the organization, that same action appears to them to be a strategy.

I learned this lesson a long time ago. I asked people about strategy & tactics and this was the typical response: “Strategy is what I do. Tactics are what the people below me do. And I’m not always sure what the people above me do.” And it didn’t seem to matter where the individual was in the organization chart. Those near the top and those in the middle had the same comment. (And in great companies, this translates all the way to the bottom.)

I’ll illustrate this with an example. At the top of a corporation, the senior executives may voice their strategy as shifting the business portfolio from declining business sectors to growing business sectors. The tactic would be to take the cash flow from declining “Division X” and give it to growing “Division Y”.

Now if you are in charge of declining Division X, you now see your strategy as maximizing near-term cash flow (in this way, the tactic from the corporation is translated into the strategy of the division). At the Division X level, key tactics to increase cash flow might be to reduce headcount and capital investments.

The head of operations in Division X would now see his strategy as finding a way to reducing labor expenses without spending a lot of money to do so (meaning the tactic at the top of the division is now the strategy in the middle of the division). The head of division operations creates a tactic of eliminating the third shift and giving more overtime to the second shift.

Now, to the head of production scheduling, that tactic becomes his/her strategy. And so goes the process all the way down the organization. One person’s tactic becomes the next person’s strategy.

Therefore, if a strategist wants to ensure that an overarching strategy gets executed, here’s what needs to get done.

1) Make sure that the overarching strategy from the top gets broken down into 1st level tactics.

2) Make sure the second level in the organization knows their role in those 1st level tactics, so they can craft their strategy appropriately.

3) Help the 2nd level of the organization develop their tactics (the 2nd level tactics).

4) Help the third level of the organization translate the 2nd level tactics into their strategy.

And so on…

Strategy is not just for the folks at the top. Everyone should be operating under a strategy. The scope of the strategy may contract as you go down the organization chart. But for each level, they need to think strategically about that which is within their scope. And that strategy needs to be linked to the tactics one level above them.

By doing this you gain two benefits—everyone is thinking strategically about their job and all the actions are linked together towards achieving the over-arching strategy.

If you want to make sure that a company’s over-arching strategy is executed properly, then you need to make sure that strategies in the lower levels of the organization are linked to the tactics of the level above them.

At first, the idea of loading up an organization chart with “good soldiers” (who are good at following orders) sounds great. You’ll get things done, because “good soldiers” obey without question. However, you might get better things done if your people take personal responsibility for developing the strategy at their level (instead of just blindly following orders). Help your people to take responsibility for the strategy at their level in a manner which supports the tactics one level up. This should make them “better soldiers.”

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