Strategic Planning Analogy #507: Hammers Are Lousy As Saws

THE STORY

Joe the carpenter wanted to be as efficient as possible, so he decided to only carry around only one tool—a hammer.

Joe had three tasks that day: hammer some nails, screw some screws and cut some boards. Joe decided to do all three tasks with his hammer. Hammering the nails went quite well with the use of the hammer.

Getting the screws into the wood with the hammer, however, was far more difficult. By the time Joe could bang the screw into the wood with the hammer, the screw was all bent, the wood was a bit shattered, and the screw was doing a lousy job of holding the wood together.

Finally, Joe discovered that if you whack at a board long enough with a hammer, you can break it into two pieces. But when compared to cutting a board with a saw, whacking it with a hammer was less accurate in getting the cut in the right place, and the edges where it was “cut” with the hammer were all distorted and ragged. This made the board less useful than if a saw had been used.

But in spite of all the problems with the results, Joe the carpenter was still proud of his work. After all, as Joe put it, “I simplified my work by having to carry only one tool.”

THE ANALOGY

Joe’s approach to his work was rather misguided. What good does it do to simplify the number of tools you carry if the end results are awful? Replacing the screwdriver and saw with a hammer lead to a rather useless outcome. Not only would the results have been better if Joe had used a different tool for each task, it would have taken less time and been easier.

Business leaders wouldn’t be as misguided at Joe, would they? In one way, I think many are. There is this tool that businesses use, called a “budget.” The budget is a good business tool, just as a hammer is a good carpentry tool. But just as a hammer cannot effectively do all the work of carpentry, a budget cannot effectively do all the work of business.

Three of the key tasks of business management are to:

1. Effectively manage the treasury function;
2. Make sure the business operating divisions are doing the right things; and
3. Provide incentives for employees to act in the best interests of the company.

Many companies rely primarily on the budget process to do all three tasks. But as we will see in this blog, that is like using a hammer to tighten screws and cut boards. The budget is an effective tool to help the treasury function, just as the hammer is effective in hammering nails. But for the other two tasks, there are better tools than budgets. By trying to use a single budgeting process to do all three, one ends up with a mess. There are better tools for monitoring the operating functions and providing employee incentives, and they should be used instead of the “hammer” of budgets.

THE PRINCIPLE

The principle here is that companies are not doing themselves any favors by using budgets as a tool where it doesn’t belong. It is great for the treasury function, but inappropriate for many of the additional places where it is used.

1. The Budget “Hammer” Works Well on the Treasury “Nail”

The key function of treasury is to ensure that the cash of the business is properly managed. It looks for efficient (and cost effective) sources of cash when internal cash flows fall short of need and looks for efficient uses of excess cash produced internally. Timing of these actions is very important, so that the proper level of funding is available to match the fluctuating cash flow needs.

The budgeting process is a rather good tool to help in this treasury function. It provides a broad overview of cash flows over time. This helps the treasury function plan in advance so that the right amount of money is in the right place at the right time at the best price. The budget is also a good tool to share with the debt and equity community, so that they will cooperate more favorably with your cash needs. It helps build trust, so that they will provide cash at a favorable rate. Treasury should be the primary goal of the budget.

2. The Budget “Hammer” is a Poor Choice for the Employee Incentive “Screw”

However, when budgets are also used as the primary tool to incentivize employees, it destroys the integrity of the budget. Employees will try to “game the budget system” in order to insure easier and higher bonuses. This creates a budget which no longer reflects best estimate of cash flows, because the numbers are padded to improve the likelihood of a bonus. As a result, it damages not only the ability of the budget to get employees to work harder but it damages the ability of the budget to accurately help the treasury plan accurate cash flow estimates.

In addition, employees understand that there is usually more than one way to hit a budget number—and not all of these ways are equally good for the long term health of the business. For example, this quarter’s budgeted profit number can be hit by doing lots of actions harmful to long term prosperity, like improperly cutting investment in the future, cutting research, cutting maintenance, cutting quality, cutting service, overcharging customers, and so on. Since both good and bad behaviors can be used to hit a budget number, the budget is not very effective as an incentive for ensuring right behavior. It is like trying to secure a screw by banging at it with a hammer.

3. The Budget “Hammer” is a Poor Choice for the Operational “Board”

Similarly, the budget is a poor choice as the primary means of determining the specific actions of the operating divisions. The main problem is that budgets are frozen well in advance, before the year begins. As we all know, the marketplace is a dynamic, rapidly changing environment. It is impossible to fully anticipate all of these potential changes. It makes no sense to tie up your operations into budgeting straightjackets, unable to adjust to the changing business environment just because the best guess estimate put into the budget nearly a year earlier has proven to be off.

Does it make sense to not exploit a great opportunity merely because that opportunity was not in the budget? That would be like a miner refusing to take advantage of a huge find of gold in the mountain because they only budgeted to take a meager amount of silver out of the mountain. And the opposite is also true…why continue a particular action merely because it is in the budget if the changing situation makes that action no longer viable?

Budgets are typically broad-based numeric documents. They are not good at understanding strategic nuances, competitive dynamics or the actions behind the numbers.  To expect that out of budgets is like expecting a hammer to effectively cut a board.

Recommendations

To get around these problems, I suggest the following:

a) Get A Screwdriver. Get a tool specifically designed for incenting employees. To insure people are incented to do the right things, specifically outline what right things those are and reward achieving behaviors instead of numbers. For example, if you want an employee to master a skill, make skill mastery the criterion for bonus. Or if you want an employee to successfully roll out a new product or enter the Brazilian market or reduce the time to convert a plant to a new production run, then spell it out IN WORDS (specific enough to be difficult to game).  In the old days, we called that Management by Objectives which then morphed into Balanced Scorecards and now Key Performance Indicators (KPI). I think the migration may be going in the wrong direction towards fewer behavior-based words and more game-able numbers, but at least it is better than bonuses based almost exclusively on budgets. In fact, I might suggest doing the “screwdriver” in the spring and the “hammer” in the fall in order to keep budgets from creeping too deeply into the incentive process.

b) Get A Saw. Get a tool specifically designed for directing operations on what is an acceptable approach to their sphere of influence. This tool would tend to set up measures using a more strategic language. It would explain the strategic role that operational unit has within the organization. It would explain what “winning” would look like for that group. It would explain what the proper trade-offs are on attributes and outcomes. It would point the direction in which the operations are to migrate to in order to reach future strategic goals. Then the company delegates the specifics, to free up the operating unit to bob and weave with the changing environment in order to exploit the moment, provided the actions remain within the strategic boundaries.

c) Improve the Hammer. Budgets can be more dynamic. Draw up some contingency budgets in advance (based on different scenarios) so that you are ready if situations drastically change. Consider rolling budgets that adjust quarterly or semi-annually (depending on your business). Note: this becomes easier to do when the budget is freed by no longer having to also work as a screwdriver and saw. Also, consider doing the screwdriver and saw work PRIOR to finalizing the budget. That way, the budget more accurately reflects what will actually be done, instead of being just a wish list. Remember, the budget shows financial outcomes which are determined by action inputs. So get the inputs figured out before declaring the outcomes.

This is not to say that budgets are totally ignored outside of treasury. The budget provides discipline for the more routine aspects of business. The budget can help to determine if the desired strategy is achievable under current cash constraints. And if the budget has no connection to actions, it ceases to accurately reflect what the future cash situation will really be. So a little bit of the strategy needs to permeate the other areas. But it shouldn’t be the primary driver.

SUMMARY

Budgets are very useful, but they should not be the master tool to drive all of your management concerns. Budgets are most effective when centered primarily on the needs of the treasury function. A second, more action-related tool would be used to incent employees and a third, more strategic tool would be used to manage operational units.

FINAL THOUGHTS

Efficiency is not the same as effectiveness. Having a single tool may appear efficient, but it may be so ineffective that it destroys your ability to properly run your business.

Strategic Planning Analogy #472: Watering Seeds

 

THE STORY
This past summer was unseasonably hot and dry.  My lawn suffered from the harsh weather.  As a result, I needed to plant some grass seed this fall to fill in the dead spots. 

Getting grass seed to grow takes a lot more effort than just throwing some seeds on the ground.  First you have to loosen the soil.  Then you have to keep watering it on a regular basis for several weeks.  Then you have to fertilize it.  That was tough work.  Tossing the seeds on the ground was the easy part.

At first, I thought I wasn’t watering the grass enough.  But then I saw a cardinal giving himself a bird-bath in a puddle where I had watered.  So I guess I watered enough.

And now, my lawn is covered with new grass.

 

THE ANALOGY
Strategy is like grass seed.  It is something new sown into the business with the hope of increasing the growth and value of the company.  And if you want to take the analogy further and think of US dollars as “greenbacks,” strategies are the grass seeds that create that green (money).

The problem is that just because one throws seed on the ground does not guarantee that the growth will occur.  If the ground is hard and dry, the seeds will just sit there until the birds eat it.  Similarly, if strategy is just thrown at a company, there is no guarantee that the strategy will take root. Just as it took a lot more than just tossing seeds to get grass, it takes a lot more than just delivering a strategy in order to achieve a strategy.

If you see the role of strategy as merely delivering a fancy document with all the clever ideas on it, then all you have done is just toss seeds at the company.  The document will then most likely just end up on a shelf and never be touched again.  It’s as if the birds ate all your seeds.

No, if you want a strategy which gets implemented, you have to get involved in all the other work—the ground preparation, the watering and the fertilizing.

  

THE PRINCIPLE
The principle here is that strategies only succeed in a company which is committed to making it succeed.  And that does not usually happen naturally.  In fact, there is usually active resistance to strategies because they require changing the status quo—and that bothers those who are comfortable or have power in the status quo.  Therefore, if you want to successfully implement a strategy, you can’t just give it to the company—you have to actively counter that resistance as part of the strategy process. 

We will refer to those actions as preparing the soil, watering, and fertilizing.

1. Preparing the Soil

In grass-growing, you prepare the soil before planting the seed. The idea is to loosen the soil so the seed can penetrate and get buried in the soil.

A similar activity needs to take place in strategy.  Before presenting the strategy, you need to first prepare the audience so that the strategy will penetrate their wall of resistance.  Since that wall of resistance is in their minds, then the mind is where you need to prepare the soil.

The core idea is very simple.  People act based on the way they think.  Therefore, if you want to change the way they act, you must first change the way they think.  In other words, if you want the leaders embrace and willingly implement the strategy, then you must first get them to think that it is right to abandon the status quo and embrace the new strategy.

There are several ways to change that mind.  The first approach is “The Burning Platform.”  This is where you change how people think about the status quo.  The idea is to convince them to believe that remaining with the status quo is not a viable option for the long term.  It does not work in the changing environment.  Instead, it is like being on a platform which is burning up.  It is only a matter of time before it is all burned up.   And if we do not jump off that platform, we will burn up as well.  It is only a matter of time.  So we may as well jump as soon as possible.

The second approach is “The Locked Door.”  The idea here is to paint a picture of a glorious and prosperous future—a place so desirable that it makes your executives salivate with anticipation when thinking of it.  Then you convince them that there is a locked door between them and that glorious future.  That locked door is the status quo.  It is impossible to reach that future as long as we cling to the status quo, because that approach cannot get you there.  It is only by tearing down the status quo that we can enter that glorious future.

The first approach of thinking prevents actions of turning back and the second approach of thinking increases enthusiasm for actions moving forward.  Depending on the nature of your soil (type of resistance) you may need one of these or some other thinking approach to prepare them for proper acceptance and action.

2. Watering the Soil

Watering the soil is an intensified effort for the period immediately after planting the seed.  It is not a one-time act, but needs to be done continually until the grass seed has fully sprouted.  The strategic planning equivalent is working intensely with executives until they see the connection between the long-term strategy and their daily actions.

If executives do not see a connection between their daily decisions/actions and the long term strategy, then they will not change their daily decisions or actions.  And, as we all know, if the daily actions don’t change, then the long-term outcomes will not change.  The real strategic outcome of a company is the cumulative result of all those daily actions (not the result of that document on the shelf).  So if you want to get the new strategy implemented, if must be meaningfully represented at the point when daily decisions are made.   Watering the seed then means that strategists need to be present when daily decisions are being made—to teach people how the new strategy should influence how those decisions are made.

For example, new strategies are typically about winning a particular position.  And in order to have enough emphasis in the winning area, one usually needs to makes trade-offs with areas less critical to that success.  Therefore, our daily actions need to make the right trade-offs so that we choose in the direction of the winning position.  And if intensive effort is not placed on training people to make the right trade-offs, then wrong trade-offs will occur.

Think back a few years ago to the crisis at Toyota.  Their strategy was built upon winning in dependability.  However, for awhile, management’s daily decisions were not keeping dependability at the forefront.  Ideas of growth, expansion, and low prices got in the way.  As a result, dependability suffered (numerous crashes, lawsuits and recalls) and Toyota had a huge set-back.  Management had to go back and re-water the soil—to get everyone to realize that dependability is top priority and must penetrate every decision made on a daily basis.  Once the soil was sufficiently watered with that intensive effort, dependability came back and so did the prospects at Toyota.

3. Fertilizing the Soil
Fertilization is a brief activity which takes place at set intervals.  For example, many recommend fertilizing grass 5 times a year.  The equivalent activity in strategy is the strategic review.  The idea here is that just as periodic fertilization keeps the grass on track to grow, periodic strategic reviews help keep the strategy on track to proper implementation.

There are several methods to do this.  One is the dashboard approach.  The idea is to set desired near-term outcomes related to the strategy.  These are usually referred to as KPIs, or key performance indicators.  You then measure actual performance against the KPIs and display them on a dashboard.  Periodically you look at the performance on the dashboard and make the appropriate adjustments to get back on track.  Depending on how broadly you want to measure the strategy you will end up with different dashboards.  In the broadest approach, you end up with something like a Balanced Scorecard.

A strategic review which will occur less frequently is the review of assumptions.  The idea here is to periodically go back to the core assumptions behind the strategy to ensure that they are still relevant.  If they are no longer relevant, then it is time to modify the strategy.  Sometimes, this process makes use of scenario planning.  In scenario planning, several potential environmental assumptions are examined.  Strategies are developed for the most like sets of assumptions.  Then, at the periodic reviews, one looks to see which scenario is coming to pass, so that  one will know which path to take.

A third approach for strategic review is known as stage-gating, or real options.  The idea here is that large strategic initiatives are broken down into smaller parts.  Each part optimizes the strategy based on what is known at the moment the stage is started.  Then, based on what is learned over the interim of that stage, you choose the proper next stage, and so on.  The periodic reviews occur for each stage.

An example would be in oil drilling, where one buys an option to drill well before drilling begins.  Then one examines in more detail the likelihood of that being a good place to drill.  If yes, the next stage is to prepare drilling.  If no, you let the right to drill lapse.  The idea is to maximize action while minimizing risk.

 

SUMMARY
Just having a strategy does not guarantee that the strategy will become a reality in the business.  To increase the likelihood that the strategy comes to pass, you also need three other activities:

1. Preparing the Soil--Changing the way the company thinks, so that they naturally want to work hard to make the strategy come to pass.
2. Watering the Soil—Intensive effort up-front to teach people how to incorporate the essentials of the strategy into everyday decision-making.
3. Fertilizing the Soil—Periodic strategic reviews in order to make sure everything is on track, that the assumptions still hold, and that periodic adjustments can be made.

 

FINAL THOUGHTS
You can’t prepare the soil, water the soil and fertilize the soil if you are locked up in the ivory tower at corporate.  No, you have to get your hands dirty and get out into the field where the soil is.

Strategic Planning Analogy #426: The Gotcha Guys (Part 2)

THE STORY
There’s an old saying that “absence makes the heart grow fonder.” That may be true, but absence certainly does not make the relationship easier.

My son works the day shift. His fiancée works the night shift. As a result, they do not see as much of each other as they would like and that adds difficulty to the relationship.

I can empathize with that. When I first moved to Columbus, my wife stayed back in Minneapolis for awhile (about 750 miles away). That was tough.

THE ANALOGY
For a relationship to thrive, there needs to be interaction. This is not only true with marriage. It is also true with the various aspects of one’s business. In particular, I am thinking about the people in charge of long range strategic goals and the people in charge of monitoring near-term financial targets (like annual budget and bonus targets).

If these two groups are not interacting together on a regular basis, they can get out of sync with each other. It can get as dysfunctional as when married couples drift apart and no longer interact on a regular basis.

If the near-term monitors and the long-term strategists are not in regular communication, their agendas may no longer be compatible. Achieving the near-term targets may no longer move the company towards the long-term goals. They might even do the opposite and move the company further away from the long term intent.

As we saw in the previous blog, many problems can occur when the near-term monitoring of the “Gotcha Guys” loses the context of the long-term goals. The Gotcha Guys can end up rewarding bad behavior and punishing good behavior. They can also stifle the creativity needed to achieve ambitious long term goals.

In this blog, we will look at some suggestions to help avoid these problems (and keep that context in place).

THE PRINCIPLE
The principle here is that long-term goals are only achieved if they are part of the daily discussion when near-term targets are being decided and monitored. Therefore, it is essential to have frequent interaction between the near-term Gotcha Guys and the long-term strategists. Here are some ideas to help make this a reality.

Suggestion #1: Set More Strategic Targets
Most of the near-term targets used by companies are simple financial metrics, like “sales” or “expenses.” As we saw in the last blog, it can be easy for people to “game the system” and use tricks to achieve these types of simple metrics in ways that have nothing to do with achieving strategic goals.

Some try to avoid this problem by trying to make the metrics more complex by using ratios. Then you might have metrics like “Sales per Labor Hour” or “Expenses as a Percent of Sales.” But, as we saw in an earlier blog, even ratios can be abused and lose their link to the bigger strategic picture.

Therefore, I suggest that some of the near-term targets avoid numbers altogether. Instead create some monitoring questions which are more subjective—requiring more of a yes or no type of answer.

In its roughest form, the question would be “Did this area take the desired steps to move the company closer to its strategic objectives?” Now this is probably too vague to use in this form. But if you have a well thought out strategy, you should be able to figure out what types of key activities need to take place to make it a reality. Then you can determine which areas of the business need to participate in each activity and how they can impact it. Some examples of key activities might be:

a) Adding some specific capacity where it is lacking.
b) Adding some specific capability where expertise is lacking.
c) Convincing consumers to believe in the claims of your positioning.
d) Creating superiority in a particular attribute essential to winning in the marketplace.
e) Properly resolving a key strategic issue.

By holding people accountable in the near-term for specific activities directly linked to the long-term strategy, one is more likely to get the long term strategy achieved. These types of questions are more difficult to “game” because you are more directly measuring actual long-term activities.

Now some people will take this one step further and try to create fine-tuned metrics around these activities. This is usually referred to as a balanced scorecard. Although having a balanced scorecard is better than just the simple metrics mentioned earlier, it may still be less ideal than the more vague and abstract version of the question “Did you move us closer to our goal?”

I have two reasons for saying this. First, if you keep the question more vague, it requires more interaction between the long-term folks and the Gotcha Guys in order to interpret the target and the performance. And as we said at the beginning of the blog, more interaction is a good thing.

Second, the more we try to push this into a metric rather than a question, the easier it is to sever the linkage between near- and long-term. The temptation is there to focus on just “hitting the number” rather than “doing what’s right.” Why provide that type of temptation?

Now I’m not saying that all the targets should be in this format. Just do enough so that the near-term and long-term people are forced to work together to ensure that people are rewarded on their activities in a long-term context.

Suggestion #2: Use Scenario Planning
As we said in the last blog, near-term targets can get out of sync with long-term goals when the environment changes (or we learn of a need to adjust our assumptions). One way to get around this problem is to analyze various scenarios in the beginning and think through their ramifications to the desired metrics.

Then, if the situation changes, the long-term people can tell the short-term people to shift the program to the alternative scenario and its alternative metrics. By using this process, it gives more opportunities for the two groups to work together (when setting up the scenarios and when changing scenarios). In addition, it is a quick way to keep everyone in sync when times change.

Suggestion #3: Force Interaction
Finally, if these other suggestions do not create enough interaction, then mandate it through policy.
Mandate periodic cross-functional meetings. Rotate people between the two departments. Put them on project teams together. Make increased interaction one of their goals. Have them sign-off on some of each other’s work. Do whatever it takes to ensure that the short-term Gotcha Guys are confronted with the long-term context.

SUMMARY
It is easy for near-term targets to get out of sync with long-term goals. To help prevent this from happening, it is a good idea for the groups responsible for near-term and long-term to interact on a regular basis. Three suggestions to do this are:

1) Add some abstract action-oriented questions to the near term criteria (“Did you do what was required to get us closer to our goal?”);

2) Use Scenario Planning;

3) Force interaction through policy decisions.

FINAL THOUGHTS
If couples stop communicating altogether, they can end up getting a divorce. Let’s keep our communications frequent between the near-termers and the long-termers to prevent an ugly divorce in our business.

Strategic Planning Analogy #419: Get Into the Flow

THE STORY
I used to work with a company that would go into a panic the week before the quarterly board meeting. They acted as if they were totally surprised that a board meeting was coming up. They never seemed prepared. As a result, there was always a last minute rush to get ready (with lots of overtime).

I was always flabbergasted by this lack of preparedness. After all, the board meetings were put on the calendar almost a year in advance. They were mandated by law to be held quarterly and they had been holding these quarterly meetings for decades. I wondered why everyone seemed to act as though the meetings were a surprise.

I used to joke that these people are so out of touch with the rhythms of the business that they are probably shocked every morning when the sun rises in the east. They probably say to themselves, “Wow! The sun rose in the east AGAIN. What a surprise! I wasn’t ready for that. Didn’t it just do that yesterday? I wonder when it will do it next time.”

THE ANALOGY
There is usually a rhythm or flow to a business. It is the way things get done on a recurring basis. Some activities seem to effortlessly mesh with the flow of the business. Others seem like a major disruption to the flow.

At the company mentioned above, board of directors meetings were treated as a disruption to the business flow. The normal flow had to stop while panicked people altered their routine and rushed to get the director’s meeting job done. After the board meeting, the normal flow returned and people acted as if the board had never met.

When it comes to strategic planning activities, we have a choice. We can either build a structure where strategic planning meshes into the regular flow or we can have it appear as a disruption—like those board meetings. As we will see below, strategic planning is better off when part of the normal flow.

THE PRINCIPLE
The principle here is that strategic planning is more effective when incorporated into the daily flow of business. This will not occur on its own, since the “tyranny of the immediate” tends to naturally push longer-term strategic issues out of the daily flow. Therefore, if you want strategic planning to be part of the daily flow, you have to actively work to make it so. Otherwise, you will end up with a dysfunctional mess like I saw with those board meetings.

Why Strategic Planning is Less Effective When Seen as a Disruption
There are several reasons why strategic planning is less effective when seen as a disruption. First of all, the reality is that a company moves in the direction of the daily flow. It is the sum of all those little decisions and daily actions which causes a company to become what it is. You can put a business mission or vision statement in a fancy frame and place it on the wall, but if it is not a part of the daily flow, it will have no impact on the business. You may as well frame a picture of a dancing bear and put it on the wall for all the good it would do.

For example, if your strategy calls for radical change and the daily flow doesn’t change, then the change strategy will never take root and become reality. The simple truth is that you are what you do. If the implications of the strategy are not integrated into the daily flow of what gets done, then the strategy will never succeed. So if you want an effective strategy it must move beyond disruption status and get integrated into the flow, where the real decisions are made.

The second problem with strategy-as-disruption is that it is often not taken seriously. After the disruption of an annual strategy session, people go back to their routines. It’s sort of like taking a vacation or going on holiday. It can be a fun diversion—a pleasant disruption of the routine—but afterward, the old routine returns. Or it can be seen as an unpleasant disruption, like getting the flu. Once the illness is over, the goal is to get back to the normal routine as soon as possible. Either way, the connection between the disruption and the routine isn’t made because the disruption is not taken seriously enough to cause any real lasting change.

It reminds me of what the civil servant government employees in Washington DC are known for. Tradition has it that they frequently say, “Government administrations come and go. Sometimes they are Democrats; sometimes they are Republicans. They make all kinds of pronouncements about grand new programs and new ways of doing things, but in a couple of years they are gone. Then another administration shows up with their own pronouncements. Well, we were here before these administrations, and we will be here long after they are gone. So we will keep doing whatever we want, just like we have always done before.”

In other words, the government doesn’t change much, because the everyday workers of the bureaucracy reject the disruptive calls which come from the outside politicians. The daily flow stays the same because the pronouncements aren’t taken seriously, and the grand strategies go unimplemented.

Steps to Get Strategy Into the Flow
Since it is critical to get strategic planning into the daily flow, it is prudent for the strategist to take steps to ensure that happens. The first step would be to create visibility at the point where daily decisions are made. If the key decision-makers only see the strategists once a year at an annual planning meeting, then the strategists will only be a small, maningless distraction. If you want to impact the daily decisions, you have to be visible all the time—to be there when the regular decisions are being made.

Get on the calendar of as many of the decision making bodies as you can. Go to the meetings. Steer the discussions to consider the strategic implications of what they are considering. If they won’t let you into the meetings, get to the meeting members prior to the meeting. Make sure the strategic context is top of mind and part of the normal decisions within the flow.
The second step is to provide a link between the conceptual and the practical. Business Missions and Vision Statements can provide a great conceptual framework for where you want to take the company or brand. But that doesn’t mean that everyone can intuitively understand how it impacts their own day-to-day actions.

For example, let’s say that your strategy is to become a leader at providing some functional attribute, like service, or quality, or speed. That sounds nice, but how should a salesman do his or her daily task differently in order to expedite this strategy? How should someone on the shop floor act differently as a result of that mission statement? Where should R&D efforts be directed to make the strategy a reality? How should a secretary answer the phone as a result of this strategy?

Unless you can provide a link between the words on a paper and what the average person does on an average day, they may never make the link. Don’t assume people will figure this out on their own. Help them to make the connection. Help them to see that the everyday actions of everyday employees impact strategic success. Help them to find ways to act in support of the strategy rather than (unknowingly) against it.

Ask people to visualize how the daily flow should look when the strategy is fully operational. Then help them figure out how to change their processes in order to get in line with that visualization.

Finally, pay attention to metrics. Metrics are the way we measure the daily flow. If you want the daily flow to move in concert with the strategy, then use tools which measure how well the flow is moving with the strategy. Don’t expect the daily flow to support the strategy if the measurement tools and benefit packages reward a different type of performance. For example, if you want to win on quality, don’t focus on cost control metrics and rewards

Some people use a version of the Balanced Scorecard to accomplish this. However, it might just be as simple as making sure that once everybody sees the link between what they do and the strategy, to measure how well that link is getting done.

SUMMARY
Strategic execution is most likely to be successful if the strategic planning process is integrated into the daily flow of how things get done in the business. Otherwise, you end up with strategic planning as being a minor disruption which gets ignored when the real work is resumed. To ensure that the strategy is integrated into the daily flow, consider the following actions:

a) Increasing the visibility of strategists and strategic thinking throughout the year at the places where routine decisions are being made.

b) Helping employees at all levels of the organization see the link between their everyday activities and the overall strategy.

c) Using metrics to measure and reward how well the daily flow is reinforcing the strategy.

FINAL THOUGHTS
There’s been a lot of talk over the years about how ineffective many Boards of Directors are. I think a lot of that has to do with the fact that they are often seen as a disruption rather than as part of the daily flow (as we saw in the story above). Unless you want your strategic planning

Strategic Planning Analogy #238: Anchor Your Boat

THE STORY

Every month I have to change a bunch of passwords at work for email, voicemail, access to data, etc., because they expire.  And I can't change them to something easy to remember.  The passwords have to contain letters, numbers and symbols, and I cannot repeat a password I've used in the past year.  It's maddening!

 

Just imagine how much worse it would be if your other forms of identification also expired every month.  What if each month you had to come up with a new first name, last name, home address, email address and phone number?  You'd probably be spending half the month setting up your new residence, getting new government paperwork for your new name, setting up new phone service, and so on.  Then, for the rest of the month, you'd be trying to contact all of your friends to let them know your new name, where you live, and how to contact you. 

 

Of course, if all of your friends are also changing identities every month, you wouldn't know how to contact them to tell them about your new identities. 

 

All of your time would be spent trying to establish your life, leaving no time to live your life.  After awhile, all the names and numbers would blur together in your brain. You wouldn't even remember your own name, because it no longer has any special meaning to you…it's just another in a long line of names.  Here today, gone tomorrow.

 

My parents had it easy.  They lived in the same house together for about 50 years and had the same phone number over that length of time.  Their identities were solid and easy to remember.

 

THE ANALOGY

Stability and continuity in one's personal identity can be a good thing.  First, it is easier to remember (for yourself and for the people you want to stay in contact with).  Second, your identity becomes stronger and more special, because its power hasn't been diluted through constant change.   Third, it allows you to spend less time on creating your identity and more time on living out who you are.

 

Although we can easily see the benefits to keeping our personal identity factors constant, I have seen many companies abandon this idea when it comes to the identity of their brand, company or selling proposition.  On a regular basis, they change their logos, their advertising slogan, their market position, their CEO and all manner of things relevant to their identity.

 

Maybe it's due to boredom.  Maybe it is out of the desperate hope that a change in identity can be a catalyst for improved performance.  Regardless of the reason, the result of constant change in business tends to be disappointing.  People get confused (both inside and outside the company), the power of the brand is diluted, and corporate resources are diverted to identity change rather than serving the customer.

 

THE PRINCIPLE

The principle here is about strategic anchoring.  If you do not anchor a boat it will drift away and you will lose it.  However, if you anchor your boat in a known location, you can find it when you need it.  Just as boats need anchoring, so do strategies, or you company will drift away.

 

It's hard to get people's attention.  And when you do get it, you only get enough time for a soundbite or a Twitter "tweet."  Complex or subtle message find it hard to get through.  This applies not only to your customers, but to your employees. 

 

Therefore, when trying to communicate strategy, don't keep changing the context or the jargon.  Anchor it to something already embedded in the brain.  Look at the Balanced Scorecard.  Robert Kaplan and David Norton came up with the concept back in 1992.  Over time, Kaplan and Norton have come up with lots of new ideas and concepts for business beyond the original Balanced Scorecard idea.  Yet, they have not abandoned the identity they gained with the Balanced Scorecard. 

 

All of their new ideas are put inside the context of the Balanced Scorecard.  Why?  It is the identity already embedded in the mind of their audience.  It is a reference point understood by the audience.  It makes it easier to get their new concepts across in soundbites.

 

It looks like a similar situation is occurring with the Blue Ocean strategy.  W. Chan Kim and Renee Mauborgne came up with this concept back in 2004, but they are not letting it die a quick death.  They now have the Blue Ocean Institute.  All their current ideas and writings are put into the Blue Ocean context.  It is becoming the solid identity foundation to build upon.  It is their version of a Balanced Scorecard.

 

If Kaplan and Norton kept redefining their jargon and context every time they had a new idea, they'd be like the person in the story who keeps changing his location and name.  You'd be spending so much time just trying to connect to your audience, that you will not have time to persuade.

 

Worse yet, abandoning the old jargon gives the impression that the old ideas and concepts should be abandoned.  And if the author is abandoning the ideas, why should I pay attention to them?  Won't those new concepts be eventually abandoned just like the old?  If the ideas become obsolete quickly, then why pay such close attention to them?   Your audience will start saying, "These, too, will pass soon, so I can get away with ignoring this latest management fad."

 

 

Don't marginalize your ideas by turning them into the "fad of the month."  Make a stand.  Keep the identity solid over a long period of time…long enough that people no longer feel they can ignore it.

 

Just because your company has strategic planning meetings every year does not mean that your strategy should change every year.  A good strategy should last quite a long time with only minor modifications.  Continuity is a good thing.

 

The same applies to the jargon and concepts used to describe the strategy.  Continuity of terminology reinforces the position in the mind of the audience.  Employees are more willing to go out on a limb and fight for your strategy if they know it is going to be around for a long time.

 

Now this does not mean that strategies are cast in concrete, never to change.  Tweaks and modifications are part of the game.  But just because one has to adapt their identity does not mean you throw the old identity away.  Rather than moving to a new house every month, like in the story, just redecorate the familiar old house.  If you look at the Balanced Scorecard "house" today, it has been vastly redecorated from what it looked like back in the early 1990s.  But it is the same, familiar house.  The boat is still well anchored.

 

Sure, the professional strategist can easily get bored with the old languages and concepts.  To spice things up and look like you are contributing, a strategist can get excited by using the latest jargon and newest tools at each strategy session.  Just remember, you audience doesn't think about this stuff as much as you do.  At the point where you are getting bored with it all, it may just be sinking in and getting comfortable with them.  And they will not spend as much time as you do keeping up with all these new approaches.  You can easily lose them in the churn of changing approaches.

 

Now, in this blog I have done just the opposite.  Rather than pound on the same analogy, week after week, month after month, year after year, I've done a new analogy with every blog entry.  This blog is analogy #238.  That's a lot of change.

 

I recently tried to remember all of those analogies and I couldn't do it.  They all started to blur.  If I, the author, cannot remember them, then the audience hasn't a chance.  If I wanted to make a big splash, perhaps I should have stayed with my favorite analogy—Strategic Planning is Like Barbecue Sauce—and just kept pounding on it week after week, like my version of the Blue Ocean.

 

One analogy can be an important metaphor for use in planning.  But 238 analogies are more than anyone can fully absorb into their daily living.  Perhaps it is time for a new approach.

 

SUMMARY

Anchoring your strategy around a continuity of terminology has advantages.  It makes it easier to get your ideas across (common language).  It also keeps your ideas from being ignored as just a passing fad.  And besides, a good long term strategy shouldn't be changing all that often, anyway.  So why keep changing the jargon which talks about it?

 

FINAL THOUGHTS

Joseph Stalin used to say, "One death is a tragedy; one million is a statistic."  Even something as monumentally tragic as death becomes just a meaningless number when it occurs countless times.  If you want to have a monumental impact on your people, don't change your strategic language countless times.  That degrades it to a mere statistic.