Pick up The Wall Street Journal and you’re likely to see a story about a company that had a great strategic plan but “crashed and burned” because its leaders did a poor job of strategy execution. This article discusses six best practices we have learned from working with hundreds of companies over the years.
Best Practice 1:
Synchronize your strategic planning process with other related systems. Like the human body, an organization has a number of systems that are interdependent. To realize the maximum benefit from strategic planning, it is essential you map all of the inputs/outputs to your organization’s human capital planning, budgeting, financial forecasting and management reporting processes. Create a calendar to ensure when each process must start/end and the key inputs/outputs so each interdependent process is tightly integrated.
Best Practice 2:
Cascade the enterprise-wide strategic planning. The strategic planning process does not end with the creation of a multiyear plan. Each function needs to understand the specific impacts and requirements the enterprise-wide plan has on it and identify a series of actions to support the overall plan. For example, the human resources function needs to provide leadership around identifying key capability gaps and how to ameliorate these gaps, assess whether the culture needs to evolve to promote desired employee behaviors, and design the right performance management, recognition and compensation programs to drive organizational performance.
Best Practice 3:
Develop/execute contingency plans. One of the components of a well-designed strategic plan is the identification of key risks that can have a material impact on the success of your business. It is essential to develop plans of action to delay, reduce or eliminate the most critical risks. One of our clients was a manufacturing company that produced highly engineered products that relied heavily on the tool and die department. If that department went “dark,” the company would stop making revenue. An action plan was initiated that centered on having contracts in place with independent tool and die shops that had unused capacity to ensure this capability would be restored in a crisis situation
Best Practice 4:
Establish performance reporting. No company bats 100 percent. There is always some outcome(s) where actual performance is less than targeted performance. This is commonly called a variance. It is important to hold regular meetings to track performance, identify performance gaps and their causes, and aggressively implement remedial actions
All of this is for naught if the senior leadership team does not use these metrics to hold employees accountable, differentiate rewards and ensure those who are the most talented progress up the corporate ladder.
Best Practice 5:
Deploy a scorecard of metrics. All companies, even start-ups, have measures that are used to guide them. The best practices are: A) Having a thorough understanding of performance drivers and using predictive and lagging measures; B) Ensuring the scorecard addresses a range of financial, market/customer, people and process outcomes; C) Cascading the scorecard down to each function, core/support process, team and employee; and D) Tightly aligning the scorecard to performance management and rewards systems
Best Practice 6:
Strong program + project management = outstanding strategic planning execution. Many of the action items in a strategic plan relate to addressing capability/performance gaps or actions around growth. This often translates to a number of programs and projects. Therefore, strategy execution is a function of good program/project management. The table on the previous page highlights the functionality of a strategic project management office (PMO)