Strategic Planning Implementation
Developing a strategy is important but a strategy is only effective when it is implemented. If your company struggles with implementation you are not alone. Below are two studies that show that the majority of companies struggle with strategy implementation:
Study 1: Fortune Magazine conducted a study that analyzed 10 CEOs who failed and found that the reason for their respective failure was not the lack of a strategic plan. The study found that 70% of CEOs failed due to poor implementation.1
Study 2: Times 1000 conducted a study of 200 companies and found that only 14% of these companies’ management thought strategy implementation was going well, and only 33% reported achieving ‘significant strategic success’.2
For this reason some have said: “Better a poor plan well executed, than a great plan poorly executed.”
The Giersch Group’s prior resources cover many of the facets for developing a strategic plan. Here we want to consider the implementation of the plan for the next several years. We are assuming that a three to five year plan has been done based on the market positioning discussed in the prior month and that the plan has been put into a financial model showing the financial statement implications of the plan for each year.
Steps for Strategy Implementation
The following steps frame an implementation process:
- The plan is communicated to the key members of the company
- The first year of the financial plan forms the budget for the next year.
- The measurement system or key performance indicators are aligned to the strategy.
- The changes needing to be made to effectuate the implementation of the plan are undertaken expeditiously.
This order of the steps is rather inconsistent with many of the published concepts for strategy implementation. The reason for the above alignment is that the smaller company has limited resources and thus needs to minimize radical changes while building good management into the company’s systems.
Communication of the Plan
The key members of the company may or may not be part of the development of the company’s strategic plan. However, it is clear that all members of the company must know both the plan and their role in achieving the plan. How far down in a company should the plan communication go? What level of detail should a communication have? What level of buy–in is required? These are some of the questions that strategists worry about. For the smaller company, the answer is relatively easy.
In a small company, everyone should know the key components of a company’s plan. What level of detail they should know is generally answered by their need to know. Each member of the company will function much better if they have a working knowledge of the overall plan, then each person can identify his part of the plan. For example, a staff member does not need to know about the cash balances of the company to do their staff level tasks, but she does need to know the client service strategy and what makes the company different. What level of buy-in they need to have is answered by the fact that smaller companies are owner operated. All teams work better when each player knows his role and believes his coach is wise and watching. In effect, the communication has to come with a level of assignment and accountability for delivery.
Regular management meetings are part of running any organization well. In a management meeting, the key points of the strategy need to be systematically reviewed. Good leaders have found that opening each meeting with a recap of the strategy or its key points creates momentum in both understanding and buy-in. Too often management adopts the view that “We’ve said this before.” Yet, often, there are new members in a company who were not there for management’s initial strategic plan communication, or the members have forgotten, or the members did not really understand when it was presented.
The Budget Process
November is the budget month in the Giersch Group’s calendar year. By having the strategic plan’s financial model built out for the next three years, year one then becomes the target for the budget. Aligning the budget process with strategy makes the budget process easier. The budget becomes a measure of top-down process and forces out any issues that will get in the way of achieving the budget or the strategic plan. Each member of the company with management responsibility can identify what has to change to make the budget and the strategy happen. Thus a measure of strategy implementation is automatic.
The Measurement
As we discussed in our Key Performance Indicators resource, measurement does create behavior. Therefore, in the budget process, those items that need to be changed or improved should be evaluated for measurement, and thereby management. The use of a dashboard is particularly helpful in reinforcing the measurement/management changes that good implementation requires.
Making Needed Changes
By now the operational changes needing to be made are naturally indentified. The challenge is to make the changes expeditiously. The company needs to avoid the 1990’s concept that the only constant is change. People, customers, and suppliers all look for stability and predictability. Stability does not indicate zero change, but does mean that change is made by a plan that is known and understood. Strategy, when well implemented, allows systematic responses to the market and internal system needs while the company environment seems well operated.
The Giersch Group’s view is that strategy, well implemented, allows for operational changes to be done smoothly to the point that the members of the company and its clients do not notice the strategic changes. Annually reviewing a three-year strategic plan creates a management style where needed changes in business allow for small changes rather than radical and disruptive changes.
A final observation is needed on making changes. Events in the market can disrupt the strategy during any year. When the market changes cause the strategy tone to be modified, the blessing of being a smaller company shines forth. Small companies can change quickly. Small companies must change quickly, because of limited capital. Therefore, a strategy cannot be viewed as a fixed plan, but a road map where the changes in the road lead to changes in the operations.
Actions
- Complete a full strategic plan, including a full financial model.
- Look at the first year of your financial model and its ability to be a budget for next year.
- Arrange a key management meeting to discuss the strategy and its implementation in the next year.
- Identify changes in operations that are needed and the actions to make the change.
- Review or develop the management tools or a dashboard to monitor the results of your strategic planning.
1Charan, Ram, and Geoffrey Colvin. "Why CEOs Fail It's Rarely for Lack of Smarts or Vision. Most Unsuccessful CEOs Stumble Because of One Simple, Fatal Shortcoming." Fortune. 21 June 1999. Web. Sept. 2011. http://money.cnn.com/magazines/fortune/fortune_archive/1999/06/21/261696/index.htm
2Cobbold, Ian, and Gavin Lawrie. Why Do Only One Third of UK Companies Realise Significant Strategic Success? Working paper. 2GC Limited, May 2001. Web. Sept. 2011. < http://www.2gc.co.uk/pdf/2GC-WP-UKCoStratSuc-090311.pdf
For more information, please visit the Giersch Group at http://www.gierschgroup.com/ or contact us at prosper@gierschgroup.com
