It’s an all too familiar scene. Corporation X seriously defaults on its commitments for several quarters in a row and the stock plummets. As a result, the board loses confidence, the CEO “resigns”, and a new CEO is appointed who promptly announces a radical restructuring of the corporation.
In recent years, newspapers have been inundated with these kinds of reports. Even in corporations where senior executives show signs of “vision” and have articulated what appears to be a sound business strategy on paper, the results fall short of expectations.
We’ve all been there at one point or another in our careers. The leadership team spends long hours agreeing on a 3- or 5-year strategy to improve business performance. Management teams work just as hard to come up with annual support budgets. Both teams complete lengthy PowerPoint presentations and comprehensive, well-constructed spreadsheet files. However, not much happens in terms of actual deliverables! Ambitious end-of-year targets are not met. The enhancement curves continue to shift to the right, until the scenario at the beginning of this article is realized. Now begins the process of restructuring the corporation.
Questions immediately arise as to why these events occur so often and include:
o What went wrong and why?
o Are the targets too aggressive?
o Are the visions and/or strategies inadequate?
o Are the middle managers incapable of executing?
o If the answer is yes to all these questions, why is this so?
These are all good questions, and many have been extensively addressed with proposals on how to find corresponding solutions. However, in my experience, a key element that needs to be addressed is the importance of strategic alignment.
What is strategic alignment?
Strategic alignment can be described as the link between business goals, which quantify strategy implementation progress toward the vision, and the goals of each of the key contributors. Key contributors include groups, divisions, business units, departments, or individual employees who have an interest in the continuation of a successful corporation.
Strategic alignment, simply put, is “everyone rowing in the same direction.” The closer the linkage and the better the alignment, the stronger the likelihood of flawless business execution becomes.
Strategic alignment has several advantages once it is properly implemented and practiced. Benefits included:
1. Allow efficient use of normally scarce resources,
2. Resulting in higher execution speed, as a corollary,
3. Promote teamwork towards common goals, and
4. Increase employee motivation, giving them a greater sense of contribution to the results of their individual groups and the corporation as a whole.
These are good results that many corporations would benefit from, but very few corporations are capable of realizing. As many corporations and their leadership teams attempt to gain strategic alignment, the question is what barriers need to be overcome.
How can strategic alignment be implemented effectively and what are the key success factors?
The first component of a successful strategic alignment is the extensive communication required within the organization to understand the elements of the vision and the key strategic directions needed. Relentless iteration by leadership and management teams at every opportunity, including sales meetings, company meetings, and operational business reviews, allows each employee to vividly understand how they can contribute to overall progress. More often than not, however, these vital communication opportunities are limited to boring presentations of high-level tables filled with data that are difficult for employees to associate with their daily jobs.
The second component of successful strategic alignment is absolutely essential to link the results of each employee’s work to the progress of the entire corporate strategy, and to do so clearly and simply. This is best achieved through the use of simple key performance measures (KBMs= key business metrics, or KPMs= key performance metrics), which can be connected to the employee’s annual performance review.
An excellent example of effective strategic alignment is practiced at Thermo Electron Corporation, a leader in the field of analytical instrumentation, headquartered in Waltham, MA. Thermo Electron uses a set of cascading goals that quantitatively measure strategic implementation progress. This “cascade effect” or “objective tree” starts at the top of the corporation and cascades down to all levels of the organization, from the corporation to the divisions; from Divisions to Business Units; from Business Units to Departments, and from Departments to Employees.
When it reaches the employee, the goals are incorporated into their annual performance goals, and these goals directly support key goals at the highest levels of the organization. This ensures both focus and alignment as the employee meets their goals on a daily basis. The goals are fed back into the “waterfall” or “goals tree” at regular goal reviews at all levels of the organization.
Implementing strategic alignment is not rocket science. It does require, however, a strong commitment from top management and a focus on relentless communication at every opportunity using simple management principles of focus, clarity and reinforcement.
In the end, effective execution of strategic alignment is a leader’s top priority and ensures goals are met and success is achieved.