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Order the new MDM Special Report: Business Planning for Distributors
Baking Success into Your Strategy
By Steve Deist
At a recent social event, a friend found himself seated at a table full of successful local businessmen and women. I asked him which of his table mates he found to be the most impressive leader.
After thinking it over a few moments, he said: “Whenever the guy on my right engaged in conversation he made me believe that he was the smartest person on the planet. When I talked with the guy on my left, he made me feel like I was the smartest.”
After thinking it over a few moments, he said: “Whenever the guy on my right engaged in conversation he made me believe that he was the smartest person on the planet. When I talked with the guy on my left, he made me feel like I was the smartest.”
As a business leader, it’s your job to make other people in your organization smarter. If you really want to unleash their discretionary energy and creativity you must create an environment in which employees have confidence in their own good judgment and the freedom to exercise it.
Convincing everyone else of your own brilliance may feel good but it’s a sure fire way to have a deserted parking lot at five o’clock.
Convincing everyone else of your own brilliance may feel good but it’s a sure fire way to have a deserted parking lot at five o’clock.
But…you’ve also got a business to manage. In the real world “self actualization” takes a back seat to making payroll. After all, you’re running a for-profit company in a cut-throat industry, not an ashram in India.
This article will make the case that the intelligent involvement of your staff in strategy is not optional. It is the only way to achieve sustained financial success. It is the key to escaping the trade-off between commitment and clarity.
The Clarity Commitment Tradeoff
Think for a moment about your company’s culture. Is it characterized by compliance or commitment? The 2006 Facing the Forces of Change study defines a compliant culture as one in which “loyalty is valued over performance, and paternalism is the dominant management style.” Now consider the clarity of your strategy. Is it clear, concise, documented and understood by employees throughout your organization? Try asking a front line customer service rep, arguably your company’s most important customer interface, to recite the mantra.
If your company is typical, it falls into either the authoritarian (clear vision, low commitment) or the consensus driven (vague strategy, high commitment) quadrant. After a little reflection, this makes sense. A strong, compelling strategy is usually the work of a small cadre of creative, experienced and very intelligent executives. “Groupthink” is usually a recipe for a politicized, lowest-common-denominator approach.
So, how does a leader create both strategic clarity and strong commitment? How does one align the entire company behind a plan created by the elite few back at corporate headquarters? How can the planning process be truly inclusive without becoming hopelessly diluted? The two sides of leadership, crafting a compelling vision and inspiring rabid commitment, seem to be in direct conflict with each other.
This conundrum is similar to that faced in annual budget meetings (or quarterly sales meetings): getting bottom-up commitment to a top-down number. But strategy adds a crucial difference. Budgets merely define what is to be accomplished; strategic plans also dictate how the company’s objectives are to be achieved.
A manager paying lip service to an unrealistic sales goal will probably still work hard to grow revenue and work in the best interests of the company. A manager who has not bought in to a strategic directive is, almost by definition, working at cross-purposes with those who have.
A manager paying lip service to an unrealistic sales goal will probably still work hard to grow revenue and work in the best interests of the company. A manager who has not bought in to a strategic directive is, almost by definition, working at cross-purposes with those who have.
In Search of the Holy Grail
At one time or another, most CEOs encounter a “3:00AM wake up call” that pushes them to strategic planning. It may be a new competitor or market opportunity, financial distress or record growth, but something compels top management to formally reexamine the company’s position. In these situations, the natural instinct is to come up with “the plan.” The call goes out to the consultants, the team of wise elders is assembled and the plan is built.
Next, of course, thoughts turn to execution. How do executives get the entire company to see the wisdom of the plan and sign up to do their part? At this point, the CEO often acts like the boastful dinner companion, trying to sell himself to everyone at the table. This is how the false distinction between planning and executing a strategy is created. To be truly effective, execution must be baked into the plan from the start. Although it sounds obvious, in our experience this simple truth is almost always overlooked.
Fundamentally, this situation occurs because results-oriented leaders naturally focus on the destination rather than the journey. They look at the plan as the answer and, if it’s not right, they failed the test. There’s no partial credit for “effort.” The reality is just the opposite. The greatest value of strategic planning should come during the process of its development. This is when the widest range of input should be solicited.
This is when you must draw on the creativity of every employee - especially those who interact regularly with customers. This is when ownership and commitment are cemented. This is a unique opportunity to develop your company’s next generation of leaders.
This is when you must draw on the creativity of every employee - especially those who interact regularly with customers. This is when ownership and commitment are cemented. This is a unique opportunity to develop your company’s next generation of leaders.
The Monty Python troupe never did find the Holy Grail, but the quest itself was a lot of fun.
Align Down, Innovate Up
Over the course of helping hundreds of companies develop and implement strategies, our firm has learned an important lesson: intelligent involvement is the only way to overcome the tradeoff between clarity and commitment. Harnessing the power of the planning process itself is the key. The design and execution of strategy must be developed together. There is no panacea, but there is a general framework for baking execution right into the planning pie.
The two most critical parts of this framework are iteration and cascading business objectives. Iteration means that the plan is refined in several passes until all the key pieces are in alignment. The process of identifying, analyzing and correcting inconsistencies is extremely powerful and a big part of the “journey” value described above. This does not mean that planning continues until everything is perfect. It does mean than fundamental contradictions or omissions are not paved over.
Cascading business objectives keep the plan aligned while supporting innovation. Each level of the organization clearly defines what is to be accomplished by the next level down, while leaving it up to them to determine how to go about accomplishing it. So, for example, the executive management team may determine that geographic expansion is essential for growth and set a goal of achieving 10% of revenue from new territories within two years. It would then fall to the strategy team to determine the mechanisms for doing this (e.g. evaluation criteria, specific locations, choice of sales offices vs. twigs vs. full branches, vendor strategy, etc.).
The general approach is illustrated in the following diagram. The plans created at each level show how the goals passed down from the previous level will be accomplished. Simultaneously, they lay out the objectives for the next level.
This process helps to ensure that strategic objectives are clear, concise, enduring and effective guides to action (Gadiesh and Gilbert, 2001) because all goals and plans for subsequent levels in the organization are validated against them. This is how strategic clarity is enforced: team members must demonstrate their understanding by creating aligned goals and plans, not just saying “yes sir.”
The framework drives innovation where it is generally most powerful - at the lowest possible level within the organization. Those with direct customer interaction, regional- or market-specific knowledge, direct technical expertise, etc. have an opportunity to enact their own versions of the strategy, again within certain constraints. They become owners. Perhaps most importantly, the process provides a vehicle for testing the validity of the strategy. If a branch office or division is unable to fit its plans within the curbs of the company’s overall plan, those curbs may be in the wrong place.
The framework drives innovation where it is generally most powerful - at the lowest possible level within the organization. Those with direct customer interaction, regional- or market-specific knowledge, direct technical expertise, etc. have an opportunity to enact their own versions of the strategy, again within certain constraints. They become owners. Perhaps most importantly, the process provides a vehicle for testing the validity of the strategy. If a branch office or division is unable to fit its plans within the curbs of the company’s overall plan, those curbs may be in the wrong place.
In our experience it is almost impossible to over-communicate a strategic vision. By bringing the maximum feasible portion of the company within the plan itself, the iterative process practically guarantees that the plan is conveyed to at least the line manager level.
Putting the Model to Work
Of course, the devil is in the details and there are many, many specific elements required to make this model work. The following guidelines will help.
• Be formal. Many executives instinctively (and understandably) steer clear of rigid strategic processes for fear that they will stifle creativity and add unhelpful levels of bureaucracy to the process. However, painful experience shows that a minimum level of stringency is critical to success. Forcing ideas down on paper ensures that they are the product of clear thinking. Scheduled presentations and status reports keeps a focus on deadlines, drives consensus and makes commitments very explicit. The formal “gates” between levels in the participation pyramid helps to keep managers from slipping into ownership-sapping micro management and validates the communicative strength of the strategy itself.
• Be patient. The power of the pyramid is the errors, contradictions and omissions that will be discovered by the lower levels of the organization. They form the critical feedback required to produce a truly aligned plan. Expect and encourage as many passes as it takes to get it right.
• Be inclusive. Don’t limit the strategy team to the usual corporate bigwigs. Experience shows that branch managers, field sales reps and even customer service staff can add important perspectives. Learn as much about your customers and competitors as you can through market research, satisfaction surveys, focus groups, etc. Consider using experienced outside resources to provide additional market insight, out-of-the-box thinking or process facilitation.
The next time you’re at a dinner party, play a little game. Try to get each of your table mates to talk about something that is really important to them. They are likely to be far more involved in the conversation, you may learn something important and you’ll definitely get more to eat!
Steve Deist sdeist@ircg.com is a Partner specializing in strategy at the Indian River Consulting Group. IRCG is an experienced based firm specializing in Distribution. Started in 1987 by J. Michael Marks, IRCG has specialists who consult with distributors and suppliers to make the changes necessary to maintain competitive advantage. You can contact them by calling 321-956-8617, or visit http://www.ircg.com/ for more information.
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