It is too familiar a scene. Corporation X seriously defaults on its commitments for several quarters in a row and stocks plummet. As a result, the Board loses confidence, the CEO “resigns” and a new CEO is appointed who immediately announces a radical restructuring of the corporation.
In recent years, newspapers have been inundated with reports of this kind. Even in corporations where senior executives show signs of “vision” and have articulated what appears to be a solid business strategy on paper, the results fall short of expectations.
We have all been there at one point or another in our careers. The leadership team spends many hours agreeing on a 3-5 year strategy to improve business performance. Management teams work equally hard to develop annual support budgets. Both teams complete long PowerPoint presentations and well-constructed, comprehensive spreadsheet files. However, not much happens in terms of actual deliverables! Ambitious year-end targets are missed. The enhancement curves keep shifting to the right, until the scenario at the beginning of this article is performed. Now the process of restructuring the corporation begins.
Questions immediately arise as to why these events occur so frequently and include:
o What went wrong and why?
o Are the goals too aggressive?
o Are the visions and / or strategies inadequate?
o Middle managers can’t execute?
o If the answer is yes to all these questions, why is this the case?
These are all good questions, and many have been extensively addressed with proposals on how to find the 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 the business objectives, which quantify the progress of the implementation of the strategy towards the vision, and the objectives 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 bond and the better the alignment, the stronger the likelihood of flawless corporate execution.
Strategic alignment has several advantages once it is properly implemented and practiced. Benefits included:
1. Allow efficient use of generally scarce resources,
2. Resulting in a higher execution speed, as a corollary,
3. Promote team efforts toward common goals, and
4. Increase employee motivation, giving them a sharper sense of contribution to the results of their individual groups and of the corporation as a whole.
These are good results that many companies would benefit from, but very few companies can realize them. As many corporations and their leadership teams attempt to achieve 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 necessary within the organization to understand the vision elements and the key strategic directions required. Relentless repetition by leadership and management teams at every opportunity, including sales meetings, company meetings, and operational business reviews, allows each employee to clearly understand how they can contribute to overall progress. However, most of the time, these vital communication opportunities are limited to boring, high-level table presentations filled with data that employees have a hard time associating with their day-to-day jobs.
The second component of a successful strategic alignment is absolutely essential to link the results of each employee’s work with the progress of the entire strategy of the corporation and to do it in a clear and simple way. This is best accomplished through the use of simple key performance measures (KBM = key business metrics or KPM = key performance metrics), which can be linked to the annual employee performance review.
An excellent example of effective strategic alignment is practiced at Thermo Electron Corporation, a leader in the field of analytical instrumentation, based in Waltham, MA. Thermo Electron uses a cascading set of objectives that quantitatively measure the progress of the strategic implementation. This “waterfall effect” or “goal tree” begins 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 comes down to the employee, the goals are built into their annual performance goals, and these goals directly support the key goals at the highest levels of the organization. This ensures both focus and alignment while the employee meets their goals on a daily basis. The objectives are accumulated in the “waterfall” or “goal tree” in periodic reviews of the goals at all levels of the organization.
Implementing strategic alignment is not rocket science. However, it requires strong commitment from top leadership and a relentless focus on communicating at every opportunity using simple management principles of focus, clarity, and reinforcement.
Ultimately, the effective execution of strategic alignment is a leader’s top priority and ensures that goals are met and success is achieved.