For a very long time the process of strategy formation and the process of strategy implementation has been seen as two separate areas and part of a two-step process. This has its roots in the assumption that strategy is predominantly a financial process best left to senior management and financial consultants that delivers a fait accompli to the line businesses and HR to implement. Change process research has demonstrated that most change initiatives fail to bring the intended benefits to the corporation. That does not prevent managers from declaring victory even for implementations that destroyed shareholder value. Even a good strategy can fail as a result of a poor implementation and the other way around.
Nice landing – wrong airport!
By integrating the strategy and the implementation process
it is possible to increase the probability of success significantly. Here are 7
steps to integrating Strategy formation and Implement the change process.
1. Have a clear non-financial goal with the
strategy.
It is fine to have a financial goal for the
strategy but it is not a strategy; a financial goal is an outcome of a
successful strategy. Strategies are in their core about creating future
sustainable competitiveness as either a response to external events or as an
attempt to create events. Too often the financial goal is communicated as a
strategy bearing no meaning to most of the stakeholders.
2. Make sure
your strategy makes the world a better place (it also ok to make a profit).
This vital element of a strategy has been known for a long time but has been
forgotten in recent years. Carl von Clausewitz put it: “There can be no
strategy without noble purpose”. With a noble purpose it will be possible to
move the organisation through a change process. Profit and revenue might be
powerful motivators for management and executive staff but as Daniel Pink
demonstrates it does not really motivate significantly.
3. Make the
cost of doing nothing clear. It is often assumed that doing nothing is the
lowest risk option. In this time of disruption it is never the case. When
Stephen Elop, CEO of Nokia, declared: “Nokia is on a burning platform” he made
it very clear that change was needed and even that would not guarantee success.
People don’t change as a result of information. They change either to get away
from a bad situation or to get to a better place or both. For the change
process to succeed, the strategy has to create tension between these two states.
4. To secure
implementation, it is important for the strategy to benefit all or most
stakeholders. Most strategies have a short term aim to create monetary
benefits for the shareholders often at the expense of other stakeholders.
Profits can be increased by reducing headcount at the expense of the people
that stay; they will have to work harder. Profits can also be increased by
reducing service staff at the expense of the customer. These kinds of
strategies are rarely implemented effectively and although short term profits
can be demonstrated it also destructs shareholder value in loss of employee
engagement and customer defection. For a strategy to be effective it has to benefit
most or all stakeholders not just shareholders. If the strategy benefits
employees, customers, external organisations and society, it should also
benefit the shareholders. Even if this is not the most common way of operating
it is quite obvious that there are a number of companies that have taken this
path and are in a league of their own. Companies like Google, Tesla, Netflix
and Virgin are willing to make their strategy work through their employees and
not at their expense.
5. Convince
your shareholders of the long term perspective or change them. It can be
challenging or even scary to take a long term strategy to the shareholder
community. Stories are countless of stocks being punished for initiatives that create
long term shareholder value. When Paul Polman took over Unilever after 10 years
of cost cutting he declared that his goal was to double the revenue and the
days of cost cutting where over. If an investment made sense it would be
implemented no matter what the quarter looked like. He decided to stop giving
guidance to the stockmarket and was immediately punished with an 8% drop in
shareprice when the quarter-rapers left the stock. As he put it “Like you
select what customers you want to serve, you also need to select what
shareholders you want to work with. You need to find shareholders that share
your long term sustainable vision for creating shareholder value without exploiting
other stakeholders. Since then, the Unilever stock price has doubled.
6. Involve
stakeholders in the strategy creation. It is not common to involve
stakeholders into the process of strategic formation. Senior management often believes
that it is best to keep this process behind closed doors to limit damage. The
assumption is that the speculation stakeholders has outside the door is less
damaging that if they were on the inside of the process. This is a reminiscent
of the ancient view of heroic leadership – senior management knows best and
just do what you are told. Most implementations fail, not as a result of people
being change resistant but as a result of people resisting being manipulated.
By involving stakeholders into the process, the strategy might change in ways
that benefits different groups and as advocates are involved the implementation
has started before the strategy process has finished.
7. Communication
of the Strategy has to involve Emotional Persuasion as well as rational
arguments. New neurological research that has proven that human behaviour is
modulated heavily by emotions and social context. Many years of study has
failed to establish a strong link between employee and customer satisfaction
and corporate results. More recent research by Gallup has shown that employee
and customer engagement directly predicts corporate performance. Where satisfaction
has it base in a rational exchange between the corporation and the stakeholders
– engagement is a fully emotional connection.
Management theory has a lot of research on both strategy formation
and change processes for successful transformation of organisations. However
most of these models assume that people and organisations predominantly behave
rationally. There has been a lot of new neurological research that has proven
that human behaviour is not predominantly rational and does not change as a
result of getting new information. But we already knew – if we were rational
there would be no wars, stock market crashes, substance abuse, obesity, poverty
or exploitation of resource.
No comments:
Post a Comment