One of the most common difficulties companies face in strategic planning is turning their vision into a reality. To transform your organization into the one you envision takes more than great strategy and implementation.
One of the most common difficulties companies face in strategic planning is turning their vision into a reality. To transform your organization into the one you envision takes more than great strategy and implementation, you also need to make the strategy an integral part of the very fiber of your organization. When we speak of this idea, we usually use the phrase “strategic alignment”. Aligning everyone in your organization with your strategy is one of the most important things you can do beyond formulating and implementing great strategies. Alignment will make it much easier for your management team to push the organization in the direction you intend. Without good alignment with the strategy, every bit of forward motion will be a struggle.
As an example, consider a retail computer store. If you are running such a store, you probably want employees who appeal to specialty customers. Helpful, cheerful and courteous employees will encourage these customers to return, even if the prices are a little higher than other stores nearby. Rude, sullen employees who don’t know how to help customers will drive customers away. If you have a good staff in a store, you won’t have to work as hard to get customers to return. If your staff is really excellent, you may even get some word of mouth advertising. While this may cost a little more in terms of the compensation you offer employees, you will get a payoff in the form of a loyal specialty customer base.
“Aligning everyone in your organization with your strategy is one of the most important things you can do…”
Specialty stores need specialty salespeople – this much is obvious – but your strategies may introduce a twist into your thinking. Let’s say there are two kinds of specialty computer stores: those that appeal to neophytes and those that appeal to technologically oriented users. If your strategy is to be a neophyte-oriented store, you want your staff to be good at hand-holding, explaining technology, and patiently answering simple questions. Deep technical knowledge may be less important than the ability to reassure customers who might otherwise be fearful about computers. At the more sophisticated store, you want a very different sort of employee. Employees who are very knowledgeable about the product will be much more valuable, and a willingness to figure out answers to difficult questions will keep the specialty “power user” coming back. The wrong person in the wrong store will be a disaster in either case, despite the fact that both might be specialty computer stores. Imagine a new computer user encountering a sales person who is just right for the techie store. The techie salesperson will overwhelm the neophyte with information about AGP slots, Frontside bus clock speed, and BIOS configurability (most of which most computer users don’t need to – or want to – know). The new user will likely go along with this, but may not make the purchase, simply because the salesperson has only convinced him or her that this is indeed a very complicated purchase. Even if he or she does buy that day, you may never see that customer again (if there is a choice) because the experience was more frightening than reassuring. This is a problem in three ways: it’s bad for your store, it’s bad for the customer, and it’s bad for the career of a salesperson who would be really good – in another store.
How do we get this alignment? There are five basic steps that you must take to assure your employees are aligned with your company’s strategies.
First, employees must have the conceptual tools required for good strategic thinking about their work.
Second, employees must understand the strategy.
Third, strategic alignment needs to be built around the structure of the organization.
Fourth, strategy must be reflected in the structure of individual jobs – especially those in critical areas.
Fifth, you must have buy-in to the strategy.
Let’s look at each of these requirements. First, strategic alignment can only work if the employees already have the tools required for good strategic thinking. This is because employees must be capable of making decisions with strategic impact in order to be aligned with the company’s strategy. Anything less than this calls for a strategy that treats people as machines. While such strategies have worked in the past – one could argue they were the foundation of the industrial revolution – they cannot work in places where labor costs are above the absolute minimum. These tools include examples, role models, and training. This does not mean that every employee needs to be a great strategic thinker, but employees must be able to understand how their work fits into the success of the organization.
Another thing to do to get people on board is to make sure your people understand enough of the basics of business that they can see how the strategy is going to make them better off, increase their job security, increase the likelihood that they get promotions, and how it will increase the likelihood that they see pay increases in the future. Without these conceptual tools, it will be much more difficult to get buy-in and intelligent support of the strategy from an employee. Several companies with whom we have worked have had well-designed performance compensation systems fail simply because the employees didn’t understand income statements.
The second item, understanding the strategy, can only happen if employees have the conceptual tools covered in the previous paragraphs. This is mostly necessary because good strategy requires focus. There are three main ways to satisfy customers: price, quality (in the broad sense, including product features, technology, packaging and a host of other value-adding features), and service (again, in a broad sense, including delivery, support, etc.). In a strategically focused organization, there are fewer ways to satisfy the customer. In simple terms, a company that targets specialty customers will excel in quality and/or service, but will likely be middle of the road or worse at price. Commodity companies excel at price, usually fall down on quality or service, and sometimes both. “Front line” employees – those that have contact with customers – often want to please customers by offering satisfaction in these three ways, but to fit with the focus of the company usually should be willing to leave some customers dissatisfied (for example, a Rolls-Royse salesperson should not get upset that a customer didn’t buy because he/she did not like the price). Without a clear understanding of the strategy, this kind of alignment is impossible, especially when “front line” employees are far removed from the strategic planning process.
“It’s very important that the way you hire, train, compensate and retain the employees you have in key trategic areas works with your strategies.”
Third, organizational structure can greatly help or hinder strategic alignment. There are several ways this can happen, but let’s look at one example. It’s very common in larger organizations to find a “silo effect”, where the organization is very effective vertically within a department or division, yet lacks efficiency and flexibility in activities which require cross-departmental cooperation. This effect will play in your favor if you create these “silos” around areas which may become separate strategic business units, but may present obstacles to integrating an acquired company, or tackling organization- wide strategic change in areas like quality or IT, which typically require cross-functional teams to succeed. Some very successful organizations, such as Hewlett-Packard, have taken this concept into account by creating “matrix” organizational structures. These structures attempt to break down “silo” walls by creating reporting structures by both operational function (i.e. manufacturing, accounting) and market or product (i.e. home office printers, banking industry).
The fourth item, job structure, is a pretty broad topic. It’s very important that the way you hire, train, compensate and retain the employees you have in key strategic areas works with your strategies. If you target commodity customers, for example, you definitely want all these things to reflect your commodity orientation. For example, in your hiring you want to be hiring people with an eye towards the fact that they might be driving costs up or down through their skills. Your commodity outlook is going to be reflected in one of two ways: either you want high-quality people who by virtue of their quality and productivity keep your costs down or you want cheap people who will keep your costs down simply because they cost less to pay. Any place where you are hiring smart expensive people, you want to be sure you can use the skills of those people to drive your costs down, otherwise all you’re doing is driving your cost up. On the other hand, if you have a specialty strategy, you definitely want to be looking for people who add value to your product or service, so smart expensive people in your company will need to add value commensurate with the cost of hiring them. At the same time, you may have ways to add value with inexpensive people and if you do, you need to manage them to think about the customer and the product or service the right way. This is especially important because inexpensive people may have difficulty understanding certain specialty marketplaces. In any case, you need to remember that you will be challenged by the cost of rejecting otherwise well-qualified job applicants who won’t fit with your strategy. A big challenge that companies face beyond this is the tendency to use specialty people in places where they should commodity ones – or vice versa. In a commodity company, this drives costs up, and the potential for added value is lost on the targeted commodity customers. In specialty companies, commodity people and commodity job structures drive value out, which will devalue your offering and drive specialty customers away. There is no question that matching employees and their jobs to strategy has a big payoff.
Fifth item: buy-in. If you have an employee who thinks the strategy isn’t good, you won’t have alignment no matter what you do. The first two items, tools and communication, will go a long way towards getting buy-in, but there are people who just won’t buy into some strategies – especially if they are smart. The techie salesperson in the new-user computer store may not buy into the strategy of targeting new users as a market. This makes sense, as the strategy doesn’t fit with the salesperson’s skill set – but it will create problems for both the employee and the company. Often, this kind of buyin problem arises as the result of a failure to fit the job design to the strategy, or some related activity, such as hiring. Occasionally, however, you will find some employees just don’t buy in to the strategy. In a non-strategic position, it might be possible to overlook a lack of buy-in, but this can be a real problem in a strategic position, especially one on the “front line”. It’s always useful to ask yourself if the lack of buy-in stems from a valid objection to the strategy (front line employees do have a unique perspective on the customer, after all). If this is not the case, you – and your employee – will be best off parting ways as soon as possible, since such a basic strategic conflict won’t be good for either your company or the employee’s career. Even if the employee performs, not adhering to strategy will cause basic problems and conflicts which will hinder that person’s growth.
Achieving buy-in is a toughie, because, unless people come up with the idea themselves, it is going to be very hard for them to feel bought in. In addition, it’s hard to get people to feel bought into a strategy that might not always be in their best interest. It is also difficult to get people to feel bought in to a strategy that doesn’t improve their job security. Getting people to buy into a strategy means, in part, you have to get them to believe in it. This means the strategy itself has to have some credibility with your employees. It’s much easier to add credibility in a company where management puts the money where their mouth is and is willing to spend a little extra money to make employees happier and make working conditions better for people. Probably the most difficult situation is when you’re in a company that has a lot of employees who are paid at the lower end of the pay scale. Often, input from these people is strategically critical and they have a critical effect on the way your products or services are created, delivered and perceived by your customers. The fact that these people aren’t making a lot of money to begin with usually means that they’re willing to consider anything management says as suspect. It’s hard for these people to believe that management is on their side. An interesting challenge for you as a leader in this position is to ask yourself “How could I be happy paying these people all lot more than they’re currently getting paid?” What would it take? It doesn’t always take pay, but if you can’t offer pay, you need to offer a real and valuable substitute. Let’s say you are in a situation where you just can’t offer pay. For example, if you’re facing heavy price competition from overseas, extracting extra value from the marketplace may become significantly more difficult. It’s easy to get people really excited about strategy if they participated in creating it. Also people may be very excited about your strategy if they understand and believe in the concepts involved.
Of course an ideal way to get people aligned with strategy is to make it their strategy. Buy-in is much easier if you can actually make your strategy a strategy that employees made up themselves. This is one of the reasons why we push for involvement in the strategic planning process for as many people as is practical. There are limits to what is practical. We have always taught that it’s really difficult to have effective, efficient strategic planning meetings when you have too many people as well as when you have too few people. What you want to look for are ways to make people feel like they are contributing to the strategic decision-making process, even when there are not directly involved in the decision-making part of the process.
Our experience has been that companies that take these few simple steps to build alignment between their employees and their strategies find greater success. Clearly, you will find better support for implementation of your strategies and more effective day-to-day use of your strategies at all levels of your organization when you achieve alignment. This will make the difference between struggling to make your vision a reality and smoothly flowing into the future you have defined.
Robert W. Bradford is President and CEO of Center for Simplified Strategic Planning, a consulting firm with a strict focus on strategic planning services for the small to mid-size company. Copyright, Center for Simplified Strategic Planning, Inc., Southport, CT, 2001. Reprinted with permission of Center for Simplified Strategic Planning..