Operational Alignment: Bridging the Gap Between Strategy and Execution
When I meet people, I like to ask them which business books they have been reading because it gives me insight into what's happening across a broad spectrum of organizations. Based on what I've heard in the past year, we're in the midst of a fundamental business shift. Gone are the weighty tomes that instruct companies to optimize their supply chains, leverage just-in-time manufacturing, or outsource business processes. In their place are titles like "The Strategy-Focused Organization" and "Good to Great."
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Many of today's popular business books have a common theme: Doing more with less is not a sustainable advantage in today's global economy. Organizations are altering their business model, designing new products, and cultivating new channels to prepare for the future. But correcting an out-of-date strategy isn't enough to stay competitive. We've all seen the results of formal strategy sessions: 50-page briefing books filled with missions and visions, key messages, and positioning statements. You probably have one in your drawer right now. After the inevitable all-hands meeting to announce a strategy change, most employees go back to doing what they've always done.
As businesses shift plans with the improving economy, they must eliminate the gap between strategy and execution. Employees must understand the organizational strategy and, more important, how it should affect what they do. And the company should have a mechanism for adjusting that strategy if an employee discovers something fundamental about pricing, competitors, or product features.
To bridge the gap between strategy and employees' day-to-day execution of that strategy, a company's executives must succeed in four areas. They must motivate employees toward the strategic objectives by communicating those goals in a way that is relevant to all. They must manage operational programs in a way that empowers individuals to take ownership of the strategic objectives. They must proactively monitor the company's progress toward incremental milestones and alert stakeholders to unexpected outcomes. And they must measure operational performance in a way that clearly identifies both problems and areas for growth. When an organization has achieved these four goals, it has achieved operational alignment, and it is in a strong position to adapt to the changing world of business.
Motivation
Corporate leaders often shrug off strategy as "just words" and spend little time articulating their organization's objectives. However, it is critical to ensure not only that the words accurately convey the company's intentions, but also that they do so in a way that is meaningful to every stakeholder. Executives who need help communicating corporate goals should consider using two tools: pathways and strategy plans. These tools can help people at all levels piece together the puzzle of how an organization seeks to achieve its vision.
To demonstrate their motivational power, I'll describe the alignment effort in a hypothetical company that is based on a composite of all of Pilot Software's client experiences. Pilot Fashions is a small-town clothing retailer with high expectations. Its vision is to become one of the United States' top three specialty chains for women's clothing and accessories. But hearing that management has set such a lofty goal, which will take many years to achieve, provides little motivation for individuals who are busy trying to accomplish day-to-day tasks.
Executives make the vision more accessible by separating movement toward it into three major steps: launching a flagship New York City store that epitomizes style and quality; scaling operations throughout the Northeast, leveraging early experiences; and expanding across the United States by focusing on achieving operational efficiencies. Then they plot the resource-allocation "pathway" that they envision for each step. Exhibit 1 shows the result, a high-level road map that illustrates how employees' focus should change over time.
The concept of pathways extends beyond simply naming milestones (launch, scale, and expand) and attaching dates to those goals. Pathways do not have to be strictly sequential or have a discrete beginning and end. They show how the company will prioritize among its complementary goals -- and so how it will distribute resources among the milestones it has identified. For example, exhibit 1 shows that Pilot Fashions expects in December 2006 to expend roughly three times the resources on pathway one (launch) as it does on pathway two (scale). And pathway three will not become the company's primary focus until early 2010.
In addition to giving employees a more tangible way to visualize corporate goals, pathways can guide the organization's operational decision-making. Since Pilot Fashions' first pathway is focused on establishing the brand in New York, the company will limit 2006 advertising and PR efforts to local media outlets. Employees can clearly see that national expansion will not become their top priority for a few more years but that growth throughout the Northeast will be their focus by late 2007. Thus, they might choose a regional PR firm to promote their New York City store in 2006, seeking a compromise between the higher prices commanded by national firms and a local boutique firm which wouldn't be able to carry them beyond the "launch" pathway's goals. Well-defined pathways help companies focus their resources and avoid the trap of tackling too many objectives at once.
