Most business owners are well aware that 90 percent of companies fail to achieve the performance objectives established in their strategic plan. Most will tell you the primary reason is “failure to execute.”
In high performing companies, the plan is a vital, active tool that guides decision-making and aligns the entire organization on achieving a shared vision. These organizations consistently achieve sustainable improvement year-over-year.
There are 10 things that every high performing company does to ensure their Strategic Plan is relevant and effective.
1. Define “why” we are in business
The Mission describes the purpose of the business; why it exists. A good Mission is short, clear and easy to understand even for those not familiar with the industry, products or services.
2. Choose a bold vision
The Vision is the “bold” goal you hope to achieve by living your Mission every day. High performing companies do not let their current limitations or barriers influence their Vision. A good Vision should stretch the organization and be “almost” unattainable. Here’s the best example of a bold vision:
“I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth.” — John F. Kennedy, 1962.
3. Identify, document what must change
The Organizational Objectives describe what the organization must do to advance from their Mission to their Vision. They establish “organizational focus.” Everyone in the company will make these activities their highest priority.
4. Align and focus resources
The Organizational Objectives are grouped into one or more of the following five “Strategic Areas of Focus (SAF)”: Growth, Service, People, Quality, Finance.
The SAF’s establish the “governance” for the strategic plan. Each of the five are assigned one or more leaders from the current leadership team. These leaders are then responsible for effectively focusing the Work System on the work priorities established by each Organizational Objective.
5. Establish quantitative measures
The next step is deciding how progress will be measured quantitatively (dollars, percent, and volume.) The Strategic Objectives define the quantitative measure and the change required (e.g. increase, decrease, stabilize).
6. Establish quantitative goals
The final step is establishing the quantitative goals. If the Strategic Objective states “increase revenue dollars.” The corresponding quantitative goal could be “increase revenue dollars by 10 percent by 2021.” We call these quantitative goals Key Performance Indicators.
Each SAF leader is responsible for a set of KPI’s that are tightly aligned to the Organizational Objectives.
7. Honestly assess your true capabilities
While most end the strategic planning process at Step 6, high-performing companies add four more steps beginning with aligning current capabilities with the KPI’s.
When Kennedy established his bold vision, did you think the Work System (NASA) had the capabilities to achieve it? Check out this Work System response to Kennedy’s Vision.
“When I first heard President Kennedy’s speech at Rice University, I was overwhelmed at the magnitude of it. I mean, we were struggling with Mercury spacecraft that weighed 2,000 or 2,500 pounds. (Now) we were talking about spacecraft that would be 10 or 20 times bigger. For me, it was just an overwhelming thought that we could actually go and land on the moon and bring somebody back.” — Glynn Lunney, Apollo Flight Director.
The critical mistake many make is expecting to achieve the KPI’s with inadequate current capabilities. Rather than build capabilities, many attempt to close the gaps with the exceptional effort of the team. This is the reason 90 percent of Strategic Plans fail.
8. Create projects to expand capabilities
For each gap, Work System teams, with the assistance of process engineers, create a detailed project charter that defines the scope of work and the investment (time and money)
9. Prioritize and activate projects
Leadership reviews the project charters, prioritizes them and chooses which projects to fund or set aside. Few companies have adequate resources to fund all projects.required to close the gap.
Once the high priority projects have been approved and funded, the Work System teams and process engineers activate the projects.
10. Manage the processes, not the people
Finally, high-performing companies manage differently. They manage processes, not people. They hold processes accountable, not people. They measure processes, not people.
Employ these 10 steps and you will dramatically improve the effectiveness of your strategic plan and your ability to achieve your performance objectives.