Most of my clients have a Balanced Scorecard. But even if it is perfectly completed with solid objectives, it is not worth much if you and I do not execute properly.
Kaplan and Norton conducted surveys in 1996 and again in 2006 about the state of strategy execution – as reported in their book The Execution Premium – Linking Strategy to Operations for Competitive Advantage (2008).
Their most important finding: having a formal strategy execution system made success two to three times more likely than not having a system.
What do you have in place in your organisation?
• Do you have a formal process of performance management? in 1964, 43 percent of organisations use a formal process of performance management and 73 percent of these used a management system based on the Balanced Scorecard (Cranfield University, 2003)
• Do you use the Balanced Scorecard for managing your company performance? (The BSC had become by far the leading system for managing company performance: US-based Institute of Management Accountants)
What are your priorities as owners and MDs?
The Monitor Group, in a global survey, asked senior executives about their priorities.
Number 1: “strategy execution” (which The Conference Board confirmed in its 2007 survey although they termed it “excellence in execution”)
Number 2: “sustained and steady top-line growth”
Number 3: “consistent execution of strategy by top management”
What else did Kaplan and Norton establish?
• In 1996 most organisations did not have formal systems to help them execute their strategies. Only 40 percent of organisations linked their budgets to strategies, and only 30 percent linked incentive compensation to strategy
• In fewer than 10 percent of employees reported that they understood their company’s strategy. Kaplan and Norton commented: “Clearly, employees who do not understand the strategy cannot link their daily activities to its successful execution”.
• “85 percent of executive teams spend less than one hour per month discussion strategy, with 50 percent reporting that they spent virtually no time on strategy discussions.”“Executives relied on local, tactical operating systems (such as budgets) for managing finances, management-by-objectives (MBO) systems for motivating employees’ performance, and decentralized IT, marketing, and sales plans. Companies had no systems explicitly designed to manage the implementation of strategy.”
Kaplan and Norton’s 2006 follow-up survey showed some similarities with their 1996 survey, the most interesting being:
• Among the respondents who reported that they still did not have a formal strategy execution system 73 percent reported an average to below average performance of their strategies.
• 54 percent of the respondents now reported that they had a formal process to manage strategy execution. Of these, 70 percent reported that they were outperforming their peer group of companies.
• These companies clearly communicate their strategy and strategic measures.
The authors place the respondents in two categories: winners and losers.
Kaplan and Norton developed a six-stage approach which they call a closed-loop management system for developing and executing strategy. It is used in an annual cycle. (Scroll down > Web site> strategic plan.)
How much time do you spend on strategic planning and execution? Do you have an execution system in place, and if yes, do you use it?
“Having a formal strategy execution system made success two to three times as likely as not having such a system.”
Albert
Filed under: leadership Tagged: | balanced scorecard, organisation, planning and execution, strategy of execution
Hey Albert
You have given us some interesting statistics and hints on the need for execution.
So we need:
- a performance management process
- a balanced scorecard
- a formal system to execute strategy
- to understand our strategy
- time set aside to discuss strategy
Do these components make up an execution system? How about a post on what an execution system looks like. Is this the six-stage model of K&N?
How do I move my team from talking about doing stuff and planning to do stuff to **doing** stuff?
Hi Stephen, It’s great that you are back from your successful consulting workshops in Malawi.
Many thanks for you observations. Yes, it is the six-stage model or closed-loop management system of Kaplan and Norton. They just have the knack of doing solid research among interesting companies and then coming up with findings and theories which are simply very usable. I will follow you suggestion and write a post (and more on my website) about their six-stage approach which links planning to execution and to then review and replanning.
Getting people to move from planning and talking about doing stuff to actually doing stuff is not easy. John P Kotter, the Harvard University change guru, advises that you have to touch emotions. Logic alone does not do the trick.
But from experience I know that even touching emotions often also does not do it. It depends on whether the listener has a flash of insight and gets a surge of interest and a yearning to act and do something different. This happens occasionally, but in any team many see new and necessary action as more work. The inner spark is not there.
Or perhaps some people are truly complacent with their situation. A disaster needs to strike before they see the old ways do no longer work. (Something very positive could come from the current financial and economic meltdown, but it is a very dramatic way to find this out.)
What I see often is that people do not move up to a personal higher level of performance. “Doing stuff” starts with whoever provides leadership. If that person becomes more thoughtful, more thorough, gives more attention to detail and moves forward, many of the others will follow.
Check the leaders. The key lies with them when it comes to follow-up after strategy workshops.
Hey Albert
yep – I suppose this is a big question. I agree that the six step process and tools like Balanced Scorecard can provide focus and the information for motivating action. There is that model that says you need a burning platform, a change vision and clear first steps all of which include an emotional component.
The “inner spark”… this probably is what Jim Collins means when he talks about getting the right people on the bus. People with spark rather than people with degrees.
I wonder how much fun and enjoyment has to do with it.
I heard a quote about, if you want people to learn to build boats, give them a love for the sea. And to illustrate from my own life:
I have been battling with the enthusiasm to do exercise in the gym to get a bit fitter and lose some weight. Then a year ago I started long-boarding. Riding waves is just the most amazing thing to do. In a year I have become much MUCH fitter, have lost about 5 kilos (without changing my bad eating habits) and feel much better physically. All because I have fun. Oh, and a son who gets me going when I feel a bit lazy. That is also an important part. I guess he would be a change champion.
Cheers hey