Assessment of the strategy execution process Nordic Light Master Class

Transcription

1 Assessment of the strategy execution process Nordic Light Master Class Fredrik Kjellberg Mannheimer, Manager Nordic part of the Palladium Group Mail: Mobil:

2 Strategy management discipline evolved in three distinct steps Harvard Business School books Harvard Business Review - articles Mastering the Management Systemvid Measurement system (The Balanced Scorecard) Management process (Strategy-Focused Organizations) Core competence (Strategy Execution)

3 There s a simple formula for successful change in business. quality strategy x quality execution = execution premium Execution has the multiplier effect + You can exceed expectations with excellent execution of an average strategy You can miss expectations with a below average execution of an excellent strategy 2

4 Most organizations have difficulties executing their strategies Less than 10% of strategies effectively formulated are effectively executed - Fortune The prize for closing the strategy performance gap is huge increasing performance by at least 50% for most organizations - Harvard Business review In the majority of cases 70% the real problem isn t bad strategy it s bad execution Bossidy & Charan, Strategy Execution More than 2/3 of the companies had targets that exceeded 9% real growth; yet less than 1 company in 10 achieved this level of profitable growth. -Chris Zook, Profit from the core 3

5 Our research identified four barriers to strategy execution Only 5% of the work force understands the strategy Only 25% of managers have incentives linked to strategy The Vision Barrier The people barrier 80% of enterprises fail at strategy execution The Management barrier The resource barrier 85% of executive teams spend less than one hour per month discussing strategy 60% of organizations don t link budgets to strategy 4

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7 2015 Audit Plans Continue to Diversify to Address Key Risks Corporate Governance 6% Other 9% Business Strategy 11% Operational 24% Fraud 4% Risk Mgt Effectiveness 12% Information Technology 8% Financial 10% Compliance/ Regulatory 15% Source: The Global Pulse of Internal Audit Survey Conducted in collaboration with the 2015 Common Body of Knowledge Study, 2015 The IIA and The IIA Research Foundation. All rights reserved. No part of this data may be copied, reproduced or otherwise disseminated without explicit permission from The IIA. globaliia.org

8 However, most organizations struggle with one or more of the common barriers to high performance. Executing Strategy Aligning Resources Decision Making We have a strategy, we just can t explain it that easily. Our leadership team does not agree on our key priorities. Our employees don t have a clear understanding of what the strategy is and their role in it. We are a collection of silos that do not collaborate. Our strategic, operational, and financial plans are not aligned. We spend too much time and effort creating plans instead of getting value from the planning process We do not know if our strategy is working until it is too late. Our data is of poor quality and we have disparate systems to report on performance. We are trying to do 100 things, rather than do 15 critical things well. Recognition and rewards are not based on driving the change we need. I m not sure our resources are allocated against priorities and our best opportunities. We don t have the right measures. There are too many of them and we re not sure which ones to use Unclear Vision and Strategy Lack of Organization Alignment Disjointed Planning and Processes Inability to Test and Adapt Performance 7

9 How to Get Started What to Change and Why XPA Develop Executive Consensus Connect to Broader Change Agenda 8

10 Improve Strategy Definition Process Improve Alignment Architecture and Strategic Awareness Enhance Initiative s Mapping and Management Leverage the BSC Office and the use of Technology Benchmarking, SWOT analysis, Foresight exercises, etc.). Strategy development decisions (Change Agenda, Strategic Objectives, Financial Impact, etc). Alignment architecture: Creation of scorecards at the department level (when applicable). Performance agreements to be better aligned to strategic objectives and initiatives. Strategic Awareness Strategy Communication Plan. Initiative Mapping: A clear Initiatives identification and prioritization. Clear distinction between Strategic Initiatives and Operational Actions. Initiative Management Increase DUBAL s capabilities on initiative (project) management. Create a common management process for all strategic Initiatives. BSC Office Leverage BSC office role in strategy (strategy development and initiative management.). Use of Technology Clear definition of requirements. Compare available options and plan implementation. Work Stream / Quarter Q Q Q Q Q Q Q Q Q Vision Established Strategy Map Design Redesign System and Functional Measures Establish Intermediate and Stretch Targets Initiative Prioritization and Management Reporting and Meeting Management Communicating the BSC Cascade the BSC Balanced Scorecard Education Personal BSCs Establish an Office of Strategy Management = Completed =Planned = To Be Planned = Continuous Process Project Approach Methodology The Execution Premium Assessment (XPA TM ) This assessment will be focus on understanding your Strategy Execution Model and compare it with Palladium s knowledge of management practices in place at organizations that have demonstrated success in executing strategy. Assessment Steps: (1) Evidence Collection (2) Evidence Analysis (3) Recommendations Collect information regarding the Current Strategy Execution Process Consolidate interviews and document analysis findings (Process Analysis) Discuss results with the internal team Conducted interviews with selected executives Strategy Definition Processes With two Parts: Annual Strategy contexts analysis (previous year performance analysis, Identification of improvement areas Implementation Roadmap of proposed initiatives 9

11 Drive Performance Executive Summary Methodological Approach- Execution Premium Process (XPP ) Clarify Strategy 2 Translate the Strategy 1 Develop the Strategy 3 Align the Organization Strategic Plan 6 Test and Adapt Optimize Data 4 Plan Operations Operating/Financial Plan 5 Monitor and Learn Process Execution A. Leadership B. IT C. OSM 10

12 Drive Performance Executive Summary Methodological Approach- Execution Premium Process (XPP ) Translate the strategy into operational terms, through the Balanced Scorecard methodology Align the organization with the Strategy, make the Strategy an everyone s job Link the strategy with the operations: allocate resources, define budgets and business processes needed to achieve it. 3 Align the Organization 4 Plan Operations 2 Translate the Strategy Clarify Strategy Strategic Plan Operating/Financial Plan Process Execution 1 Develop the Strategy 6 Test and Adapt 5 Monitor and Learn Define a change agenda and formulate a comprehensive Strategy aligned with the Mission, Vision and Values of the organization Optimize Data Monitor the strategy execution and adapt the strategy based on the performance results Make the execution of the strategy a continuous process. Establish a complete performance management process 11

13 Methodology The Execution Premium Process 2.1 Develop Themes 2.2 Design Strategy Map w/ Linked Strategic Objectives 2.3 Define Measures / Targets 2.4 Prioritize & Fund Initiatives 2.5 Assign Accountability 3 - Align Organization 2 - Translate Strategy 3.1 Align Business Units with Strategy 3.2 Align Support Units With Strategy 3.3 Communicate Strategy 3.4 Align Individual Goals & Compensation 3.5 Align Stakeholders & Board 4.1 Set Priorities for Key Processes 4.2 Integrate Resources Capacity Plan With Strategy 4.3 Create Operational Dashboards 4.4 Conduct Budgeting (Operating) A.1 Drive Strategy Execution Agenda A.2 Define Strategic Change Agenda A.3 Align Executive Team Behaviour w/ Strategy A.4 Establish the OSM EXECUTION Processes Initiatives B.1 Design Strategy Management System(SMS) Technology B.2 Provide Timely Analytic Support B.3 Provide Real Time information 1 - Develop Strategy 1.1 Affirm Mission Values and Quantify the Vision 1.2 Perform Strategic Analysis 1.3 Formulate the Strategy 1.4 Define Value Gap 4 - Plan Operations 5 - Monitor & Learn 6.1 Test the Strategy / Cause and Effect Relationships 6.2 Test Robustness of the Strategy 6.3 Use Decision Analytic Models 5.1 Conduct Strategy Review Meetings 5.2 Conduct Operational Review Meetings 5.3 Manage Initiatives 6 - Test & Adapt A- Leadership B - Technology C Create OSM Infrastructure C.1 Establish OSM as System Designer C.2 Make OSM the process Owner C.3 Provide Staff Resources C.4 Establish Senior Reporting Level 12

14 Current status and desired state as compared with documented successful organizations 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 HoF companies Current status Priority state 13

15 Current status and desired state 5,0 2,45 2,04 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 SVK Nuläge SVK Börläge 14

16 Internal Audit common barriers Currently ongoing update of the planning and performance review process We are missing some key stakeholders The timing is not correct the management team have too many operational issues on the agenda 15

17 The gold standard in Strategy Execution and Performance Management Independent research demonstrates the extraordinary value created by Palladium s Execution Premium Process. Organizations using Palladium s framework achieve superior shareholder value than non- Balanced Scorecard users 3 Year Increase in Shareholder Value* 150% 24% 51% Without Balanced Scorecard (1) With Balanced Scorecard (1) Palladium Hall of Fame Organizations (2) *Shareholder value based on market value of equity. 164 publicly traded firms analyzed; (1) Source: The effects of adopting the Balanced Scorecard on shareholder returns Aaron Crabtree and Gerald DeBusk, Advances in Accounting, June 2008 (2) Palladium Research 16

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19 Q&A Fredrik Kjellberg Mannheimer, Manager Nordic part of the Palladium Group Mail: Mobil: