STRATEGY EXECUTION ESSENTIALS. A CEO s guide on how to improve the execution of strategy.

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1 STRATEGY EXECUTION ESSENTIALS A CEO s guide on how to improve the execution of strategy.

2 Introduction Improving the Execution of Strategy Strategy and execution: the CEO s dilemma Most organisations have a strategy a carefully worked out plan of how to address the market they operate in. And yet the ability to execute is still as problematic as ever. For several years in a row, CEO s of large organisations consider Excellence in execution and Consistent execution of strategy by top management to be the top two critical challenges they face. But despite this awareness and the investment made in reporting systems and management methodologies, there still seems to be something fundamental missing when it comes to the implementation of strategy. Execution is the responsibility of the CEO and if the issues they face are to be overcome then there must be a new approach to the way strategy is communicated, resourced, monitored and the way in which management decisions that effect its implementation are taken. This approach is bound up in the term Corporate Performance Management, but as with other terms, this is often misunderstood and in recent times has become synonymous with computer software. But the concept is far more than this and has the potential to transform the way organisations are managed, as will be outlined in this brochure. 82% of Fortune 500 CEOs feel their organisation did an effective job of strategic planning, however only 14% of the same CEOs thought they did an effective job of implementing strategy. Forbes magazine. In a survey of senior executives respondents said their firms achieved only 63% of the expected results of their strategic plans with the shortfall being attributed to a failure to execute the company's strategy effectively. Marakon Associates, Economist Intelligence Unit Strategy focus concerns CEO s are getting more and more frustrated about the execution of strategy. They understand what should be done to align the enterprise with corporate goals. They discuss this with their peers, management and external advisors to create a concise objective for the years to come. But for some reason, something goes wrong with its execution. It s not as if there is something wrong with the strategy as most managers would agree on the organisations intended course. The concern is that focus is often lost as the realities of day-to-day operations and the issues that arise soon overwhelm any notion of strategic direction. You have reporting systems and dashboards but they barely help you! Never before has so much information been available to support strategic decision-making. During the last two decades companies have made significant efforts to refine their reporting systems through the use of computer software. With the ever-growing sophistication of IT systems they have been able to improve not only the analysis of data but also the way in which users can access and manipulate that information. After 20 years of systems evolution, it could be argued that CEO s now have all the information they need to help execute strategy. And yet, the execution of company strategy still remains their top concern. What is lacking is a clear link as to how plans can be turned into actions. Actions that can be put into place quickly. Actions that can be followed up, tracked and reported in the context of achieving strategic goals. Strategy execution is not just about the numbers but how everyday activities lead to the achievement of long-term corporate goals.

3 Execution essentials Essential 1: a clear way of communicating strategy Strategy execution is a team game: The execution of a plan requires teamwork. However, team members are constantly drawn into day-to-day operational issues, and often don t know how strategy applies to their daily work. To improve on the execution of strategy, three things are essential: To help overcome this, the past two decades has seen an explosion in management methodologies such as The Balanced Scorecard. These methodologies recognize the importance of getting the whole organisation behind corporate strategy A clear way of communicating strategy. A continuous, closed-loop management process. A technology-based support system. Without a common strategy organisations are destined to follow the combined whims of departmental managers as they make decisions based on their own personal goals or gut instincts. Key to improving execution is : A way of clearly communicating what the strategy is to every employee / department and their involvement in its execution. A way of linking all departmental activities with the achievement of both short and long-term strategic goals. One of the best ways of communicating strategy is through cause and effect diagrams or strategy maps that show how the organisation plans to achieve its goals. When combined with financial results, these maps provide management with a framework in which to discuss whether the strategy is working and what could be changed to improve performance. The importance of Cause and Effect is that it tells a story of how to get success Paul R. Niven Organizations need a new kind of management system one explicitly designed to manage strategy Success comes from having strategy become everyone s everyday job David Norton and Robert Kaplan

4 Execution essentials Essential 2: a continuous, closed-loop management process Strategy execution requires action. Actions require resources. And as things rarely work out as planned, there needs to be some check as to what has happened and what needs to change in order to stay on track. Inside organisations, the foundation of these actions is within the management processes that plan and monitor corporate performance. Traditionally these have been calendar based annual planning, quarterly forecasting and monthly reporting, but in today s fast-changing, turbulent business environment these are no longer good enough. To improve execution, these processes must be focused on strategy and treated as a single, continuous process that is triggered by events and exceptions rather than an arbitrary date on a calendar. Continuous planning is not about doing the same management practices only faster and more often. After all, organisations struggle to produce a budget within four months and so repeating their current processes isn t going to help. What is required is a complete re-think about the organisation s management processes that creates a strategic plan, assigns resources to it and then tracks its performance. It s a re-think that must concentrate on the execution of strategy in a constantly changing business environment. According to Gartner, at least 50 per cent of companies implementing management solutions simply automate existing finance-oriented processes and fail to improve performance management processes across the organisation. As a result they forecast that these organisations will not realise the benefits of CPM. Best Practice companies decouple their internal management processes from the calendar and provide a set of planning and reporting processes that utilize continuous processing and monitoring of activity. Aspects of strategic planning are not once-a-year events but a continuous process. The pace of change is so great that management needs to monitor the strategic implications of new developments on a continuous basis. David Axson Key performance management questions: Planning Are adequate resources being assigned to those activities that implement strategy? Are managers aware of risks being run and how they could impact the achievement of strategic goals? Adjust Monitoring Are the planned activities being implemented? Are activities having the right affect on strategic goals? What risks are we running? How will the business environment impact our plans? Will the current and forecast activities deliver the planned strategic goals? What changes should be made to achieve or better the forecast strategic goals? Will there be sufficient resources to continue execution in the future?

5 Execution essentials Essential 3: technology based support systems Systems play an important role in managing performance but only if they are able to: 1 2 Continually reflect the business environment. A Corporate Performance Management system needs to cater for a business environment that is constantly changing. Objectives, strategies and initiatives will have all been set up with a particular environment in mind. If that environment changes then unless the system can highlight and respond to change quickly, the initial strategic objectives will be based on outdated premises, and corporate strategy will lose credibility. IBM s executive report After the Crisis, states "While it s not possible to consistently predict the future, there are ways to improve an organisation s capability to sense and anticipate change. With so much data available literally at our fingertips, the challenge becomes turning that data into useful information and insights to enable action." Span the entire organisation. The flexibility of responding to change can only be achieved when the CPM systems in place span all of the information available in the company, and over all of the reporting and planning functions. The breath of this span and associated functionality is far more important than the level of detail and / or the mathematical finesse of the functions provided. Senior management are more interested in how plans evolve and relate to other parts of the organisation, rather than the exactness of a forecasted figure that s placed out of context. 3 4 Constantly align people with strategy. If changing external factors are not reflected in a rigorous planning and reporting process, then the buy-in to strategy and even how strategy applies to a managers daily work, will soon disappear. Crucial to the success of a CPM system is the way it supports management processes that ensures managerial actions are always aligned and informed. Scott Glatstein comments "It s difficult to implement a new strategy without changing the way the organisation works. Does the workflow across your various departments and divisions support your marketplace intent? Can your systems and tools meet the demands of the new strategic vision? Pursuing a new strategy with old capabilities is a recipe for disaster." Learn from the past. Strategy is a road-map, not a point in time. Strategic plans span many years and many people, with the latest incarnation being the result of much combined learning. During that time, many decisions will be made that were based on current knowledge that existed at the time, whether right or wrong. Ignoring or forgetting about the past increases the likelihood that future corrective actions will also fail to achieve their purpose. Keeping this documentation in a way that is both accessible and easily understood for future planning exercises, will make a big impact on the effectiveness and speed by which resources can be realigned to execute strategy.

6 Mixing it all together Improving the approach to strategy execution Establishing a management approach that is focused on strategy execution is, like a strategic plan, a long-term commitment. It is an approach that will continually evolve and that has to adapt to the ever-changing business environment in which the organisation operates. The approach includes: CPM software. Technology systems are a crucial part of a CPM approach. The right system provided it is implemented correctly, enables execution and increases managerial productivity during execution. But it is only one part. Management buy-in. Implementation also requires the buy-in of the management team. Unless there is a discipline from management to steer their specific business unit so that it is aligned with company strategy, no organisation can fulfill its strategic goal. To gain this buy-in, the approach must be flexible enough to cater for day-to-day operational issues while at the same time helping the business unit towards achieving long-term corporate goals. CPM expertise. The third and last part of the approach is to have a coach or company champion responsible for CPM. They should understand corporate strategy and the management processes required to maintain it. They would also, ideally, be involved in monitoring success and be contributing to the refinement and improvement of the approach. It is important to remember that CPM is a holistic approach to strategy execution. It cannot be established by replacing old systems for newer ones, or by re-engeneering a single process. It is an approach that will change the way finance organizes the planning and reporting process; how IT develop systems to support decision-making; and the way management teams interact with each other. The CorPeuM approach... CorPeuM is a new approach to performance management, based on our unparalleled expertise in designing and implementing best practice systems for planning, budgeting, reporting and analysis in some of the world s leading organisations. Through this experience we are fully aware of the challenges in implementing performance management systems and the shortfalls found in many of the mainstream applications available today. These factors led us to develop an approach, backed up by a new breed of software application, which redefines the way organisations manage corporate performance. An approach that focuses on the development, funding and execution of strategy. Well funded, Focused Team. So far, over 3 million Euros has been invested in CorPeuM and as there is no legacy product to maintain, the complete focus of the team is on developing an approach that will become the reference standard for CPM over the next decade. Our international team consists of product strategists with acknowledged expertise in best management practices; product architects with over 100 years of development expertise in performance management solutions and development engineers with expertise in the latest Microsoft technologies. The result is a solution that fully supports performance management that is unequalled anywhere in Europe and probably in the world. To find out more, visit our website or contact us through a web form or at this address marketing@corpeum.com