I have been helping a client for some time now on strategic planning and culture transformation. With a solid strategic plan and plan administration process in place and a roadmap for cultural change, I am proud to say that they’ve come a long way on both fronts. However, their journey is far from over. Strategic alignment seems to be a friction point that has proven difficult to smooth.
Complicated by a re-organization that moved the firm from a function-centered reporting structure to a market-centered one, the newly realigned leadership team finds itself struggling to drive the new organization to flawless execution. With one foot in the old paradigm and one in the new, staff are stressed to understand how to best operate within the new organizational construct.
In an effort to provide a path forward, we’ve decided to focus on metrics. Because people pay attention to what they’re measured by, the best way to get a behavior change is to measure to the new behavior intended to be instituted.
Top-Down Strategic Alignment Approach
A way to drive change and ensure alignment is to start at the top, or strategic layer comprised of your top leaders, of the pyramid and decide on the two or three key things needed to manage the business. Once determined, the middle-tier metrics, what we’ll call tactical comprised of your middle management, should be defined by cascading and interpreting the top-level measurements. Similarly, the lower-tier metrics, which we’ll refer to as operational comprised of managers and supervisors, should be defined by cascading and interpreting the middle-tier measurements.
When done this way, the resulting set of metrics will serve to improve strategic alignment.
Of course, there is three main specifics to account for as you craft an aligned set of metrics, including:
1. Time Perspective: It important to note that the time horizon associated with an effective metric shifts, as you move up and down the pyramid. For instance, a top-level metric may be tracking performance towards a goal that sits 3 or 4 years out. Metrics related to business retention, net new sales and total revenue growth are ones you would typically find at the top of the organization. The measurement would tracking against performance this year on the achievement of these goals.
However, mid-tier metrics would be tracked for a goal to be achieved this year. For example, a metric for the middle tier might be on-time delivery to customers with the associated lower tier metric being just-in-time parts ordering.
So, the strategic metric of customer retention aligns with the tactical metric of on-time delivery which aligns with the operational metric of on just-in-time parts ordering.
2. Data Collection: The way that metrics are collected and tracked is also critical to proper strategic alignment. It’s best to collect data as work is performed, not count things after the fact. If metrics are tracked in real-time, you improve your chances of addressing developing issues before they become damaging conditions later on.
Take just-in-time parts ordering metric, for instance, if the data is reported and collected on a monthly basis, you may not know for nearly a month that critical parts have been out-of-stock and have been delaying production (thereby affecting on-time delivery, as well). It would be weeks later that you’d know that you needed to find other suppliers to fill the gap.
Thus, data must be collected in a timely fashion to create the best opportunity to maintain strategic alignment.
3. Data Assessment: The assessment of the metric data collected is critical to ensuring strategic alignment. Mistakes can happen when data is misinterpreted. Indeed, if your assessment indicates everything is hunky-dory and, in fact, it’s not, you will have missed the opportunity to take timely corrective action in addressing an emerging situation and give it additional time to fester into a big problem down-the-road.
To extend further our just-in-time parts ordering metric example, let’s assume parts ordering and delivery was being reported on a daily basis and you failed to recognize that parts delivery slippage was occurring, your business would still be adversely affected by production delays.
Leaders must understand metric data and efficiently evaluate it up and down the pyramid lest metric collection becomes irrelevant.
To sum, people pay attention to what they’re measured by, so metrics (if done right) can be the enabler needed to help management and staff, alike, to adjust their behaviors so that they can strategically aligning their efforts for the good of the business.
