To assess adequacy, use these three approaches:
Ask probing questions. Does your boss believe the current direction will provide enough return on the effort your group will expend to implement it? Are there plans in place to secure, develop, and preserve resources for carrying it out? Are profit and other targets high enough to keep the group on the right track? Is enough money earmarked for capital investment? For research?
Use a variation on the well-known SWOT method. See the box “From SWOT to TOWS.”
Probe the history of how strategic direction got defined. Find out who drove the process of defining strategic direction. Was it done in a rush? If so, the developers might not have thought through all the ramifications. Did it take a long time? If so, it might represent a lowest-common-denominator compromise that emerged from a political battle. Any mistakes during the development process could compromise the strategy’s adequacy.
From SWOT to TOWS
SWOT is arguably the most useful (and certainly the most misunderstood) framework for conducting strategic analysis. The reason has to do with how the tool was developed and, critically, how it was named. SWOT—an acronym for strengths, weaknesses, opportunities, and threats—was originally developed by a team at the Stanford Research Institute (SRI) in the late 1960s.2 The group came up with the idea of simultaneously analyzing internal capabilities (strengths and weaknesses) and developments in the external environment (threats and opportunities) to identify strategic priorities and develop plans to address them.
Unfortunately, the developers named their method SWOT, with the implication that the analysis should be carried out in that order—first, internal strengths and weaknesses, and then external opportunities and threats. This implied hierarchy has created no end of problems for those who use the methodology to drive strategy discussions in teams. The problem is that in the absence of something to anchor the discussion, an analysis of organizational strengths and weaknesses can very easily become abstract, undirected navel-gazing. As a result, groups often fail in trying to define their organization’s strengths and weaknesses, end up frustrated and exhausted, and so give short shrift to critical developments in the external environment.
The correct approach is to start with the environment and then analyze the organization. The first step is to assess the organization’s external environment, looking for emerging threats and potential opportunities. Naturally this assessment must be conducted by people who are grounded in the reality of the organization and knowledgeable about its environment.
Having identified potential threats and opportunities, the group should next evaluate them with reference to organizational capabilities. Does the organization have weaknesses that make it particularly vulnerable to specific threats? Does the organization have strengths that would permit it to pursue specific opportunities?
The final step is to translate these assessments into a set of strategic priorities, blunting critical threats and pursuing high-potential opportunities. These are then the inputs to a more extensive strategic planning process.
The confusion that has flowed from naming the method SWOT is so pervasive that a name change is probably in order. The alternative? Call it TOWS, so that people get the right cues about the best order for conducting the process.
Assess Implementation
Have the mission, vision, and strategy of your organization been pursued energetically? If not, why not? Look at how your group’s strategic direction is being implemented—what people are doing and not what they are saying. This approach will help you pinpoint whether problems stem from inadequacies in formulation or implementation. Ask yourself these kinds of questions:
Is our overall pattern of decisions consistent with our defined direction? What goals does the organization actually seem to be pursuing?
Are we using the specified performance metrics to make day-to-day decisions?
If implementation requires teamwork and cross-functional integration, are people acting as teams and collaborating across functions?
If implementation requires the development of new employee skills, is a learning-and-development infrastructure in place to develop those skills?
Your answers to these kinds of questions will tell you whether to push for changes in your group’s strategic direction or in its implementation.
Modify Strategic Direction
Suppose you discover serious flaws in the mission, vision, and strategy you have inherited. Can you radically change them or the way they’re implemented? That depends on two factors: the STARS situation you’re entering, and your ability to persuade others and build support for your ideas.
If you believe that your group is on the wrong path, you need to raise questions to persuade your boss and others to reexamine strategic direction. If you conclude that the existing strategy will move the group forward, but neither fast enough nor far enough, the wisest course may be to tweak it early on and plan for bigger changes later. For example, you might raise the targeted revenue goals modestly or recommend investing in a needed technology sooner than the strategic direction calls for. More fundamental changes should wait until you’ve learned more and have built support among key constituencies.
Shaping Your Group’s Structure
Whether or not you decide to change the strategic direction of your organization, you still need to assess the adequacy of the structure. If the structure doesn’t support the strategy—either the existing one or a new one you plan to put in place—your organization’s energies will not be directed appropriately.
One caution: much of an organization’s power gets allocated via its structure, because it defines who has the authority to do what. So take care not to take on structural change unless it is obvious that it’s needed—for example, in turnaround or rapid-growth scenarios. Tackling structural change early on can be particularly perilous in realignments, where there isn’t a burning platform to drive the change process.
What is structure exactly? Most simply, your group’s structure is the way it organizes people and technology to support the mission, vision, and strategy. Structure consists of the following elements:
Units: How your direct reports are grouped, such as by function, product, or geographical area
Reporting relationships and integration mechanisms: How lines of reporting and accountability are set up to coordinate effort, and how work among units is integrated
Decision rights and rules: Who is empowered to make what kinds of decisions, and what rules should be applied to align decisions with strategy
Performance measurement and incentive systems: The performance-evaluation metrics and incentive systems that are in place
Assess Structure
Before you begin to generate ideas for reshaping your group’s structure, look into the interaction of the four structural elements. Are the pieces out of tune or in harmony? Ask yourself these questions:
Does the grouping of team members help us achieve our mission and implement the strategy? Are the right people in the right places to work toward our core objectives?
Do reporting relationships help align effort? Is it clear who is accountable for what? Is the work of different units integrated effectively?
Is the allocation of decision rights helping us make the best decisions to support the strategy? Is the right balance achieved between centralization and decentralization? Between standardization and customization?
Are we measuring and rewarding the kinds of achievements that matter most to our strategic aims? Is the balance right between fixed rewards and performance-based rewards? Between individual incentives and group incentives?
If you’re in a start-up situation—and therefore forming a new group—you will not have existing structures to evaluate. Instead, think about how you want the structural pieces to work in your group.
Grapple with the Trade-Offs
There is no perfect organizational structure; every one embodies trade-offs. Thus, your challenge is to fin
d the right balance for your situation. As you consider changes in your group’s structure, keep in mind some common problems that can arise:
The organization has silos of excellence. When you group people with similar experience and capabilities, they can accumulate deep wells of expertise. But they can also become isolated and compartmentalized. The implication is that you need to pay attention to how integration happens. This includes looking at who is responsible for bridging the chasms between functions, as well as identifying whether the right integration mechanisms, such as cross-functional teams and group performance incentives, are in place.
Employees’ decision-making scope is too narrow or too broad. A good general rule is that decisions should be made by the people who have the most relevant knowledge, as long as their incentives encourage them to do what is best for the organization. If your group’s decision-making process is centralized, you (and perhaps several other individuals) can decide quickly. But you may be forgoing the benefit of the wisdom of others who have better information to make certain of those decisions. This structure can lead to ill-informed decisions and can tax those who make all the decisions. If, on the other hand, people are given decision-making scope but do not understand the larger implications of their choices, they may make unwise calls.
Employees have incentives to do the wrong things. The best predictor of what people will do is what they are incentivized to do. Effective leaders seek to align the interests of individual decision makers with the interests of the group as a whole. This is why placing more emphasis on group incentives is effective in some organizations: they focus everyone’s attention on the ability to work together. Problems arise when measurement and compensation schemes fail to reward employees for either their individual or their collective efforts. Problems also arise when rewards advance employees’ individual interests at the expense of the group’s broader goals—for example, when multiple employees who could serve the same set of customers lack incentives to cooperate. This was the problem confronting Hannah in the story at the beginning of the chapter.
Reporting relationships lead to compartmentalization or diffusion of accountability. Reporting relationships help you observe and control the workings of your group, clarify responsibility, and encourage accountability. Hierarchical reporting relationships make these tasks easier but can lead to compartmentalization and poor information sharing. Complex reporting arrangements, such as matrix structures, broaden information sharing and reduce compartmentalization but can diffuse accountability.
Aligning Core Processes
Core processes (often referred to as “systems”) enable your group to transform information, materials, and knowledge into value in the form of commercially viable products or services, new knowledge or ideas, productive relationships, or anything else the larger organization considers essential. Again, as with structure, ask yourself whether the processes currently in place support your mission, vision, and strategy.
Make the Right Trade-Offs
Keep in mind that the extent and types of processes you need depend on the trade-offs you need to make. Think, for example, about whether your primary goal is to drive flawless execution or to stimulate innovation.3 You can’t hope to execute with high levels of quality and reliability (and low costs) without an intensive focus on developing processes that specify both the ends and the means (methods, techniques, tools) in exquisite detail. Obvious examples are manufacturing plants and service delivery organizations. But these same sorts of processes can impede innovation. So if stimulating innovation is your goal, you may need to develop processes that focus on defining ends and rigorously checking progress toward achieving them at key milestones, and not so much on controlling the means people use to achieve the results.
Analyze Processes
A credit card company that sought to identify its core processes came up with the results shown in table 6-1. It then mapped and improved each of these processes, developing appropriate measurement schemes and altering reward systems to better align behaviors. It also focused on identifying key bottlenecks. For critical tasks that were insufficiently under control, the company revamped procedures and introduced new support tools. The result was a dramatic increase in both customer satisfaction and the productivity of the organization.
Your unit or group may have just as many processes as the credit card company. Your first challenge is to identify those processes and then to decide which of them are most important to your strategy. For example, suppose your group’s strategy emphasizes customer satisfaction over product development. You would want to ensure that all the processes involved in delivery of products or services to customers support that goal.
TABLE 6-1
Process analysis example
Align Processes with Structure
If your group’s core processes are to support its strategic direction, they must also align with the unit’s structure (the way people and work are organized). We can compare this relationship to the human body. Our anatomy—skeleton, musculature, skin, and other components—is the structural foundation for the body’s normal functions. Our physiology—circulation, respiration, digestion, and so on—is the set of systems (or processes) that enable the various parts of the body to work together. In organizations, as in human bodies, both the structure and the processes must be sound and must reinforce one another.
To evaluate the efficiency and effectiveness of each core process, you should examine four aspects:
Productivity. Does the process efficiently transform knowledge, materials, and labor into value?
Timeliness. Does the process deliver the desired value in a timely manner?
Reliability. Is the process sufficiently reliable, or does it break down too often?
Quality. Does the process deliver value in a way that consistently meets required quality standards?
When processes and structure mesh with each other, the good results are clear to see. For example, a customer service organization structured around specific customer segments also shares information across teams and responds effectively to issues that affect all customer groups.
But when processes and structure are at odds—as when different teams compete for the same set of customers using different sales processes—they hamstring one another and subvert the group’s strategy.
Improve Core Processes
How do you actually improve a core process? Start by making a process (or work-flow) map—a straightforward diagram of exactly how the tasks in a particular process flow through the individuals and groups who handle them. figure 6-2 shows a simplified process map for order fulfillment.
Ask the individuals responsible for each stage of the process to chart the process flow from beginning to end. Then ask the team to look for bottlenecks and problem interfaces between individuals responsible for adjacent sets of tasks. For example, errors or delays may occur when someone in customer relations communicates to the fulfillment group the need for special handling of an order. Process failures are commonplace during hand-offs of this kind. Work with the team to identify opportunities for high-leverage improvements.
FIGURE 6-2
A process map
Process analysis stimulates collective learning. It helps the entire group understand exactly who does what, within and between units or groups, to carry out a particular process. Creating a process or work-flow map also sheds light on how problems arise. You, your boss, and your group can then decide how best to improve the process—for example, by streamlining and automating work flows.
A few words of caution. You are probably responsible for a number of processes. If so, manage them as a portfolio, focusing on a few at a time. Take care to factor in your organization’s capacity to absorb change.
Developing Your Group’s Skill Bases
Do your direct reports have the skills and knowledge they need to perform your group’s core processes superbly—and thus to support the strategy you have identified? If not, the entir
e architecture of your group could be compromised. A skill base comprises these four types of knowledge:
Individual expertise. Gained through training, education, and experience
Relational knowledge. An understanding of how to work together to integrate individual knowledge to achieve specified goals
Embedded knowledge. The core technologies on which your group’s performance depends, such as customer databases or R&D technologies
Metaknowledge. The awareness of where to go to get critical information—for example, through external affiliations such as research institutions and technology partners
Identify Gaps and Resources
The overarching goal of assessing your group’s capabilities is to identify (1) critical gaps between needed and existing skills and knowledge and (2) underutilized resources, such as partially exploited technologies and squandered expertise. Closing gaps and making better use of underutilized resources can produce significant gains in performance and productivity.
To identify skill and knowledge gaps, first revisit your mission and strategy and the core processes you identified. Ask yourself what mix of the four types of knowledge is needed to support your group’s core processes. Treat this as a visioning exercise in which you imagine the ideal knowledge mix. Then assess your group’s existing skills, knowledge, and technologies. What gaps do you see? Which of them can be repaired quickly, and which will take more time?
To identify underutilized resources, search for individuals or groups in your unit who have performed much better than average. What has enabled them to do so? Do they enjoy resources (technologies, methods, materials, and support from key people) that could be exported to the rest of your unit? Have promising product ideas been sitting on the shelf because of lack of interest or investment? Could existing production resources be adapted to serve new sets of customers?
The First 90 Days, Updated and Expanded_Proven Strategies for Getting Up to Speed Faster and Smarter Page 13