Strategy execution how can you do that?

In the last few years, western economies didn’t flourish much. As a consequence, companies started focusing on more efficient, or smarter ‘production’. Companies need to improve productivity, thereby keeping cost prices at an acceptable level and reinforcing their competitive position. To be able to meet these future requirements much time and effort is put into formulating a strategy to accomplice this. And yet results are often disappointing. Why?

Because formulating a strategy alone is not enough. A company also has to execute it. Why do so many companies fail in doing that? Companies don’t find the right way of translating the strategy into useful Key Performance Indicators (KPI) that can help them to really execute the strategy and monitor the progress of the execution.

KPI’s are often too fluffy. They are too distant from business operations. There are many methods for determining KPI’s like BSC or EFQM. These are good methods and help to manage the communication of the strategic objectives. They can also help to carry out self-assessment on the maturity of the organisation. But methods like BSC or EFQM don’t resolve the fact that KPI’s are to fluffy and distant. An organisation needs more to control its business than just a set of KPI’s. It needs the right set of KPI’s. How can an organisation determine these?

An organisation should map out all relevant processes in a hierarchy to ensure alignment with the core strategy. The process will help determine the correct KPI’s. KPI’s that measure real things like defects, quality, costs or service levels. KPI’s that are put in context of the business processes. The relevant KPI’s or operational indicators help the organisation to understand where to focus their continuous improvement efforts.

A method for helping organisations in executing its strategy is Integrated Performance Management (iPM). iPM is the answer to the question how the targets of an organization can be translated to the execution on the shop floor. iPM makes sure that the ‘what’ question is linked to the how question, by coupling the strategy to the processes of an organization.

iPM is a five step model that validates strategy, defines strategic objectives and KPI’s, links process maps en performance, involves all employees and creates an attitude and commitment into continuous improvement. Going through the five steps thoroughly will result in the following advantages:

- iPM links processes to customer needs and consequently is customer-focused;
- iPM creates focus. Firstly by reducing the number of objectives and secondly by focusing on relevant processes;
- employees are involved from the start which increases acceptance. They determine the best performance indicators and improvement initiatives to measure the success and improve the performance of their job;
- performance indicators linked directly to the process will be of a more direct nature and consequently, make sure that they give management relevant and frequent information about how the organisation is performing;
- iPM eliminates functional boundaries or stovepipe thinking; stating priorities is possible;
- iPM shows what improvement initiatives are useful in executing your strategy. Thus this initiative management offers a structural approach for process improvement, which allows you to overview and control your initiatives and ensures that finances are only channelled to those initiatives that contribute to strategic objectives;
- process orientation of iPM lowers the barrier for organisations to introduce activity-based management and it provides a basis which is also required for corporate governance and/or quality systems.

By using iPM an organisation can really execute the strategy because in makes clear were the difference can by made: the business processes. It is linking strategic ambitions with daily activities. It brings the formulated strategy to the shop floor.

If you would like to have more information about strategy execution, take a look at the book: P. Geelen en R. van de Coevering (2005), Integraal Performance Management, Kluwer, Deventer.

Or read the article:
G. Rens en F. Hermkens (2006), Van strategie naar executie, Business Process Magazine.

Freek Hermkens has several years of experience in optimizing processes, and is currently working as a consultant at O&i (www.oi.nl) in Utrecht.