3. Balancing Short and Long Term Goals
Most companies do not realistically set
goals - at all
Most of those that do are either good at
setting their long term goals, or their short
term goals – but not both
A successful organization knows where it is
going in the short-term - but with an eye
towards long term goals 3
4. Balancing Short and Long Term Goals
Companies who do set goals frequently
fall into one of two categories:
1. Long term goals are defined and in
place, but short term goals are almost
non-existent
2. Short term goals exist, but there are no
well-defined long term aims
4
5. Long Term Goals,
But No Short Term Aims
The problem is:
Long term goals are so far off, they
rarely get worked on
Procrastination, ―analysis-paralysis‖,
―business as usual‖ become dominant
5
6. Short Term Goals,
but No Long Term Aims
This type of organization is busy with action:
Likely achieving short-term targets
consistently.
But little or no thought on where the
organization is heading
Never quite makes the leap to the next
level
6
7. Gresham’s Law For Management
Discussions about bad operations drive out
discussions about good strategy
implementation
Companies can get
trapped in a vicious cycle
Making or closely missing
numbers each quarter
7
8. Gresham’s Law For Management
Companies then fail to examine how to
modify their strategy to:
Generate better growth opportunities
Break the pattern of short-term financial
shortfalls
Analysts, investors, and board members
start to question management’s
imagination and commitment
8
9. Causes of Underperformance
Breakdowns in a company’s management
system cause underperformance
Not managers’ lack of ability or effort
Failure to balance tensions between
strategy and operations is pervasive
60% to 80% of companies fall short of the
success predicted from their new strategies
9
10. Successful Strategy Execution:
Two Basic Rules To Follow
10
1. Understand the management cycle that links
strategy and operations, and
2. Know what tools to apply at each stage of the
cycle
11. If employees
understand the
company’s goals,
then they will
generally make
the right
operating
decisions
11
Disseminating Company Strategic Goals
Drives Better Organizational Decisions
12. Management system ≡ integrated set of
processes and tools for a company to:
A good system is an information ―Loop‖
A Management ―Loop‖
Provides A Management System
12
1. Develop its strategy,
2. Translate it into operational actions,
3. Improve key processes, align resources &
budgets
4. Monitor operational progress & review strategy
5. Test & adapt the strategy
13. Avoid Shortfalls By Creating a Loop
Develop a strategy statement
With specific objectives and initiatives of
a strategic plan
With time frames for achievement of
significant milestones
Map out operational plans and
resources needed to achieve objectives
Use the strategic plan as a guide
13
14.
15. Maintain The Loop
As managers execute the strategic and
operational plans, continually monitor for
results to see if strategy is working
Review internal results
Watch data on competitors and the business
environment
Periodically reassess the strategy
Update it if underlying assumptions are out-
of-date or faulty
15
16. Stage 1: Develop the Strategy
Define mission, vision, and values
Conduct strategic analysis
Formulate strategy
16
17. Define Mission, Vision, Values
Which customers or markets will we target?
What is the value proposition that distinguishes us?
What key processes give us competitive advantage?
What are the HR capabilities required to excel at these
key processes?
What are the technology enablers of the strategy?
What are the organizational enablers required for the
strategy?
17
18. Examples of Mission Statements
Make People
Happy
Explore the
Universe and
Search for Life
and to Inspire the
Next Generation
of Explorers
NASA
Walt Disney
Expresses the core values of
the organization.
Conveys unique qualities about
the organization.
Simple, clear and
understandable to everyone.
18
19. Define Mission, Vision, Values
What business are we in - and why?
Agree on the company’s:
purpose (mission),
its aspiration for future results (vision), and
the internal compass that will guide its actions
(values)
What are the key issues we face in our
business?
Strategic analysis of the company’s external and
internal situation
19
21. Conduct Strategic Analysis
Assess the company’s internal capabilities
and performance.
identify the distinctive resources and capabilities
that give the firm a competitive advantage.
Summarize the conclusions from the external
and internal analyses in a classic SWOT
matrix
Assess how internal attributes and external
factors help or hinder the company
21
23. Conduct Strategic Analysis
SWOT
External Assessment:
Marketplace, competitor’s, social
trends, technology, regulatory
environment, economic cycles .
Internal Assessment: Organizational
assets, resources, people, culture,
systems, partnerships, suppliers, . . .
• Easy to Understand
• Can apply at any
organizational level
• Needs to be:
Analytical and
Specific
• Be honest about
your weaknesses
Good Points Possible Pitfalls
SWOT SWOT
23
24. Conduct Strategic Analysis
Ensure that strategy leverages internal strengths
to pursue external opportunities,
counter weaknesses and threats (internal and
external factors that undermine successful strategy
execution)
This analysis will reveal issues that the strategy
must address:
the best role for new products and services;
whether new partners need to be acquired;
what new market segments the company might enter;
which customer segments are contracting
24
25. Formulate Strategy
Decide on a course of action of how best to compete. The
strategy must respond to the following questions:
Which customers or markets will we target?
What is the value proposition that distinguishes us?
What key processes give us competitive advantage?
What are the human capital capabilities required to
excel at these key processes?
What are the technology enablers of the strategy?
What are the organizational enablers required for the
strategy?
25
27. Stage 2: Translate the Strategy
Target Setting:
Define strategic objectives and themes
Select strategic initiatives
Select measures and targets
27
28. Define Strategic Objectives
Simplify the structure and use of a
strategy map by chunking it into
3 - 5 strategic themes
A strategic theme ≡ distinct set of related
strategic objectives
28
33. Conduct Strategic Analysis
SWOT & BSC Are Different Tools
SWOT is used to define the goal
The Balanced Scorecard is used to:
design a plan to achieve that goal, and
measure success.
33
34. Stage 3: Plan Operations
Improve key processes
Develop sales plan
Plan resource capacity
Prepare budgets
Monitor & Measure with Scorecards
34
35. Operational Plan
After strategic metrics are in place, operational
plan lays out actions
Set priorities for process improvement projects:
Preparing a detailed sales plan
Prepare a resource capacity plan
Create operating and capital budgets
35
36. Improve & Align Key Processes
Identify required resources to implement the plan
Short term projects
Focus on ongoing processes, e.g. responsiveness,
speed, quality and cost
Biggest bang for the buck comes from focus on
business process management, total quality
management, lean management, Six Sigma, and
reengineering programs on processes and sales
36
The Goal
align/link near-term process improvements
with long-term strategic priorities
37. Develop Sales Plan
Identify realistic revenue goals
Deconstruct the overall sales target into:
the expected quantity
mix
nature of individual sales orders
production runs
transactions
37
38. Plan Resource Capacity
38
Resource Type Total
Hours
Available
hours/month
per resource
unit
Resource
units
required
Resource
units
supplied
Capacity
utilization
Brokers 27,070 130 208.2 215 97%
Account
Managers
6,540 130 50.3 51 99%
Financial
planners
7,300 130 56.2 59 95%
Principals 4,627 130 35.6 36 99%
Customer
service
representatives
14,654 140 104.7 110 95%
IT consultants 10,321 7,920 69.2 75 98%
Computing MIPS
utilized
548,19
4
7,920 69.2 75 92%
39. Prepare Budgets
Once managers have determined the
required level of resources, the financial
implications become easier to calculate.
Most of the resource capacity represents
personnel costs
included in the OpEx budget.
Increases in equipment resource capacity
reflected in the CapEx budget.
39
40. Prepare Budgets
The process quickly and analytically
generates operating and capital budgets
40
that grow logically and dynamically out
of the sales and operating plans rather
than being imposed by fiat or through
power negotiations
42. Customer Quadrant of the
Balanced Scorecard
What is important to our customers? How do
customers evaluate our timeliness?
What do customers consider a quality product? Are
there any standards or goals currently set by our
customers?
How and what do customers currently evaluate our
organization?
In the financial area, what is important to our
customers?
What does responsive mean to our customers? Are
any goals or standards set?
42
43. Internal Business Quadrant of the Balanced
Scorecard
How do we define quality—a product with few deficiencies? How do we
define success—a quality product? How we know we’re successful?
How are process improvement requirements determined? How is their
impact currently measured?
How is productivity measured? Is it important? Are goals or targets set?
How do we define and measure ―cycle time?‖ Are improvement goals or
targets set?
How do you do, and who does, the Quality vs. Schedule vs. Cost
tradeoffs?
43
44. Innovation and Learning Quadrant of the
Balanced Scorecard
What attributes of quality are currently measured?
Are any goals set?
Are there any ongoing process improvement
activities? Any measurements being taken as to
their impact? Are any targets or goals set?
Is employee satisfaction currently measured?
What activities are being modified to improve
responsiveness? 44
45. Financial Quadrant of the Balanced
Scorecard
How do you know if the organization has effective
financial control?
What defines success? How do we know if we are
successful?
How is the cost/performance tradeoff
accomplished?
Are there any ongoing improvement activities?
Are any targets or goals set? 45
46. Stage 4: Monitor & Learn
Hold strategy reviews
Hold operational reviews
Link the audience for both types of
reviews
46
47. Reviews
47
Information
requirements
Dashboards for KPI’s;
weekly and monthly
financial summaries
Strategy map and
balanced scorecard
reports
Strategy map, balanced scorecard,
P&L reports, analytic studies or
strategy, external and competitive
analyses
Frequency Daily, twice weekly,
weekly, or monthly
depending
Monthly Annually or quarterly for fast-
moving industries
Attendees Departmental &
functional personnel,
senior managers for
financial reviews
Senior management
team, strategic theme
owners,
Senior management team, strategic
theme owners, functional and
planning specialists, business unit
heads
Focus ID & solve operational
problems (sales declines,
late deliveries, downtime,
supplier problems)
Implement strategy Test & adapt strategy based on
causal analytics, product-line &
channel profitability & new
technology developments
Goal Respond to short-term
problems & promote
continuous improvements
Fine-tune strategy;
make midcourse
adaptations
Incrementally improve strategy; set
strategic & operational plans; &
targets; authorize spending for
strategic initiatives & other major
discretionary expenditures
Operational Review Strategy review Strategy testing and adapting
Meeting Type
48. Operational Reviews
Frequent review of dashboards on sales, bookings,
and shipments:
Customer complaints
Late deliveries, defective production
Mechanical breakdowns
the extended absence of a key employee
new sales opportunities
The speed at which new data are posted on
dashboards is the central factor in determining
meeting frequency
48
49.
50. Stage 5: Test and Adapt the Strategy
Conduct profitability analysis
Conduct strategy correlation analysis
Examine emerging strategies
50
51. Conduct Profitability Analysis
Cost and profitability reports
Examine activity-based costing reports for
P&L of each product line, customer, market
segment, channel, and region
See where existing strategy has succeeded
and failed
Re-boot loss-making operations and expand
scope and scale of profitable ones
51