Putting Stategy Into Action


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Putting Stategy Into Action

  1. 1. Perspective Karim Sabbagh Rabih Abouchakra Ghassan Hasbani Bahjat El-DarwichePutting Strategyinto ActionBuilding a Disciplinefor Better Performance
  2. 2. Contact InformationAbu DhabiRabih AbouchakraPartner+971-2-699-2400rabih.abouchakra@booz.comBeirutGhassan HasbaniPartner+961-1-985655ghassan.hasbani@booz.comBahjat El-DarwichePrincipal+961-1-985655bahjat.eldarwiche@booz.comDubaiKarim SabbaghPartner+971-4-390-0260karim.sabbagh@booz.comJuergen Ziehfreund also contributed to this Perspective. Booz & Company
  3. 3. EXECUTIVE With the privatization of certain government-controlled enterprises, the steady expansion of family-ownedSUMMARY conglomerates, and the strong growth of the commercial sector, the Middle East has one of the most vibrant and dynamic economies in the world. In order to continue to thrive, Middle Eastern companies now need to quickly convert ambitious strategies into action in a highly dynamic and increasingly crowded marketplace. To be effective in this endeavor, senior management needs to create and institutionalize a formal approach to strategy execution. This approach facilitates top-down monitoring, creates cross-functional integration, enables proactive and coordinated decision making, and flags issues before they become problems.Booz & Company 1
  4. 4. HIGHLIGHTS • Most companies develop powerful strategies but have trouble imple- menting them. • Successful strategy management moves from strategy development to business planning and resource allocation to execution management and finally to performance measure- ment. • Four capabilities are central to strategy execution management: execution governance, progress monitoring, strategy communication, and accountability mechanisms.CREATIng And Senior management often blames the deficiency on the strategy, whenInSTITUTIng the real problem actually lies in theA FoRMAl execution of the strategy. Instead of taking the simpler steps to addressAPPRoACh execution breakdowns, managementTo STRATEgY then develops an entirely new strat- egy, thus starting the vicious circle allEXECUTIon over again. The consistent leaders in every industry avoid this problem by rapidly turning strategy into action through a formal process. Most organizations do not executeIn our experience, most companies well, by their own admission. Overare adept at developing powerful, the past four years, Booz & Companycompetitively differentiating strate- has collected and analyzed moregies. Where they fail is in the execu- than 170,000 organization profiles,tion of those strategies. In the early completed online by individuals fromdays after launching a strategy, an more than 1,000 companies, govern-organization is typically euphoric ment agencies, and nonprofits in moreand engaged in the new direction, but than 50 countries. The consensus iswithout daily follow-through, that clear. Three of every five organiza-energy dissipates, and the company tions perceive themselves as weakfinds itself in a defensive posture. when it comes to strategy execution.Market positions erode. Management The inability to execute tops the listand staff become frustrated as noth- of CEO concerns, according to Theing seems to change, and there is gen- Conference Board,1 a priority we haveerally more talk than action. When confirmed in conversations with ourkey financial objectives are eventually clients around the globe. Althoughmissed, the problem becomes obvious. nine of 10 companies have strategic and business planning processes in place,2 only five of 10 have estab- lished a formal execution process.32 Booz & Company
  5. 5. STRATEgY Companies typically understand the importance of strategy setting and on the other hand, is often perceived as a hands-on, detail-oriented, day-to-daydEVEloPMEnT invest significant resources and senior series of endless tasks. Strategy devel-And STRATEgY management time in it. As a result, most companies today have smart, opment occupies the minds of only the best and brightest for a concentratedEXECUTIon sound strategies. They have utilized all period of time during the annual plan-nEEd To BE of the tools and methodologies per- fected over the last four decades (e.g., ning cycle, whereas strategy execu- tion harnesses the energies of everyInTEgRATEd SWOT analysis, portfolio analysis, employee at every level every day. scenario planning, dynamic strategic Strategy setters chart a course miles simulation) to assess and optimize ahead; executors push the organization their external environment and inter- along that course, inch by inch. nal organization—at least on paper. Yet strategy execution cannot be Although senior management generally divorced from the strategy it is meant feels comfortable and competent devel- to enable. It must be well-integrated oping strategies, they are less interested into an overall approach to strategy in the mundane task of executing management that moves from strategy those strategies. Strategy development development through the business is viewed as a high-level, intellectual planning and resource allocation exercise that is part of the senior man- process to performance measurement agement agenda. Strategy execution, (see Exhibit 1).Exhibit 1Integrated Strategy Management Aligns All Activities Ideal Strategy ManageMent approach “How do we measure success?” 6 “Have we been successful?” “What do we want to achieve?” Performance 1 “How do we want to reach our targets in the long term?” Measurement Performance Measurement Strategy Development “How do we Execution 5 Managementget things done efficiently?” Strategy “How do we ensure 2 Cascading strategic alignment across all units?” Resource Allocation 1-Year Business “How do we allocate financial and Planning 4 human resources to succeed?” “What do we need to do 3 and achieve in the short term?”Source: Booz & CompanyBooz & Company 3
  6. 6. InTEgRATEd Executing on a strategy typically falters in one of two places: It either independently at every level, and execution is utterly random. ItSTRATEgY falls through the cracks between steps becomes almost impossible for anMAnAgEMEnT in the cycle, or it is never properly coordinated because Step 5 is skipped organization to deliver forecasted results. over; in other words, there is no dedicated and disciplined execution By way of example, a Middle Eastern management approach in place. telecommunications company realized that it needed to align its business and Between each of the major steps in functional unit managers with the the strategy management process, overall corporate strategy. It achieved there are a series of activities that this by separating each corporate need to occur to keep the cycle objective into its key components moving smoothly (see Exhibit 2). and translating those into business For example, between strategy unit strategic objectives, followed development and strategy cascading, by a workshop to align senior each corporate objective needs to be management, in which each executive separated into its key components presented his strategy, including and then translated into strategic requirements from other units. These objectives for each business unit. strategies were then translated by the Between business planning and responsible unit heads into executable resource allocation, companies need business plans with specific initiatives to determine the required manpower and time lines for the coming year. As and budget for each initiative. a result, all initiatives could be linked Without these linkages, senior to corporate strategy, demonstrating management’s strategic directives are to middle management their never enacted. Strategy is interpreted contribution to corporate objectives.Exhibit 2Linkages Ensure Consistent Strategy Execution and Measurement Strategy Corporate strategic directions and priorities, developMent typically for the next 3 to 5 years Segregate each corporate objective into its key components and formulate as unit strategy Strategy Translation of corporate strategy into strategies for caScadIng all major units of the company (3 years) Detail each unit strategy with key initiatives for the coming year BuSIneSS Business plan of a unit (1 year) plannIng Determine required manpower and budgetary resources for each of the initiatives reSource Required manpower and budgetary resources allocatIon for the business plan Develop an execution plan with milestones for each of the initiatives and track regularly executIon Structured approach including governance, progress monitoring, ManageMent strategy communication, and accountability mechanisms Use execution and resource plan as a basis for performance management perforMance Results measurement, variance analysis, and MeaSureMent recommendation of remedial actionsSource: Booz & Company4 Booz & Company
  7. 7. EnSURIng In addition to minding the gaps in the strategy management cycle, For example, one of the largest renewable energy companies in theThAT STRATEgY companies need to pay attention to world implemented a comprehensiveEXECUTIon Step 5 and set forth a clear execution management approach. execution management approach when senior management realizeddoESn’T FAll that the company’s overall resultsThRoUgh Typically driven by a dedicated execution management office (EMO) were, to a large extent, disconnected from the strategic objectives. Cross-ThE CRACkS at the corporate level, an effective functional steering committees were execution management approach created for each project and an facilitates top-down monitoring and execution management scorecard cross-functional integration. It flags was developed to allow senior and addresses emerging issues before management to monitor key projects they become problems. It enables on a weekly basis and anticipate proactive and coordinated decision delays and misalignments. making and ensures on-time delivery against strategic objectives. An effective execution management approach flags and addresses emerging issues before they become problems.Booz & Company 5
  8. 8. UnlEAShIng Based on our experience at Booz & Company helping many companies By surveying an organization’s employees on its performance inThE transform their organizations, we’ve aligning and exploiting each of thesePERFoRMAnCE identified four fundamental levers that organizations can pull to improve levers, it is possible to determine where and why execution break-gEnE execution and align individual actions downs are occurring (see www. with corporate strategy. They are: orgdna.com to take the OrgDNA Profiler® survey). However, convert- • decision rights—the underlying ing the diagnosis into the right treat- mechanics of how and by whom ment plan is still daunting. decisions are truly made Most organizations default to treat- • information flow—the movement ing structure first. Moving lines and of knowledge and metrics used to boxes on an organization chart and measure performance, coordinate adjusting spans of control seems the activities, transfer ideas, and make most obvious course of action. It’s decisions visible. It’s tangible. And it gener- ally releases trapped costs quickly. • motivators—the objectives, But it is rarely successful, as most incentives, and career alternatives restructurings fail to address the other made available to employees three determinants of organizational effectiveness. Restructuring alone • structure—the formal organization addresses only the symptoms of the model, including reporting lines organization’s dysfunction, not the root causes (e.g., unclear accountabil- These are the primary “genes” in an ity, misdirected career paths). organization’s DNA. They identify an organization and determine how well In fact, of the four genes in organiza- it executes. tional DNA, decision rights and infor- mation are roughly twice as powerful as the other two (see Exhibit 3). Based on our continuing client work and research, we have identified these as the “dominant genes” in an orga- nization’s makeup (see “The Secrets to Successful Strategy Execution,”Exhibit 3Relative Strength of Strategy Execution Levers (out of 100) Harvard Business Review, June 2008). Structure and motivators, on the other hand, are recessive—less important, but still relevant and Information Flows 54 influential. Decision Rights 50 Motivators 26 Structure 25Source: Booz & Company6 Booz & Company
  9. 9. how To The beginning of any effective strat- egy execution program begins with for all parties and significant delays in the procurement process, impactingBEgIn A a careful assessment of the level of the quality of service delivered to theSTRATEgY alignment between and among these four organizational levers. A company client.EXECUTIon might examine, for example, whether Once companies identify gaps andPRogRAM the flow of information supports the allocation of decision rights. Do conflicts, they can better direct limited resources to where they are most likely those making decisions throughout to unleash potential performance. If the organization have access to the the major issue impeding performance information they need? is the fact that decision rights are closely held at corporate headquarters A large utility company in the Gulf while the relevant information resides Cooperation Council (GCC) decided in the field, then a company can focus to implement a centralized purchas- on improving the flow of information ing structure in order to leverage to senior management rather than economies of scale across its different wasting time and money on restructur- regional units. A centralized purchas- ing or overhauling incentives. ing department was created and given the rights to purchase the needed Even the most resilient, high-perform- material for all the units. However, ing companies stand to benefit from the department didn’t have access to this exercise, as they understand, per- the most recently updated informa- haps better than any, that the journey tion defining the user requirements as to enhanced execution is a never- users in the different units were still ending one. The healthiest companies accustomed to dealing with the local and those with the healthiest potential (decentralized) purchasing officer and focus their attention and energy on sharing their requirements with him. driving continued progress rather This misalignment created frustration than declaring victory.Booz & Company 7
  10. 10. dEVEloPIng We’ve indicated that most companies fail not in the development of their (information), and accountability mechanisms (motivators).A dISCIPlInEd strategy, but in its execution. Further,APPRoACh we’ve stated that execution typically falters because companies let it slip Execution GovernanceTo STRATEgY through the cracks in their strategy • Are the roles and responsibilities ofEXECUTIon management cycle or do not develop a disciplined approach to execution individual managers and decision bodies well-defined and understood? management. Finally, we’ve intro- duced the four levers that companies • Are managers fulfilling their can use to improve execution by execution role effectively, even if it aligning individual actions with cor- stretches beyond their immediate porate strategy. purview? How does this all come together to • Does the EMO proactively drive guide companies as they try to put in the process and support decision place a dedicated execution manage- makers? ment approach? In our experience, companies typically develop an execu- The execution governance structure tion management approach around should answer these questions four critical capabilities, each of which by clearly identifying execution- leverages one of the core drivers of specific roles and responsibilities and organizational DNA (see Exhibit 4). establishing supporting organizational entities, including the EMO itself. These four critical capabilities are execution governance (decision The EMO should be part of the rights), progress monitoring (infor- strategy-planning unit of a company mation), strategy communication and report to the senior executive in Exhibit 4 Execution Management Approach Should Leverage Key Organizational Drivers Execution Progress 1 2 Governance Monitoring Define clear roles and Set up multi-level execution decision rights and reporting systems and establish an Execution formal mechanisms to Management Office with a facilitate decision making cross-functional scope and progress tracking Decision Rights Information Strategy Accountability 3 4 Communication Mechanisms Leverage internal and Link individual’s contribution external communications to to strategy execution to ensure that management his or her performance and employees focus and appraisal and reward high commit to strategy execution performers Information Motivators Source: Booz & Company8 Booz & Company
  11. 11. charge of strategy development. Its consequent sector strategies, and Progress Monitoring principal roles are that of an analyst Level 3 sponsors will take on specific and advisor. As an analyst, the EMO initiatives. • Does the executive team get all the provides explanations of reports information it needs to make good generated for senior management Regardless of the particular execution decisions? and insight on the impact of various governance setup and reporting lines, performance drivers. As an advisor, it is important that strategy execution • Do executives feel that progress the EMO identifies risk-mitigation “owners” have the organizational status reports are based on objective and business opportunities based on clout to lead execution initiatives criteria? insights gained from these reports. and coordinate with other initiative owners. Not only are they responsible • Is the senior management meeting As Exhibit 5 indicates, in addition for implementing the strategy as it agenda too occupied with execution to the corporate EMO, there are cascades down the levels of the orga- issues or not occupied enough? often typically additional execu- nization, but they are accountable tion management offices set up for raising issues and risks as soon • Are progress reviews well scheduled that support the implementation of as they come to light. They should in terms of preparation, discussion, cross-functional strategic themes also have the authority to demand and follow-up time? and report to executive sponsors of progress information from different these themes. As the strategy cascades initiative owners, even if they belong • Which parts of progress reporting down the organization, sponsors at to other units. The selected execu- could be (further) automated to various levels take on clearly defined tion governance structure should increase efficiency? responsibilities. For example, Level 1 fully leverage line management and senior managers will “own” various build on existing responsibilities, Progress monitoring starts with a elements of the corporate strategy. targets, incentives, and performance clear and unambiguous accounting of Level 2 sponsors will roll out the measures. execution status and ends with a link Exhibit 5 Sample EMO Chart organIzatIonal Setup CEO / Executive Committee Reports to Head Corporate Strategy Corporate Execution Management Office Execution Execution Execution Execution Execution Sponsor 1 Sponsor 2 Sponsor 3 Sponsor 4 Sponsor 5 Reports to Execution Sponsor Strategy 4 Unit View Execution Management OfficeStrategy View VP Initiative Project Manager Project Team VP Initiative Project Manager Project Team VP ... ... ... VP ... ... ... VP ... ... ... Source: Booz & Company Booz & Company 9
  12. 12. to performance measurement. The The EMO should be regularly polling Strategy Communicationgoal is to provide management with a line managers on the status of variouscomprehensive, accurate snapshot of strategic initiatives. Are they on track, • What level of understanding/buy-in/execution effectiveness. at risk of delay, or delayed? ownership have managers and employees reached?The main objectives of progress moni- For example, a leading GCC finan-toring are straightforward: to help cial-services company adopted a • Which communication channelsmanagement at all levels take account three-tiered approach to progress have proved to be most successful?of progress, facilitate issue resolu- monitoring. At the board level, ation, and enable decision making. It strategy-execution committee was • Has employee input and feedbackkeeps execution activities on track established to review progress on been incorporated and used to fine-and maintains their momentum, while a monthly basis. At the executive tune strategy execution?providing for a two-way information level, business unit heads met on aflow between strategy setters and fortnightly basis to update the execu- Strategy communication is anthose on the front lines executing that tion management office on progress important complement to executionstrategy. within their respective initiatives. At activities and should convey not only the department level, weekly meet- the substance of the strategy itself,To successfully monitor progress, ings were held to drive the day-to-day but also important achievements inexecution status reports need to be strategy-execution steps. This was executing it. It should lay out thea permanent fixture on monthly underpinned by the incorporation rationale for the strategy (e.g., marketexecutive meeting agendas. Moreover, of strategy-execution performance trends/changes, new company targets,companies need to establish effec- metrics into the organization’s overall emerging opportunities) and explaintive execution-specific processes such performance appraisal process. The the strategy in straightforward terms,as issue resolution and escalation overall structure proved particularly using a “storytelling” approach.mechanisms. Concise progress report effective when problems arose, by Communications should be explicit intemplates should focus executive ensuring timely visibility of the emerg- describing what will change and howattention on key outstanding issues. ing issues among the firm’s leadership. it is likely to affect employees. Strategy communication should convey not only the substance of the strategy itself, but also important achievements in executing it.10 Booz & Company
  13. 13. The second thrust of strategy com- • Has senior management sent clear From target setting through appraisalmunication is to celebrate milestones signals by rewarding outperformers to reward management, personalpassed and other execution “wins.” and disciplining underperformers? objectives are inextricably linkedA continuous stream of positive news to corporate and cascaded strategicfosters buy-in and alignment with • Has the human resources depart- goals. The appraisal process is consis-the strategy among employees. In ment effectively linked performance tent and transparent company-wide,announcing achievements, commu- rewards to execution contribution? and people earn rewards in terms ofnications should connect each one to compensation, recognition, or careerthe strategic objective(s) it furthers. • Do these rewards also reflect development that are commensurate and reinforce cross-functional with their contribution to execution.The EMO should drive strategy collaboration?communication in close cooperation For example, if strategy executionwith the corporate communications Accountability is more than just hinges on cross-functional coopera-department. The EMO’s role is to responsibility or even authority; it tion, then that should be reflecteddefine communications requirements is an obligation to report and justify in the target-setting, appraisal, andand craft key strategy-communication task or activity outcomes. Without reward processes. If Manager Amessages, then convey them to corpo- accountability, there is no ownership. works with Manager B in a differ-rate communications for elaboration Compliance trumps results. Progress ent unit to execute a given strategy,and broad dissemination. slows and agreements lapse. People then Manager A should weigh in on shirk responsibility. Manager B’s appraisal and vice versa.Accountability Mechanisms Moreover, their rewards should reflect An effective alignment of account- the success of their cross-functional• Has each strategic initiative been abilities to strategic objectives should partnership in moving execution assigned a clear owner who drives provide an end-to-end solution to forward. execution? these problems and be closely linked with the execution roles and decision rights established as part of the gover- nance structure.Booz & Company 11
  14. 14. ClIMBIng The big question confronting Middle Eastern executives today is not A Middle Eastern services company followed a rigorous course in identify-UP ThE “Where do I take my company?” but ing gaps and improvement potentialsSTRATEgY “How do I get there?” Setting a clear strategic course is vital, but insuffi- in its initial execution approach. After interviewing key managers on differ-EXECUTIon cient. Companies also need to ensure ent levels and assessing the outcomelEARnIng execution. of progress reviews in the executive committee, it decided to change keyCURVE Because each organization is different elements of the approach, including a and faces a unique set of internal and refocused executive committee session external variables, there is no univer- with a new format to get quickly to sal solution to the execution challenge. decision making on key execution Organizations need to start by engag- issues. ing in a careful diagnostic that encom- passes all four major organizational Successful companies will be the ones levers—decision rights, information, that can readily make steady incre- motivators, and structure. Based on mental improvements as well as the intelligence gathered through that achieve step-change gains as they diagnostic, companies can chart a execute their strategy. These winning strategy-execution approach. companies will likely have four things in common: robust execution gover- The companies that excel will be nance, rigorous progress monitoring, those that find a way to climb the continuous strategy communication, strategy execution learning curve and well-aligned accountabilities. quickly and nimbly (see Exhibit 6).Exhibit 6Moving Up the Strategy Execution Learning Curve IllustrativeExecution Initial Review Execution Phase 2 Review Execution Phase 3Management Execution & Improve & ImproveEffectiveness Phase Continuous incremental improvements Step-change improvements 6–9 Months 3 Months 10 Months 2 Months TimeSource: Booz & Company12 Booz & Company
  15. 15. Endnotes1 The Conference Board, “CEO Challenge Survey,” 20072 Booz & Company analysis3 Balanced Scorecard Collaborative (now the Palladium Group)survey, 2006About the AuthorsKarim Sabbagh is a partner Ghassan Hasbani is a partnerwith Booz & Company based in with Booz & Company based inDubai and Riyadh. He leads the Beirut and Riyadh. He special-firm’s communications, media, izes in telecommunicationsand technology practice in the markets assessment, invest-Middle East. He specializes ments strategies, mergers andin sector-level development acquisitions, marketing, prod-strategies, institutional and uct and service development,regulatory reforms, large-scale organizational restructuring andprivatization programs, and governance, technology plans,strategy-based transformations channel strategy and manage-focused on strategic planning, ment, customer care, businesspartnerships and alliances, development, and CFO andmarketing, and business pro- CEO agendas.cess redesign. Bahjat El-Darwiche is aRabih Abouchakra is a partner principal with Booz & Companywith Booz & Company based based in Beirut. He specializesin Abu Dhabi. He focuses in communications and tech-on public administration nology and has led engage-modernization, public policy, ments in the areas of telecomlarge-scale transformation, and sector liberalization andorganizational development growth strategy development,and change management. policymaking and regulatory management, business devel- opment and strategic invest- ments, corporate and business planning, and privatization and restructuring.Booz & Company 13
  16. 16. The most recent list of Worldwide Bangkok Madrid Dubai South Americaour office addresses and Offices Brisbane Milan Riyadh Buenos Airestelephone numbers can Canberra Moscow Rio de Janeirobe found on our website, Asia Jakarta Munich North America Santiagowww.booz.com Beijing Kuala Lumpur Oslo Atlanta São Paulo Hong Kong Melbourne Paris Chicago Mumbai Sydney Rome Cleveland Seoul Stockholm Dallas Shanghai Europe Stuttgart Detroit Taipei Amsterdam Vienna Florham Park Tokyo Berlin Warsaw Houston Copenhagen Zurich Los Angeles Australia, Dublin McLean New Zealand & Düsseldorf Middle East Mexico City Southeast Asia Frankfurt Abu Dhabi New York City Adelaide Helsinki Beirut Parsippany Auckland London Cairo San FranciscoBooz & Company is a leading global managementconsulting firm, helping the world’s top businesses,governments, and organizations.Our founder, Edwin Booz, defined the professionwhen he established the first management consultingfirm in 1914.Today, with more than 3,300 people in 58 officesaround the world, we bring foresight and knowledge,deep functional expertise, and a practical approachto building capabilities and delivering real impact.We work closely with our clients to create and deliveressential advantage.For our management magazine strategy+business,visit www.strategy-business.com.Visit www.booz.com to learn more aboutBooz & Company.Printed in USA©2009 Booz & Company Inc.