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Focus is also one of the key variables surfaced in the Hackett Best Practices study mentioned in Chapter 1. Participants in Hackettâ€™s studies of key staff functions (finance, strategic decision making, information technology, and related areas) currently comprise nearly 2,000 organizations, including 100 percent of the Dow Jones Industrials, 84 percent of the Dow Jones Global Titans Index, and 90 percent of the Fortune 100. The aim of Hackettâ€™s strategic decision-making benchmark study is to determine best practices in the areas of planning and performance measurement. These areas encompass strategic planning, tactical and financial planning, performance measurement, and forecasting. Based on this study, firms that exhibit best practices in these areas are distinguished by four major characteristics:
1. Integrated. These organizations employ a well-defined process and methodology for linking strategic plans with tactical plans and goals with measures.
2. Focused. They concentrate on a small number of key performance indicators, budget a small number of line items (among world-class firms, 40 or even fewer), forecast only major variables, and report exceptions rather than extensive details.
3. Fast. World-class companies exhibiting best practices close their books in 2.9 days and report in one day. World-class, process-focused finance organizations complete their planning and budgeting in fewer than 90 days.
4. Leverage technology. They employ a single, integrated system to ensure that they are integrated, fast, and focused, and provide system access to a broad spectrum of users.12
Just as the specific industry or market is unimportant in determining success, so are the specific processes and methodologies employed
The Strategy Gap
Exhibit 2.2 Strategic management processes.
in linking strategies, tactics, and metrics. No one methodology guarantees success. Integration simply requires that systematic actions be taken to formulate and achieve the linkages.
The process of integrating strategies, tactics, and metrics is an essential part of corporate performance management (CPM) and answers these questions:
â€˘ Where are we?
â€˘ Where do we want to go?
â€˘ How do we want to get there?
Strategic analysis, strategy formulation, and strategy implementation are the processes used to address these questions. Exhibit 2.2 diagrams the interrelationships among these processes. Each of these processes encompasses a number of subprocesses that will be covered in detail in Chapter 3.
INTEGRATING TOP-DOWN AND BOTTOM-UP STRATEGIC MANAGEMENT
In many organizations there is a tendency to equate strategy with corporate strategy and to define it even more narrowly in terms of strategic development. In these organizations, top-level management is focused
Strategy in the Next Economy
on the question: Where do we want to go? Their emphasis is on understanding the competitive environment and creating a vision for the future. The more mundane question of How do we plan to get there? is ignored. Once the annual planning meetings are held and the strategic plan is produced, the plan is either put on the shelf or tossed over the fence to operations. If things go astray, the top level will pressure the operational level to try harder.
The view from the other side is often the opposite. Many lower-level managers state that the key to organizational success is operationsâ€”the efficiency with which the day-to-day grind of production, selling, marketing, servicing, and the like are performed. If things go astray, these same managers will also tell you that senior management just does not understand the operational challenges and the decisions they face on a daily basis and the inherent need for fast action in the face of competitive challenges.
Clearly, operations are an important element in the strategic landscape. However, there is a difference between action and execution. Operations need to be tied with strategic objectives. As Gerry Johnson and others put it: â€ś[I]f the operational aspects of the organization are not in line with the strategy, then, no matter how well considered the strategy is, it will not succeed. . . . It is at the operational level that real strategic advantage can be achieved.â€ť13
For instance, consider what happened to the United Kingdomâ€™s retail firm Laura Ashley. The firm started as a husband-and-wife (Laura and Bernard Ashley) operation producing scarves in their flat in London. During the 1980s they became a globally successful fashion and retail firm providing a product line of clothing, accessories, and home furnishings with a unique look and appeal. After the death of the firmâ€™s namesake in the mid-1980s, top management seemed to lose direction. During the 1990s regional managers were allowed to institute operational systems based on the specific demands in their regions. The regional stores also tried to service the immediate needs of their customers. There was no overall vision for the hundreds of Laura Ashley stores located across the world. The firmâ€™s performance suffered accordingly. Only recently has it started to make a comeback after several years of recurring losses. The fate of Laura Ashley is typical of firms whose managers â€śsimply respond to what happens around them ... with no anticipation of what might happen and no hope of shaping what could happen.â€ť14