Why Do Only 10% of Companies Execute Their Strategy?

Creating a strategy and then executing it is sometimes an easier-said-than-done proposition. To increase the odds of a successful execution in today’s multi-faceted business climate, many organizations create “strategy centered scorecards” to measure the journey toward their established vision and objectives.

Strategy scorecards allow business leaders to easily focus resources on executing their set strategies. A critical step in using a strategy scorecard is to communicate with employees and external stakeholders the focused outcomes and performance drivers by which they will achieve their vision and strategic objectives. Without this scorecard, organizations run the risk of poor strategy execution.

According to Paul Niven, author of Balanced Scorecard, Step-by-Step, some of the reasons for poor execution of organizational strategy include the following:

• Only 5% of the workforce understands the strategy
• Only 25% of managers have incentives linked to strategy
• 85% of executive teams spend less than one hour per month discussing strategy
• 60% of organizations don’t link budgets to strategy

How can you help your credit union overcome Niven’s statistics?

Consider developing a strategy scorecard.

Let’s begin with some tips for creating and communicating your credit union’s strategy scorecard. Using your strategy, develop a list of financial and NON-financial measurements that you believe will advance your strategy and have a positive impact on the vision of your credit union (develop this list with your team and be diligent to narrow the list to the most important measures). When developing a clear strategy scorecard system, it is important to incorporate measurements that are historical (lagging measurement indicators), as well as those that are forward-looking (leading measurement indicators).

Now, what is a “lagging measurement indicator?” Lagging measurements, or indicators, are outcome measurements that help you gauge your strategy’s progress by examining the final end result or outcomes of your collective efforts. Use of the "lagging" term reflects the delay or gap between your actions and a change in the final end result. Lagging indicators have a DIRECT bearing on an organization or department's bottom line.  There is a business interest in and financial benefit from improvement in these areas.

Next, what is a “leading management indicator?” Leading measurement indicators are process measurements that help you gauge incremental progress you are making toward key outcome (lagging) measures. Since leading indicators measure the results from your processes, there is less of a delay between your actions and a change in the system/process. They are the performance drivers -- the key factors that enable the overall end result (outcome) you want to achieve. Leading indicators have an INDIRECT bearing on an organization or department's bottom line. Where there is a business interest in improvement in these areas, there is not often an immediate financial benefit to the organization or department.

To continue with the process, take your list of Financial and Non-Financial measurement indicators and have your team organize them into 4-to-6 strategy scorecard categories. Please remember that these strategy scorecard categories should align with your strategy. Some examples of categories include:

• Financial
• Market
• Environment
• People
• Operations
• Adaptability
• Suppliers
• Product/Service Quality

Once you have developed your strategy scorecard, ask the following questions of each measurement:

• Is this a critically important measure for your organization or department?
• Are the results measurable?
• Can you collect meaningful information on this metric every month?
• If the answer to any of these questions is “no” – seriously consider dropping the measure, or immediately find a way to measure it.
• Your list should have no more than a total of 15 measures.

One last tip to complete your strategy scorecard -- help your team solidify agreement on each metric. Answer the following questions:

• What is the description of the critical measure indicator?
• What does it measure and why it is important?
• How will the measurement be calculated?
• What is the goal measurement (actual metric)?
• Who owns the measure (name the individual/s)?

List other documents or reports that can be used to support an understanding of the metrics. In developing a meaningful link, you may consider things like:

• Data models
• Year-to-year comparisons
• Relevant data trends
• Year-to-date trends
• Peer group comparisons, etc.
• You also may want to attach supporting documents, such as questionnaires, schematics, floor plans, etc.

Type this URL in your web browser http://www.connectionsonline.net/docs/CriticalMeasuresWorksheet.pdf to share your strategy scorecard as well as communicate and share your strategy scorecard to your internal and external stakeholders. In addition, make certain that any changes to critical measures are explained thoroughly to all employees.

Your employees, managers and peers will want to know how well the organization or department is performing toward your strategy. Employees should know and understand how the work they do impacts the organization or department's strategy scorecard. Your strategy scorecard will help everyone in the organization make better decisions – top down, bottom up, and laterally – about how they spend the resources, time and money they control.

Are you playing "Moneyball?"

I just saw the movie Money Ball, starring Brad Pitt.  Wow, what a great movie.  It demonstrates the decision process the Oakland A’s baseball management used to try and leverage their limited resources to put a winning team on the field.  They didn’t recognize that their actual decision process was flawed. They used the same “flawed” decision-making process every season and would always get the same results: Not a sustainable winning team. 

Credit Union management has a similar objective – a winning team that provides a sustainable financially viable institution for their members. So how can credit unions improve the odds of winning with “Moneyball?” 

By improving their decision process...

Paul Nutt, author of "Why Decisions Fail: Avoiding the Blunders and Traps that Lead to Debacles”, has researched more than 400 decisions made by top executives of large companies. From his research, Nutt found that half of all decisions fail. Failed decisions result in continued setbacks, which prevents you from achieving your business goals.

Nutt says the failed decisions share three common blunders. Managers (1) rush to judgment, (2) misuse their resources, and repeatedly use (3) failure-prone tactics to make decisions.

First Not Always Best


Rush to judgment means managers use the first remedy that they come across, meaning they don’t take time to think through the issues that “need” a decision. This behavior often happens whether it is a simple decision with few consequences or a highly complex issue requiring a disciplined, analytic approach. Reasons are numerous, but this blunder is due to job pressure – getting it done now is more important than the outcome of the decision.

Nutt found that failure is four times more likely when decision makers quickly embrace the first idea they come across. 
To counter this issue, it is best to follow a five-step decision making plan:

1.     Identify and clarify the problem

2.     Gather information

3.     Evaluate the evidence

4.     Consider the alternatives and implications

5.     Choose and implement the best alternative.

Use Your Resources Right 


Misuse of resources occurs when managers spend their time and money on the wrong things during decision-making. For example, an organization decides to introduce two new products (which have high resource costs associated with them), and then don't make resource trade-offs by stopping other projects to free up resources.  

To minimize this blunder, before you decide to deploy resources for a decision, create a quick "case study" for the decision. Ask yourself the following questions.

1.     Why are we doing this?

2.     What goal does it support?

3.     What is the resource budget - time and dollars?

4.     What is the difficulty and risk for implementing the decision?

5.     What is the payback and when will you start getting your return?

6.     "No" should be acceptable if the answers to these questions don't support the alternative.

Prone to Failure

With this blunder, Nutt found that two-thirds of all decisions are based on failure-prone tactics. Success, however, increased up to 50% when better tactics were used.

For example, most managers are aware of the importance of collaboration in the decision-making process. Nutt's research indicated decisions based on collaboration succeed more than 80% of the time. Unfortunately, his research found that collaboration is used to implement only one in five decisions.

In addition, Nutt discovered that 60% of the time managers use only their position power or "charismatic personality" and expect employees to do what they say.

Examining the Decision Process

In our fast-paced business climate, it is easy to get in the habit of using these three decision blunders. Here’s some subtle advice: Avoid these bad habits. Use the following checklist - for yourself, or for your direct reports - when you need to make a decision for the benefit of your organization:

1.     Did you conduct your research and prepare your "case study?"

2.     Did you uncover and reconcile all competing claims?

3.     Have you looked at people's interests and commitments?

4.     Did you use collaboration to help determine the decision?

5.     Are you "telling" people what to do rather than "engaging" them to participate in the decision implementation?

6.     Are your expectations clear and have they been communicated to stakeholders?

7.     Have you researched solutions?

8.     Have you really given a good review of evaluations?

9.     Have you anticipated - and answered - ethical questions?

10.  Have you learned anything about your decision making process that can apply to this decision?

So if you want your members to benefit from your organization's success to be sustainable, and win with “Moneyball”. Avoid the easy-to-fall-into-blunders and make winning, collaborative decisions. Your organization and membership will not disappear in the next decade but will, conversely, prosper for a long, long time.

4 Barriers Keeping You from Implementing Your Company’s Strategy – and Tips to Eliminate Them

There are numerous factors in improving a credit union's performance today: adding to the membership-base, increasing products/services per household, improving productivity by adding new technology, etc. As we all know, there is no lacking for ideas in this performance-related area. The challenge for a credit union executive is to minimize the many barriers faced on a daily basis to get the best ideas implemented and embraced within the organization.

We hosted a leadership symposium representing executives from a number of successful credit unions. We asked these executives to use a diagnostic tool that assesses the strengths and barriers of their organization to implement their strategy. Bridges Consulting Group developed the tool to identify critical success factors for implementing the organization's strategy. The tool reflects 52 reasons why implementations fail. The purpose of their participation was to see what executives agreed were the top factors, or barriers, to implementing strategy within their respective credit unions.

Listed below are the top four barriers they selected, providing tips to eliminate them so your credit union's strategy will be easier to implement.

1. Lack of inspiration and motivation from senior management. Simply put, senior management has to demonstrate they are passionate about the business and encourage others to feel that same kind of passion. They have to connect with their employees in other ways, too: listening to their employees, including them in the decisions they make, demonstrating integrity and giving people what they want within the executive's capability – i.e. if not money, then verbal recognition, or some other demonstration of appreciation for good work.
2. No clear communications. Communication is about the creation of meaning and understanding, not simply moving information around. Senior managers need to dialog regularly with employees about the organization's purpose, goals, projects, differentiation, members, competitors, and how their departments and the employee's personal efforts contribute to the organization. It's about clarity – it's about inspecting what you expect. Repetition is a good thing – even if the executives themselves may be bored with the subject matter. Former General Electric chief and author Jack Welch said that it took him six years of constantly telling his employees, you are first or second in your business or you are out, before they really understood (believed) it.
3. Inconsistency among management about what to do and how to do it. Standards are essential for any company that seeks to improve. Continuous improvement methods are based on a repeatable process – and employees leverage their learning from participating in the process. A stable process is a framework for collecting, and evaluating, performance. Once you are collecting performance information on the process, you have a platform to develop improvement opportunities. Consider the following two scenarios: When you are driving a car, you can be driving 50 miles an hour (or more) and you can predict that the other drivers barreling down the freeway will follow the “rules of the road.” Drivers have adopted a standard that is predictable to any other driver on the road – which makes driving FAST very productive – and relatively safe. However, anyone who owns a boat knows that a boat owner cannot rely on any other boat operators to behave according to waterways rules (or standards for operating a boat). Consequently, when you are speeding across the lake, assume there is another boat barreling down to cross your bow from the left. According to rules of the waterways, you have the right of way. The other boat is supposed to slow down and let you pass across his bow (allowing you to continue at your current speed). BUT because, there is no predictable standard for acting according to the “standard rules,” you will slow your boat to make sure you don't crash with the boat coming across your bow.
   
   Lacking standards, or lacking the organizational discipline to ensure everyone complies with the work standards you have, really slows down your organization. No one can afford to slow down, so be sure to review what standards your organization has in place and ask yourself this question: Is your organization disciplined enough to comply with those standards and use the learnings to improve those standard processes? One other big benefit to standardizing the process is it reduces inconsistency among management about what to do and how to do it – reducing stress and wasted effort among management's employees.
4. We already have too much to do – and not enough time to do it. According to a recent Accenture study, the average middle manager is swamped by useless information and spends about two hours a day looking for the data he or she needs. Once the information is found, Accenture reports that half the information has no value to their jobs. Companies tend to have “silos” of information, each department having its own system for organizing data – structured or unstructured. This information is not shared or access is difficult by other people outside the “silo” who could benefit from it. At least annually, managers should conduct a communication audit of meetings and reports and eliminate certain meetings and reports that are not useful. Develop and implement standard systems for organizing data, making sure that access to information across the enterprise encourages organizational transparency.

An amazing insight when reflecting these barriers to strategy execution is that overcoming these issues doesn't really “cost” anything. It is a matter of changing the behaviors and culture of the organization – executives being more inspirational, being clearer on your communications, standardize your work processes so you can move to process improvement, and remove waste from your reporting and meetings. Even though these changes are “free,” the results are “priceless.”

Welcome to COL Ignites Productivity blog...

Welcome to our "COL Ignites Productivity!" blog where you can discover the latest leadership trends and tips to improve organizational performance.  We are a multi-award winning company that works with many of the industry's top credit union CEOs and executive teams to ignite productivity and execute strategy.

We look forward to connecting with you and helping your organization achieve new heights through enhanced operation efficiencies, improved communications and discussions, engaged employees for better customer loyalty, and quicker meetings -- all of which greatly improves productivity, reduces costs and raises profit.

The purpose of this blog is to provide you with helpful advice and information we have gained over the years through our research and field tested experiences.  We will provide you with knowledge you can use -- tips, case studies, and success stories that can be easily adapted to your organization.

We look forward to helping you succeed!
Karla Norwood