Strategies are hypotheses of cause-and-effect. This sounds a bit complicated but all it means is that:
- hypotheses are your predictions, your bets; you reserve the right to be wrong
- cause-and-effect is the relationship between inputs and outcome; if you invest in some new product or service or process or person, then some kind of result is expected to happen that is desirable as part of your mission to achieve your vision.
In a nutshell, you want to gather up ideas – good, bad or otherwise! – and think them through in a way that establishes a set of objectives for the upcoming period of time that you’ve set. This could be one year, three years, five years, or even longer.
For this, you want diverse inputs of all kinds from all possible sources and people. Allow for heated, friendly debate and cross-examination. Employ research, competitive analysis, personal observations, employee input, statistics, industry trends, out-of-left-field wildness, whatever.
Let people fully speak their minds to prevent singular points-of-view from dominating the discussion. You need people to express fully their own opinions.
The ideas can and should cover the gamut of the organization, including:
Having gone through this rigorous process, you distil the ideas down into a handful of critical objectives that you’ve hypothesized as necessary for success. Leave yourself room to admit that you may be making incorrect bets but that it isn’t acceptable just to sit back and let nature run its course (unless that is what you have consciously decided to do!).
One of the challenges you may face is that people will want to include all sorts of things that they think are important to their own particular area – and they may well be right – but they are probably not strategically important to the organization as a whole. This “bottom-up” thinking needs to be replaced by “top-down” prioritization by all involved.
Making process improvements in an operational area is always good to see but based on the current strengths and weaknesses of the organization overall, or the market opportunities and threats, they may need to be put on the back-burner for a year if critical resources are required elsewhere.
To ensure the successful strategy execution – possibly more important than the strategy itself – you set a handful of meaningful measures/metrics with numerical targets and associated initiatives/projects. These support the strategic objectives and structured as part of a balanced scorecard including financial and non-financial elements.
From there, you establish a regular status check-up schedule to stay on course and to keep people focused on the right priorities. Monthly or quarterly agendas need to explicitly go through the scorecard and associated initiatives. Is the status of each green (on track), yellow (warning signs) or red (danger)? Is it the execution that is the issue or is it the strategy itself?
Each metric and each initiative should have an owner to maintain accountability and energy. When the status is red, the point of the agenda item is not to gang up and point fingers, but to collaborate on determining what needs to be done – financial or people resources typically – to get the status back to green.
Finally, depending on your organizational philosophy, you can tie achievement of the strategic plan’s objectives to compensation, in what’s known as pay-for-performance. Individual and/or team bonuses can be paid as part of people’s total rewards (on top of their base salary) if certain levels of performance are achieved.
Differing amounts can be paid on a scale from threshold values to stretch objectives. Part of your overall compensation strategy may be to determine the proportion of fixed versus variable components (base and bonus) to help establish the kind of culture you would like to see where everyone shares in both the risks and rewards of the business.
Additionally, overall scorecards can be cascaded to departmental or individual scorecards to help break down strategic objectives.