Performance management without ‘coming clean’ is not possible
In order to prepare an organization Cockpit, it is sufficient that the organization has a strategy at a certain point in time. However, writing a book on strategic performance management without ‘coming clean’ is not possible. Because, in strategy formulation, content, tools like Cognos and BusinessObjects, and process influence each other. That is also the reason that the leadership of an intelligent organization tries to make content and process reinforce each other.
Ownership is the key
The third principle of the organization Cockpit, namely ownership, offers the key to this. Ownership determines whether ‘it works’ or not. How can ownership play a role in the process of strategy formulation?
Three ways to ‘boost’ the quality of the strategy
There are three ways to give a significant ‘boost’ to the quality of the strategic process, in which ownership makes for a better result. These methods can be used separately, but they also mutually complement and reinforce each other. In fact they are a ‘recipe’ for developing and updating a strategy.
How do managers develop and update strategy?
1. Perform a periodic SWOT analysis to reassess the strategic position
The SWOT analysis has a great influence on the orientation (the mental model) of the management team. This orientation results in an overall picture of the organizational environment:
- Some organizations perform explicit SWOT analysis; other organizations do it implicitly. The same mechanism is recognizable in both cases: observations of reality steer the discussion within the management team.
- The strategic position of the organization becomes clear during the discussion. This starts the management team’s ownership of the strategy to be pursued.
- The top management and the organization’s management team then think together about the desired strategic position and the best route to that position. They confront the capabilities of the organization (strengths and weaknesses) with the developments in the environment (opportunities and threats) and draw their conclusions from this. Can we exploit current opportunities with the existing competencies? Alternatively, should we make internal adjustments in order to survive in the rapidly changing environment?
- Basically, the confrontation between opportunities and threats on the one hand and strengths and weaknesses on the other raises four fundamental questions. The strategic process is triggered in a natural way with these questions. The managers involved have ownership of this process.
2. Use strategy mapping in order to shape and visualize the strategy
A large number of methods for determining strategy are in circulation in the literature and in practice. There is no lack of strategic tools:
- Many managers have nonetheless struggled to find an appropriate way to formulate strategy, develop their strategy and then to get support in this process.
- Many methods are highly instrumental in their approach and do not make much use of the interactive aspects and possibilities of the strategy formulation process. They ignore the ownership principle.
- A desirable method of strategy development is one where a major role is played by precisely those aspects of the process that promote ownership. Defining the search field in a mapping session is an excellent opportunity for this. After all, the characteristic and the success of strategy mapping is that the desired strategy is brainstormed and discussed with a group of managers.
- In this way, the intelligence of the group is mobilized and, in addition, it creates a commitment to the strategy and to the search fields that have been formulated together. You may therefore use strategy mapping as a strategic tool, a tool to develop a strategy after the SWOT analysis has been completed.
3. Use the PDCA cycle to keep the strategy up to date
Four steps are required to draw up a strategic information plan: exploring the environment, strategy formulation, determining the management task and development of search fields.
- Of these steps, the strategy formulation is the most decisive. Because if the strategy has been developed by the managers, it implicitly guides the thinking of the managers. The managers then look at the environment in another way.
- During strategy formulation, the managers develop certain insights that in turn evoke certain expectations. Managers will more or less automatically check whether those expectations do indeed become reality. Ownership promotes this process.
- Everyone knows that human expectations are rarely completely realized. This mismatch ensures that the organization’s strategy must be adjusted again. The management task and possibly the search fields must then be adjusted again. Strategy formulation has become a continuous process driven by ownership. With the exception of the classical approach – shown in Whittington’s first quadrant – which is highly sequential, the other approaches more or less follow the organic approach described.
- It is actually quite simple. If the reality differs from the expectations, if that difference is thought to be important enough and if there is a sense of ownership, then another action is taken. We see here that the idea of the PDCA cycle also works on a strategic level.
Organization Cockpit and the idea of the cycle
The Cockpit organization concept is based on the idea of the PDCA cycle. Directors and managers of organizations make plans to be successful. For this reason alone, they will really follow whether their strategy actually works. They want to see to what extent the reality / implementation differs from their expectations. Therefore, we include performance indicators in the organization Cockpit for each of the strategic search fields. We can expect that there will always be a mismatch; you are never fully on track.
The managers with a sense of ownership will try to explain this mismatch. Then they will adjust their strategy a little bit. They will take new measures and the theory is that this will reduce the mismatch. By looking at the performance indicators again, you can see if that is really the case.
The launching of a strategic learning process
The crux is that the idea of the PDCA cycle triggers a strategic learning process. No complex formal feedback systems are needed for this. The beauty is that the idea of the cycle costs nothing and always works. New observations lead to another strategic orientation, which in turn leads to new actions. Then you observe, and the cycle repeats itself. By always making adjustments where necessary, the management increasingly learns how strategy optimization should happen. A strategy is never finished; it is a permanent process of direction seeking.