1 Strategy to Tactics: Setting Quantifiable Objectives And Performance Assessment May 11, 2007...

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Strategy to Tactics:

Setting Quantifiable Objectives And Performance Assessment

May 11, 2007

Harland E. Hodges, PhD

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Strategic Management

• Why do we exist? (Mission/Vision)

• Where are we? (Situational Analysis)

• Where do we want to be? (Goals/Objectives)

• How are we going to get there? (Who, Resources, When, Success/Failure)

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Mission/Vision

Top Management Establishes the Mission/Vision

• Involves thinking strategically about

– Future of company

– Where are we going?

• Tasks include

– Creating a roadmap of the future

– Deciding future business position to stake out

– Providing long-term direction

– Giving company a strong identity

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Entity Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Entity - Level Managers

Business - Level Managers

OperatingManagers

Functional Managers

Two-Way Influence

Two-Way Influence

Strategy: Two-Way Process

Top DownBottom Up

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• Three considerations– External environment – Internal environment – How well are we doing now?

Situational Analysis

Current and future analysis of factors that can affect the future

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. Economic conditions

. Legislative and regulatory conditions

. Political conditions

. Legal environment

. Technology

. Competition

. Markets

. Suppliers

. Other

External Environment

1. Identify those forces likely to exert greatest influence over next 1 - 3 years - Usually no more than 3 - 4 factors quality as real drivers of change

2. Assess impact

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Internal Environment

. Skills, expertise, human capital

. Facilities and equipment

. Financial resources

. Customers

. Products/services

. Technology

. Quality

. Alliances

. Internal politics

• S W O T represents the first letter in– S trengths– W eaknesses– O pportunities– T hreats

• A core competence is a well-performed internal activity that is central to a company’s competitiveness and viability

• A distinctive competence is a competitively valuable activity that a company performs better than its rivals

S W

O T

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How well are we doing now?

• Qualitative assessment -- What is the strategy?– Company– Scope– Recent accomplishments– Alignment with functional

strategies, goals and objectives

• Quantitative assessment -- What are the results?– Measurement against

financial and strategic objectives?

Two Key Steps

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Strategy to Tactics

Deliverables

Projects

Programs

Strategic Initiatives

Tact

ical

Lev

els

Tact

ical

Lev

els

Business Goals

Entity Goals

Vision

Strategic Levels

Strategic Levels

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Organizational Vision

Strategic Initiative 1

StrategicInitiative N

Program

Project 1 Project 2

Program

Project 1

Project 2

Project 3

Program

Project 1

Project 2

Project 3

Program

Project 1

Project 2

Project 3

Multiple Initiatives Multiple Projects

Prioritize

Don’t over commit resources

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Goals/Objectives

… without the last minute nothing would ever get done

Setting Goals/Objectives• Converts strategic mission/vision, and situational

assessment into specific performance targets

• Creates yardsticks to track and measure performance

• Pushes company to focus on results

• Helps prevent complacency and coasting

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Goals/Objectives

Objective-setting process is mostly top-down, not bottom-up!

1. First, establish organization-wide objectives and performance targets

2. Next, set business objectives

3. Then, establish functionaland departmental objectives

4. Individual objectives are established last

Entity Objectives

Business Objectives

Functional Objectives

Operating Objectives

Top Down

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Goals/Objectives

Characteristics of Goals/Objectives

– Represent commitment to achieve specific performance targets

– Well-stated objectives are

• Quantifiable

• Measurable

• Contain a deadline for achievement

– Communicated in writing and spell-out how much of what kind of performance by when and by who

– Measure performance

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Short range objectives lay the foundation for long range objectives

• Short-Range objectives– Targets to be achieved soon– Serve as stair steps for reaching long-range

performance• Long-Range objectives

– Targets to be achieved within3 to 5 years

– Prompt actions now that willpermit reaching targetedlong-range performance later

Short or Long Range

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Crafting the Strategy• Primarily a market-driven activity

• Successful strategy development depends on

– Business vision

– Perceptive analysis of the external and internal situation

– Attracting and pleasing customers and stakeholders

– Outcompeting rivals

– Forging a competitive advantage

– Prioritizing

Executing the Strategy• Primarily an operations-driven

activity

• Successful strategy execution depends on managements ability

– Direct organizational change

– Manage multiple initiatives

– Good organization-building and people management

– Creating and nurturing a strategy-supportive culture

– Continuous improvement

– Getting things done and consistently deliver good results

Is tougher than crafting strategy

Planning vs. Executing

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Executing strategic initiatives takes adept leadership to

– Convincingly communicatereasons for the new strategy

– Overcome pockets of doubt and resistance to change

– Build consensus and enthusiasm

– Resolve priority conflicts

– Launch and manage a variety of strategic initiatives at the same time

– Secure commitment of concerned parties

– Get all implementation pieces in place and coordinated

– Integrate many different departments to smoothly function as a whole

Executing

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• Implementing and executing strategy involves a company’s whole management team and all of its employees

– Just as every part of a watch plays a role in making the watch function properly, it takes all pieces of an organization working cohesively for a strategy to be well-executed

• Top-level managers must lead the process and orchestrate major initiatives

– But they must rely on the cooperation of middle and lower-level managers to see that things go well in the various parts of the organization and on employees to perform their roles competently on a daily basis

A Team Effort

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How are we going to get there?

““Don’t confuse a plan with Don’t confuse a plan with executionexecution. .

A plan is good intentions. A plan is good intentions.

You don’t win with good You don’t win with good intentions!”intentions!”

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Management Cycle

Report Model

SetGoals

SharedInfo

Plan

Monitor

Analyze

• Resources• Constraints• Viability

• Budgeting• Resource Allocation• Time Frame• Performance

• Efficiency • Benchmarking

• Variances• Effectiveness• Modifications

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Who?

Ultimately, someone has to be responsible

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Objectives (projects) may be departmental or company wide. In either case, selection of the project participants is extremely important.

. Team members.. Departmental.. From many departments within the company

. Matrix organization … management support project member may be assigned to the project effort on a part time basis he/she may wind up with multiple supervisors … conflicts will have to be resolved.. Project manager/leader

Who?

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Work QualityHuman Resources TimeCommunications Financial Resources

The project manager is key to the objective/project success. Many hard decisions will have to be made and it will test their leadership abilities.

Project Manager

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Project Manager Traits

• Create vision• Execute vision• Motivator• Communicator• Empathetic, yet results oriented• Ethical• Focused• Tenacious• Creates infrastructure for success• Manages expectations• Understands business risk• Knows when to cut losses• Asks the hard questions• Answers the hard questions

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Project Project

Project Plan

Work Breakdown

• Sub-components are identified

• Resources and responsibilities are allocated and assigned

• Timelines are established for completion

• Monitoring schedule is established

• Reporting requirements are defined

• Project and sub-component success are established

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MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Work

Breakdown

Tasks

Gantt Chart

Plan Actual

Communications/Monitoring

Effective communications and monitoring of plans is critical to the successful implementation of strategic initiatives.

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Enthusiasm Disillusionment Panic

Search for the GuiltyPraise and Honors

for the Non-participants

Punishment of the Innocent

Unsuccessful Projects

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Successful Projects

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““A management system should A management system should provide a framework for picturing provide a framework for picturing the major factors in the situation the major factors in the situation as an integrated whole. It should as an integrated whole. It should be realistic. It should simplify the be realistic. It should simplify the complex rather than complicate complex rather than complicate

the simple.”the simple.”

… … George OdiorneGeorge Odiorne

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MBO

Management by Objectives• Peter Drucker, 1954, “The Practice

of Management”

– Is a systematic and organized approach that allows management to focus on achievable goals and attain the best possible results from available resources

– Aims to increase individual and organizational effectiveness by aligning organizational goals and subordinate objectives

– Clarifies and quantifies objectives to allow for monitoring, evaluation, and feedback throughout the hierarchy of objectives

7. Individual objectivesa. Performanceb. Personal development

6. Department and unit objectives

5. Division objectives

4. More specific overall objectives

3. Overall organization objectives

2. Mission

1. Socio-economic purpose

Hierarchy of Objectives

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Setting Objectives

Objectives• are set jointly throughout the

organization by the superior and subordinate

• written and clearly stated with emphasis on verifiable results rather than activities and personality

• should outline results in quantifiable terms for both performance and personal development (e.g. Quantity, Quality, Time. Cost, Skills, etc.)

• should be challenging yet reasonable

• should not neglect other important aspects of a job that can not be quantified

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Control & Appraisal

Control

• refers to the measurement of organizational performance

• involves the measurement and, if necessary the correction of performance

Appraisal

• refers to the evaluation of individual performance

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Appraisal

• focuses on performance, not personalityfocuses on performance, not personality

• supervisor self control rather than controlsupervisor self control rather than control

• responsibility for evaluation and development rests primarily with responsibility for evaluation and development rests primarily with subordinate not supervisorsubordinate not supervisor

• an opportunity to learn from the past, but to focus on the future an opportunity to learn from the past, but to focus on the future … a great amount of time should be spent on new objectives… a great amount of time should be spent on new objectives

• shared, rational analysis of performance by the supervisor and shared, rational analysis of performance by the supervisor and subordinatesubordinate

is not a fault finding session that both the superior and subordinate dislike

is a positive, constructive, and oriented toward the future.

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Benefits of Strategic Management

Good strategic thinking and good management of the strategy-crafting,

strategy-executing process

• guides entire firm regarding “what it istrying to do and to achieve”

• helps unify numerous strategy-related decisions across the company

• creates a proactive atmosphere

• promotes development of an evolving business model focused

on bottom-line (financial viability) success

• provides basis for determining how best to allocate company resources

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Strategic Planning Measurement & Control

3%

28%

33%36%

Not clearly established

General and verbally communicated

Written & measurable with target

dates

Written & measurable with target

dates & used to evaluate personnel

performance

Goals & Objectives

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Key Findings (Goals)

Perceived Sophistication

Pe

rfo

rma

nc

e

Go

als

Companies who perceive they have more sophistication in their planning process tend to have more clearly defined measurable, performance objectives.

Companies with more strategic planning knowledge tend to have more clearly defined measurable, performance objectives.

Strategic Planning Knowledge

Pe

rfo

rma

nc

e

Go

als

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Key Findings (Performance)

Clearly Defined, Measureable Performance Goals

Pe

rfo

rma

nc

e

Companies with more clearly defined measurable, performance objectives tend to meet or exceed their expectations

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Key Findings (Improved Knowledge)

Regardless of current performance all companies felt that better performance results would be obtained with “increased knowledge” of the strategic planning discipline Increased Knowledge of

Strategic Planning

Pe

rfo

rma

nc

e

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Needs

Impro

vem

ent

59%

30%

11%

0%

0%

Make it worseNo Impact

Improve SlightlyImprove Moderately

Improve Significantly

Knowledge Impact

Needs Improvement

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Met

Expec

tatio

ns

29%40%

26%

6%

0%

Make it worseNo Impact

Improve SlightlyImprove Moderately

Improve Significantly

Knowledge Impact

Met Expectations

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Excee

ded

Expec

tatio

ns

38%41%

19%

3%

0%

Make it worseNo Impact

Improve SlightlyImprove Moderately

Improve Significantly

Knowledge Impact

Exceeded Expectations

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Superio

r

57%

43%

0%0%

0%

Make it worseNo Impact

Improve SlightlyImprove Moderately

Improve Significantly

Knowledge Impact

Superior

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Did N

ot Do

45%

0%

27%

27%

0%

Make it worseNo Impact

Improve SlightlyImprove Moderately

Improve Significantly

Knowledge Impact

Did Not Do

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Needs

Impro

vem

ent

Met

Expec

tatio

ns

Excee

ded

Expec

tatio

ns

Superio

r

Did N

ot Do

Make it worseNo Impact

Improve SlightlyImprove Moderately

Improve Significantly

Overall Knowledge Impact