AT A GLANCE
- How to succeed in a fast-changing business environment.
- Four barriers that prevent aligning daily operations with its strategy.
- Six steps of implementing Corporate Performance Management
Imagine the following scenario: A company is trying to adapt to the fast-changing business environment. So, its strategy team builds a long-term plan based on the vision of the board of directors. Simultaneously, however, the operations team develops an annual operations plan that has its specific objectives.
Unfortunately, “the left-hand doesn’t know what the right hand is doing” scenario is far too common among organizations. However, if you want to succeed in the new normal, you need to have an agile, measurable, and fully-integrated management mindset. That’s where Corporate Performance Management (CPM) comes into play.
“Unfortunately, “the left-hand doesn’t know what the right hand is doing” scenario is far too common among organizations.”
CPM is a management tool to translate organizational strategies into applicable operational plans and to monitor their implementation. It allows an enterprise to monitor and manage its performance. Although there are different methodologies, they all serve the same purpose: to improve business performance.
Thanks to Corporate Performance Management, an organization can align its daily operations with its strategy. CPM is more than a system that improves company-wide performance according to the expectations of top-level executives. It is also a philosophy about how you can continuously track your performance. As the adage goes, “If you can measure it, you can manage it”.
BARRIERS TO TRANSLATING STRATEGY INTO OPERATIONS
Based on our experience, organizations face four major challenges in aligning their strategies with daily operations. You might find at least a couple of them quite relevant.
The gap in the mindset of the top executives and operational levels
Generally, the board of directors, CEO’s and shareholders primarily focus on growth, profits, investments, and dividends. In return, they spend much less time considering daily operational issues, such as manual operations, misalignment between sales and dispatch, or employee concerns.
The opposite is also exact. A production supervisor would regularly think about operations, not worrying a lot about how much a shareholder will be earning at the end of the year.
The above business dynamic creates a significant gap between the expectations of the top management and the performance of the operations. As a result, many companies find out that either they don’t bear the required capabilities to achieve the set strategy or they need operational improvements before starting to consider the strategy.
Not communicating vision and strategy to operational levels
When a company cascades and communicates the vision and strategy to operational levels, success often follows. That said, the below problems could prevent that from happening:
- Lack of collaboration among business and functional units while setting the strategy
- Lack of informing the operational levels once a vision/strategy is set
The former often results in a non-viable approach, as business units don’t own the strategy. The latter causes employees to be unaware of the strategy. As a result, the operational plan won’t serve the company’s top priorities and targets.
Overlooking business constraints
Most strategy-setting exercises are fancy. They expand the vision of the participants, making them believe they can achieve anything they want. However, every company has constraints. If those limitations are overlooked, the strategy becomes a non-viable strategy.
The disconnect from operational realities, the unquestioning acceptance of shareholders’ expectations, and prioritizing a particular party’s needs all prevent organizations from walking the talk.
Vision and strategy should be motivating and challenging -both in terms of contents and articulation. They also need to be rooted in the company’s current performance, improvement areas, and challenges ahead. By doing so, the company can develop a structured set of priorities and transfer that information to operations.
Lack of adaptability in strategy implementation
Businesses operate in a dynamic world. That said, many organizations lack the necessary agility to succeed. They have difficulty identifying their next critical moves, let alone implementing them. Excessive bureaucracy, lack of digitization and automation, as well as inefficient processes, get in the way.
Companies that can’t adapt to their continuously-changing environment often end up with a non-viable strategy. As a result, they deprioritize action plans, living with never-ending improvement areas.
SIX STEPS OF IMPLEMENTING CORPORATE PERFORMANCE MANAGEMENT
Lately, organizations of all sizes have been asking our guidance to apply Corporate Performance Management initiatives. When helping our clients to translate their strategy, we use Maven Insights & Solutions’ six-step CPM approach.
MAVEN INSIGHTS AND SOLUTIONS’ SIX-STEP CPM APPROACH.
- We start by reviewing and fine-tuning -and, if necessary, building- their vision and strategy. By doing so, we make sure that the expectations of both shareholders and top management are in line with the company’s operational realities and current performance.
- Next, we define the strategic themes and pillars. That is a process that allows top management and functional executives to collaborate. Strategic pillars guide the operational plan and ensure that it is in line with organizational vision.
- Then, we build a strategic map to define strategic objectives. That is a very crucial step as it directly connects the direction from top-level to the operational levels.
- Following that, we work with business units to cascade the strategic objectives to operational targets. By developing scorecards, we translate KPI’s from the business unit level to functions and individuals.
- We, then, establish the Governance Toolkit, which includes the charter, RACI, communication plan, CPM processes, KPI library, performance reporting, and executive dashboards. By doing so, we ensure a smooth transition and governance towards CPM implementation.
- Finally, we use Shadow Management techniques to ensure continuous monitoring of the company performance and improving it further.
Our CPM methodology also has four critical factors.
FOUR CRITICAL FACTORS OF MAVEN INSIGHTS AND SOLUTIONS’ CPM METHODOLOGY
- Applying simple SMART principles during the strategy process.
- Achieving controllable transparency. All stakeholders should have access to the information within the boundaries of confidentiality.
- Engaging all organizational levels to align the entire fully.
- Developing a robust communication framework throughout the CPM cycle. Organizations can be agile only when the right information flows in a timely and effective fashion.
While Corporate Performance Management isn’t the latest management tool out there, we notice that it is becoming highly-popular around the world. CPM can help you implement your valuable strategy through objective and viable measures while enabling you to identify further improvement areas throughout your journey.