1. Current Thinking on Strategic
Planning and Implementation
Cap Gemini Ernst & Young
July 2001
2. We’re trying to answer two questions
• How do global, multi-business line companies develop strategy?
– Focused on the role of the corporate centre in helping companies make, communicate and
implement strategies.
• What is the latest thinking on how these companies should develop strategy?
– What does “good” look like?
– Best practice?
– Useful approaches?
It is intended to foster discussion about how to address the key challenges.
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3. Document structure
• Corporate Strategic Planning?:
– Why Do It?
– How Does It Happen?
– What Does It Look Like?
– What Are Some of the Pitfalls?
• Evolving Ideas on What “Good” Looks Like
• Implementing Strategic Intent
• Company Examples
• Implications for Global, Multi-business Companies
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4. Corporate Strategic Planning
• Why Do It?
• How Does It Happen?
• What Does It Look Like?
• What Are Some of the Pitfalls?
5. Why have a corporate strategic planning function?
• To be the custodian of the overall best interests of the corporation:
– Maximise the overall performance of the business portfolio
– Manage trade-offs across the business
– Tee-up investment/resource-allocation choices and decisions
• To set the “boundaries” of the company:
– What’s in the portfolio
– Manage merger and acquisition activity
• To steer and influence “strategy making”:
– Influence managers in the business unit
– Determine key mechanisms (planning procedures, hurdle rates, control processes,
organisational processes)
– Develop culture in which business units propose and implement strategy.
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6. How does it happen?
Formal Strategic Opportunistic
Planning Process And/Or Process
• Set calendar • One-off event or process
• Links corporate and BU • Possibly triggered by internal
strategic plans or external changes
• Linked to planning and • Could be managed internally,
budgeting cycle or draw on external help
• May or may not be linked to
planning and budgeting
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7. What does it look like?
It’s very Varied
Centre very involved in
Centre very detached
BU strategies
Elaborate planning
No planning systems
systems
Strategic discussions
Strategy discussions ad
very structured and
hoc and informal
formal
Centre initiates and Centre reacts to BU
executes acquisitions acquisition proposals
etc
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8. What are the pitfalls?
Pitfall Definition
Habits of Mind • Tunnel vision, blindspots, or enthusiasms about the right strategy
Barons
• Senior group executives fight to build up their own territories with little regard for the
corporate interest
Interference
• Corporate influence over business unit strategies seen as arbitrary, unpredictable,
indiscriminate or uninformed
Exercise in Cleverness
• Fall into an adversarial mode in which corporate and business levels try to score points off
each other
Bureaucracy • Seen as a planning exercise, a repetitive annual event that adds little value
Hockey-sticks
• Over-optimistic projections which reduce the value, and credibility of planning and control
Lip Service
• Disconnect between strategic goals and what really influences promotion and financial
rewards—people pay lip-service to the strategy
Control Games
• Control objectives can become ends in themselves and gamesmanship to meet defined
targets can damage long term business health
Moving the Goalposts • Shifting strategic objectives
“Yes, Chairman” • Studies arrive at conclusions that already enjoyed wide support in the business
Strategy and Inaction
• Communication and consensus-building is not an integral part of the strategic decision
making process
Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987.
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10. This section is a “potted history” of ideas about “good”
strategic management
Hamel
Hax and Majluf Markides
Goold & Campbell Mintzberg Kaplan & Norton
Gratton
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
T
A “looser”
Formalised How to Be creative.
H Structure
and roles.
planning
role for
strategic
operationalise Be different.
process. strategy. “People” focus.
planning.
E
M
E
S
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11. GOOLD & CAMPBELL
Goold and Campbell tried to describe the best role for the
corporate centre
• How the centre should add value to the businesses.
• What sort of relationship it should have with business unit managers.
• How it should manage the process for making strategic decisions.
But they found no “ right answer”—no single, universal to good strategic
management.
Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used.
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12. GOOLD & CAMPBELL
Instead they found different—but valid—strategic
management styles
Framework to Describe Strategic Management Styles
High
Centralised
Planning Influence
• Degree to which centre shapes
Strategic Strategic strategies
8 different strategic planning programming • Measure of top-down
management styles involvement
• About input to decision
Strategic Strategic Financial
venturing control programming
Holding Financial
company control
Low
Flexible Strategic Tight Strategic Tight Financial
Control Influence
• Targets the centre agrees with BUs
• How centre reacts to results
• About outputs of decisions
Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used.
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13. GOOLD & CAMPBELL
The three most common styles were “strategic planning”,
“strategic control” and “financial control”
Strategic
Management Strategic Planning Strategic Control Financial Control
Style
• The centre: • A variation on the Strategic • Centre’s influence exercised
– Establishes extensive planning Planning style. mainly through budgeting
process. process.
• Centre prefers to leave
– Makes major contributions to initiative in development of • Broad strategic direction left
strategic thinking. plans to BU managers. to the business units.
– May have a corporate strategy
Management guiding BUs. • Centre “checks quality” of
Approach plans, rather than provides
• Less attention devoted to direction.
control targets.
• Targets set for strategic
objectives (e.g. market
share) as well as financial
performance.
• BOC • Courtaulds • BTR
Company Examples • BP • ICI • GEC
• Cadbury Schweppes • Hanson Trust
Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used.
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14. GOOLD & CAMPBELL
Successful companies matched their strategic management style
to the business circumstances
Diagnostic to help making strategic
Characteristics of Companies with
management style to business
successful decision-making process
circumstances
• Match strategic management style to • Nature of the business:
the business circumstances – Diversity of the business portfolio, and
• Central managers close enough to linkages between business units
each business to be able to add value – Size and payback of investments
• A free and open exchange of – Stability of the competitive battle facing
the business
information and views between the
centre and business units • Resources in the organisation:
• Shared commitment, energy and – Personality of the Chief Executive
purpose between all levels of – Skills and experience of senior managers
management. – Degree of financial stress on the
organisation.
Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used.
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15. HAX AND MAJLUF
Hax and Majluf focused on the process to develop a
strategic plan
They outlined two Major Cycles in the Strategic Planning Process
Strategic & Operational
Strategic Formulation
Budgeting
Corporate Corporate
Business Business
Functional Functional
Source: A.C. Hax, N.S. Majluf: “The Strategy Concept and Process, A Pragmatic Approach,” 1996.
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16. HAX AND MAJLUF
They prescribed the whole strategic planning process
through to detailed budgets
Planning Strategic and
Strategy Formulation
Perspectives Operational Budgeting
Environmental
Internal Scrutiny • Horizontal Strategy and Vertical
Scan
Integration Revisited Budgeting
Corporate • Resource Allocation and Consolidation and
Strategy Portfolio Management Approval
Corporate Strategic Thrusts and • Budgeting guidelines
Performance Objectives
Mission
Business Internal Scrutiny Environmental Scan Business
Budgeting
Strategy
Proposed Strategy,
Programs, and
Budgets
Functional Internal Scrutiny Environmental Scan Functional
Budgeting
Strategy
Proposed Strategy,
Programs, and
Budgets
Source: A.C. Hax, N.S. Majluf: “The Strategy Concept and Process, A Pragmatic Approach”, 1996.
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17. HAX & MAJLUF
In this view, “good” strategic management involves
following a disciplined process
• Same process regardless of the company’s business circumstances
• Strong focus on rational dimension, and data-driven approach
• Although prescriptive, probably reflects key elements of many strategic
management processes:
– Strategy cycle feeding in to planning and budgeting cycle
– Top-down and bottom-up iterations
– Corporate, business and functional dimension to strategy making and planning and
budgeting.
Source: Michael Goold and Andrew Campbell, “Strategies and Styles,” 1987.
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18. MINTZBERG
Mintzberg puts forward a very different view about “good”
strategy making and “good” strategic planning
Deliberate Emergent
Strategy Strategy
• Realisation of the strategy matches • The strategy is identified from
the intended course of action patterns of consistencies deserved
• Planned strategy in past behaviour - despite, or in the
absence of, intention
• Strategy developed in a formalised
process • Strategy develops inadvertently:
• Essence of strategy formulation = –Without conscious intention of senior
management
analysis
–Often through a process of learning
• Provides the organisation with a • Synthesis of past and current
sense of purposeful direction.
behaviour
• Essence of strategy formulation =
creative act of synthesising
experiences into a novel strategy.
Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994.
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19. MINTZBERG
For Mintzberg, successful strategy making is looser,
messier, and more creative than “conventional” planning
• Strategy making needs to function
beyond the boxes:
– Understand the difference between strategic
planning and thinking
Search all those strategic – Strategic thinking involves intuition and
planning diagrams, all those creativity.
interconnected boxes that
supposedly give you • Strategies often cannot be developed on
strategies, and nowhere will schedule and immaculately conceived:
you find a single one that – Must be free to appear at any time and at any
explains the creative act of place in the organisation
synthesising experiences into – Typically through messy processes at informal
novel strategies learning
– By people at various levels who are deeply
involved with the specific issues at large.
Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994.
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20. MINTZBERG
He saw five roles for strategic planners
Role Specifics
• Codify - clarify and express - the strategies in terms sufficiently clear to make
them fully operational.
Strategic Planning • Elaborate them into sub-strategies, ad hoc programmes, and action plans.
• Convert them - e.g. consider their effects on budgets and performance
controls.
• Communicate strategic intentions - via programmes, schedules, budgets
Communication & Control • Control pursuit of them
• Gain support of influential outsiders
• Help managers find fledgling strategies:
Finding Strategy • Find patterns
• Discover new ways of doing or perceiving things
• Analyse specific issues
Analysis • Provide simple, alternative conceptual interpretations of the world
• Encourage managers to think about the future in creative ways
Catalyst • Get others to question conventional wisdom, and help people out of conceptual
ruts.
Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994.
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21. KAPLAN & NORTON
Kaplan and Norton—in the 90s—shifted the focus to
operationalising the strategy
• Kaplan and Norton, like others, linked shareholder value creation to strategy
to tangible measurable performance at a grass roots level
• Their unique insight was to balance the financial perspective against a
customer perspective, an internal business perspective, and an innovation
and growth perspective
• Power of approach is in integration:
– Links strategy to shareholder value creation through an integrated set of specific
objectives with clearly-defined measures
– Enables strategic goals to be translated into achievable, measurable objectives throughout
an organisation.
Source: Robert S Kaplan and David P Norton, “The Balanced Scorecard, Translating Strategy Into Action”, 1996.
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22. KAPLAN & NORTON
In 2001, Kaplan and Norton broadened the role of the
Scorecard to encompass mobilising and engaging people
• The new scorecard has a stronger mobilisation focus:
– Provides a mechanism for integrating the efforts of the whole organisation, involving all
employees in the strategy discussion
– Provides continuous feedback or the effectiveness of the strategy
– Mobilises change through executive leadership
• The most important broadening of the role is in the concept of the strategy
map:
– Provides the primary basis for conceptionalising how the strategy works
– Maps all the underlying dynamics through which strategy drives performance
• The strategy map is a visual tool to link the scorecard’s financial perspective
with new, broader customer, internal and learning and growth perspectives:
• Customer perspective - defines the customer value proposition that will
deliver the financial performance
– Internal perspective - outlines how internal operations and innovation will create customer
value
– Learning and growth perspectives show how to develop internal capabilities that the
internal processes need.
Source: Robert S Kaplan and David P Norton, “The Strategy-Focused Organisation: How Balanced Scorecard companies thrive in the new business environment.”
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23. HAMEL
Hamel’s most recent view is “good” strategy making is
about “information” and “revolution”
Key themes:
• Today’s business environment is in an ‘age of revolution’
• The status quo is doomed - the only chance for survival is innovation:
– Business concept innovation
– Innovation that changes the bases of competition in an industry
• Call to create permanent revolution:
– Continually challenge, refresh and overturn prevailing mindsets in an industry.
Too influenced by the dot.com bubble?
Source: Gary Hamel, “Leading the Revolution”, 2000.
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24. MARKIDES
Markides’ view is also about innovation—“good” strategy
making is about thinking and being different
Key themes:
• Companies need to continually explore new opportunities for strategic
innovation
• Strategy innovation is about exploiting unique strategic positions. To do this
companies need to answer some basic questions:
– What business are we in?
– Who are our customers? What will we offer them?
– How will we do this efficiently?
– What kind of organisation do we need to support our choices?
• Unusual success in business derives from doing unusual things
• The essence of strategy and competitive advantage is not doing the same
things as your successful competitors, but doing it differently.
Source: Constantinos Markides. “All the Right Moves”, 2000.
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25. GRATTON
And Gratton’s perspective is that “good” strategy making is
about capturing the emotional commitment of people
Key themes:
• A company’s capacity to perform is dependent on its ability to:
– Capture the emotional commitment of its members, and
– Integrate this commitment into complex modem of co-operation and collaboration
• Gratton proposes humanistic and action-orientated view of organisations:
– Humanistic : corporations are social entities that provide meaning and purpose for people
– Action-orientated : Companies exist not for the development of their employees, but to
perform business tasks and deliver on business goals
– Companies that successfully bridge those two ideas can enhance organisational
performance
• Gratton provides a six-step management process to link the nature and
aspiration of human beings with the performance of the organisation.
Source: Lynda Gratin, “Living Strategies: Putting People at the Heart of Corporate Purpose”, 2000
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26. So, “good” strategy making (from corporate view) is
about . . .
Emerging Themes
. . . horses for courses (specific to each Situational Strategic
company) Management Styles
. . . following a disciplined, formal process
A Formal Process
. . . “between the boxes” stuff (creativity,
learning) Fresh Creative
Thinking/Ideas
. . . operationalising the strategy
Operationalising the
. . . mobilisation Strategy
. . . innovation Being Different
. . . revolution Buy-in and Mobilisation
. . . being different, being unusual
. . . capturing the emotional commitment of
people
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28. STRATEGIC IMPLEMENTATION
Having decided one’s strategy, implementing strategic
intent is essential for operational reality to follow
• The tools to develop an appropriate organisational Turning Vision into Reality
strategy for change are well proven
A powerful business strategy needs to be matched
• However many businesses fail to deliver the strategy by a powerful delivery mechanism in order to turn
they develop vision into reality
High
• Usually the fundamental business management process
is at fault – the bridge between strategy and operation is
not functioning
Unfulfilled vision Challenging
vision
Operational
Power of Strategy
Strategy
Engine
c e
Pa
• Various models exist to ensure the machinery between
strategy and operational engine are effective: No Pedestrian
– Mintzberg’s three step operation
vision vision
– Balanced scorecard
– Business management process. Low
Low Power of Delivery Method High
To exploit an organisation’s capability and potential, the power of its strategy needs to
be matched by the power of its delivery mechanism and pace of implementation.
Source: Alan Meeking, Business Strategy Review, Winter 1994.
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29. STRATEGIC IMPLEMENTATION: MINTZBERG’S THREE STEP OPERATION
Strategic planning must be differentiated from strategic
thinking
Strategic Planning Overview
What is Strategic Planning? Strategic Planning Issues
• Strategic planning is defined as “the • Many companies have a problem with the
process by which an organisation envisions actual planning system. It often breaks
its future and develops the necessary down because of faulty preparation and
procedures and operations to achieve the implementation
future… it requires the clear setting of goals – Line managers not involved
and objectives which provide the
organisation with its core priorities and a – Business units not designed correctly
set of guidelines for virtually all day-to-day – Action steps not defined in detail
managerial decisions” – Strategic plans not integrated with other
organisational controls like budgeting
• It is a structured process that organises and – Objectives not defined properly by top
co-ordinates activities of managers who do management
the planning.
• However, the “how to do it” in practice
varies significantly between companies –
there is no one “right” solution.
What is Strategic Thinking?
• This is the creation of new business
strategies in either a formal or informal
setting.
Source: “The Fall and Rise of Strategic Planning”, Henry Mintzberg, HBR, Jan-Feb 1994.
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30. STRATEGIC IMPLEMENTATION: MINTZBERG’S THREE STEP OPERATION
Strategic planning can be used to programme and
operationalise a company’s strategies in three steps
Codification Elaboration Conversion
• Strategies must be clarified and expressed • Codified strategies need to be broken • Consider the effects of changes on the
in terms sufficiently clear to render them down into substrategies and adhoc organisation’s operations e.g effects on
formally operational, so their programs as well as overall action plans budgets and performance controls
consequences can be worked out in detail specifying what must be done to realise
each strategy • Objectives need to be restated and
• Care and attention to detail is essential so budgets reworked, policies and standard
as not to lose nuance and subtlety • E.g. Build four new factories and hire 200 operating procedures reconsidered to take
new workers. into account the consequences of the
• E.g. A broad vision like “capturing the specific changes.
market for a new technology” is very
different from a specific plan to “increase
market share to 35%, focusing on the high
end”.
• Co-ordination of strategy and
formalisation into an operational
plan.
Programing of strategy in this way will also gain the tangible as well as moral
support of influential outsiders such as financiers, suppliers and governmental
agencies.
Source: “The Fall and Rise of Strategic Planning”, Henry Mintzberg, HBR, Jan-Feb 1994.
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31. STRATEGIC IMPLEMENTATION: BALANCED SCORECARD
The balanced scorecard facilitates the development of
strategic planning through to an operational plan
• The four management processes on the scorecard separately, and in
combination, contribute to the linking of long-term strategic objectives with
short-term actions.
Managing Strategy: Four Processes
Translating the vision
• Clarifying the vision
• Gaining consensus
Communicating and linking
• Communicating and Feedback and learning
educating Balanced • Articulating the shared vision
• Setting goals Scorecard • Supplying strategic feedback
• Linking rewards to • Facilitating strategy review and learning
performance measures
Business planning
• Setting targets
• Aligning strategic initiatives
• Allocating resources
• Establishing milestones
Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996.
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32. STRATEGIC IMPLEMENTATION: BALANCED SCORECARD
The balanced scorecard facilitates the development of
strategic planning through to an operational plan
Communicating and
Translating the Vision Business Planning Feedback and Learning
Linking
• Helps managers build a • Lets managers communicate • Almost all organisations are • Existing feedback and review
consensus around the their strategy up and down the implementing a variety of tends to focus on whether
organisation’s vision and organisation and links it to change programs. Managers company/department/
strategy, in order for people to departmental and individual have difficulty integrating diverse employees have met their
act on becoming “best in class”, objectives initiatives to achieve their budgeted goals
“number one supplier”. – E.g An oil company uses the strategic goals, leading to
Statements must then be scorecard as the basis of frequent disappointment • With balanced scorecard a
translated into operational terms calculating incentive company can monitor short term
that provide useful guides to compensation. • When managers use the results from three additional
action at the local level. ambitious goals for balanced perspectives – customers,
• Traditionally departments are scorecard measures as the internal business processes and
evaluated by their financial basis for allocating resources learning and growth – and
performance and individual and setting priorities, they evaluate strategy
incentives are tied to short term undertake only the initiatives that
financial goals help achieve their long term • Strategies can therefore be
strategies. modified to reflect real-time
• The scorecard gives managers learning.
a way of ensuring that all levels
of the organisation understand
the long term strategy.
Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996.
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33. STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS
The business management process is dynamic and is built
up in stages
The Business Management Process (BMP) Framework
2
Key Performance
Indicators
3
Customer and 1 Performance 6
Strategic
Shareholder Targets
Structured
Business
Needs Review
Objectives 4
Gap Analysis
5
Improvement
Initiatives
7
Linkage
• The business management process is a framework to facilitate operationalisation of an organisation’s strategy
• Its elements do not have to be implemented concurrently or in full to start producing an operational benefit and
organisational learning
• The framework is founded on the premise of Plan-Do-Review – new strategic objectives are set in the light of
achievement and experience hence, institutionalising continuous improvement.
Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4.
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34. STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS
The seven elements of the business management process
allow incremental progress to be achieved and reviewed
Business Management 1. Strategic Business
2. Key Performance Indicators 3. Performance Targets
Process Framework Objectives
• Setting objectives based on needs of • Introducing a balanced set of KPIs • Setting challenging targets against the
organisation’s primary stakeholders related directly to the strategic business KPIs as a spur to achievement and as a
(customers and shareholders) objectives linked top-to-bottom foundation for systematic progress
2 throughout the organisation and derived review
3 • Translating these needs into a limited from the root causes and key drivers of
1 6 number of strategic business objectives operational and financial performance. • Targets must be cascaded throughout
4 to be achieved in a given time period. the organisation, broken down into sub-
5 targets for shorter time windows and
communicated visually.
7
4. Gap Analysis 5. Improvement Initiatives 6. Structured Review 7. Linkage
• Identifying the performance or capability • Developing a limited set of properly • Implementing structured, simultaneous • Replicating the basic BMP framework at
gaps that must be closed in order to planned resources and managed and interactive review of progress each review level and connecting the
deliver the targeted performance levels, improvement programs to close the against both KPI targets and organisation top-to-bottom through
based on the premise that you cannot gaps in performance or capability improvement initiatives cascaded KPIs and structured review.
have a performance target without some
concept of the means for its delivery. • Identifying, prioritising merging and • KPIs are reviewed at an appropriate
rationalising the large number of existing frequency
initiatives thereby releasing energy,
resources and goodwill across the • Performance information is factual and
organisation. is simply presented
• Focus is an action not on excuses
• Follow up is well planned and
conspicuous.
The critical elements of this system are structured review and top-to-bottom
linkage.
Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4.
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35. STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS
Improved performance using the business management
process
Reasons for BMPs
Potential Pitfalls The Pull-Through Effect of KPIs and BMP
Success
• Top-to-bottom attention is • Barriers to change
Cu o ces
directed on achieving the – Managerial frustration
pr
sto s m i
organisation’s key objectives Business
M
m e an m p
bu
ark ess
– Staff cynicism
r d ag rov
sin
et- str
Need
ri v e m e m
co
• Shortfalls in performance are
foc ate
– Lack of resources
en en t en
lla
us gy
promptly and systematically
bo
b u an t
ed
rat
sin d
Cr n an
addressed • Lack of support from the top.
io
Effective
os d p solv
ess
s
s f ro in
PI Leadership
un bl g
M
• A continuous cycle of planning, K
ct i em
an
f
on
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eo
objective-setting, achievement
al
em rv es
Critical Success Factors s
eff
and review drives organisational
en isor s
dU
ec
ta y
t
learning and continuous
n
nd
improvement
• Support from the top io n a MP
tat nd B
Inv
• n a
me
Activities not contributing to key
olv
• Target the enthusiastic first
em
le
Te
business objectives are quickly
p
am
en
identified and eliminated,
Im
t
wo
• External help in implementation
L e g an
releasing resources for more
rk
or
arn isa
productive use. to start the process off and
ing tion
move it to the point where
Cu an g
ch
ltu e
improvement is self-sustaining.
re
“The whole process gives a substantial boost to
managerial productivity. Anything up to a 10-
fold cut in unproductive meeting time is common
place” Alan Meekings
Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4.
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