The Power of Alignment [Part I]: Four Strategic Components
Once an industry leader, an electronics company dramatically shifts its strategy to regain lost ground. Its plan seems simple: Implement enterprise resource planning (ERP), software that will track activity across the organization and standardize measurement.
But doing that’s not as simple as it sounds. Besides requiring a significant technical effort, ERP impacts an organization’s culture to a degree few companies fully appreciate. It requires employees to change how they work and collaborate, tightens controls and procedures, narrows the scope of some roles and changes the pace of almost everyone’s job.
The Power of Alignment
Alignment—or how an organization’s culture syncs up with its strategy—is an important contributor to performance. In a study of over 1,000 respondents from more than 100 companies, alignment, or a lack of it, accounted for a 30-percent difference in performance between firms. Considering the many factors that drive business performance—the economy, competition, technological change and government regulation to name just a few—executives have little choice but to give it careful consideration.
If they don’t, the consequences are serious. According to McKinsey, a shocking 70 percent of transformation efforts fail. The culprit: lack of alignment between strategy and culture.
Think of it this way: A strategy that’s truly transformative will inevitably change how employees interact with each other, approach their jobs and communicate with customers and vendors. Yet too often leaders fail to pay enough attention to the challenges involved with adjusting the mindsets and behaviors of employees in order to match a new strategy.
Yes, managing alignment is challenging. It’s like building a jigsaw puzzle when the pieces are both moving and changing shape. But even when leaders recognize their organization’s culture must shift to support a new approach, they must put in the effort to identify the culture’s current form and describe how it must look in the future.
Measuring Alignment
Historically, executives assessed alignment and success through operating metrics. While this is the state-of-the-market approach, it carries high risk. Operations data tends to focus on efficiency and effectiveness rather than alignment. Also, it often fails to reveal underlying faults in an organization’s infrastructure.
To assess alignment—and anticipate how it might shift—leaders need to rapidly identify challenges, easily pinpoint where intervention is needed and precisely measure the outcomes that demonstrate how well culture and strategy are coming together.
This is what the Organizational Strategic Assessment™ (OSA) is designed to do. It enables executives to quickly and easily see how well their workforce has aligned with their company’s strategy and the culture necessary to support it. It also helps them design new approaches and identify critical areas that must shift in order to improve alignment.
OSA assesses the organization’s culture through the lens of four strategic components: strategic focus, relationships, daily operations and people development.
Stopping the Bleeding
Let’s return to our electronics company. Previously, it had taken an analytic approach to the business, believing that would maximize profits. But after decades of market leadership, the firm’s executives realized they were falling behind. When they implemented ERP as a solution, they didn’t realize they would have to change the organization’s culture, as well, to match the faster-paced, more competitive environment.
Using ERP forced employees at all levels to change the way they interacted—in other words, how they managed their relationships. The company’s culture had reflected decades of successful market leadership, but now that legacy had to evolve. Processes and collaboration had to become more innovative and serve customers more effectively. No one could consider resting on their laurels anymore.
This would have a direct impact on the third area, daily operations. Traditionally, the company functioned according to a strict hierarchy, with a strong top-down relationship between managers and employees. The ERP strategy required looser relationships so that employees and teams could operate more independently and respond to customers more quickly.
Finally, in order to be more responsive, the company had to hire people with real track records of performance—another big shift. Previously, the organization could afford to focus on development, either recruiting people with high potential or growing talent from within. In the modern, fast-pace world of business, that approach was no longer viable.
In short, the four strategic components of OSA were misaligned. To executives, the results were painful.
Getting Back in Alignment
Not surprisingly, employees resisted making changes. Productivity dropped. Key players threatened to jump ship. Market share continued to erode. For their part, the company’s leaders were perplexed and frustrated. They couldn’t see where they’d gone wrong, or how they could get the business back on track.
The answer came after they reviewed their steps and took a hard look at how the company did business every day: They had developed a new strategy without considering its impact on culture. To align the two, they had to involve employees. The workforce had to feel not as if it was trying to build a new ship, not save a sinking one.
Using the OSA, executives identified how each of the four strategic components needed to change. It gave them a language to communicate clearly and get employee buy-in. In addition, the assessment spotlighted gaps in their transformation efforts and areas where leaders would have to realign their teams. In order to move the organization into alignment, the executives learned, they needed to consciously change mindsets, behaviors and processes throughout the workforce.
How they accomplished that is what we’ll look at next.
The Power of Alignment [Part II]: Mindsets, Behaviors and Processes