Strategic alignment

the connecting link between strategy and execution

Abstract:

As project practitioners, we understand the importance of project execution, which is nothing but putting Organization Strategy Into action. However, often times the link between strategy and execution is under-recognized. This paper discusses the importance of strategic alignment in organization strategy, portfolio selection, key performance indicators (for operational matrix) and project execution. This paper also presents the evidence of strong co-relation between greater business results and improved strategic alignment, as well as the cost of not aligning strategy and execution. Lastly, the paper gives some tangible tools to obtain greater strategic alignment in the organization.

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Presented by:
Devang Patel, PMP
Kyra InfoTech Inc.

Organization Strategy Definition:

Strategy (Greek “στρατηγία”—stratēgia, “art of troop leader; office of general, command, generalship”) (Strategy, n.d.) is a high level plan to achieve one or more goals under conditions of uncertainty.

Why strategy is important: Strategy gives a common vision for the organization, serving more like a North Star. It guides activities and decision-making based on a common set of assumptions.

Companies with strategy produce better business results than companies that have no strategy at all. Companies that align strategy and execution see even better results.

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Exhibit 1

The good-to-great companies did not focus principally on what to do to become great; they focused equally on what not to do, and what to stop doing (Collins, 2001).

Companies that only do things that align with the strategy, and not the things that don't align with the strategy, allows organizations more resources and time to execute what matters the most.

Strategic alignment, not just limited to the projects, but to everything that the company does, is primarily broken into two broad categories:

  1. Projects: Preparing an organization for tomorrow
  2. Day-to-day operations: managing today's business

The following example demonstrates where company departments have competing goals and where strategy is not in alignment with various functions within the organization.

Example:
Harvard Business School senior professor was engaged in an advisor role for the airline industry. He was flying first class to meet with the executive team in London.
Everything was great; the boarding process, the onboard food, greetings at the destination, until the baggage claim came into the picture. It took more than 20 minutes for baggage to arrive for the first class passengers.

After a discussion with the executive team, it was discovered that the baggage claim team was given an end of the quarter budget target to meet. This budget target was in conflict with the strategy of providing the best possible experience for the first class passengers (Sasser, 2002).

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Exhibit 2

Aligning Strategy and Execution

  1. Commitment to the strategy
    Strategic Planning is basically a two-fold process and involves input from many people in the organization.

    First, assessment of the environment in which the company operates. This includes assessment of macro-economic condition, political and legislative changes, competition, customers, and alternatives.

    Second, what a company should do to improve chances of success. Input solicitation from all functional leaders increases the chances of strategy acceptance.

  2. Communication of strategy
    According to Professor Robert S Kaplan of Harvard Business School and co-creator of the balanced scorecard, “You have to communicate the plans to employees seven times in seven ways” for them to understand those plans.

  3. Performance management system
    The performance management system provides clear definitions to the organization strategy in terms of goals and targets. It helps organizations align priorities, resources, and operations, and provides a holistic view of an organization's functions. The previous example of the airline industry's competing goals could have been prevented if the executive team would have looked at the holistic view of the operations. Scorecards are one of the most widely used tools in the industry for a performance management system.

  4. Selection of the right project portfolio to support strategy
    We have seen over and over two symptoms in the organization:
    1. Redundancy in project selection and
    2. Pet project syndrome

Specifically in larger organizations, there are multiple projects going on to obtain a single objective. For example, one of the clients I worked with had an objective of electronics document management. Multiple business units had many initiatives going on to obtain the same objective. This led to three different flavors of an electronic document management system, ultimately causing maintenance overhead over many years.

Pet project syndrome
During project portfolio selection, cognitive biases and politics play a major role. Often times, individual or team agendas supersede an organization's agenda.

How to overcome biases, politics, and proper allocation of resources to the right portfolio, by embracing rational decision making?

During a previous engagement, we developed a simple prioritization matrix to quickly and objectively prioritize projects for the organization. The sponsoring department, with assistance from the project management office (PMO), would respond to simple questions. The prioritization matrix would provide a score based on those responses. The project score, along with the business case, would make those decisions objectively for the executive steering committee. See Exhibit 3 for an illustration of a prioritization matrix.

Project Prioritization Matrix Sample

Exhibit 3: Project Prioritization Matrix Sample

5. Align Incentives: Put your money where your mouth is.

By aligning an incentive system, organizations can influence and reinforce desired behavior in employees. The incentive system provides clear understanding of a company's core values, and guides employees with selection of action(s) on a day to day basis.

Conclusion

“Strategy without tactics is the slowest route to victory; tactics without strategy is the noise before defeat.” - Sun Tsu, Ancient Chinese Military strategist.

“The essence of strategy is choosing what not to do.” - Michael Porter

Strategic alignment provides a framework for decision making on what is important to the organization and what is not. It brings harmony in planning and action.

Collins, J. C. (2001). Good to great. New York, NY: HarperCollins.

Sasser, E. (2002). The parable of the bungled baggage and the unhappy customer. Harvard Business Press. Retrieved from http://hbswk.hbs.edu/item/3147.html

Strategy. (n.d.) In Wikipedia. Retrieved from http://en.wikipedia.org/wiki/Strategy

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

©2013, Devang Patel
Originally published as a part of 2013 PMI Global Congress Proceedings – New Orleans, Louisiana, USA

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