Strategic measurement and management for organizational improvement
a model for our nation's government
Creation and maintenance of management systems is a task driven by immediacy. At best, it is viewed as an expedient – a means of achieving a specific goal or set of goals. The commercial sector consistently teeters on the brink of financial downturn and is driven by this economic reality (Afuah, 2004, p. 3). Fueled by market forces, such as competition, supply and demand, and, as seen recently, petroleum prices, commercial organizations must be vigilantly prepared to respond to crises of cost or revenue. For this reason, these organizations have been at the forefront of management innovation and the creation of streamlined approaches to achieving organizational goals. Commercial sector organizations have recognized the need for implementing strategic systems for the management of resources, revenues, costs, and risks. Such systems are supported by measurement models that address strategic imperatives while sustaining the health of these systems.
Conversely, Federal organizations, being less immediately impacted by the same market forces as their commercial counterparts, have lagged well behind in the adoption of strategic management and measurement systems. These organizations are characterized by ad hoc approaches to implementation of management innovations, which often fade as the onus for their creation diminishes. The impact of this lag is the inefficient, and often ineffective, response to issues or crises in a timely manner and the failure of countless initiatives. Recent comments made by Associate Deputy Secretary of the Department of Energy, Bruce Carnes, illustrate this point. Secretary Carnes was quoted as stating “[t]hat the paradigm for the Department [of Energy]” is that “we make commitments we can't meet, we make promises we can't keep.” Secretary Carnes went on to comment “[m]y view is that prayer is not a strategy for project management.” The Secretary's comments were made in reference to a “disease” present in the U.S. Federal Environmental Management Complex. He specifically highlights recent programmatic failings at the Waste Treatment and Immobilization Plant at the Hanford site in Washington State, which is facing a new round of cost and schedule increases (Weapons Complex Monitor, 2005, p.2).
The relatively immature state of strategic planning in Federal organizations poses a threat to the achievement of National goals and objectives and impacts these organizations' abilities to serve effectively as stewards of the public interest. Unless a clear strategic vision is articulated at both the National level and throughout the many agencies of the Federal government, the status-quo of inefficiency will be maintained and the benefit to the American people will fail to reach its full potential. This paper addresses the practice of strategic management and measurement and proposes a path forward to implementation of strategic systems in Federal agencies.
The Role of Mission and Vision
Strategic management, stripped of complicated terminology and models, is nothing more than a means to facilitate achievement of a specific set of goals or objectives. That being true, the primary input for establishment of a strategic plan is the articulated mission, vision, and goals of the organization. These elements establish the destination for crafting of the strategic roadmap. In the corporate arena, it would seem that this tenet is a foregone conclusion. Ford Motor Company (2005) lists their mission and vision on their website as:
Our vision is to become the world's leading consumer company for automotive products and services.
We are a global family with a proud heritage, passionately committed to providing personal mobility for people around the world. We anticipate consumer needs and deliver outstanding products and services that improve people's lives.
Both mission and vision are straightforward and leave little room for interpretation as to the desires of the organization. Google's (2005) mission statement, similarly clear and direct, states that they seek to “organize the world's information and make it universally accessible and useful.”
Both of these companies, leaders in their own fields, have determined a clear path forward for where they want to be as organizations. They have articulated what they do and why they do it, and, in the Ford example, where they want to go as an organization. In communicating the strategic where, when, and why, they have given themselves a basis for creation of a strategic management and measurement plan – or how – for achieving their desires. Frances Hesselbein (1997, p. 83-84) asserts that the “essence” of strategic management is the ability of the organization to not only to clearly articulate, but also understand their mission. According to Hesselbein, this is a concept that transcends the size or complexity of the organization.
Following the example of their corporate counterparts, government organizations have begun to establish mission and vision statements as well. On their website, the U. S. Food and Drug Administration (FDA) (2005) lists their mission statement as:
The FDA is responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, our nation's food supply, cosmetics, and products that emit radiation. The FDA is also responsible for advancing the public health by helping to speed innovations that make medicines and foods more effective, safer, and more affordable; and helping the public get the accurate, science-based information they need to use medicines and foods to improve their health.
Of immediate note is how much more complex this mission is that that of Google listed above. Also notice how less tangible the stated desires seem when compared to those expressed in the mission of Ford Motor Company. Additionally, the mission and vision statements should not be a litany of services that the organization provides, but distillation of what is important to that organization and articulation of where the organization wants to go. Compare the following mission statement provided by the U. S. Secret Service (2005) on their website with the mission of Ford.
The United States Secret Service is mandated by statute and executive order to carry out two significant missions: protection and criminal investigations. The Secret Service protects the President and Vice President, their families, heads of state, and other designated individuals; investigates threats against these protectees; protects the White House, Vice President's Residence, Foreign Missions, and other buildings within Washington, D.C.; and plans and implements security designs for designated National Special Security Events. The Secret Service also investigates violations of laws relating to counterfeiting of obligations and securities of the United States; financial crimes that include, but are not limited to, access device fraud, financial institution fraud, identity theft, computer fraud; and computer-based attacks on our nation's financial, banking, and telecommunications infrastructure.
Organizational mission and vision must be both clearly stated and have a degree of tangibility if they are to be useful in forming the direction of strategic plans and strategic management efforts. Another element of critical significance in the strategic paradigm is that of measurement, metrics, and the systems and processes used to collect and report these items. The following section is a discussion of measurement in a strategic context.
Measurement and Continuous Process Improvement
The Role of Strategic Measurement
Strategic management and measurement is an overarching practice that is fuelled by sound project management practices. Theories of measurement executed at the strategic level are expressed at the project level. Generation and reporting of meaningful metrics in an organization can facilitate management's understanding of project status and guide the implementation of strategy. In a project-oriented environment, as found in many Federal agencies, measurement is crucial for project success and provides increased visibility into how projects progress against established goals. Measurement imparts an epistemological understanding of project status to aid management decision-making, enable the comparison of projects to facilitate financial or resource decisions, and, most importantly, provide a linkage of projects with the mission, vision, and goals of the organization (Exhibit 1).
Exhibit 1: The Role of Strategic Measurement
Project execution is subject to roadblocks and issues that arise outside of any risk management planning. This is especially true in the Federal government where many projects are one of a kind, technically advanced undertakings such as those at the Department of Energy discussed earlier in this paper. Failure to institute adequate measurement systems will result in miscalculated and ineffective risk mitigation strategies.
The ultimate challenge comes in effectively choosing the right set of metrics to accurately portray the current status of project success and strategic alignment. Common mistakes in metrics development include:
- Mistaking discrete tasks for measurable objectives;
- Mistaking operational measures for strategic measures; and
- Having too many metrics
An organization can have any number of operational measures, but their strategic ones should generally be limited to as few as six and no more than a dozen (Kaplan, 1996). An over abundance of strategic measures can prevent organizations from focusing on their strategic objectives. Over-measuring also makes it difficult to determine what metrics are truly important because there are so many to manage that each one cannot possibly be given the attention they deserve.
Another potential pitfall linked to organizational ability is metrics overload. If primary project producers are spending more time collecting and reporting metrics than in project execution tasks, these activities will have a negative impact on overall project health and production capacity. In general, it is best to reach a healthy middle ground between what one would like to measure and what absolutely needs to be measured.
Organizational abilities also factor into the creation of measures - that is the physical ability to collect, measure, store, or report data in a meaningful way. One of the key concepts in measurement is that it is critical to measure only what is important and to only collect data that will be somehow utilized for a meaningful purpose. Project or process measurement is often viewed as a bureaucratic hindrance to project production. Collection of meaningless data can fuel that misconception and may lead to non-compliance in metrics collection efforts by key project participants.
Measures chosen should be driven by organizational mission and goals and the nature of the paradigm in which the project exists. There are several factors in developing measures (Exhibit 2). However, these are not the only things to consider. In most organizations, executive guidance can weigh heavily on what should be measured. This is especially true in the Federal Government where guidance and performance requirements are often dictated at each level above an organization including the Executive and Cabinet levels. Federal agencies are often subject to the legislative or regulatory performance and measurement standards imposed by other Federal agencies or even through Congressional mandate.
Exhibit 2: Factors Influencing Measures Development
Continuous Process Improvement
The Continuous Process Improvement Cycle is a critical element of any strategic management and measurement system (Exhibit 3). Strategies need to be adapted over time to account for changes in the organizational environment. In the Federal government, new leaders move into the organization and political parties ebb and flow in the degree of their power. As leaders deal with the financial highs and lows that occur, the organization, in post implementation, needs to continually address how well the measures, tools, processes, and solutions that came out of the model are serving to address their strategic needs. This is not an easy process, but should be undertaken at least once each year – preferably twice. If projects and actions are out of line with strategy and goals, these rogue activities can lead to tremendous amounts of wasted efforts and resources. By continuously assessing the performance measurement criteria and their alignment with strategy, much of this waste can be minimized. This will allow the organization to refine its measures and optimize performance and impact.
Exhibit 3 - The Continuous Process Improvement Cycle
Strategic Systems Deployment Model
Implementation of strategic management systems in Federal organizations is a difficult task. Because of the relative low level or strategic maturity in many of these organizations, it is necessary to take a holistic approach to systems deployment that may begin with refinement of the mission and goals of the organization. Perhaps the best way to understand how these systems are best implemented in the Federal environment is through an example. The Strategic Systems Deployment Model (SSDM) depicts the steps that may be taken when embarking upon such and endeavor (Exhibit 4). This model assumes a base level of strategic organizational maturity and focuses on implementation of the Balanced Scorecard as the primary management and measurement tool for strategic integration. While there are countless tools that will achieve this objective, the Balanced Scorecard is a preferred tool because of its relative simplicity and ease of implementation. Additionally, the Balanced Scorecard has already gained some traction in Federal organizations and is somewhat accepted and respected in that arena. However, regardless of the solution, the steps to implementation remain the same and the following model can very adequately facilitate a methodological approach to strategic management and measurement in Federal organizations as well as the commercial sector. This SSDM proposes a four- phase approach to strategic system implementation that begins with a thorough organizational analysis.
Exhibit 4 - A Model for Strategic System Deployment in Federal Organizations
Examination of SSDM Phases
Phase I: Strategic Analysis
The foundation for strategic management and measurement is developed thorough strategic analysis of nearly every aspect of the organization that will be impacted by strategic realignment including:
- The organization's strategic framework – how well the mission, vision, goals and strategy of the organization are articulated and aligned. In an organization with a lower level of maturity in this arena, upfront strategic planning will be more time consuming and intense but necessary for successful system implementation;
- The organization's existing project framework;
- Organizational maturity level. Organizational maturity can be assessed by using the Project Management Institute's Organizational Project Management Maturity Model (OPM3®) (Farenkrog, Abrams, Haeck, & Whelbourn, 2004). This model can help an organization to tie projects and programs into organizational strategies and goals and assess the quality of project, program, and portfolio activates within the organization;
- The technological environment including which tools exist in the organization that might aid in the Balanced Scorecard deployment;
- The internal and external stakeholder environment; and
- Environmental analysis.
Phase II: Strategic Planning
The Strategic Planning Phase cements the foundation for a successful implementation. Utilizing data gained in the Strategic Analysis Phase, this segment of the model works to clearly define requirements for development and to articulate expected outcomes. Time is spent in this phase ensuring that the mission, vision, and goals of the organization, as well as, its strategic plan and strategic objectives are all clearly defined and conform to strategic management best practices.
Once the strategic framework has been ensured, there are two imperatives that must be addressed and can be done so in either a parallel or sequentially manner. First is the task of metrics development. This effort polls stakeholders at different levels of the organization, ideally in focus group format, to define what absolutely needs to be measured in the organization, at each level, to ensure the achievement of strategic goals and objectives. Second, in this phase is the assessment of tools or other technology resources that, based upon client requirements, will assist the organization in generating, collecting, utilizing, and reporting of metrics collected.
Phase III: Solution Development
In the Solutions Development Phase, the organizational Scorecard (or other solution) is constructed. This is often an arduous process and involves alignment of metrics with Scorecard perspectives and, often, redefining of metrics based upon new or different perspectives developed in earlier phases. In this phase, a tiered Scorecard system is established where strategy is measured at all levels of the organization and aggregates up to the executive/director level. This is important because if strategy is only a unidirectional push down from the top of the organization and is not measured or owned in part by the lower levels of the organization, the implementation effort is likely to fail.
The Solutions Development Phase also begins to establish criteria for selection and ranking of projects in line with strategic goals. This is one of the most important steps in the process as this is where the strategy and goals begin to cross over into the operational realm and unify the organization. In many organizations, this is also the point at which a Project Portfolio Management (PPM) System would be established. At this time, project-level measurement systems are established that translate higher-level strategic measures into tactical performance metrics.
Project measurement systems should report two types of data – tactical and strategic. The tactical measures are those used by project managers to measure the technical project data needed for proper management at that level, but that does not roll up into the strategic arena. Strategic project measures, on the other hand, are directly linked, via strategic measures, to progress toward the achievement of the mission and goals of the organization. Because of their strategic pedigree, project performance measures of a strategic nature can be used to determine how well a select project is performing and how well it ties in to the core vision of the organization. Organizations can use these types of measures during project selection efforts and to make decisions about the allocation of key resources.
A second important point to be made about project performance metrics is that they must be established, measured, and reported for each project or the effectiveness and impact of both the project and the organizational strategic management plan will be diminished. Even in organizations that do not use some sort of project portfolio management system, strategic measurement must be established for projects during the project planning phase. The process for generation of these metrics is, much the same as it is for its strategic counterparts, simply a distillation of the mission, vision, and goals of the organization, this time down to the most fundamental organizational level.
Phase IV: Solution Deployment
Deployment of the developed solution(s) is critical and often much of the tweaking that needs to be done can be taken care of through the use of a pilot deployment for both tools and processes. A pilot deployment is important because it affords the opportunity to learn, on a smaller scale, what was or was not properly addressed during solution development and mitigates the impact of errors with toolsets and processes. After the pilot has been deployed, resulting data should be reviewed and solutions should be fine-tuned as needed. Then, the Enterprise tool and solutions deployment begins. In the post deployment period, a deployment review is crucial to determine what impact the new process or solution had on the target organization.
Strategic Management and Measurement are not obtuse concepts, but they must be approached appropriately and be supported by the foundations of organizational mission, vision, and goals and a strong strategic measurement approach. The model articulated above, while illustrative, can serve as a roadmap for implementation of strategic management systems in the Federal sector. As stated in the introduction of this paper, the effective need for strategic systems thinking and plans in Federal government is immediate. The failure to implement these concepts has a direct impact on the cost of projects and initiatives and on the effectiveness of the organization in serving the public interest. In the current global political environment, there is little margin for error in Federal responses to issues and crises, institution of strategic management and measurement approaches can help close the gap between goals and achievements.
Afuah, A. (2004). Business models: A strategic management approach. New York: McGraw Hill/Irwin.
Fahrenkrog, S., Abrams, F., Haeck, W., & Whelbourn, D. (2004). Organizational Project Management Maturity Model (OPM3®) Retrieved July 15, 2005 from http://www.pmi.org/prod/groups/public/documents/info/pp_opm3rfpfile.pdf.
Ford Motor Company. (2005). Overview. Retrieved July, 15 2005 from http://www.fordmotorcompany.com/en/company/about/overview.htm.
Google. (2005). Company overview. Retrieved July, 15 2005 from http://www.google.com/corporate/index.html
Hesselbein, F. (1997). The circular organization. In F. Hesselbein, M. Goldsmith, & R. Beckhard (Eds.). The organization of the future (pp. 81-86). New York: The Peter F. Drucker Foundation for Nonprofit Management.
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Boston: Harvard Business School Press.
United States Food and Drug Administration. (2005). FDA's mission statement. Retrieved July 15, 2005 from http://www.fda.gov/opacom/morechoices/mission.html.
United States Secret Service. (2005). Mission statement. Retrieved July 15, 2005 from http://www.secretservice.gov/mission.shtml.
Unrealistic baselines, a continuing problem for EM (2005, June 13). Weapons Complex Monitor 16 2.
©2005 Oxley Enterprises, Inc.
Originally published as a part of 2005 PMI Global Congress Proceedings – Toronto, Canada