Many companies think they have a strategy and still the owner and the managers feel the important moments slip through their fingers. For many companies knowing what the goal is is already an achievement. The next step is to get the strategy across and get everybody involved.
So, the whole company is collected in the cafeteria, or the auditorium, and lathered with one liners (marketing got most involved in the strategy) the message is presented. And received with skepticism. Sounds familiar? It happens all the time.
Most people do not understand a message unless the message is cut to size specifically for them. Chances are that you have to explain the strategy a different way for everybody in the company. Each and everybody in the company wants to know what to do in their function. If you give that person the high level lines you are interested in, it will not sink in. Next time, you have to explain it again. Next time you will explain it a bit different, causing additional confusion. After a while you loose track of your own strategy.
Perspective is needed. First admit that the level you are interested in, is not interesting to anybody else in the company. That same statement is valid for everybody else in the company. The information you need in the strategy is different from the information a production manager needs. The mail clerk needs different information too. Managers need more general direction, hand-in-the-dirt employees need detailed information. All employees have their own perspective.
You, the general, the top manager (or somewhere-in-between manager), need a high level overview and a clear view on the goals. The deeper we go into the organization, the more personal the detail. You need to know about those details to explain the impact of the strategy to everybody. Perspectives on your strategy help you understand the details at different levels.
Perspective
As explained before, we want to know:
The answers to those three questions describe a perspective. When we can describe perspectives for all people in our company, we have a complete strategy. Yes, there are multiple perspectives to your strategy. Luckily we can generalize perspectives well enough to keep the strategy manageable.
The highest perspective is that of the company as a whole. The people most interested in the success of the company as a whole are shareholders and banks. In other words, the people who are interested in the financial results of the company. That is why we call the top perspective the financial perspective. This is of course different for organizations that are not focused on financial success. Non-profit organizations and associations with members for example, may not have financial success at the top of their strategy. But, that is a subject for another article.
The company exists for financial success. That is why we make and sell the product or provide the services to customers. The financial success is the income of the owner, the dividend for the shareholders or the interest for bankers.
Given this perspective, we can answer the questions:
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Why are we settings our goals? To achieve financial success.
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How are we achieving our goals? By selling a product or service, that brings in revenue.
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Who are we doing it for? For shareholders and banks.
We now have a perspective in which we can collect our Financial goals, the goals that entice people with money to invest in our company.
The next perspective builds on the “how?” question of the financial perspective. If we want to sell a product or service, we need to satisfy customers and entice them to buy our product or service. We will call this the Customer perspective. However, in some cases we have to call this Cooperative due to a lack of customers. Imagine for example, an army. The army wants to achieve victory by defeating the enemy. So, the army needs the cooperation of the enemy to achieve its success. Customers are not enemies of course, but we need their cooperation to achieve our financial success.
Let's answer the three questions for the Customer perspective:
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Why are we setting goals? To sell a product or service, that brings in revenue.
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How are we achieving our goals? By developing and producing our product or service.
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Who are we doing it for? For customers.
In the Customer perspective we collect the goals that entice the customers to buy our products.
And, on to the next perspective. If we want to develop and produce a product, we need an organization and processes to have the people in the organization work together. Of course, if there is only one person in the organization... Still this organization or this one person must perform a number of processes in order to consistently produce the product or service. At a minimum there are the selling and billing processes, that usually are different from the production process.
We call this the Process perspective. Alternatively we could call this the Organizational perspective, because here is where we look at how processes or organizations work together.
The answers to the three questions for the Process perspective are as follows:
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Why are we setting goals? To develop and produce our product or service.
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How are we achieving our goals? By effort of our employees.
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Who are we doing it for? For the organization as a whole.
In the Process perspective we collect the goals that entice the organization as a whole to develop and produce the product or service.
If we want to gain the effort of our employees, we need each individual in the organization to stand behind the strategy. We call this the Individual perspective. Most goals in this perspective focus on how each individual can grow and learn in the organization, so we also could call this the Learning and Growth perspective.
The answers:
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Why are we setting goals? To maximize the effort given by individuals in our organization.
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How are we achieving goals? Difficult to answer, possibilities are: fitting or leave; grow to the needs of the company; find your place. This is much up to the individual.
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Who are we doing it for? The individuals in the organization.
In the Individual perspective we collect the goals that entice individuals to make an effort for the company.
Of course we could continue with yet another perspective, if only we could answer that “How?” question better. But, at this point it depends on the goals of the individual. Most often the answers have to do with the amount of effort the individual is willing to give for the money received. At that point we are at the top of an individual strategy: what are the financial goals of this individual.
When we have addressed the financial stakeholders, customers, organization as a whole and all individuals in the organization, we addressed everybody involved in the organization and so we can stop developing our strategy in further detail.
Know Your Audience
We have four perspectives in our strategy:
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Financial Perspective,
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Customer Perspective,
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Process Perspective,
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Individual Perspective.
Each perspective is related, to other perspectives. Supporting the higher perspective and supported by the lower perspective. Each perspective is suited for a different audience.
When you talk to the investors, you talk and explain extensively about the financial perspective. You will use the customer perspective to support the financial perspective, and the process perspective and the individual perspective to show it can be done by the organization.
When you talk to customers, in meetings with customers or in marketing material, the financial goals are usually not mentioned much but may explain why you are doing something. For example, achieving a certain financial size to achieve procurement benefits may well be interesting for customers to know. However, the information that the organization can support the promises you make to the customer and that the individuals are willing to make an effort are more interesting to most customers. Customers want to be able to believe the promises you make to the customers.
When talking to managers in your organization, or in small organizations: when talking about processes, you explain extensively how processes must work together, how hand-offs are organized and which parts of the organization must grow and which must shrink. You can explain this in terms of the customers willing to buy and improved product that will improve the financial results of the company. The explanation is supported and made credible by the the Individual perspective.
When talking, addressing individuals in the organization, the Individual perspective is emphasized. What do you need from individuals? What is available to get the individual there? How can each individual contribute to the quality of the process, the quality of the product and the quality of the financial results.
When Building a Strategy
A strategy is built up of goals. When collecting these goals, keep the perspectives in mind. The perspectives will help you communicate the strategy later. Good communication will help increase the chance of success of the strategy.
Each perspective must have goals. Each goal(except in the Financial perspective) must contribute to one or more goals in the next higher perspective. And thus, each goal (except in the individual perspective) must be supported by one or more goals in the next lower perspective. You can collect goals until the people who are the most involved in the perspective are bought in to the strategy.
That will get the strategy across.
Further Reading
The above is roughly modeled after Kaplan and Norton's “Strategy Maps.” At the minimum my ideas about strategy are strongly inspired by their books, including “Strategy Maps”, “The Strategy-Focused Organization” and “The Balanced Scorecard.” Kaplan and Norton discuss strategy at the enterprise level, my goal is to have the same approach available for small and medium businesses. Using a somewhat stricter definition and modeling of a strategy, my approach is also applicable to one-person, individual strategies.
The importance and possibilities of the Process or Organization Perspective are described by Rummler and Brache in their book “Improving Performance.” That book explains how an organization and its processes should be designed from strategic goals. Although the view on strategy is slightly different, the book gives a clear view on how strategy interacts with organization and processes.
Everyone interested in measurable goal setting and using a strict methodology to achieve it should learn more about Six Sigma.
