aligning the vision of your business strategy with your organization’s ability to execute. Perhaps one of the most important is making sure the execute responsible for the results (who that is is an entirely different conversation) is wearing bi-focal lenses.
This is an excellent metaphor I picked up in one of the many facilitated workshops I’ve done (I wish I could remember the man’s name or what company he was from) but it is a great phrase to bring to life a much bigger idea.
Basically, one of the skills an executive who is responsible for the execution engine that is driving shareholder value needs to have is a very fungible sense of time. What does this mean? Well here are some “truths” about time.
- Valuation is a reflection of the future. Your firms’ valuation (either it’s market capitalization or what other investors will pay for it) is a reflection of FUTURE value, not current or past. Let that sink in. The stock of your firm already factors in “the markets” belief of your value.
- The strategic focus in based on where things are heading. Because your organizations’ primary mission is to increase shareholder value, your CEO, CFO, and maybe your strategy team are far more interested to predict what the world will look like in the future (but not too far out) and then develop a strategy based on that. In other words, the vision they have is a view of the future. Not right now.
- A strategy is translated into budgets. Part of the strategy is to set metrics or guidelines of performance. For example if a CEO believes a) strongly where a market is heading and b) they can improve the overall productivity of the organization (mostly by reorganizing or cost cutting) and capturing these anticipate future revenue streams, they can justify huge gains (For example, an improvement of operating margin from 10% to 20% over three years).
- Execution requires a balanced focus on a short and long term. CEOs and CFO’s are very smart people so they will plot out the path from 10% to 20% over a three or five-year plan. Year one is easily obtainable (say get to 12% operating margin). Point? CEOs and CFO’s have an event horizon over a period of time. Lens 1 – 3-5 year horizon.
- Well-intended activities to drive annual number get launched. What happens next is where you start getting disconnects in time. A massive flurry of activity happens across the organization with annual strategic planning heavy focused on hitting the annual target. It makes sense, the CEO and CFO cannot afford to miss the “streets” expectations that they set, or the confidence the market has in the firms “future” gets discounted and the stock price might go down. But, what it means is that firm is now squarely fixated on its annual target. Lens 2 – Annual target.
- Resources are allocated by budgets, not needs. The money to pay for all of these activities believed required to get to the goal (in this example 12%) comes from all of the various functional groups and their budgets. The budgeting process set up is mostly based on allocations and what was spent in the prior year. So, now the focus shifts between the past year and the present time (right now what your budget will be). Lens 3 – Past focus; and right now (what budget do we have.
- Targets are set looking through rear view mirror. Goals, objectives, and quotas get established for sales teams and people. These targets are often set by gauging past performance to predict the future and by making many different assumptions. What’s worse, it’s typical that the quotas (and associated compensation plans that meant to be an incentive for the right behaviors) are rolled out late. Lens 4 – past focus to create the targets and then given sales teams less than a year to achieve their annual target.
- Forecast and pipeline cadence out of alignment with the buying cycle. Many firms are moving to set quotas based on quarterly or even monthly performance. However, if the problem-solving lifestyle for a targeted customer is one year and the salespeople are managed to a monthly target – those salespeople are going to be encouraged to be out of alignment. Lens 5 – focus on meeting internally created deadlines and not customer oriented milestones.
- Past successes versus learning new techniques. Most business strategies today are differentiation driven and therefore require some degree of change to sales tactics (selling to new buyers, getting ahead of an RFP, cross-selling, providing more of a total solution, etc). While these changes are stated, the degree of change isn’t well communicated or understood. What will happen is that sales leaders (under pressure to produce monthly or quarterly results) will revert back to techniques that worked for them in the past (think “proven best practices”) rather than work to develop a new technique. Lens 6 – Leveraging past success and beliefs when learning approaches and strategies is required.
- The immediacy of the fog of battle. Any human is going to act with intensity when under pressure and salespeople have always been the most accountable roles in any organization. Feeling the pressure to respond quickly to various customer demands doesn’t put the sales force in a state to thoughtfully consider the future strategy (and with so many unaddressed problems are likely to get more agitated with conversations about the vision). Lens 7 – being in “the moment” of each minute of each day. Making the calls, following up, resolving issues, etc.
Bottom Line: Tightly aligning the business strategy (which drives the expectation and perception of the valuation) with the overall ability to execute in a way that shows trajectory to that vision (which provides evidence your company is on the path) is a lot more challenging today. Regardless if its: targeting a new buyer, the increased complexity of a market, the need for new sales approaches, goals to combine different products and services into new value for customers, rapidly changing competitive environments, the accelerating pace of business cycles, the transformative effects of technology, new styles of work or any combination above – organization are going to need to learn new ways to blend the their strategic planning with their execution approaches if they want to compete in the 21st century economy.