Excellence in execution
Periodic surveys conducted by The Conference Board reveal that excellence in executing strategy is the chief concern of executives worldwide. They have good reason to be concerned. According to Dr. David Norton, less than 10% of effectively formulated strategies are effectively implemented. Yet strategy and its execution are at the core of organizational success. Seventy percent of organizations that have a formal strategy execution process in place outperform their peers.
Dr. Norton was in town recently to speak before business and government leaders at a conference organized by the Institute for Solidarity in Asia (ISA). ISA works with local government units (LGUs), national government agencies, and professional associations to help them implement a performance governance system (PGS) based on the Balanced Scorecard (BSC). BSC is a formal system that supports effective formulation and execution of strategic plans. It was developed by Dr. Norton and retired Harvard Business School professor Dr. Robert Kaplan.
As I wrote here recently, the ISA has had some notable success in helping LGUs such as San Fernando, Pampanga and Iloilo City, Iloilo. San Fernando received a special award from ISA at the conclusion of the conference for its success in institutionalizing the PGS. Successfully institutionalizing the program means that it has made strategy an ongoing process that transcends shifts in leadership. Iloilo has also been recognized internationally for its success in implementing and sustaining the PGS.
The experience of these cities shows that good governance can flourish in the Philippines, despite its reputation for corruption and bureaucratic inefficiency. But to flourish, LGUs and other organizations-including those in the private sector-must practice five principles of what Dr. Norton calls strategy-focused organizations. Those principles are: 1) Mobilize change through executive leadership; 2) Translate strategy to operational terms; 3) Align the organization to the strategy; 4) Motivate to make strategy everyone’s job; and, 5) Govern to make strategy a continual process.
The first principle is basic yet elusive. Strategy, Dr. Norton reminded his audience, is not led from the bottom up. It is a top-down process. Translating strategy to operational terms is the core of effective strategy formulation. It involves viewing the organization from four perspectives: financial, customer, processes, and learning and growth. Financially, a common objective is creating new sources of revenue. The measure for that objective could be revenue from new services and products in the private sector. In an LGU, the objective might be increasing tax efficiency, and the measure might be revenue from real estate taxes. Then, a target is agreed upon.
From the customer perspective, increasing customer satisfaction is something all organizations should aspire to achieve. That’s the objective. The measure is customer satisfaction, and the target should be high, close to 100%, and based on credible feedback such as third-party surveys. A popular process in LGUs is time to process a business permit, measured in days, and a target. Both San Fernando and Iloilo have made impressive strides in accomplishing such process objectives.
For San Fernando, aligning the organization to the strategy-principle three-involved multisectoral consensus building and developing scorecards for LGU departments as well as private-sector organizations and associations. The departmental BSCs provide a guide to align and sustain alignment with the strategy. Principle four cascades the BSC down to individual employees, and illustrates their role in executing the strategy. Principles three and four are at the core of effective implementation of an effectively formulated strategic plan. To keep individuals mindful of their role, Dr. Norton illustrated pocket-sized copies of individual BSCs. He had a pen with a roll up that could be pulled out to reveal a BSC. Awards and other forms of recognition also play an important role in keeping strategy top-of-mind.
Making strategy a continual process involves providing resources-a budget, technology, people-and continual process improvement and sharing between departments. It also involves regular reviews and adjustments as conditions change.
The value of BSC and its sibling PGS is their capacity to make strategy personal, and providing a shared understanding of its purpose. As I was driving home Monday afternoon following a strategic planning session for one of my firm’s departments, my wife suggested that it would be a great tool for the next administration to implement, perhaps down to individual voters, so everyone knows their role in national development.
I think that’s a great idea.