Plan & Measure

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

-        Abraham Lincoln, former U.S. President

Everything up to now has been about the What and the Why of Strategy.  What do we need to do and Why?  Now we need to focus on the How?  Specifically, who needs to do what by when and what does success look like?

In my experience, great plans are typically broken into time horizons with finer and finer focus:

Mission

What is our business goal (not to be confused with Purpose) over the coming 3 – 5 years.  This is typically ambitious but feasible – often referred to as a Big Hairy Audacious Goal. BHAG.

Annual Priorities

3 to 5 priorities to be focused on this year to either leverage current strengths or develop new strengths that will move you closer towards your BHAG. 

Annual priorities must: 

• Support the current mission (via strengths to leverage and develop) 

• Be set annually by the leaders 

• Not become individualized by each department 

Quarterly Priorities

3 to 5 priorities that support the annual priorities. These are spelled out for all four quarters of the coming year, giving you measurable milestones throughout the year. 

SMART Objectives

Projects and/or large tasks required to achieve the quarterly priorities.   SMART stands for: 

• Specific: Specific enough to fully understand 

•  Measurable: Can tell when it’s complete 

• Achievable: Can be completed 

• Relevant: To the game plan 

• Time-bound: Has a deadline (a specific date) 

Measure – what are the Metrics that Matter?

Organization leaders generally have a pretty clear picture of the direction they want their company to go. However, research shows that just 5% of the workforce understands their company’s strategy and only 25% of managers have incentives linked to that strategy.

To help remedy this, Robert Kaplan and David Norton of Harvard Business School introduced the Balanced Scorecard. It has gained wide acceptance as an effective strategic management system, a performance measurement system, and a communication tool.

Simply put, the Balanced Scorecard enables organization leaders to convert purpose, business model and plan into specific and measurable goals, with action plans to achieve those goals. 

The scorecard is described as “balanced” for the following reasons:

• It recognizes the need to balance financial indicators of success such as revenue with non-financial indicators such as customer satisfaction. 

• It also balances the internal requirements of employees and processes, with the external requirements of customers and shareholders.

• It looks at past performance (lag indicators) such as financial statements as well as current performance (lead indicators) including the measurement of daily business systems and processes.

Finally, it provides a balance between short-term and long-term objectives.

A completed Balanced Scorecard will not only link your growth plan to measurable company goals, but it aligns employee efforts and business processes to those objectives. It is the foundation for creating a culture of continuous improvement.  

When setting Balanced Scorecard goals, you will look at your business strategy from four different perspectives.

1.    The Financial Perspective promotes strategies for growth, profitability, cash flow, return on investment, and mitigation of risk, as viewed by an owner or shareholder.

2.    The Customer Perspective promotes strategies for creating product value, market differentiation, and customer loyalty.

3.    The Internal Processes Perspective promotes strategies for developing high-performance business systems and processes e.g. operational excellence 

4.    The Employee Perspective promotes strategies that create a culture of continuous learning, innovation and the personal growth and retention of valued people.

However, the key with successful Measures is to stay focused on the wood and not get lost in the trees:

• Agree a core set of metrics that the leadership team share and stay focused on.

• Make those metrics visible to everybody – what’s important to the leader becomes important to everybody else and the opposite is true.