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NCC IT Adviser Article

SEE HOME PAGE ON NCC WEBSITE FOR LINK TO ARTICLE on STRATEGY & CHANGE GOVERNANCE

Strategy and change are inseparable practices. You cannot execute strategy without change and you cannot change effectively without a strategy. But how many of us can say that our organisation has a tightly connected strategy and change process? Andrew Hudson, managing director at Change Director, provides a thought-provoking perspective…

All too often the governance of strategy and change is disconnected. One reason for this is that after the business case for a change investment is approved, the focus switches from benefits to delivery, with the value or contribution to strategy rarely reviewed again.
Another dimension to strategy is performance management and the link to business as usual. Strategies are set using performance objectives and measures agreed with the operational areas. Actual performance is then tracked against expected performance. For most organisations the practice of performance management is well established, with executive remuneration linked to the achievement of performance targets.

The tendency to focus on short-term performance issues has led to less time being made available to review medium and longer-term strategy. Executives need to consider if they are committing enough time to reviewing the medium and longer-term strategy. They will be more likely to achieve longer-term improvement objectives if they oversee strategy execution and value creation, rather than just being involved in deciding what the strategy is and reviewing actual performance.

This new focus also requires improvements in terms of the way strategy and change is governed. Executives need better insights and governance structures in place to be able to oversee strategy implementation. This will require a step change in terms of strategy and change governance and reporting. One of the main gaps is the lack of combined performance and benefit reports to highlight future performance gaps. A study by Cranfield School of Management found that only one-in-four organisations measure the benefits of change post-approval. It is not a big surprise to learn that the majority of managers are dissatisfied with benefits management practices.

The Execution Premium – the latest book in Kaplan and Norton’s balanced scorecard series – advocates that organisations need to establish a continuous and systematic approach to strategy planning and execution. Through a number of surveys they found that organisations with a formal process to manage strategy execution were far more likely to outperform their peers.

There is, therefore, a significant opportunity for someone to take the lead in terms of introducing better practices for strategy and governance. That person may come from IT, where many new management practices originate (eg, project and benefits management). IT also has a vested interest in demonstrating value, aligning itself to the organisation’s strategy. It also has a key role to play in terms of deciding on and commissioning new systems for better governance of strategy and change.

The following sections describe some of the critical success factors to consider if you are looking to establish new practices.

CSF1: Executive commitment

Securing executive commitment to new ways of governing strategy and change are not as challenging as you might think. Most executives appreciate that governance practices can be improved, and will be receptive to any insights about governance performance and opportunities to improve it. There is usually a tipping point, where executives realise new insights about their strategy execution plans which leads them into making better and more informed decisions. They could also get early warning of performance gaps and see the remedial actions bring things back on track.

It might be possible to secure commitment to a top-down review of strategy governance with recommendations to improve practices and an overall framework. If it is not possible to secure commitment to this exercise, then the best way might be to start producing new insights into the strategy and change portfolio using this to leverage an alternative way of working. The benefits of a new approach should be clearly understood so that the benefits of the new way of working are better appreciated.

CSF2: Strategy management office (SMO)

At present, many organisations have separate teams for performance, project and operational risk management. As practices move to a more connected approach, it makes sense to have a central team or strategy office to bring together a single and connected approach. Indeed, a number of leading research organisations and consultancies are now advocating the adoption of a central strategy office or SMO.

A good example of how IT has taken the lead is the case where the CIO of a major airline realised that IT needed to demonstrate its value and appointed a head of IT PMO to oversee the adoption of project portfolio and benefits management practices. The IT governance and value-based approach was so valued by the CEO that the head of IT PMO was initially appointed head of the corporate PMO. It was then realised that the performance management team needed to be part of the same team, so the head of corporate PMO was then promoted to head of corporate strategy.

One of the key benefits of a single office is that the governance of strategy and change becomes far more integrated. There are also economies of scale, where having an organisation-wide governance process, strategy and change team avoids the overhead of running multiple project offices across the organisation.

CSF3: Improved governance practices and reporting

A new approach will require a review of existing practices, the definition of a new governance process and the appointment of a new team to oversee the establishment and operation of the new governance process. A new governance process should build on existing project, risk and performance management terminology and practices, otherwise there is a risk of confusing people about the new process.

At this stage it would be worth appointing a consultant or consultancy to help with the definition and establishment of a new process. A consultancy can also bring in best practice, and provide independent guidance and mentoring through the transition process.

The major focus of a new governance practice is the linking of performance, benefits and project management practices. This will include an executive level forum to select and review change initiatives from a value perspective.

CSF4: A new tool for strategy planning and reporting

At present, the vast majority of executive reporting is done through a combination of spreadsheets, documents and presentation formats. Whilst some BI tools have been established to report and analyse performance from operational systems, the majority of information is gathered and provided manually. The process for managing all these documents is complex and inefficient. There are typically thousands of versions of documents which are often emailed and circulated in multiple.

An alternative to this mass storage of documents is a central data repository (not a document repository) with a single source of information input. This repository will provide a central and shared list of performance measures, benefits and change initiatives. The repository should include electronic formats for business cases and performance reports. Having the data stored centrally enables significantly streamlined and improved reporting practices.

It is worth exploring new applications for strategy and change management. Some vendors offer rapid and low-cost implementation solutions with free use of the software until its value has been proven. It is worthwhile conducting a trial of a strategy and change tool, since the learning far outweighs the cost and time investment. There are also huge benefits to be gained from having a single repository approach which will improve the efficiency and effectiveness of the team.

CSF5: Business cases and measures

In order to properly connect strategy with change it is essential to move from paper-based business cases to electronic formats that can be linked to performance objectives and measures. The biggest challenge is that the measures used to track organisational performance are often percentages and ratios which are difficult to measure performance improvement against.

Many managers find percentage measures difficult to drive performance improvement against, whereas quantity measures (eg, number of fails) are much easier. Identifying performance measures (financial and non-financial) by process makes benefits identification simpler and more consistent.

Conclusion

The next few years will see the gradual adoption of more integrated approaches to strategy and change management. Organisations that move quickly to establish this approach will perform better than their peers. Individuals that take the lead establishing new practices will be rewarded with improved career prospects and a greater profile within the organisation. Consultants that offer support for implementing improved governance practices can gain a greater profile in the organisation, which in turn can lead to more profitable and long-term client engagements.


1 March 2011