If you are new to Strategic Planning and want to familiarize yourself on what a strategic plan is and how to go about preparing one, then this article will be useful.
Strategic plans are prepared at different levels using different approaches, but the ones mentioned below are 5 important elements of a good strategic plan. The framework of Hoshin Kanri Policy Deployment aptly covers these 5 elements.
Traditionally strategic plans are considered to be complex and bulky reports that runs to pages. But that isn’t necessary true. However, it is true that there is lot of work that goes into creating an organization’s strategic plan. But a good strategic plan can just be a one-document containing the following elements :
Business Goals
Business goals are the organizational level goals that are closely tied to the organization’s vision and mission. It reflects the aspirations of the organization and their commitment to their customers, shareholders and employees. Usually the organizational goals are restricted to not more than 5 and preferably just 3. Each of these goals are quantifiable measures with agreed targets for next 3 years. Not all goals are equally important, so it would be a good idea to arrange them in the order of importance.
If your organization feels that all the goals are equally important, then there is no need to prioritize them.
Measures of Success
As mentioned earlier, it is important to quantify all goals. So there is a clear difference between vision and goals. ‘To be market leader in next 3 years’ isn’t a goal. For some goals, there may be more than one measure of success. It’s a good idea to include all of them, but they can be carefully screened before inclusion.
Organizational Strategies
Organizational Strategy is the most misused management term. Goals and strategies are interchangeability used and they are thoroughly confused. As Michel Porter puts it, strategies represent the ‘How’ part of achieving the goal, not the ‘What’. Strategies are arrived based on internal and external environments. Number of strategies to be no more than 7 but preferably just 5. I’m not covering the details of the how organizational strategies are arrived here, but you will find information regarding this in other articles. Most times, a given strategy can be helpful in achieving more than one goal.
Like goals, strategies have to be prioritized as well. Some organizations consider inorganic growth as a strategy and include it as the last strategy. But it isn’t mandatory to include acquisition as a strategy by default.
Ownership for Goals
Goals without individual ownership will never be accomplished. Hence each of the goals at the organizational level are owned by individual leaders. Just to reiterate, I used the word ‘Owned’ not ‘Assigned’. Hence the individual leaders of the organization engage in a discussion and agree to own goals rather than being assigned by the Chief Executive. In achieving some of these goals, there will be inter-dependencies. That’s where joint accountability comes into play.
Strategic Projects (Initiatives)
Strategic Initiatives are strategic thrust areas where the leadership believes the organization has to do something different in order to achieve 1 or more goals. Few synonyms for Strategic Projects are Strategic Initiatives, Critical Strategic Projects, etc. There is no restriction on the number of strategic projects, but should be limited based how much an organization can manage concurrently. Most organizations falter here. Similar to goals and strategies, strategic projects are also prioritized. In order to ensure a strategic project is successful, there needs to be a robust project plan, cross-functional teams and rigor.
Once created, a strategic plan is a live document and needs to be reviewed and updated every month.
Q – How to solve Ownership Issues; A – Catch Ball Technique
It is indeed this topic very close to heart for many of us, isn’t it?
Each of us will have stories of frustration to share on how we were appraised poorly, received low bonuses, promoted last, long arguments with boss & colleagues and in some cases even lost our jobs for no fault of ours!
When goals come from seniors, in good spirits, it is assumed as everyone’s responsibility to meet them. But when really things don’t go as they were planned, scapegoats are born.
I have seen lack of responsibility in the following situations:
a) Ownership issues for failures between departments. For example, if there’s staff attrition, is that HR or Line Manager who owns this failure b) Ownership issued within homogeneous teams. For example, lack of ownership on team sales target among sales staff of that team
While (a) has been difficult to resolve traditionally, (b) is not so much a problem when the Manager exercises good control (Top-down).
Catch-ball technique, a part of Hoshin kanri or Policy Deployment Planning is a very effective method to encourage employees to take ownership and empower them.
As the name suggests, the ‘ball’ of responsibility is thrown between team members till consensus is arrived. In essence, it is a series of constructive and dialogue-based process where team members discuss and agree on ownership of targets.
Unlike the traditional top-down approach, manager doesn’t thrust targets on his team. In this technique, she proposes a target and allows the team to debate on the capabilities, constraints, resources, etc., before they agree on a goal. If they disagree, the manager has an opportunity to review the target, as she too hasn’t agreed the target with her manager.
Thus the mechanism involves several rounds of discussion between team members before goals are agreed. From an organizational perspective, the CEO/business leader gets to know by the end of ‘catch-balls’ if the target set by him is achievable or not; and the constraints associated with it.
In my personal experience, as people get to discuss about the target in advance, several opportunities arise, such as:
Systematic: A lot of planning activity gets accomplished upfront, rather than putting it for later months Think-tank: There is thorough understanding about the target – what needs to be accomplished, when, how, challenges, levers, etc, among all the team members Team Work: Team members get opportunity to mingle and understand each other better. Especially in today’s environment where staffs rotate every 2 years and we end up dealing with new members every time, these catch-ball sessions help.
Shared responsibility: Many targets require participation from other functions, like the above example of staff attrition. So in this case, may be attrition due to ‘managerial’ issues can be owned by line management and those due to ‘compensation & retention’ by HR. Something like this cannot be agreed till such time discussions happen. In preparation to such achieving such a target, a robust data collection mechanism at the time of staff exit has to be implemented. Such aspects don’t get discussed in traditional goal setting.
Empowerment: When targets are not achievable, it encourages dialogues with Managers or Senior Managers on why it can’t be achieved. Such situations usually force managers to empower their teams. So, even when a manager is ‘control-freak’, he is forced to empower his team. Culture: Due to the nature of discussions, when catch-ball technique is used over 1 or 2 years for annual planning sessions, there is a big change in company’s culture. People are open and transparent. They see each other eye-to-eye and they learn to agree to disagree.
Accountability: Many times, when targets are unachievable, people accept such targets only to see how they can palm it off later when things don’t work. They probably know of other constraints that can be their ‘official’ reasons for failure – clearly cases of procrastination and finger pointing. Such situations don’t occur as ‘Catch-ball’ encourages discussion and subsequently ‘Kanri’ ensures rigorous monthly monitoring. Stretch Targets: As illustrated in the article of ‘bottom-up’ example, teams tend to achieve more than the target and that too willingly. In order to learn more about how catch-ball technique is executed, refer to my article titled ‘How to implement Catch-ball Technique’
Bando example of bottom-up approach to deploy targets
Here’s a live case that I read from The TQM Magazine, Volume10, Number 6, 1998 by Yoshio Kondo. I liked it and thought it is very apt and also interesting to read.
“Bando Chemical Company, for a long time had been implementing the top-down type of planning, in which production was carried out in accordance with targets set by the factory manager. In the first 2 weeks of the month, there used to be sag in production but there used to a catch-up in the last leg.
After much investigation and deliberation, this factory decided to change its system for setting the monthly production quotas. Under the new system, the factory manager would first propose the draft monthly production target and explain carefully why it was necessary to achieve that target. The proposal would then be thoroughly discussed by the people in the workplace. When this system was first implemented and the individual values determined as a result of the discussion were collated, the final value turned out to be a little less than that originally proposed by the factory manager.”
When such situations we often try thrust higher targets on people in order to meet the originally proposed value. Though we start our with a bottom-down approach we end up with top-down. To an employee, it looks like an eye-wash.
“This factory took a different approach. It was decided to trust their commitment and enthusiasm and leave the total arrived at as the official monthly production target.
A curious thing happened when the setting of targets was changed from top-down to bottom-up in this way. The sag in the monthly cumulative total production graph occurring at the beginning and middle of the month disappeared, and the production proceeded more or less in accordance with the target line. Also, the monthly target was consistently achieved. Another interesting thing was that, although the target value established as a result of discussion in individual workplaces in this way started out slightly under the factory manager’s proposed draft target, it increased month by month and at the end of six months, was approximately 20 percent higher than the factory manager’s proposal, a result originally thought to be out of the question.”
So again, this is an example of successful bottom-up approach. We wouldn’t ever adapt this method. It is time-consuming and many managers feel defeated to accept a target lesser than what they initially proposed!
It sounds impractical in our culture and current conditions.
There is no doubt that it is a powerful way to get team energized, but lacks universality.
There’s a great opportunity to adapt ‘catch-ball’ technique which overcomes most deficiencies of bottom-up approach and top-down approach.
Hoshin Kanri Policy Deployment
Sometimes it can be really frustrating to see that valuable time is lost in firefighting. When strategic planning and execution are done in a systematic manner, using Hoshin Kanri Policy Deployment, there will be upto 50% immediate impact. There are various methods that can be adapted to accomplish this. Suggestions in the Hoshin Kanri (Policy Deployment) section of the resources would be invaluable. Why don’t you check them out.In a series of 4 articles, I would cover about the traditional ways that most of us adapt to deploy targets to our teams, pros & cons, live cases and introduce ‘Catch-ball’ technique of policy deployment that is used of deploying targets which is several notches about traditional methods.
First in this series, I m talking about traditional ways of deploying metrics. Here are two scenarios that I commonly come across where people are really puzzled about deploying goals to teams.
Scenario 1
- Head of a business unit has received an annual target which is atleast 3 fold more than last year. While he doesn’t have a say in deciding his targets, he has to manage to convey this target to his team managers. He knows there is going to be resistance, but he wouldn’t care much about it as he doesn’t have a choice.
Scenario 2
- Staff attrition is on a rise this year. Operation attributes this to low non-competitive staff compensation & lack of flexible work policies. However, HR head associates this to poor staff supervision, low/no motivation, poor daily management and lack of clarity on growth. So essentially, there is lack of ownership for staff attrition.
Scenario 1 is an example of Vertical deployment of targets to one’s direct reports and scenario 2 is Horizontal deployment, where there is shared ownership of targets, inter-dependencies, etc. between different departments.
Traditionally, vertical deployment of targets has not been a problem due to concentration of power and controllership with the functional head. Mostly Top-down approach is used, but rarely Bottom-up approach is also used.
Read my articles ‘Matsushita example of Top-down approach to deploy targets’ & ‘Bando example of Bottom-up approach to deploy targets’ where they are interesting live cases to read.
Both these approaches have their own pros & cons. Lets review the most important ones.
Top-down approach
Pros
- Quick & fast in deploying
- Goes well with directive leadership or when the message comes from ‘trusted’ & ‘respected’ Leader
- Also works well for regulatory targets
- Most of times, teams achieve such targets
- Incentives are carrot & stick
- Works where there are dominant reporting relationships
Cons
- Demoralizes teams
- Not a long term & sustainable approach
- Discourages openness & transparency
- Can’t be used to share cross-functional ownership
We all know that top-down is the single most commonly used method to deploy targets today.
Bottom-up approach
Pros
- Team participation is high & so builds morale
- Encourages empowerment & fosters openness
- Benefits on long run
- For cross-functional goals, it’s not as bad as Top-down
Cons
- Targets may not be met all times
- Leader should be ready to compromise if team can’t deliver
- Time consuming process
Bottom-up most of the time, sounds impractical and an ideal-case.
Catch-ball technique
In my experience, ‘Catch-ball’ technique which is used in Hoshin-Kanri is much more effective method to deploy goals. It takes a mid-way approach between top-down and bottom-up, but at the same time it doesn’t compromise on the ownership, timeliness and success rate.
More importantly, in an increasingly matrix-driven culture, deploying goals to peers (cross-functional) for shared accountability can only be addressed by Catch-ball technique. Traditional methods of Top-down and Bottom-up down have least impacts.
Turn your strategy to reality using Hoshin Kanri or Policy Deployment
Strategy is a key element to any organization or individual’s success. Traditionally, Small & Medium Businesses have been deprived of a good strategic document. I have usually observed that founders’ vision becomes their strategy. As the organizations grow, their course is governed by several factors other than the strategy itself. Believe me, its very common!
With large corporations, the story is very different. A robust and well thought through strategy is crafted by the best brains with the help of extensive analytics, in-depth market research, detailed understanding customer behavior, economic conditions, financial barriers, global trends, etc. The problem is actually with execution of the strategy. Complexity arising out of geographical spread, cultural diversity, multiple leadership styles, incentive programs, corporate dynamics, communication barrier, etc., play against effective execution.
While these are prevalent in large corporations, several small & medium businesses haven’t been spared.
Is your organization one of them, find out yourself.- What % of the company’s staff understands the strategy?
- Are your performance goals and incentive tied to the strategy? Is it also the case with your manager & your sub-ordinates?
- Are there disagreements on ownership of failures?
- Do the budgets tie-in with strategy?
- By the time your performance goals are agreed, half the year is gone?
- If its not there in the goal sheets, don’t expect it to happen?
- Last year is history. We may a fresh start every year?
- Are critical projects focused to the strategy? What % is delayed?
- How often have you seen meetings where implementation of strategy is discussed?
- Poor penetration of organization’s vision
- Weak top-down deployment of strategy
- Lack of integrated planning
- Poor feedback mechanism on what is working
- Dispersed ownership & accountability
- Unstructured communication & change management programs
Hoshin Kanri or simply Policy Deployment, Japanese term for Strategic Policy Deployment has been used by several successful corporations to fix the above issues. Toyota, Bridgestone, Bank of America, HP and Komatsu are a few topping the list.
Literally Hoshin is ‘Direction’ and Kanri is ‘Execution’.
Hoshin Planning process consists of
- Strategic Vision & Mission for next 3 – 5 years
- Strategic goals in line with Vision & Mission
- Scorecard wrt Customers, Stakeholders & Associate
Along with this comes a host of review and monitoring mechanism. It provides detailed approach to translate strategy to action.
In its simplest form, Hoshin Kanri (Policy Deployment) can be used to create a 3 page Business Plan for Small & Medium Businesses and start-ups.
If you are looking for Hoshin Kanri Policy Deployment consultant in Chennai, Bangalore, Mumbai, Delhi and across India, contact us.Sign-up for collaborat newsletter