Strategic Planning, Business Strategy & Performance Management A Roadmap to Creating Organizational Success

Transcription

1 Strategic Planning, Business Strategy & Performance Management A Roadmap to Creating Organizational Success by Bob Cartwright, SPHR CEO & President Intelligent Compensation LLC

2 ANATOMY OF A STRATEGIC HR BUSINESS LEADER Keen Understanding of organizational values, standards, morals, and ethics Strategic Decision Maker Strategic Competency Strategic Thinking Skills Command, Responsibility, Authority Experience, Skills, Knowledge, Business Acumen

3 4 Elements Of A Strategically Aligned Leadership Team FOCUSED ACCOUNTABLE DISCIPLINED SENSE OF SUCCESS Leaders Provide leadership, Vision, Purpose, Strategy, Commitment, Learning, Coaching, Mentoring

4 LEADERSHIP PEOPLE - KNOWLEDGE Management / Business Execution ORGANIZATIONAL POWER

5 Strategic Teams Effectively Work Together Focus On The Mission Foster The Organizational Culture Collaborate To Establish And Meet Organizational Objectives Develop & Deploy Business Strategy Integrate Macro Business Vision With Micro Business Process Execution Provide Leadership, Support, & Resources Track Critical Core Business Measures Communicate Learnings & Display Success Link Project Teams To Business Objectives Stand Behind Results Good or Bad

6 Traditional Approach vs. Performance Leadership Traditional Approach Hoard power Sub-optimization Single annual event Corporate down / administrative process Not integrated Mgmt driven minimum participation Performance / reward process Ad hoc / discretionary Performance Leadership Knowledge is Power Maximum optimization Continuous focus on results Integrated part of business planning Aggregated info / perf planning / analysis Shared responsibility / maximum employee involvement Performance / reward process measurable / aligned to success

7 The Big Picture How Does The Organization Intend To Win / Perform Execute The Mission Actualizing How You Intend To Win / Perform Discover Strengths and Leverage values, differences, similarities, views, and attract others with complimentary and diverse /knowledge skills Performance Leadership Alignment of Organizational Resources With Mission & Culture Specific Goals & Objectives. Execute And Effectively Manage The Process Through Training & Continuous Communication

8 The Big Picture How Does The Organization Intend To Win / Perform Reward Strategy Alignment Of Organizational Performance Management Process (Measurable Business Area Team / Individual Goals & Objectives) With Performance Specific Reward & Recognition Programs. Execute The Business Strategy Reward / Celebrate Success

9 Measuring Success - Alignment Organizational Structure - Is the organizational structure conducive to achieving expressed goals? Is the organization properly staffed and coordinated for optimal efficiency? What about Succession & Leadership Development? Leadership Alignment - Do our leaders possess the appropriate how and why knowledge (awareness, understanding, etc.) to do their jobs? Do our leaders have the skills (proficiency, expertness, talent, etc.) necessary to effectively perform their jobs? Do our leaders have the ability (authority, discretion, motivation, etc.) to complete their goals and objectives? Do our leaders have other traits needed to most effectively address current business needs & future initiatives?

10 Strategic Links To Success Defining Culture & Mission Defining Strategic Vision & Values Developing A Strategic Plan Executing A Tactical Strategic Plan - Establish ST & LT Goals & Key Objectives - Make Them Measurable Leadership & Support For Each Initiative Communicating The Strategic Plan To Solicit Support Workforce - They Create Success Continuous Improvement & Change Recognize & Reward For Value, Contribution & Achieved Success

11 Critical & Key Questions Does the Organization Have A Clearly Defined Operating Philosophy? Purpose (Vision) and Reason (Mission) For Existence. Are The (Vision) (Mission) (Values) In Sync With The Organization s Culture and Operating Strategies? Has the Organization Developed A Business Plan & Identified Key Initiatives?

12 Critical & Key Questions If No - Why Not? If So, Is The Organization Properly Aligned To Achieve The Desired Results Performance Alignment - Focused Alignment Of People & Processes To Achieve Business Initiatives & Goals. Desired Results - Translation Of Business Vision & Strategy Into Action: Drive The Organization To Excellence, Grow The Business, Improve Operational Effectiveness, Achieve Financial Objectives, Reduce Cost, Customer Satisfaction, On Time Delivery, New Business Development, Manage To Budget, Process Improvement, Teamwork, Innovation/New Products/Services, Etc.

13 Critical & Key Questions Challenges To Executing Strategy? Who, What, When, Where, & How What are the Prevalent Components In Establishing Goals & Objectives? Why Is It Important To Align Key Initiatives Into A Strategic Plan & Communicate The Plan To The Organization? Who Should Be Responsible For Making It All Happen? Who Are They? Who Should Drive The Process? Who Participates In These Decisions?

14 Performance Leadership / Management - Critical Success Factors Setting Right Goals & Measures Cascading / Line of Sight Setting Measurable Tactical Goals & Objectives That Drive The Organization Business Area Team - Individual Alignment Of The Organization And Resources To Achieve Business Goals and Strategic Success Establishing Member Roles / Accountability Determining & Establishing Roles of Business Area Team Members Committing To Company & Business Unit Area Goals & Objectives

15 Performance Leadership / Management - Critical Success Factors Executing The Performance Management / Leadership Process Commitment / Trust / Values / Empowerment / Candor Establish Formal Team/Individual Commitment and Behavior To Execute Game Plan Determining How The Business Teams Will Work Developing & Executing A Game Plan For Maximum Performance Measuring Success - Metrics (Company, Business Unit - Team Individual)

16 The Biggest Dirty Little Secret In Business Lack of Candor Lack of Candor Blocks smart ideas, fast action, and good people contributing all the stuff they ve got. To Get Candor Reward It Praise It Recognize It Talk About It Demonstrate It

17 The Biggest Dirty Little Secret In Business Lack of Candor Candor Leads To Winning Three Main Ways Candor gets more people in the conversation which leads to getting idea rich Candor generates speed when ideas are in everyone s face, they can be debated rapidly, expanded, enhanced, and acted upon. The approach surface, debate, improve, decide Candor cuts cost and eliminates meaningless meetings and reports that confirm what everyone already knows

18 Definition of Strategy Merriam-Webster a : a careful plan or method b : the art of devising or employing plans toward a goal Michael Porter Leverage of key activities to achieve competitive innovation (changing the rules of the game). It is about being different. Hamel & Prahalad Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. Resource-based view The use of valuable, rare, non-substitutable, and inimitable resources and capabilities to create sustainable advantage.

19 What is Strategic Planning? It is a systemic approach of decision-making focused on future outcomes. It sets the game plan on how outcomes are to be accomplished, and how success is to be measured and evaluated. It is a disciplined effort to produce integrated and fundamental decisions, processes and actions that shape and guide what an organization is where is wants to go, and what it needs to do to get there. It sets the direction, but not the detailed means (tactical plans) of achieving the integrated goals of the organization. It is a process of defining and organizing the initiatives and goals of the organization for the benefit of future outcomes. It is a roadmap to lead an organization from today to where it would like to be tomorrow and in the future.

20 Why do Strategic Planning? Defines the strategic direction for the organization and it s players and stakeholders Creates a shared vision, mission and goals which can be broadly communicated Defines the current state (SWOT) and the desired state (Initiatives & Goals) Clarifies the accountability for executing actions and achieving the organizational strategies Identifies the influences and barriers to success Positions the organization to be more pro-active, to handle change, and to strive for continuous improvement Helps create alignment throughout the organization.

21 Planning Process Assessment - Where are we now? Vision, Mission, Objectives, Values Where do we want to be? Monitoring How are we doing? Strategies How will we get there? Implementation Who must do what?

22 Strategic Process Management

23 Assessment Historical Analysis Environment Scanning Competitor Analysis SWOT Analysis Research

24 Organization Planning Components Vision What do we want to look like? What is our purpose? Mission Why do we exist? What is the reason for our existence? Values What makes us who we are?

25 Organization Planning Components Critical Drivers What are the key drivers to achieve our vision and mission? Goals/Objectives SMART Critical few Defined Roles & Responsibilities What are my roles and responsibilities? Where do I add value?

26 Focused Strategic Initiatives Activity Related Productivity Related Meeting Attendance Project Suggestion Planning Performance Related Financial Schedule Change Related Program Continuous Improvements Operational Mergers & Acquisitions Financial Related Strategic Revenue Leadership Cost Control Group Profit Individual

27 Good Plans Have Consequences Flexibility Presence of leading and lagging indicators Understanding of the competitive landscape

28 Lagging Indicators Marketing $ to New Customers Ratio Revenue from new Products & Services Market Share Staff to Revenue Ratio Improved Technology Infrastructure Customer Retention / Churn Legislative win/loss record Increasing Customer Value Solved Problems = Customer Impact Revenue Growth Product Defects Cost per Sale (repeat vs. new) Sales cycle Fund Raising Results Market Image / Brand Perception Perceived Competitive Differentiation Media Coverage Organizational Culture Survey Results Results via New Competencies Customer Loyalty Work Climate Training ROI Service Quality Improvement New Customer impact on Organization s Market Image Outcomes

29 Leading Indicators Database Mining Activity Develop. of New Customer Services Development of Mktg Collateral Systems Downtime Inventory Control Space Utilization No. of T & D Programs Create New Customer Experience Customer Request Response Time No. of New Products Product Time-To-Market Customer Acquisition Cost Website Traffic & Applications Conference & Exhibit early registration Blogging Environmental Scan Analysis Marketing Strategy Development IT Strategy Development Political / Media Strategy Develop. Marketplace Visibility Activities Communications Activities Internal Knowledge Management Budget Alignment to Strategy Build & Protect Intellectual Capital Organizational Behaviors Alliance partner integration efforts Regulatory Relationships Vision Enrollment efforts Sales Leads New Job Bank & Screening Process = improved talent & fit New Ideas Generation

30 Implementation Tactical Action Plans Implementation Elements Contingency Plans Rewards & Recognition

31 What makes a good plan? Line of sight Clear linkage of individual goals to organization operating plans Budget, operating plan and workload tightly coupled Cross organizational communication & measurement

32 Why Is Planning Important? Clear picture of how trends impact our present and future. Workforce Agreed upon direction and strategy. Clearly defined mission, vision and values that support all efforts. Specific, clear plans to improve performance. Improved decision-making. Better leadership & business execution Development of strategic thinking and implementation skills.

33 Workplace Trends Rising threat of fraud & identity theft Data protection The impact of Global economics, business strategy/process, worker mobility, culture, competition, protectionism, etc. The influence of social networking, especially as it relates to recruiting Facebook, Twitter, Linkedin The continuing importance of work/life balance / multiple caring responsibilities family, parents, military Multi-Generations In The Workplace Baby Boomer Retirement Growing need to develop talent - management strategies Job Fit Job Match Evidence-based management tools, ROI / IOB Compensation Exec, Pay Inequality, Health Care, Govt

34 Why Is Planning Important? Better allocation of resources and responsibilities. Identification of short term and long term attention areas. Increased recognition as a differentiator from external and internal sources. Consistent, sustained success, as opposed to marginal success.

35 A Few Consequences Of Not Planning or Bad Planning Organizational inefficiency Missed opportunities Staff frustration Leadership frustration Misspent dollars Misspent resources Misdirected Customer Loyalty

36 When Scenarios Don t Play Out Quite The Way We Had Planned

37 Organization Key Initiatives SWOT Analysis STRENGTHS WEAKNESSES OPPORTUNITIES THREATS Sample Questions To Answer What initiatives / strategies should the organization adopt For FY 2014 What strengths, weaknesses, opportunities & threats exist?

38 Business Strategies & Scorecard Typical Business Strategies Financial / Operational Internal Business Processes & Support Competitiveness & Growth Opportunities Customer / Customer Satisfaction Within each Strategy: Knowledge Objectives Measures Targets Initiatives

39 Key Business Financial Measures Revenue - The total income, both cash and non cash, received from an enterprise or business, before any expenses are paid. Net Income Total revenue minus all costs to run the business (business expenses, depreciation, and taxes. Net Income = Revenue Cost of Doing Business (Operating expenses, depreciation, taxes, and other expenses)

40 Key Business Financial Measures EBITDA Earnings before interest, taxes, depreciation, and amortization EBITDA = Revenue-Expenses (excluding tax, interest, depreciation, and amortization)

41 Key Business Financial Measures Gross Margin - A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company. Gross Margin = Revenue Cost of Goods Sold Revenue

42 Key Business Financial Measures Economic Value Added - A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".) Economic value added attempts to capture the true economic profit of a company. EVA = Net Operating Profit After Taxes (NOPAT) - (Capital x Cost of Capital)

43 Typical Manufacturing Company Consolidated Income Statement (in 000 s) Operating income $107,196 Other income (expense) Dividends and interest income 5,250 Interest expense (16,250) Total other income and expense (11,000) Income before income taxes and extraordinary items $96,196 Provision for income taxes 41,446 Income from continuing operations before extraordinary items $54,750 Extraordinary item: loss of assets due to volcanic eruption net of income tax benefit of $750 (5,000) Net income $49,750 Average common shares outstanding 14,650,000 Earnings per common share before extraordinary loss $3.74 Earnings per share extraordinary loss (.34) Basic earnings per share $3.40

44 Sample Financial Measurement Net Income

45 Sample 2014 Regional Sales Goal

46 Six Sigma Methodology Operational Success DMAIC

47 DMAIC in Detail

48 Courtesy of Talent-Reach Consulting The 7 Barrels of Waste-Knowledge Defect & Rework Material Processing Transport Waiting Inventory Motion

49 Courtesy of Talent-Reach Consulting Transactional Examples of Waste Rework Material Processing Transport Motion Waiting Inventory Spelling Errors on docs Multiple copies Mis-charged time Moving teams of people Unorganized workspace Waiting For signatures Excess office supplies Recalculate pay Not including holiday pay on checks Damaging laptops Not recycling materials Tracking work progress Too many approval signatures Rearranging employee seating Physically moving products Stretching to reach stapler Working at multiple locations Searching for employees Waiting at the copy machine Storing old Receipts Stockpiling printer paper

50 Strategy To Execution Measure & Communicate

51 Performance Management Guiding Principles Based on agreement, feedback, and dialogue. Performance is assessed against agreed upon objectives. Employee behavior is assessed to ensure organizational core values are upheld. Requires open and honest communication throughout the organization

52 Performance Management Guiding Principles A collaborative development process at all levels in organization. Functions as a natural process of strategic management. Creates a shared understanding of what needs to be done throughout the organization to improve performance and develop skills. Translates organizational goals into team and individual goals. Relies on consensus and co-operation vs. coercion.

53 6 Top Objectives of Performance Management 1. Collaborate & align organizational goals and objectives with business area team and individual goals and objectives 2. Improve organizational performance 3. Improve business area team and individual performance 4. Provide a basis for personal performance excellence & development 5. Develop a performance culture 6. Link reward and recognition programs to the performance management strategy of the Organization.

54 Top Reasons Why Companies Measure Business Performance To monitor and control To drive improvement To maximize the effectiveness of the improvement effort To achieve alignment with organizational goals and objectives To reward and to discipline

55 Business Performance Measurements Tools To Balance 5 Major Business Tensions Within An Organization 1. Balancing profit, growth and control 2. Balancing short term results against long-term capabilities and growth opportunities 3. Balancing performance expectations of different constituencies 4. Balancing opportunities and attention 5. Balancing the motives of human behavior

56 Factors That Influence Performance Setting Goals Member Roles Relationships Source: Richard Beckhard, Optimizing Team-building Efforts, Journal of Contemporary Business, 1972

57 3 TYPES OF GOALS ESSENTIAL GOALS - Must Be Done PROBLEM SOLVING GOALS - Ought To Be Done INNOVATIVE GOALS- Would Like To Be Done

58 Thematic Goal Thematic goal = rallying cry Defining objectives = qualitative components shared by all members of leadership Standard operating objectives = ongoing priorities

59 GOAL SETTING A goal should answer the following questions : 1. What? 2. When? 3. Who? Goals Have 5 Basic Components They Must Be Specific They Must Be Measurable They Must Be Action Oriented They Must Be Realistic They Must Be Time Specific or Have An Ending - A Dream With A Deadline

60 Setting Effective Goals Goals Should Be Expressed Positively Goals Should Be Precise Include Dates, Times, & Amounts Provides Ability To Measure Achievement Set Priorities - Direct Attention To Most Important Goals Should Be Written Down, Tracked, & Communicated Keep Goal Strategic & Achievable

61 Productivity Output When Setting Goals Utilize Measures To Achieve Results Customer Satisfaction Quality Product / Service Reduction Cost / Inefficiencies Gain - Financial / Membership / Leadership Communication Team Development And Participation Continuous Improvements Time / Desired Behaviors

62 2014 KEY GOALS & ACTIONS WORKSHEET WHAT WHO DUE BY WHEN STATUS

63 SAMPLE - ORGANIZATION 2014 KEY TACTICAL GOALS & ACTIONS SAMPLE WHAT WHO DUE BY WHEN STATUS Achieve Business Growth of 30%. Leadership December 31, 2014 Review Monthly / Quarterly Execute Strategies to Increase Revenues By 10% VP Sales December 31, 2014 Review Monthly / Quarterly Develop Strategic Marketing Plan VP Marketing May 2014 Review Monthly Achieve EBITDA at 3.5 Mil for Leadership December 31, 2014 Review Monthly / Quarterly

64 Performance Leadership / Management - Critical Success Factors Setting Right Goals & Measures Cascading / Line of Sight Setting Measurable Tactical Goals & Objectives That Drive The Organization Association Business Area Team - Individual Alignment Of The Organization And Resources To Achieve Business Goals and Strategic Success Establishing Member Roles / Accountability Executing The Performance Management / Leadership Process Commitment / Trust / Values / Empowerment / Candor Establish Formal Team/Individual Commitment and Behavior To Execute Game Plan Determining How The Business Area Team Will Work Developing & Executing A Game Plan For Maximum Performance Measuring Success - Metrics (Company, Business Unit - Team Individual)

65 Common Mistakes Made When Measuring Performance Measuring Too Much Focus on no more than 3 to 5 critical areas of performance. Measuring Results Only Its important to focus on both the how and the what Measuring Within One Function Keep in mind both results and customer Measuring The Easy Measure those things that should be measured keep in mind the performer s line of sight control and influence

66 Common Mistakes Made When Measuring Performance Assuming Measurement Systems Need To Be Complex Simple systems often have the best chance for success Assuming People Don t Want To Be Measured Oftentimes, employees do want to be measured so they can get feedback on how to improve their performance

67 Measuring Success - Recap PERFORMANCE CRITERIA Actions Should Be Specific, Measurable & Within The Participants Control Should Tie Into Key Organizational Measures To Maintain Overall Strategic Focus Performance Criteria / Measures Should Be Weighted Based on Level of Criticality & Priority Communication Is Key To Success Communicate Early & Often Communicate In Terms All Employees Will Understand Always Include A Call To Action

68 Measuring Success - Performance Alignment Have We Aligned The People & Processes On A Common Path Focused On The Overall Achievement Of The Organizations Goals? Do We Have A Clear Mission Statement Understood By All? Does Our Team Of Individuals Understand Our Strategic Plan & Have Defined Roles & Aligned Goals? Are We In Continuous Communication About Our Strategic Priorities? Are Our Leaders Leading & Are We Measuring & Monitoring Our Progress? Are Our Employees Empowered To Achieve Their Goals & Support The Overall Strategies Of The Organization? Are Compensation & Rewards Aligned With the Business?

69 Total Compensation / Reward & Recognition Strategies Monetary Base Pay Benefits Annual Incentives / Variable Compensation Long-Term Incentives Alternative Rewards Non-Monetary Recognition Growth Career Development Training & Development Work Environment Flexible Scheduling Work-Life Balance

70 Strategy To Execution Leadership Are the right people in place to lead? Is the senior leadership team working together? Strategy - Have We Defined What We Are Trying To Achieve? Initiatives - Do We Know What We Need To Do To Get There? Measures - Are We Validating Progress & Achievements? Alignment - Is The Organization In Sinc And Do We Have The Tools To Execute Our Strategies? Individual - Are Goals Linked To Line Of Sight Opportunities To Support The Overall Business Strategy & Associated Goals? Continuous Communication - Are We Talking, Informing & Staying Focused On Priorities?

71 The Most Admired Companies Achieve Success Through People & Developing Human Capital Have Strong Organizational Culture - Current & Future Have Profound Employee Engagement High Loyalty & Motivation Have Strategies That Get Executed Manage Innovation Balance Work Success - Rewards - Life Long-term Focus As Reported By The Hay Group

72 Strategic Links To Business Success Maintain A Strategic Vision For What You Need To Win Plan Recognition And Reward Programs For Success Remember Your Employees - They Create Success Make Programs Simple / Make Them Understandable / Make Them Smart Align Compensation With Business Strategies / Performance Link Each Program To Desired Success Factors / Measures

73 Strategic Links To Business Success Provide Leadership And Support For Each Strategy Implement Consistently Plan For Continuous Improvement & Change Communicate Candidly The Good The Bad The Ugly Reward & Recognize For The Right Reasons Align Both Monetary & Non-monetary Reward Strategies

74 THANK YOU FOR ATTENDING Strategic Planning, Business Strategy & Performance Management A Roadmap To Create Organizational Success Bob Cartwright, SPHR President / CEO Intelligent Compensation LLC bob.cartwright@intelligentcomp.net QUESTIONS?