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Turning strategy into results

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– How can leaders translate the complexity of strategy into guidelines that are simple and flexible enough to execute? Rather than trying to boil the strategy down to a pithy statement, it’s better to develop a small set of priorities that everyone gets behind to produce results.

Strategy, at its heart, is about choice. Few companies succeed by making a single big bet. Most winning strategies are based on a bundle of choices about, among other things, the customers to serve, the scope of the business, product offerings, and capabilities that interact with one another to help a company make money.

Strategy is inherently complex. We see this in the thick reports and complex frameworks that companies use to describe their strategic choices and how they connect with one another. Describing a strategy favors complexity, but executing it requires simplicity.

To influence day-to-day activities, strategies need to be simple enough for leaders at every level of the organization to understand, communicate, and remember — a strategy that gathers dust on a shelf is nothing more than an expensive bookend.

A strategy for execution must provide concrete guidance while leaving managers with enough flexibility to seize novel opportunities, mitigate unexpected risks, and adapt to local conditions.

The act of codifying past choices into an explicit strategy, moreover, reinforces historical commitments and locks a company into inertia. Complex strategies, particularly those that include detailed plans, tend to be long on guidance but short on flexibility.

Strategy Made Simple

How can leaders translate the complexity of strategy into something simple and flexible enough to execute? Your first instinct might be to boil a complex set of choices down to a handful that matter the most. Indeed, a series of strategy experts have argued that managers should do just that by distilling their strategy to a concise statement (less than 35 words) summarizing a few core choices.

The strategy distillation approach hinges on a few fundamental strategic categories — such as the choice of target customer or core competencies — that can summarize the heart of any company’s strategy. Strategies in transition posed another challenge.

Combining choices that drove historical success with those required to win in the future resulted in convoluted statements that left employees baffled as to where they should focus.

Simple strategies, that were found, don’t work for companies that compete in multiple businesses, serve multiple customers, or are in the midst of a strategic transition.

Distilling a strategy into a few core choices sounds great in theory, but often derails in practice. To differentiate a company from rivals, the strategy should be specific to the company’s history and context, which implies the list of potentially strategic choices is long.

Any short list of essential factors is likely to exclude choices that are critical to some companies. To be clear, this critique is not meant to devalue the work of the strategy scholars who created these frameworks, but rather to underscore the difficulty of reducing the inherent complexity of strategy into simple statements.

Many companies simply cannot cram 10 pounds of strategic complexity into a three-pound bag. If boiling down a complex bundle of choices to a few key elements doesn’t create a strategy for execution, what does?

Strategic Priorities

Instead of trying to summarize their strategy in a pithy statement, managers should translate it into a handful of actions the company must take to execute that strategy over the medium term.

Strategic priorities should be forward-looking and action-oriented and should focus attention on the handful of choices that matter most to the organization’s success over the next few years.

Many complex organizations that compete across multiple industries, product lines, and customer segments rely on strategic priorities to advance strategy.

More than two-thirds of S&P 500 companies, for example, published explicit mid-term objectives intended to help implement their strategy.

What companies call their corporate objectives doesn’t matter; S&P 500 companies use a variety of labels, ranging from the mundane (strategic priorities, areas of focus, strategic objectives) to the exotic (such as “interconnected ambitions” and “greatness agenda pillars”).

Common Names for Strategic Priorities Among S&P 500 Companies

Whatever terminology companies use, their objectives share a few common characteristics. They typically extend three to five years — shorter than that is too tactical, longer too visionary.

They are limited to a handful — of S&P 500 companies publicizing their objectives, 78% listed between three to five in total.

And they are strategic, in the sense that they describe specific actions that will help the company to execute its strategy, as opposed to financial targets or corporate values.

Strategic Priorities Among S&P 500 Companies

Many executives reveal that they use strategic priorities but report that the approach isn’t working as much as they had hoped.

To set the strategic agenda and drive implementation effectively, it is found that strategic priorities need to balance guidance with flexibility, counterbalance the inertia of business as usual, and unify disparate parts of the business. Crafting strategic priorities that do all of these things — and do them well — is a tall order.

Furthermore, the exposé will describe the seven characteristics of effective strategic priorities, explain why they matter, and suggest practical diagnostics managers can use to assess their company’s strategic priorities.

How Effective Are Your Strategic Priorities?

Executing strategy often requires different parts of the company to work together in new ways (such as when a company moves from selling stand-alone products to integrated solutions or when a retailer blends online and retail sales).

Strategic priorities should reinforce one another to ensure the different parts of the company are moving in tandem. At a minimum, the priorities shouldn’t conflict with one another or pull the organization in opposing directions.

The best strategic priorities hang together and tell a coherent story about how the company as a whole will create value in the future. They should also provide guidance on how to adjudicate the conflicts that will inevitably arise as different parts of the organization try to execute the strategy in the trenches.

Strategic priorities should lay out what matters for the company as a whole to win and should reflect the interdependencies among the choices.

If senior executives pursue goals that aren’t aligned with one another, the disagreements will filter down the silos, and the various teams will work at cross-purposes.

Management teams sometimes diverge because each function wants to promote its own pet objective: Human resources might want to say something about “world-class talent,” for example, while finance might want to highlight how the company delivers “industry-leading shareholder returns.”

Rarely is anyone considering the trade-offs among these objectives, their interdependencies, or whether meeting unit-level objectives will affect the company’s ability to succeed.

These priorities can reinforce, rather than break down, organizational silos.

Executives rightly focus on how to craft a great strategy, but often pay less attention to how their strategy can be implemented throughout a complex organization.

To steer activity in the right direction, a strategy should be translated into a handful of guardrails that provide a threshold level of guidance while leaving scope for adaptation as circumstances change.

Strategic priorities are a common tool to drive execution, but in many cases these objectives are not as effective as they could be.By following a few guidelines, executives can articulate a strategy that can be communicated, understood, and executed.

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Are we long—or short—on talent?

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  • By looking at their supply of skills and talent in a new light today, organizations can take actions that better prepare their companies for tomorrow’s challenges.

 

CEOs and HR leaders worried about the viability of their talent strategy may be excused an occasional sleepless night. After all, there’s a closetful of bogeymen to pick from as disruptive technologies such as digitization, automation, and artificial intelligence combine with demographic forces to continue transforming the nature of work, how it gets done, and by whom. The resulting job displacement could be massive—think Industrial Revolution massive—affecting as many as 800 million people globally by 2030 and requiring up to 375 million of them to switch occupational categories and learn new skills.

Companies are already feeling the heat. Fully 60 percent of global executives in a recent survey expect that up to half of their organization’s workforce will need retraining or replacing within five years. An additional 28 percent of executives expect that more than half of their workforce will need retraining or replacing. More than one-third of the survey respondents said their organizations are unprepared to address the skill gaps they anticipate.

The competitive implications are profound. Organizations that expect to benefit from a digital transformation or a promising new strategy won’t get very far if they lack the people to bring the plans to life. What might seem like an irritating talent gap today could prove a fatal competitive liability in the not-too-distant future.

 

How can organizations better prepare for what’s coming?

For starters, they should embrace a more expansive and dynamic view of their talent supply—one that tosses out the usual preoccupation with titles and traditional roles and looks instead at the underlying skills people have. Indeed, we find that when companies start with skills—the ones they need, the ones they have, and how the mix may change over time—they can free up their thinking and find more creative ways to meet the inevitable mismatches.

In this narrative, we’ll show how forward-looking organizations are grappling with these challenges and highlight ways that CEOs and senior leaders can spark progress that is tangible, practical, and quite often beneficial for both employer and employee alike. Oftentimes, taking the first step can be as simple as asking: For our five most important skills, are we long—or short—on talent?

 

Shift happens

Consider the European bank whose market position was threatened by new, more digitally savvy rivals. The shifting competitive landscape required action, but when the bank’s leaders compared their proposed strategic response with a three-year projection of the bank’s talent pool, they saw a mismatch. The plan made sense, but executives feared that their people couldn’t execute it.

For example, the bank would soon have serious skill gaps in its retail-banking unit, particularly among branch managers whose roles needed to change to encompass areas such as sales expertise, customer orientation, and digital capabilities, given the new strategy. Meanwhile, the bank’s IT group faced both undersupply and oversupply: programming skills would be too scarce, while IT infrastructure skills would be too plentiful. To complicate matters, the bank faced strict regulatory and labor restrictions that prevented most layoffs. Any solutions would require flexibility and creative thinking.

To respond to the imbalances, the bank developed a range of interventions. For example, the bank is rolling out upskilling programs to help prepare its retail bankers for the aspects of their jobs that are changing; elsewhere, reskilling and retraining programs (including new digital and analytical skills) are helping employees’ secure new roles in the company. Still other employees have been offered part-time positions, an option intended to appeal to those nearing retirement.

Finally, for some employees, the bank is exploring secondment opportunities with selected not-for-profit organizations. Under the arrangement, both organizations pay a portion of the employee’s salary. In principle, this benefits everyone: the not for profit (which gets a talented employee for less money), the employees (who are doing meaningful work using skills that are in high demand), and even the bank (which pays less for skills it already has in surplus, while potentially enhancing its visibility in the community).

While the bank’s overall approach is still a work in progress, its example is instructive not only for its breadth but also for the outlook of its leaders. Instead of just looking at its talent supply through the lens of its traditional jobs or roles, which after all are changing, the bank’s executives pushed themselves to take a more objective, skills-based look. Similarly, the bank’s experience underscores the importance of setting aside long-held assumptions about which roles are most important, as prevailing opinion may be outdated or biased.

 

Are we long—or short—on talent?

Adjusting the skills of a workforce requires a blend of rigor and creativity; it also requires dedicated commitment and attention from senior management. One way to spark a fruitful C-suite conversation about talent supply is to borrow a page from the dismal science and look at skills in the context of surplus and shortage.

Starting with a thought exercise such as this can help break down an otherwise intractable problem into smaller chunks that can be approached with discipline. At the same time, testing potential interventions using the logic of microeconomics can help managers see a wider portfolio of options beyond reskilling at one extreme, and layoffs at the other (exhibit).

 

The following snapshots highlight ways that organizations have addressed both talent gaps and overages.

 

 

We’re short on talent: Build, acquire, or rent?

While talent shortfalls arise for many reasons, the supply-side remedies can be summarized in just three watchwords: Should we build on our existing skills? Should we acquire them? Or should we “rent” them?

A global manufacturer investigated these options as it looked for ways to fill several looming skill gaps. One of the most acute shortfalls was in data science, a problem complicated by the company’s suspicion that it was losing ground to high-tech firms as an employer of choice.

On closer look, their fears were justified: a talent-supply forecast that used machine learning to predict the likelihood of employee attrition found the company’s data scientists would be eight times more likely to leave than other colleagues. Clearly, the company couldn’t simply hire its way out of the problem; filling the skill gap would also require better employee retention.

Subsequent analysis helped the manufacturer spot opportunities in both areas, starting with a plan for more meritocratic career paths and redesigned leadership tracks to keep employees engaged and happy. The company is now working on simple changes to its recruiting and interviewing processes, to be more responsive and to help make candidates feel more valued throughout the process.

Of course, another way that companies can acquire skills en masse is through M&A, an approach pioneered in the tech industry, where it was given the portmanteau “acquihiring.” It has since become more common in other industries. Walmart used it in 2011 when the company bought Kosmix, a social-media company, to form the nucleus of what would become Walmart Labs, the retailer’s digital-technology unit.

Companies can also start nurturing skills today that they may benefit from later. Programs such as this are intriguing to employers, because it lets them tap a new pool of talent and then create and shape the specific skills they need. The approach also holds considerable social promise, as it can be designed to support underemployed groups, such as young people or military veterans.

Finally, companies can obtain skills by “renting” talent; for example, through outsourcing partnerships that bring specialized skills or by tapping the gig economy, where the rise of digital platforms has rightly captured executives’ attention.

 

We’re long on talent: Redeploy—or release?

Invariably, the changing nature of work will create skill overages that even the most inspired corporate upskilling or reskilling programs can’t manage. In these cases, companies must choose whether to redeploy workers or to find thoughtful ways to let them go.

As the case of the European bank demonstrated, there may be regulatory reasons to consider the redeployment of workers by offering their skills to a third-party organization for a fee. There might also be cultural, financial, strategic, or even social reasons for redeploying skills.

In the private sector, meanwhile, the video-game industry has long “loaned out” the specialized skills of software engineers to other video-game companies, including competitors, when their own projects hit unforeseen snags. While the approach may seem counterintuitive, the arrangement helps the sponsoring company maintain ready access to skills that are particularly rare and hard to recover once lost. The engineers, meanwhile, appreciate the change of pace and the chance to work on high-visibility projects with talented counterparts.

To be sure, redeployment programs such as these tend to be the exception rather than the rule. And no program can forestall all the job separations that come with technological change.

 

Work, Adapt, Repeat

The nature of the evolving workplace confronts leaders with the need to think quite differently about people’s relationship to work. In this vein, we are particularly intrigued by concepts such as “lifelong employability” that prioritize helping people successfully adapt—again and again, if necessary—as the economy evolves.

Yet if companies are to bring ideas such as these to fruition, and truly reorient their organizations around skills and not just roles, they will need more than just a mind-set shift. Many, if not most, companies will find their people-operations infrastructure and talent-management system creaking under the strain of new challenges. Designing a winning employee value proposition, for instance, is much harder when career paths are themselves in flux.

Indeed, HR will need to sharpen its own skills, not only in traditional areas, like employee retention and performance management, but also in new ones, such as managing the risks associated with gig work. In this respect, HR leaders are no different from those in any other function—all of whom must be prepared to evolve if they are to be effective in helping the larger enterprise adapt to the changing nature of work.

 

  • By Megan McConnell and Bill Schaninger

 

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