During tough economic times, organisations both public and private alike, look at where savings can be made in terms of staff, other overheads and even structure. These cuts tend to be described by terms like ‘efficiency savings’ and yet rarely is the overall efficiency of the organisation properly examined during this process.
This is because many organisations, probably even the majority, are complacent when it comes to the way they devise and deliver strategy. Unlike many other areas of business, if the strategy is deemed to be working seldom is the question ‘can we do it better?’ applied. And the mindset ‘we’ve always done it like this’ wins out over change, or even the consideration of change.
So, when we hit tougher economic times, the efficiency (and effectiveness) of the strategy is rarely examined closely. Instead savings (cuts) are applied in other areas and as the economy recovers the system of planning which was ‘good enough’ remains. ‘As good as it can be’ doesn’t get a look in.
In my experience there is no such thing as an organisation which cannot improve the way it devises and delivers strategy. I have experienced companies who, although successful, lacked a mission, lacked vision or (frequently) confused the two. This didn’t prevent many of these companies from being successful however it did prevent them from being as successful as they could or should be.
Then there are the businesses who fail to grasp what strategy is, planning almost randomly or even not planning at all, stumbling from minor success to minor success and considering themselves to be well run.
And these are the companies that survive an economic down turn or who appear to thrive during the good times. How many fail not because the market place deserts them but because they failed to plan appropriately – not the same thing as simply planning.
Even more prevalent, almost pandemic, is the failure to understand integration of strategy and the huge efficiencies and improved effectiveness proper integration can bring to their business.
There are those that don’t integrate between levels, strategy is owned by Board and/or senior management but neither shared, understood nor brought into by middle management and those at the coal-face.
However, the vast majority of organisations that do plan, that do implement good strategy and share it across tiers, do so in what is termed a ‘horizontally integrated’ way. By this we mean that every area of the business has a plan, every aspect is covered in individual strategies. The boxes are assumed to be ticked. Sound familiar?
Horizontal integration of strategy often works well during the good times, when budgets are not so under pressure but even during the good times they are not the ideal way to maximise resources and to ensure that profit is maximised.
That requires ‘Vertical Integration’ a method of planning whereby all departments, all targets, all resources, in fact every aspect of the business are cross referenced. The impact of one success or failure in one department is considered against its impact throughout the business and planning throughout reflects this.
In the tough times switching to such planning allows the organisation to maintain services while still identifying areas where economic savings can be made. When the good times return this will then be reflected by a far more efficient and effective business maximising profit.
© Jim Cowan, Cowan Global Limited, 2010