Wednesday, April 22, 2020

Do Your Projects and Initiatives Support Your Strategy?

Strategy has little value until it is implemented.

In a world where disruption can happen overnight, moving rapidly from strategy formulation to implementation is critical.

Yet too many companies go only halfway, putting their best people into formulation and in effect ending up treating implementation as an afterthought. As a result, strategies fail, customers leave, key talent is lost and financial performance suffers.

One key piece of closing the gap between strategy formulation and strategy implementation is strategic alignment.

Most people think of strategic alignment as a noun (“the state of having everything aligned to strategy”), but it’s better to think of strategic alignment as a verb - it’s about action.

Here’s a better definition.

Strategic alignment (verb): The process of aligning an organization’s decisions and actions so that they support the achievement of strategic objectives.

This definition emphasizes decision-making and actions. Actions typically follow decisions so if your organization doesn’t have the ability to make well-aligned decisions, you  really can’t take well-aligned actions.

Implicit in the definition is also the fact that strategic alignment involves NOT doing some of the things that you might currently be doing. For example things that do not support the realization of your strategic objectives.

One of the most important and costly “things” your organization is doing are projects. And managing the strategic alignment of your projects must be part of your project portfolio management process.

Not for nothing is “creating a strong link to strategy” one of the four goals of project portfolio management.
Strategic Alignment
But before you can assess the strategic alignment of the projects in your portfolio you must do two other things first:

1) Weight your strategic objectives
2) Scale your strategic objectives

Weighting your strategic objectives

I assume you have a list of your strategic objectives. If not, please read my article “What Is Strategy? And What Isn't.” first.

What you need to do now is determine the relative importance of your objectives.

Not all of your objectives are equal. Also your key stakeholders are unlikely to agree on what the relative importance of your objectives are.

Without a common “set of rules” that can guide decision-making and actions it is difficult to keep things aligned. So, you need to “weight” your objectives but you need to do it in a way that everyone supports.

While this sounds like a simple task, it is not. Simply grabbing a whiteboard and asking a room full of people to weight / rank your strategic objectives is most of the time not very effective.

That kind of process is wide open to decision biases and tends to be poor at building real consensus and buy-in (though you may think you reached consensus).

Research into decision making (specifically into multi-criteria decision making which is what you’re dealing with here) shows that a method called Analytic Hierarchy Process (AHP) is one of your best choices.

You can learn more about AHP here. For the purpose of this article I assume that you have a weighted list of your strategic objectives that clearly shows what is most important.

You should share this list with your team(s). The wider you share it, the more thoroughly your team(s) understand what you’re trying to achieve and why, the more likely they are to use your objectives to help drive their own decisions and actions.

“Strategy execution is helping people make small choices in line with a big choice.” - Jeroen Flanders

Scaling your strategic objectives

The next step is to create a scale for each of your strategic objectives. These scales should measure the contribution to the objectives. For example, if entering the Chinese market is one of your strategic goals, your scale might look like this:

What difference will this project make to our ability to enter the Chinese market?

0 - No impact on Chinese market entry
1 - Small impact on Chinese market entry
2 - Moderate positive impact that would make a small, but definite difference
3 - A real difference to either the speed, size or risk of market entry
4 - A significant difference to either the speed, size or risk of market entry
5 - A game changer or “must have” for market entry in China

It is hard to write a good scale but you get the idea - you’re looking to capture what the impact is on the strategic objective.

Assessing the strategic alignment of your projects

Selecting projects and initiatives is one area in which strategic alignment can be easily and quickly improved and where that work has a massive impact on the performance of your organization.

Selecting projects is often done by an executive committee and, because of this level of visibility, people tend to assume that the resulting project portfolio is aligned to strategy.

Research indicates that this is not the case. According to research by the PMI, 20% of projects in your portfolio contribute so little to strategic objectives that they should be stopped.

By assessing the strategic alignment of your projects and killing off the projects that are not aligned (labelled as “Waste” in the following diagram) you can re-allocate those resources to important projects that are struggling (red) and turn them into successful projects (pink).

What you’ve seen so far is that strategic alignment is about making decisions and taking actions that align to your strategic objectives.

“Objectives” is plural. There are usually several of them.

So assessing strategic alignment is not simply a check box task. Asking a simple yes/no question, “Does Project X align with strategy?” is one of the most common mistakes people make when trying to achieve strategic alignment.

This is because everyone will just say “yes”.

What you’re interested in is the contribution Project X makes to your various strategic objectives.

In other words, whenever you’re making an important project portfolio decision you should be evaluating the contribution each project makes to your strategic objectives. Only then will you be able to work out which alternative is best aligned to those strategic objectives.

So you have a weighted list of strategic objectives, you have a scale that captures the contribution to these objectives, now you need to define who is actually evaluating the actual contribution.

And this depends on which project you’re evaluating. Generally, the answer should be “people who are experts and who do not have a preference for one outcome or another”.

If the person requesting the project is asked to score their idea against different objectives, they will try to “game” the system by scoring everything higher than it should be.

Making your scale about “contribution to an objective” has made it much harder to game the system than simply asking, “Does it contribute..” so you’re already ahead of where you were, but you will have scoring bias if, for example, the project sponsor answers the questions.

This is why it’s a good idea to have an “independent expert” do the scoring where possible. If that’s not possible, you can always have an expert review answers for reasonableness. This helps you collect more consistent and unbiased data.

Sometimes you’re measuring something that is quite subjective or something that you can only estimate by intuition (as opposed to “level of effort” or “net present value” which you can model or based an estimate on previous data).

For example, you might be asking “What is the contribution of this project to employee satisfaction?” That’s a hard thing to estimate in any really “rational and reliable” way. In this case, pulling in a panel of people and asking them all the same question will give you a much better answer.

Research shows that a group of people, even if it’s just 3 people, is much better at making estimates than an individual.

So the rules are:

> Use subject matter experts to score the contribution of your projects against your weighted strategic goals.

> Ask a group of people their opinion.if you’re measuring something that is inherently subjective.

Now you’ve scored your alternatives, simply multiply together the score and weight for each goal to calculate an overall score for each alternative. The result is an overall score for each alternative allowing you to see which projects are most aligned to your strategy.

It’s often a good idea to present this information in a format with the weighting of each goal and the contribution to each goal for each alternative clearly visible.

In a nutshell: Strategic alignment is the process of aligning an organization’s decisions and actions so that they support the achievement of strategic objectives.
Posted on Wednesday, April 22, 2020 by Henrico Dolfing