Making Strategies Work
Pietro Micheli
Steve Macaulay
No manager likes to be associated with failure, but that is precisely
where many managers stand in relation to strategy – both its
formulation and implementation. Now to get to the bottom of this
issue, we have got in the studio today Dr Pietro Micheli.
Now Pietro, you are from the Centre for Business Performance here at
Cranfield, you have seen many strategies come to grief. Tell some
more about what makes for a successful strategy and an unsuccessful
one.
Pietro Micheli
We have seen numerous examples of strategies that fail, and when I
say fail it is sometimes due to a strategy that is flawed, so it poorly
designed, but it is mostly poorly implemented – so poorly executed.
Steve Macaulay
So is that the nub of the issue then? People don’t implement
strategies very well?
Pietro Micheli
That’s right; so we have done a lot of work in trying to understand
what are the problems in implementing strategy. The first one is that
the implementation and the formulation are disconnected and so we
think that we can plan and then somehow the plan will be put in
practice, but we don’t pay too much attention – we invest too few
resources in the actual application of it and that is the first problem.
A number of organisations have introduced performance
management systems to overcome this problem and to some extent
they have exceeded.
Steve Macaulay
So, let’s pin this down then; what are performance management
systems?
Pietro Micheli
It is basically a set of objectives, targets, indicators and incentives and
an information system to support them. And so these are systems
that can be very useful in translating a strategy into practice.
Steve Macaulay
So they are things like objective setting, setting up measures,
reviews; that kind of thing?
Pietro Micheli
That’s right; absolutely right. And over time we have seen very
good examples, but also quite a few poor ones and the big
difference is on one hand the time that is taken by an organisation
to implement those systems, but also – and especially – it is the type
of behaviours that these generate and that is very important.
So on one hand, the work that we have done is technical – so we
have looked at how to develop good targets, good indicators, how to
phrase objectives and communicate them – but is also what is the
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Pietro Micheli
impact on the behaviours of people? And so from a strategy to
measurement to decision making is really the focus of the work that
we have done.
Steve Macaulay
Now, let’s get specific; give me some examples because these sound
very conceptual things to me. What do they mean in practice?
Pietro Micheli
In practice it means, for example, if I introduce new targets and new
measures I have to make it relevant to the individuals. So
individuals throughout the organisation – not only top management,
but everyone in the organisation – has to understand why they are
there, what type of results will they bring, what type of use will be
made of the data that we collect and also how the organisation is
going to learn and improve from using the system – not only used as
a control system, but mostly to generate that improvement, the
learning that organisations really need.
And so it is by involving people at the beginning, so throughout the
first stages of the execution of the strategy, but also in reviewing the
strategy and the measurement system. And the result is that we
get their commitment and there understanding, if you want, that
really makes things better.
A lot of scorecards, dashboards etc., have also failed in the sense of
not bringing about the improvements and that is due to the fact that
we have seen leadership and performance management as two kind
of substitutes, but actually they are complements. So we need to
have organisations that are well led and well managed, and a
performance management system can help you do that, but it is no
substitute for that.
Steve Macaulay
Give me an example then of good leadership because everybody
talks about leadership.
Pietro Micheli
It is really showing the type of behaviour that we want to see in the
rest of the organisation; so it is really walking the talk, it is not just
talking about it. And it is when that statement and when the
priorities for the strategy of an organisation becomes real because
we see it; we see it in practice and we can relate to it. And so it is
not just about collecting data over how we have done – which is
partly important – but it is also about how do we communicate
priorities in a way that is very tangible to people because they can
see their targets, they can see their incentives and that is something
that can make a big difference that comes in the execution phase as
opposed to the formulation of the strategy.
Steve Macaulay
So if you were to leave people with a message here, it feels very
complicated to me really; certainly, I have got the picture it is a lot
about behaviours, it is a lot about maybe measures – but it is more
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Pietro Micheli
than that. It is a complex set of things, but what would you say?
Pietro Micheli
The best companies are the ones that look at the technical side of
things; so their measures and scorecards or whatever, but also the
behavioural side of things. It is about people and it is about
people’s behaviours. It is when you understand how the two come
together is then when you make a real difference.
Steve Macaulay
Pietro, thank you very much.
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