By: Abdul Hanan Abd Mokti, Senior Consultant, Sageconsulting Sdn Bhd
Imagine the scenario: As a CEO you were developing a 5-year strategic plan for the company. By the end of the 4-day gruelling strategic planning session, you had established your mission, vision, themes, objectives, measures/KPIs and targets. And due to time constraint, coupled with the fact that you were already exhausted, you said to your management team “We have completed the bulk of the strategy, now I’ll leave the details to the team”.
Your second-liners then delegated the task of identifying strategic initiatives to the middle management. They started looking at initiatives from the previous years, some of which have been completed, and some to be brought forward to this year. They introduced some new initiatives, but mostly tweaked the current ones here and there. Being an operational business with standardised processes, life seemed to be going on as usual.
Fast-forward 12 months. Despite completing (most of) the strategic initiatives, the outcomes of your measures are not that encouraging, and you begin to wonder why.
Defining Strategic Initiatives
Let us begin by understanding what strategic initiatives are.
“Strategic initiatives represent the force that accelerates an organisational mass into action, overcoming inertia and resistance to change. Strategic initiatives are the collection of finite-duration discretionary projects and programs, outside the organisation’s day-to-day operational activities, that are designed to help the organisation achieve its targeted performance” – Kaplan and Norton
In short, strategic initiatives are specific programmes, activities, projects or actions an organisation will undertake in an effort to realise the objectives and meet the performance targets.
Desired Characteristics of Strategic Initiatives
Four key words can be used to sum up the desired characteristics of effective strategic initiatives: R.I.D.E. – Relevant, Impactful, Distinct, Executable
A strategic initiative must directly and effectively serve, and is crucial to, the achievement of the relevant Strategic Objective. Which means that when determining and designing an initiative, there needs to be a clear relationship between the successful completion of the initiative and the fulfilment of the objective. For example if the objective is “Competent Resources” then a “Develop Structured Competency Development Framework” could be a directly contributing initiative.
Ideally, the initiative should also positively contribute to the achievement of the relevant performance target. However, because performance is always
appraised based on the achievement of measures/KPIs, a common mistake that managers do is aligning the initiative towards measures/KPIs rather than serving the objectives. This is especially true when the fulfilment of the objective cannot be directly and practically measured and a ‘proxy’ measure is used.
For example, for objective “Increased Employee Loyalty”, a practical appraisal cannot be identified that accurately determines the degree of loyalty of an employee. Therefore “Employee Turnover Rate” may be used as a ‘proxy’ measure. The problem starts when initiatives (such as “Increasing Resignation Notice Period” to quote an extreme example) are established with the aim of reducing employee turnover rate rather than instilling employee loyalty. In the end employee turnover rate may be reduced but there is no guarantee that employee loyalty is improved.
An effective strategic initiative must focus on creating a material, distinctive and lasting impact which cannot be achieved if things were allowed to continue the way they currently are. It must depart from the status quo and focus on change. An initiative cannot exist for its own sake. It is required only if there is a real need for it. For example:
- When a new objective and measures/KPIs are introduced
- When targets for existing measures cannot be achieved through normal operational means
- When there is a significant increase in target that requires new approach/method
- When there is a risk of a significant drop in current performance due to new circumstances
Targets that are achievable through normal operational means do not require initiatives. Probably the target needs to be reviewed upwards to create impact?
A strategic initiative must be clear and distinct in the sense that:
- It is different from normal operations / current processes / departmental accountabilities / job description
- It is specific in terms of objectives and scope
- The completion, achievement or outcomes can be measured
- It must be projectisable, i.e. can be treated as a project with specific title, timeline and resources
- There is no redundancy between one initiative and another
For example, “Improve Credit Control” is too vague as an initiative to serve the objective “Improved Cash Flow”. Credit control is already the operational job of credit management department anyway. Probably “Establish New Debt
Collection Procedures” is more suitable as initiative if the current procedures fail to ensure timely collection.
In the excitement of the strategic planning session, it is all too easy to get carried away with a large number of fantastically optimistic initiatives. Remember that they require time, efforts and other resources. It is therefore critical that organisations identify a balance between the cost of implementing the initiatives and the benefit to be reaped from it. Typical questions to be asked are:
- What are the costs involved (including opportunity costs)?
- Do we have the necessary resources?
- Can they be feasibly implemented?
- What else need to be in place before the initiative can take-off?
- What is the level of organisational readiness to embrace the change likely to be brought about by the initiative?
Only if a proposed initiative can satisfy the four criteria above can it be considered for implementation. In the next article we will talk about detailed implementation planning for the initiatives.