The first months of 2020 are over and it is time to take (the first) stock of the 2020 annual plan. As an organization, you are well on your way to kickstarting the (strategic) objectives set out in the organization’s effective annual plan. Good strategy execution is characterized, among other things, by regular steering. What is often missing is the tools and setup to get information to dress up this steering. Does your organization succeed in using the right information to steer the realization of the strategy?
With only a catchy annual plan, you won’t make it as an organization. Countless studies focus on reasons why companies and organizations fail to successfully realize a strategy, in short, ‘Why strategy execution fails’ (Forbes, 2019). Many companies conclude too early that their strategy has not worked and fall back to “business as usual. But, on what information is this conclusion based? This is because many companies do not know how they are actually performing on their strategic goals and therefore have never been able to manage them. For example, they receive management reports from two months ago, have no idea what the KPIs in the report mean, put hours into understanding a report and are left with no action items based on the results. The question then becomes, how did this company come to this conclusion and why did they abandon a, perhaps successful, strategy?
Creating, monitoring and steering
The solution lies in setting up a structure where good decision and steering information is produced. Unfortunately, we see that many such management reports, if they exist at all, focus on reporting last month’s performance. However, past performance is not always relevant and does not provide the desired information needed for future direction. To provide a manager with information that he or she can work with, it is at least important that the information has the following characteristics:
1. Management information is up-to-date
In an earlier insight, we talked about successfully meeting goals with the three R’s: direction, space and regularity. And the R “Regularity,” means looking at the KPIs regularly (monthly). Here, it is crucial that the numbers are recent and up-to-date. This seems redundant to say, however, in practice it turns out that this is far from always the case. It often takes a lot of time to retrieve the right information and compile it into a management report, which means that the information presented is already out of date. So don’t discuss February’s results until the end of March! Not only is it important to ensure that there is recent data, but also that your process is properly set up to deliver information quickly when needed.
2. Steering information is a translation of strategy
In addition to up-to-date information, it is important to show the right information. Correct management and steering information is characterized by a link to this annual plan. The annual plan (of which OGSM is an example) defines the target KPIs (what is the dot on the horizon) that must lead to the realization of your strategy. It is also these KPIs on which you, together with the financial KPIs, must steer. Steering only on financial KPIs will not lead to strategy realization.
3. Visual and narrative
A study conducted by Supply Value tested the effect of narrative effects to a dashboard. Keller and Tergan (2005) concluded that “data visualizations support data-driven decision-making by ensuring that the human processing system is used more efficiently.” This involves both the amount of information as well as the mental effort it takes a manager to take in the information. Therefore, provide a good structure as well as visual techniques to decisively bring the management information to the decision maker.
4. Forward-looking and provides insights
If all three previous elements are met, one can really make the move from data to information. The final element that makes management information useful is a look forward to the future. From experience, we see that much management information is reporting and descriptive. We believe that a manager wants to know what the performance of the past month(s) means for the progress on strategy in the coming month. If performance negatively affects the progress on strategy, but remains within pre-agreed tolerances, there is no need (necessarily) to steer. However, adjustments will have to be made if strategy realization is at risk. If a manager is not aware of this, steering will always be based on incomplete information.
Good management information is characterized by providing the right tools at the target level to adequately steer for results. The monthly steering and ability to iterate the execution of your strategy makes you very agile as an organization!
