Executing Strategy: Alignment Makes The Difference

A Companys success depends on its people. But their collective power stems, in part, from an organizations ability to point them in the same direction and importantly, in a direction that is aligned to the organizations business strategy. When an organizations leadership, workforce and culture are aligned with its strategic priorities, people can be a major source of sustainable competitive advantage. For example, if an organizations strategic priority is to compete through innovation and product development, then it will benefit from a culture in which new ideas are encouraged and where cooperation across functions is strong. TP-ISRs Organizational Effectiveness Framework summarizes this relationship.

Leadership

Strategy

Culture

Engaged Employees

Improved Business Performance

Leadership

Strategy Culture Engaged Employees

Diminished Business Performance

While organizations choose to compete in various ways and can pursue multiple strategic priorities, in practice, only a limited number of distinguishable, core strategic priorities exist. Because we believe different drivers will have influence on different group of employees. For instance, many companies contend that their strategy is one of growth. Digging deeper into that statement usually reveals a growth strategy focused on better service to customers, new product development, lower cost or fewer defects from a production process. Building on this logic, we identified through research and our experience working with leading companies five major strategic business priorities, and then secondly, identified the cultural elements that must be in place to support the successful execution of each of the strategic priorities. The five core strategic priorities identified are: 1) Customer service. Most organizations have some conceptualization of the customer, regardless of the extent of contact between customers and employees. The types of organizations with a dedicated strategic focus on providing unique solutions to customers typically include financial services

and retail companies -environments which often operate a large network of units (e.g., stores, bank branches) that are specifically designed to deliver service excellence. 2) Efficiency. Service alone is often not enough to drive higher sales and profitability. Many business models must also address the on-time delivery of goods and services to market. Organizations with a dedicated focus on efficiency include many manufacturers, especially consumer goods companies that must meet delivery dates for goods to store shelves. Hard and soft manufacturing companies alike face similar efficiency challenges, whether the goods to be delivered are construction steel or foodstuff. A focus on efficiency often includes an emphasis on lean production and cost containment as part of the process of meeting delivery dates for production. 3) Innovation. Pharmaceuticals face the well-documented dilemma of patent expiration for current products in the marketplace, creating a clear strategic need to focus on the development of new products, the essence of innovation. In increasingly competitive markets, manufacturers and service companies are also becoming more concerned with their ability to adapt to changing conditions, anticipate future customer needs, and address those needs through research and development activities. 4) Quality. Many manufacturers of durable goods, such as automobiles, maintain a strategic focus on reducing defect rates in products delivered to market. A quality focus has much in common with an efficiency strategy. The key difference under a quality mandate is the prominence given to the error rate in the production process, rather than the timing of the delivery of goods produced from that process. 5) Brand/Image. Finally, some organizations compete in their markets based on the reputation of the goods and services they provide. Examples include professional services firms and high brand value companies, which often provide services that are difficult to differentiate from competitors, or that rely on relationship-building activities to secure trust in the products and services provided. To identify the cultural elements that must be in place to support the successful execution of each of the five strategic priorities, we drew on our unrivalled normative data and data on high-performing global companies obtained from over 30 years of experience conducting employee research.

The Research Process

1
Focus on financially HighPerforming Companies

Compare those that score high on items related to strategic priorities with those that score low

3 Determine

the largest differences across all categories (supervision)

Conduct key driver analyses and linkage analyses on items related to strategic priorities

Review relevant literature associated with each strategic priority

Combine findings from steps 3-5 to distinguish cultural differentiators for each strategic priority

The research clearly identified a set of cultural elements that differentiate high and low performance companies for each of the strategic priorities. See table below:

TP-ISR Cultural Alignment Framework

Major Strategic Priorities

Efficiency

Quality

Innovation

Customer Service

Company Image

Cultural differentiators by strategy in financially high-performance companies

Manage timelines effectively Execute plans and initiatives swiftly Act on customer input Make improvements based on employee input Communicate about issues directly impacting employees Involve employees in problem solving Build teamwork Create regular contact points between managers and employees

Show fairness and consistency in employee relations Demonstrate an understanding of workplace challenges Encourage giving best Build teamwork Make improvements based on employee input Provide sufficient resources Provide opportunities to learn values Communicate about issues directly impacting employees

Communicate company priorities Show alignment between goals and department objectives Trust staffs judgment Make decisions promptly Execute plans and initiatives swiftly Encourage continual improvement Celebrate successes Involve employees in problem solving Anticipate market trends and customer needs

Provide clear future vision Communicate about company performance Involve staff in problem solving Build teamwork Recognize good performance Encourage giving best Articulate clear values Provide opportunities to learn values Make decisions consistent with expressed values Trust staffs judgment Know customer needs

Communicate about company performance Inspire confidence in decision making Make strategic decisions with the marketplace in mind Provide clear future vision Manage change effectively Earn respect from employees

Drawing on the above insights and our normative database, we are able to help organizations assess how well their culture supports the execution of its business strategy and further, identify those areas they should focus on in order to achieve alignment and drive business performance.

Case Study Excelling at Customer Service

The Challenge: A global financial services organization with over 100,000 employees had been expanding rapidly through acquisitions and organic growth. Its challenge as it continued to grow and acquire was to ensure the organization was still positioned to achieve its strategic goal of delivering first-class customer service. What we did: Drawing on our cultural alignment framework and normative database, we firstly identified the core cultural characteristics that must be in place for the organization to successfully execute its strategic priority of superior customer service and secondly, by assessing its own cultural profile, identified the elements that were either impeding or supporting the execution of its strategy.

Step 1: Examining the Companys Culture

Employee opinions on the cultural elements required to deliver superior customer services were compared with TPISRs Global High Performance and Global Financial Services Norms. The results clearly identified key gaps in the companys current profile, especially when compared with our Global High Performing Companies. Compared with this group, the company was struggling in three key areas: i) Developing a strong belief in the companys products and service, ii) Leadership at a divisional level and iii) Investment in ways to better service its customers.

Step 2: Identifying specific actions to improve customer focus in the organization

The next step was to identify the drivers of customer service in the organization or those factors that were having the biggest impact on customer service. This would ensure the organization focused its investment effort on areas that had the biggest potential to drive service improvement. The results revealed that three factors were most influential in driving perceptions of customer focus: i) Looking for Better Ways to Serve Customers, ii) Strong Leadership Decision Making, and iii) A Strong Belief in Products. Interestingly, two of these areas were also where the company performed unfavorably against high performance companies, reinforcing the need for the organization to focus on these two areas. Strong Leadership Decision Making Strong Belief in Products & Services Strong Belief in Products Looking for Better Ways to Serve Customers Leadership -Strong Decision Making

Driving Perceptions of Customer Focus

Customer Service

Step 3: Identifying the right actions for specific employee groups

To enable targeted action plans to be developed for different areas of the business, we further identified what drove superior customer service for different employee groups. Our analysis determined that employees fell into one of three broad groups i) Fully Focused on the customer (53% of employees), ii) Partially Focused on

the customer (32% of employees) and iii) Unfocused (15% of employees). Partially Focused or Unfocused?

The obvious question for the

company was what should they do to improve the customer focus of the 47% of employees who were either

Motivating Factors
Career Development Fully Focused Partially Focused Knowledge & Service Orientation Unfocused

Customer Service

Further analysis revealed that the motivating factor for employees who were Partially Focused or Unfocused was increasing their knowledge of customer needs and helping them to identify better ways to provide service. The motivating factor for Fully Focused employees was to invest in them for the long-term by providing opportunities for career development.

Conclusion:
Through a series of analyses, we were able to help the client identify what specific areas to focus on in order to align its culture to its business strategy and deliver superior customer services. These included: 1. Supporting employees to identify innovative ways to help customers 2. Developing a strong belief in the companys products and services 3. Improving employee knowledge of customer needs 4. Providing career development opportunities Armed with these insights, the company was able to develop a roadmap to achieve the desired cultural state and deliver superior customer service. As corporations operate in an ever more complicated and competitive environment, the need for organizations to achieve a culture that supports the execution of its business strategy is gaining importance. This means understanding and implementing those HR programs that drive the cultural attributes that distinguish high performing companies from their peers. With so many companies applying measurement systems to capture the contribution of human capital to performance, quantifying the degree of strategy-culture alignment and subsequently defining programs that improve the alignment is a journey organizations cannot afford to miss.

ABOUT TOWERS PERRIN-ISR

Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services and actuarial consulting. Towers Perrin-ISR, the global research business of Towers Perrin, helps companies gain insights into the views of their critical stakeholders - employees, senior leaders and customers - and use these insights to shape people strategies and programs that align organizational culture, employee behavior, customer behavior and financial results. Towers Perrin has offices and alliance partners in the worlds major markets. More information about Towers Perrin is available at www.towersperrin.com.

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