Producing a corporate mission

A corporate mission statement is a short, memorable statement that clarifies the reasons for the existence of an organisation and expresses what its purpose is. There is a fine but distinct line between a mission statement and a vision statement, which gives a broad, inspirational image of the future an organisation is aiming to achieve.

For the purposes of this checklist a corporate mission is taken to mean a description of the underpinning purpose of an organisation. A mission statement defines the essence of an organisation and what it stands for. It describes the purpose of the organisation and identifies how the organisation defines success.

The corporate mission may be known as a corporate philosophy or credo. Whatever it is called, it should combine the inspiration of ‘where we are going’ with the realities of ‘where we are now’ and ‘how we are going to get there’.

The production of an effective mission statement can:

However, mission statements have been widely criticised as often not being worth the paper they are written on, so it is important to understand that they need to be:

Developing a sense of mission requires strategic thinking, effective internal communication, empowerment and, in some cases, cultural change. This checklist is intended to provide guidance for senior managers who wish to produce a mission statement and develop a sense of mission within their organisation.

Action checklist

1 Create a project team

The senior management team is usually responsible for establishing an organisation’s mission, so the project team should consist of either the complete senior management team, or perhaps, in a larger organisation, a working group selected from the senior management team. The process of producing a corporate mission involves an analysis of the strategy and future of the company. Conducting a SWOT analysis of the organisation and its markets can be a helpful start in identifying its strengths and opportunities. The appointment of an external facilitator may help the team if there are likely to be problems in reaching a consensus agreement on the mission.

2 Gather information

The project team should investigate, appraise and define the current ethos and values of the organisation, using internal and external sources or information. Meetings and interviews with senior managers will form part of this process. Other areas to examine should include published and visual materials, the website, the general corporate image or brand and current strategy. Gerry Johnson and Kevan Scholes’s model of the ‘cultural web’ may be helpful here. With a number of influential managers, identify:

External opinion can be researched by means of press files, analysts’ reports and the views of customers and suppliers.

When sufficient information has been gathered on internal and external views, they should be reviewed and compared to build a broad picture of the organisation. The project team should collate this information and prepare a detailed report to facilitate the production of the corporate mission statement. As the values are attitudes these will need to be communicated to and accepted by employees.

3 Build consensus

The senior management team needs to reach a consensus on a clear mission for the organisation. This is where an external facilitator can play an important role. The mission should help to define direction, and give a clear declaration of where the management team wants to take the organisation. It should give all stakeholders a clear message on organisational intentions.

Barriers to the adopted direction should be explored and appropriate steps and responsibilities should be agreed for dealing with these obstacles. Resourcing, core organisation competencies and possible employee development needs are among the factors to consider. This process will help the team develop ownership of the mission and take responsibility for it.

4 Draft a mission statement

The mission statement should be written and agreed by the senior management team as a whole, as it needs to draw upon and represent the consensus reached on the future of the organisation. The mission statement acts as the guide for the organisation-wide evolution of a sense of corporate mission.

The following are past and current examples of mission statements from some leading companies:

Assess (and ask others to assess) the mission statement for clarity, succinctness, memorability, believability and motivational aspects, then revise it as necessary. Bear in mind that a mission statement does not, in itself, create a sense of mission. Employees will respond to a mission statement only if they can understand it, relate to it and own it, so make sure that the wording is clear and simple.

5 Communicate the mission throughout the organisation

Consider how the mission will be communicated throughout the organisation. The range of ‘pick and mix’ options that can be used includes workshops, cascaded briefings, internal newsletters or bulletins, the intranet or group meetings. It is essential to develop a sense of ownership of the mission throughout the organisation, as only employees can bring the mission to life in their daily activities and dealings with customers.

6 Develop action plans and set objectives

Organisational objectives and strategy define what the organisation needs to do and the approach it will take to fulfil its mission. Action plans can build on the consensus and commitment developed within the senior management team. Set objectives by asking what needs to be done to realise the mission, and plan to overcome major barriers to achieving the vision. This is where the mission process meets with strategy and planning.

7 Monitor and review

The development of a sense of mission is a long-term process. Introduce means of monitoring the views of stakeholders to give indications of the spread of the sense of mission, the relevance of the statement, how well it is understood, and the degree to which corporate values have been cascaded throughout the organisation. Build references and links to the mission statement and values into all organisational activities, meetings and individual performance management practices. Use regular group meetings to promote and develop the philosophy.

8 Use the mission statement to focus the organisation

Developing a sense of mission is usually more successful if it is viewed as a long-term, evolutionary process. Some organisations develop a mission statement that they then use to provide a focus for the business. This approach can be useful, but is usually successful only where there has been close consultation with managers in the development of the mission.

As a manager you should avoid:

 

Corporate values

In The Nature of Human Values (1973), Milton Rokeach defines values as ‘an enduring belief that a specific mode of conduct or end-state existence is personally or socially preferable to an opposite or converse mode of conduct or end-state existence’. In everyday terms this means that values are our ideas about how things should be; they are the product of the things that we both prefer and prioritise above other things.

Individuals have priority values, as do organisations. The choice is not whether or not to have values – it is whether or not to deliberately work with them.

In starting to think about corporate values try to distinguish between two main types:

Successful organisations are linked with strong values and culture. Values are a key component of an organisation’s culture and should underpin the whole organisation by guiding behaviours to support cultural change. Organisations that commit to consciously values-based cultures can drive improvements in productivity and customer satisfaction and achieve long-term competitive advantage. When core values are both effectively expressed and genuinely lived out staff engagement is positively affected, as employees gain a greater sense of meaning in work, which in turn increases motivation and commitment. For corporate values to be meaningful they have to be expressed in terms that make sense to employees. For corporate values to be credible they should align with the strategic purpose of the organisation and be reflected in leadership and management practice.

Formally adopting core values in an organisation is not a quick fix. It takes time and planning to analyse and develop consistent and enduring values, and then to implement them as part of an overall strategy. Core values programmes may encounter problems. Some individuals may feel unsettled by a values initiative if they sense that their own values do not completely align with the corporate values being expressed. Value statements can prompt criticism of managers and leaders who do not appear to be living up to the sentiments expressed. Corporate statements of any kind are useless unless lived out in practice.

When executed well, values programmes make a significant positive difference to attitudes and behaviours at individual and team levels – aspects of organisational life that can be hard to influence through policy or training interventions. Values-congruent organisations enjoy high levels of stakeholder confidence and are often more successful at attracting inward investment than their peers.

Corporate value statements are often used in association with vision, mission and/or purpose statements.

This checklist explores ways to analyse, develop and implement values as part of an overall organisational strategy.

Action checklist

1 Analyse the current situation

Be clear about why your organisation intends to embark upon a values programme and start thinking about how you will measure the progress of the work. You might want to build up basic information on how employees and customers perceive the values expressed by the organisation and how these show up in their behaviour. Review any articles or documents written about the organisation. Which ones express the best characteristics of the organisation? In customer feedback surveys and correspondence, what makes your organisation one that people think well of? Unprompted comments are the best.

You could also use results from performance reviews and/or exit interviews. Focus groups and interviews are useful to delve deeper and find out more. Share all findings, the good and the less good, with the team chosen to work on the values programme.

2 Build the values team

A small team comprising key employees and the chief executive often works most effectively when developing values. Making sure there is visible ownership of the initiative across the whole organisation, rather than just handing it over to the HR department, helps establish credibility and confidence. It is crucial to set the scene and get senior managers to drive and fully support the values process. Ideally, members of the values team should have willingly agreed to take part as opposed to being directed.

3 Identify and articulate core values

There is no ideal number of core values to have: 3–5 is fairly common. The more you have the harder it is for people to remember them and bring them to life in everyday practice.

Your core values should express what is distinct and specific about how your organisation does what it does. Core values need to be more than a simple list of words. Each value should be a word or short phrase with an associated explanation. If you do not state what your organisation means when it says ‘trust’ or ‘excellence’ or ‘passion’, people will draw their own conclusions and the way in which values are transmitted and lived will vary widely. Having a value label – such as trust – followed by a descriptor helps ensure values are meaningful and differentiate your organisation from its competitors. Ask yourself whether the values are easy to understand. Are they memorable? Are they useful in guiding employees to make effective decisions for themselves? Values and values statements need to be long-lasting, so take your time and do not rush their development.

There is no right way to arrive at the core values for your organisation. Some organisations bring in external specialists at this stage, and an objective viewpoint may be useful. Organisational values is a specialist field, so check whether the consultant(s) you are considering have successfully executed similar programmes elsewhere. Employee and stakeholder engagement may be appropriate, but leaders and managers must align with the final iteration of the values and be able to consistently model the values in practice.

4 Assess current strategy in relation to values

Consider how your strategic aims and objectives align with the values. If you are planning changes to your strategy, look at the values and determine how to express those changes in the context of the core values. If values are truly core, they do not change every time there is a new corporate plan or horizon scan.

5 Embed the values into everyday behaviour

There needs to be a correlation between the value statements – what you say you will do – and behaviour – what you actually do and practise daily. The behaviour exhibited has to align with the values.

Reinforce the values and desired behaviour throughout the organisation. During recruitment, for example, provide clear guidance on what the organisation stands for. At interviews, ask questions designed to test alignment or fit with corporate values and recruit people who align with your organisation’s values. Embed values in all HR processes including performance management, promotion, pay, rewards and recognition programmes, and disciplinary and dismissal procedures. Recognise employees when they honour the values, and coach or discipline, depending on the situation, employees who do not.

6 Provide meaningful measures

Inspire and engage employees by being transparent about how the organisation is performing. Use a simple scorecard to share performance data, aligning values and behaviour to particular measures. This acts as a reminder that desired behaviour can change and improve scores and have an effect on the bottom line.

7 Communicate the values at every opportunity

Values need to be understood and remembered throughout the organisation. Senior managers should communicate the values and repeat the messages regularly. Stories are a powerful way of communicating values; deliberately collect, share and repeat stories of positive behaviour from employees which demonstrate the values in action. Make sure the values are visible by displaying them on posters, banners, screensavers and even t-shirts and mugs.

8 Live the values

Leaders throughout the organisation should act as role models and live the values by demonstrating desired behaviours. Strategic decisions, for example, can and should be guided by a commitment to the core values. Leaders and managers should be aware of the negative impact dishonouring the corporate values can have on the success of a values initiative.

9 Sustain a values-based culture

Continuous improvement and discipline in embedding the values are crucial to sustaining the values culture, as is making sure that employees are aware that the values adopted represent a permanent change in the organisation.

A yearly review of the progress made in integrating the values into everyday practices is recommended. This can be undertaken by the values team and may result in the implementation of action points and goals to drive improvement.

As a manager you should avoid:

 

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Igor Ansoff

Father of corporate strategy

Introduction

Igor Ansoff (1918–2002) was the originator of the strategic management concept, and was responsible for establishing strategic planning as a management activity in its own right. His landmark book, Corporate Strategy (1965), was the first to concentrate entirely on strategy, and although the ideas outlined are complex, it remains one of the classics of management literature.

Life and career

Ansoff was born in Russia and his family emigrated to the US in 1936. His early academic focus was on mathematics, and he obtained a PhD in applied mathematics from Brown University, Rhode Island. He joined the Rand Corporation in 1950, and moved on to Lockheed Aircraft Corporation, where he eventually became vice-president, plans and programmes, and then vice-president and general manager of the industrial technology division.

In 1963, Ansoff was appointed professor of industrial administration at the Carnegie Institute of Technology in Pittsburgh. He went on to hold a number of positions in universities in both the US and Europe. He continued to act as a consultant after retiring from academia in 2000 and, on his retirement, was named Distinguished Professor Emeritus at the United States International University.

Key theories

Until the publication of Corporate Strategy, companies had little guidance on how to plan for, or make decisions about, the future. Traditional methods of planning were based on an extended budgeting system using the annual budget, projecting it a few years into the future. By its nature, this system paid little or no attention to strategic issues. However, increasing competition, interest in acquisitions, mergers and diversification and turbulence in the business environment meant that strategic issues could no longer be ignored. Ansoff felt that, in developing strategy, it was essential to systematically anticipate future environmental challenges to an organisation and draw up appropriate strategic plans for responding to these challenges.

In Corporate Strategy Ansoff explored these issues, building up a systematic approach to strategy formulation and strategic decisionmaking through a framework of theories, techniques and models.

Strategy decisions

Ansoff identified four standard types of organisational decisions: strategy, policy, programmes and standard operating procedures. The last three, he argued, are designed to resolve recurring problems or issues and, once formulated, do not require an original decision each time. This means that the decision process can easily be delegated. Strategy decisions are different, however, because they always apply to new situations and so need to be made anew every time.

Ansoff developed a new classification of decision-making, partially based on Alfred Chandler’s work in Strategy and Structure (1962). This distinguished decisions as strategic (focused on the areas of products and markets), administrative (organisational and resource allocating), or operating (budgeting and directly managing). Ansoff’s decision classification became known as strategy-structure-systems, or the 3S model. (Sumantra Ghoshal later proposed a 3Ps model – purpose, process and people – to replace it.)

Components of strategy

Ansoff argued that within a company’s activities there should be an element of core capability, an idea later adopted and expanded by Gary Hamel and C. K. Prahalad. To establish a link between past and future corporate activities (the first time such an approach was undertaken), Ansoff identified four key strategy components:

  • product-market scope – a clear idea of what business or products a company was responsible for (pre-dating the exhortations of Tom Peters and Robert Waterman to ‘stick to your knitting’)
  • growth vector – as explained in the section below on the Ansoff matrix, this offers a way of exploring how growth may be attempted
  • competitive advantage – those advantages an organisation possesses that will enable it to compete effectively, a concept later championed by Michael Porter
  • synergy – Ansoff explained synergy as 2 + 2 = 5 (i.e. the whole is greater than the sum of the parts) and it requires an examination of how opportunities fit the core capabilities of the organisation.

Ansoff matrix

Variously known as the product-mission matrix or the 2 × 2 growth vector component matrix, the Ansoff matrix remains a popular tool for organisations that wish to understand the risk component of various growth strategies, including product versus market development, and diversification. The matrix was first published in a 1957 article, ‘Strategies for diversification’; Figure 5 shows what such a matrix may look like.

Of the four strategies given in the matrix, market penetration requires increasing existing product market share in existing markets; market expansion requires the identification of new customers for existing products; product expansion requires developing new products for existing customers; and diversification requires new products to be produced for new markets.

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Figure 5: The Ansoff matrix

Ansoff’s article focused particularly on diversification as a potentially high-growth but also high-risk strategy requiring careful planning and analysis before any decision is taken. He viewed diversification as a particularly important growth strategy, requiring organisations to ‘break with past patterns and traditions’ as they go along new ‘uncharted paths’ where, generally, new skills, techniques and resources will be required. His matrix offered a method of carefully analysing and evaluating the profit potential of diversification strategies.

Paralysis by analysis

It has sometimes been suggested that the application of the ideas in Corporate Strategy can lead to too much emphasis on analysis. Ansoff himself recognised this possibility, however, and coined the now famous phrase ‘paralysis by analysis’ to describe the type of procrastination caused by excessive planning.

Turbulence

The issue of turbulence underlies all Ansoff’s work on strategy. One of his aims in establishing a better framework for strategy formulation was to improve the existing planning processes of the stable, post-war economy of the US, since he realised these would not be sufficient to cope with pressures that rapid and discontinuous change would place on them.

By the 1980s change, and the pace of change, had become a key issue for management in most organisations. Ansoff recognised, however, that while some organisations were faced with conditions of great turbulence, others still operated in relatively stable conditions. Consequently, although strategy formulation had to take environmental turbulence into account, one strategy could not be made to fit every industry. These ideas are discussed in Implanting Strategic Management, where five levels of environmental turbulence are outlined:

  • repetitive – change is slow and predictable
  • expanding – the marketplace is stable, growing gradually
  • changing – incremental growth, with customer requirements altering fairly quickly
  • discontinuous – some predictable change and some more complex change
  • surprising – change that cannot be predicted that both develops, and develops from, new products or services.

In perspective

Although other strategists frequently refer to Ansoff’s work, it has not become more generally recognised in comparison with that of other theorists. The complexity of his work and its reliance on the disciplines of analysis and planning are perhaps among the reasons Ansoff is not popularly viewed as being in the top echelon of management thinkers.

Other theorists were working on similar themes at similar times to Ansoff. In the 1960s, his notion of competence (which was later developed by Hamel and Prahalad) was not unique, and although Ansoff seems to have been the originator of the 2 × 2 growth vector component matrix, a similar matrix had been published earlier. During the 1980s and 1990s, it is likely that much work by other theorists about strategy formation under conditions of uncertainty or chaos owed something to Ansoff’s theory of turbulence, though it is difficult to evaluate the extent of the debt.

A debate between Ansoff and Henry Mintzberg over their differing views of strategy was reflected in print over many years, particularly in Harvard Business Review. Ansoff has often been criticised by Mintzberg, who disliked the idea of strategy being built from planning that is supported by analytical techniques. This criticism was based on the belief that Ansoff’s reliance on planning suffered from three fallacies: that events can be predicted; that strategic thinking can be separated from operational management; and that hard data, analysis and techniques can produce novel strategies.

Ansoff was one of the earliest writers on strategy as a management discipline, and laid strong foundations for several later writers to build upon, including Porter, Hamel and Prahalad. He invented the modern approach to strategy and his work pulled together various ideas and disparate strands of thought, giving a new coherence and discipline to the concept he described as strategic planning. During the 1970s and 1980s, this concept shaped more theories about management as other writers took up Ansoff’s ideas, such as core competence or ‘sticking to your knitting’.

 

Developing strategy

There are many definitions of strategy. Perhaps the simplest is the direction an organisation takes with the aim of achieving future business success.

Strategy sets out how an organisation intends to employ its resources, including the skills and knowledge of its people as well as financial and material assets, to achieve its mission or overall objectives and its vision.

There is a fine line between mission and vision and the terms are not always used in the same way. Generally, however, mission focuses primarily on an organisation’s purpose, the reason it exists, and corporate vision is an image of the future to which an organisation aspires.

Strategy development is the process of researching and identifying strategic options, selecting the most promising and deciding how resources will be allocated across the organisation to achieve objectives. Some of the key questions an organisation needs to ask in connection with its future are as follows:

It has been said that in strategy everything is simple but nothing is easy. At times of economic turbulence, environmental uncertainty and growing complexity, how organisations can best set their direction for the future remains an enduring subject of debate and interest.

In the past, most organisations took a highly structured approach to strategy development known as strategic planning. This was an annual process of putting plans in place for the coming year and beyond. However, in today’s complex and turbulent business environment, it is impossible to plan for every eventuality and strategy-making needs to be a more flexible and dynamic process, reflecting a way of thinking strategically about the business and the environment in which it operates. Organisations that fail to think strategically are vulnerable to threats and ill-prepared to take advantage of fresh opportunities. A flexible but focused approach puts organisations in a better position to deal with setbacks and to respond to new opportunities as they emerge. Nonetheless, organisations still need to gain a clear understanding of the marketplace and their strategic position within it. Analysis and planning remain important for the majority of them.

There are many models of and approaches to strategy and a plethora of tools and techniques to help strategy-makers assess their current position and evaluate options for the future. Such tools should not be regarded as recipes for success; they should be used with careful thought to help analyse and understand an organisation’s strategic context.

Failing to think strategically means that an organisation will become reactive, vulnerable to threats and closed to opportunities. Organisational strategy needs to be:

This checklist provides a framework for thinking about and developing organisational strategy. It is based broadly on established processes of analysis, choice and implementation.

Strategy development is often seen as predominantly the responsibility of senior management. However, in some cases, senior managers set the strategic direction and divisional heads will then be given responsibility for developing appropriate strategies for their parts of the business. Moreover, all managers have a role to play in implementing and shaping strategy and in gaining acceptance from the teams that will be executing the strategy day to day. It is important for managers to develop their strategic awareness, to be aware of their organisation’s current position and open to potential opportunities for change and development.

Action checklist

1 Understand the current position

Start with an assessment of the organisation’s current position. This involves looking at recent performance and position in the marketplace.

Questions to ask include:

Try to form a balanced view of the organisation, not just the rosy side. Do not make assumptions – seek evidence so that decisions and future plans are based on reality.

2 Reflect on how you got there

Based on analysis of the current position, consider the reasons behind successes and failures. Are these a result of market forces, for example, or are they the result of internal strengths or weaknesses? Questions to ask include:

3 Be clear about your corporate identity (mission, vision and values)

Revisit any existing statements of the organisation’s mission – its purpose and what it exists for, its vision – what it aspires to achieve and its values – the manner in which it believes it should do business. Are these still appropriate and valid? Consider whether your perspective needs to broaden to take advantage of fresh opportunities or be narrowed to maintain focus and effectiveness.

Try to gain a clear sense of identity by asking questions such as:

4 Analyse your strengths and weaknesses

SWOT analysis, which focuses on assessing organisational strengths and weaknesses as well as threats and opportunities, is a popular tool which can help to focus attention on an organisation’s capabilities and identify factors that could limit its achievements.

A review of the strengths and weaknesses of the current portfolio of products and/or services offered by the organisation should also be included. The Boston matrix provides a framework for assessing the current and potential performance of products or services and can help to guide decisions on which are worth investing in for the future.

5 Analyse the business environment

The PEST analysis tool, which is used by many organisations to help them get an overview of the current and future business environment in which they are operating, traditionally focused on political, economic, social and technological factors. A number of variants such as PESTLE and PEST-C have evolved to include additional factors such as legal, environmental and cultural.

Questions to ask include:

Pay particular attention to identifying the driving forces in your sector. These are the major underlying causes of changing competitive conditions. The most common are:

Porter’s five forces model can help to assess the factors affecting the competitive position of an organisation.

6 Identify and evaluate strategic options

A clear understanding of the current position should generate insights that will help an organisation identify the most promising strategic choices. Factors to be considered include:

When evaluating strategic options, consider the conditions that must be true for the strategy to be successful and identify barriers to success. In some cases it may be possible to conduct tests to gauge the likelihood of specific scenarios, but bear in mind that the future is never certain. In recent years there has been a growing emphasis on the benefits of combining the results of rational analysis with the experience and intuition of strategic leaders.

It is important for organisational strategies to take account of identified weaknesses and to provide a framework for addressing them, as well as capitalising on organisational strengths. For each option, consider the investment and resources that will be required and their availability. This should include:

Time frames should also be discussed. These vary hugely from sector to sector. For example, internet businesses are evolving fast, but companies in the energy sector, where exploration and infrastructure development are involved, need to take a much longer-term view. Although it takes time to change thinking and shift resources, in general tighter time frames are being set for targets than in the past.

7 Set objectives

Once the strategic direction has been agreed, it is crucial to translate this into specific objectives. These need to be firm without being so rigid that any modifications will result in failure. Objectives should be set by considering how the strategy is to be realised and what, in measurable terms, needs to happen if it is to be successful.

The following aspects should be covered:

8 Communicate the strategy

Communicate details of the thinking that is emerging throughout the organisation. This will involve clearly documenting strategic decisions and adjustments as they are made. All employees, and especially managers, need to be fully aware of organisational strategy and to understand how their own job roles contribute to the achievement of organisational objectives. Widespread consultation and feedback will help to gain commitment, but will also facilitate the gathering of additional information on threats and opportunities from those who work on the front line.

9 Implement the strategy

In recent years there has been a growing awareness that it is one thing to formulate a strategy but another to implement it. Unless the practical implications are worked out and acted on, the strategy will be no more than a statement of hopes and aspirations for the future. A clear route map needs to be outlined with time frames and staging posts. If objectives are to be achieved, everyone in the organisation should have a clear understanding of what needs to be done, when and by whom. Depending on the size of the organisation, the implications of the strategy for business and operational plans, marketing plans, financial plans and budgets, project plans and personal development plans need to be clarified and the steps that need to be taken identified.

10 Review progress

The end point of strategic action is a combination of products and services, employees, customers and technologies that produce results. The one constant is the need to stay close to the market. This involves continuing measurement of progress against objectives; continuing assessment of the market and business environment or the needs and requirements of stakeholders; and continuing adjustment to changing circumstances to take advantage of changing technologies and explore new opportunities as they become apparent.

As a manager you should avoid:

 

Setting objectives

An objective is an end towards which effort is directed and resources are focused. Terminology varies and there is sometimes confusion over the use of terms such as objectives, aims, policy, goals and targets. It is important that everyone in an organisation understands the meaning of the terms used. The term ‘objective’ is used throughout this checklist.

This checklist is intended for managers who participate in setting corporate objectives, or who interpret and apply such objectives to their own functional or departmental areas of responsibility.

Setting corporate objectives involves clarifying the strategic aims and policy requirements of the organisation and agreeing related complementary operational objectives. This is an integrated process that links corporate planning or strategy-making to business operations and organisation structure. Objectives may be long-term and high-level or short-term and low-level. As objectives are cascaded through the organisation they usually become more specific, with clearly defined areas of application and time limits. Every department, unit, team and individual should have clear and meaningful objectives.

For objectives to be achieved successfully it is necessary to identify clear areas of responsibility, such as improving performance or service, and to prioritise objectives as essential or desirable. Write a statement of objectives that are SMART: specific, measurable, action-oriented, realistic, time- (and resource-) constrained. All objectives should be subject to a process of discussion and agreement with those members of staff responsible for their achievement. When staff members are involved in agreeing objectives, it is easier for them to take ownership of them and more likely to lead to commitment and successful achievement.

Be aware that if you fail to set objectives, you risk not knowing how or whether what you are doing fits in with your organisation’s longer-term plans or higher-level objectives. This can result in confusion and lowered morale, and it will be difficult to assess how successful you have been in managing personal, team or organisational performance.

Action checklist

1 Develop and communicate the organisation’s mission and vision

People often confuse mission and vision statements. It is possible, and even desirable, to have objectives relating to both.

The mission statement expresses the reason an organisation exists (e.g. to make top-quality cars) and provides an umbrella statement of its standing objectives. Typically this mission is enduring and changes little (unless the organisation undergoes radical re-engineering or a change of context).

The vision statement is an expression of the end result to which the organisation aspires. Typically, it provides guidance on timescale and measurable outcomes or indicators. For example: ‘Our aim is to become the largest-selling car manufacturer in the world by 2020.’ Such statements should be clearly communicated and reinforced with all employees, not just senior managers.

2 Identify corporate objectives from the mission/vision statements

It is important to link corporate objectives with mission and vision statements. This helps individuals see the importance, relevance and value of objectives and thus reinforces commitment to achieving them.

Formulating organisational strategy and objectives is normally the responsibility of senior management, but in empowered organisations this process may be delegated to other staff members. Some organisations use a bottom-up process to gauge achievability at the delivery level. This has the advantage of promoting personal commitment to objectives with an element of team contribution and monitoring.

The strategy is formulated by an assessment of:

Much will depend on the organisation’s values, as these express what is important to it – for example, its employees, its public image, or its environment. Objectives and strategies for achieving them should be governed by the organisation’s values. Be aware that setting new high-level objectives could challenge organisational values (or change them).

It is important to make sure that the set of objectives for any function, team or individual is truly representative of the things that matter most to the organisation. The objectives that are agreed will draw attention and effort, and you do not want effort to be misdirected or important aspects of work performance to be neglected because they have not been included in the objectives.

3 Agree objectives for senior managers

This involves allocating the corporate objectives by function, business unit and/or by product or service. You should prioritise the objectives, create time frames and confirm the resources required to meet them.

4 Agree objectives with those who are to tackle them

Objective setting should not be undertaken by order or command. The ideal process is one of proposing and seeking ideas, discussion, negotiation and agreement. Remember Kipling’s six honest serving men: who, what, where, when, why and how. Answering these questions is the minimum that both manager and job holder should require from a one-to-one meeting. Equally, this should not be a process by which objectives are overly diluted – the purpose is to stretch performance towards a desirable future.

5 Identify appropriate performance measures

Wherever possible, quantitative performance measures should enable progress to be monitored against objectives to create a baseline of achievement. If such measures are not possible, another means of monitoring progress should be established.

Performance measures (which can be employed on a team or individual basis) should indicate what is expected and how well people are doing in meeting their objectives. Such measures should be clear, concise, easy to collect and interpret, and relevant, in that they should provide information that shows you and your organisation how well you are performing.

Performance measures should relate to:

Performance measures usually cover information related to:

It is generally agreed that, to achieve optimum levels of motivation, it is desirable for managers and staff to be able both to track their progress towards key milestones and to discern the impact of actions taken to deliver objectives and vision. Many organisations use key performance indicators (KPIs) to track this in a range of significant, relevant and representative ways; others use scorecards such as the balanced scorecard developed by Robert Kaplan and David Norton.

6 Set up procedures for reviewing performance

Managers may need time to help staff understand and interpret their objectives and the contribution they make to corporate strategy. Objectives and the related performance measures should be subject to review, especially if there are significant changes at the environmental or organisational level, or in the nature of the work to be carried out. An honest appraisal of past performance provides learning opportunities and a basis for agreement on revised or new objectives. Regular reviews of progress are beneficial both for the organisation and for individual personal development.

As a manager you should avoid:

 

Implementing strategy

Strategy implementation is the process by which an organisation translates its chosen strategy into action plans and activities, which will steer it in the direction set out in the strategy and enable it to achieve its strategic objectives.

The development of organisational strategy is a complex and demanding process, and leaders who have devoted time, effort and resources to the selection of a strategy that they believe will secure the success of their company may feel they have good reason to be confident about the future. Nonetheless, their chosen strategy stands little chance of success unless it is acted on. Effective implementation is critical to the success of organisational strategy.

If strategy is to be more than an expression of hopes and aspirations for the future, the practical implications for organisational operations and activities must be thought through and put into practice. Strategy implementation requires organisations to put initiatives in place that are focused and realisable. A strategic focus should encourage them to develop disciplined processes for feeding strategic initiatives across the organisation in a meaningful, realistic and achievable way.

The implementation or execution of strategy, however, is often neglected and its results are frequently unpredictable. Problems encountered in the implementation of strategy often lie not in any flaws in the strategy itself, but rather in a failure to implement it effectively. Such failures can mean that strategic initiatives are only partially successful and lead to frustration, as the hoped-for strategic benefits are not realised. Ultimately, they can result in the decline or even failure of the business as a whole.

Translating strategy aims into actionable processes in an ordered fashion, however, is not easy. The setting of priorities and the development of plans may present organisations with formidable management challenges. The effective execution of strategy can be impeded by many and varied difficulties, such as weak or inconsistent senior-level commitment, a lack of support from managers and employees, cross-departmental conflicts, ambiguity in roles and responsibilities, or a lack of accountability.

This checklist aims to help managers understand the complexities of strategy implementation and provide guidance on the factors that will help organisations achieve optimal, rather than maximal, implementation of strategy.

Action checklist

1 Ensure that plans are aligned with organisational mission, vision and values

Strategic development is an important business activity that involves defining the strategic direction an organisation will take and the objectives it aims to achieve. Obvious as this may seem, it is important to ensure that implementation plans are based on the stated organisational strategy and objectives. Just as strategy must be derived from the organisation’s mission and vision and in line with organisational values, so implementation must follow the direction set out in the organisation’s strategic documents and prioritise those things which are seen to be most important for its future success. Bear in mind, however, that organisational mission and vision, or even values, may need to change in response to changing circumstances and should be reviewed regularly.

2 Build an effective leadership team

The optimal implementation of strategy depends on the people-management and leadership capabilities of both strategic and operational managers. New strategies may create new requirements for leaders and the organisations they lead. Strategic change may require new personnel with fresh perspectives, or differing skills and experience. Strategic shifts may well entail a change in emphasis involving new customers or markets, technologies or business processes. Leaders may need to adjust their leadership styles, or learn new management techniques and approaches. The implementation of a new strategy may alter priorities, change resource allocations and involve a shift in relationships. This can sometimes pose a threat to the power and status of influential people within the organisation.

Processes for assessing and developing leadership should be seen as a normal part of strategic implementation. Leaders must take an objective view of the existing management team, including themselves, and assess whether it is capable of implementing the strategy. Ideally, coaching or development should be offered to help individuals improve their performance or develop new skills, if necessary, so that they are better able to achieve the required goals and objectives. Some people may be incapable of adapting, resistant to change, or unwilling to accept a revised role and prefer to move on to another organisation. These are sensitive issues that must be handled carefully, with due regard for legislation relating to issues such as redundancy and constructive dismissal.

Building the right team is crucial to the success of strategy execution. Organisations need to have HR personnel and processes in place to recruit new people as required. The selection of team members should not, however, lie solely with the HR department but must involve senior management. This will reinforce the importance of the initiative and can also be a means of identifying talent within an organisation. Involvement in implementation teams should be seen as a positive career move.

3 Create an implementation plan

A full implementation plan with milestones needs to be created for all levels of the organisation. The plan should outline the steps necessary to achieve the objectives and include schedules for key activities. The resources needed to achieve the objectives must also be detailed. The plan should quantify the financial, personnel, operational, time and technological resources required, and identify those responsible for individual initiatives.

The implementation plan sets priorities and accountabilities, including short-term and long-term objectives. Strategic objectives should be broken down into manageable pieces and establish a chain of command; they may also outline additional organisational structures that need to be aligned with the strategy initiative, such as cross-functional teams. Accountability is an important factor in successfully delivering strategy and acts as a motivator, concentrating people’s minds on following through on the responsibilities allocated to them. Personal accountability must be clearly defined so that individuals understand what they are responsible for.

A fundamental task when drawing up a strategic implementation plan is to draft it in such a way that it can be split into separate action plans for each project and initiative. Make sure that good project management practices are followed and that training in project management methods is given where appropriate. The plan also needs to be visible, so that it does not become disconnected from the decision-making process, and accessible to all, not restricted to the strategy department or senior managers.

Strategy implementation is a dynamic process that has to take account of changing conditions affecting the strategy and its implementation. You must be able to change and amend the plan as circumstances dictate and the latest version should incorporate the results of ongoing learning.

4 Allocate budgetary resources

Securing a satisfactory budget is one of the main requirements when implementing strategy. A new strategy may entail the development of new processes, the purchase of new equipment, the recruitment of additional employees, staff training or development activities, or the upgrading of information technology. The budgeting process needs to ensure that strategic initiatives are properly resourced and can be implemented in the agreed timescales.

Organisations use budgets to make sure that what is important gets done, but it is all too easy to focus on tactical challenges and short-term financial targets and allow this to take up a large amount of time and resources. Strategic initiatives can become victims of this process, so the budgetary process must be aligned with strategy. Each aspect of the strategy must be linked to operating and capital budgets.

Budgetary processes can also be used to track whether activities are behind schedule or not achieving the anticipated results. Financial forecasts, key performance indicators (KPIs) and actual expenditure can be compared to assess progress and decide whether the costs involved are worth the results being produced. In some cases, it may become necessary to adjust the budget in order to reallocate or redistribute resources and get the strategy back on track.

5 Assign objectives and responsibilities

A formal planning and measurement structure is needed to implement strategy effectively. Strategic responsibilities and objectives must be clearly assigned so that individuals understand their roles within the strategy and are able to take responsibility for or ownership of specific strategic tasks and outcomes. All those who have a role to play in the implementation of the strategy need to be clear about intended outcomes and their responsibilities for the achievement of these. Making sure that employees know and understand their roles and how these contribute to organisational objectives is the job of those who have drawn up the strategy and those who are responsible for ensuring that it is being implemented effectively.

Objectives and responsibilities should be made explicit, and where possible they should be assigned to individuals rather than teams, as this makes for clear personal accountability. Employees at all levels also need to know how their performance will be measured and evaluated. Measures should be created for each task and documented, so that everybody knows what the intended outcomes and the expected time frames are. Organisations will be unable to hold individuals to account if strategic objectives or outcomes are not measured.

It is important to break strategic goals down into smaller objectives that can be measured and tracked. Meeting specific objectives step by step will give individuals and teams a sense of achievement, generate a sense of momentum and help to maintain enthusiasm. Be aware that some outcomes, such as a growth in profits, are relatively easy to record and measure, but others, such as staff morale and engagement, will require softer measures.

6 Align structures and processes

All organisations have existing business processes, plans and structures in place to manage their operations. Often these operate in isolation and bear little relation to each other or to organisational strategy. If separate business units set their objectives independently, the contribution they make to organisational success could well turn out to be less than expected.

For an organisation to be capable of effectively implementing strategy, structures and processes need to be aligned with the strategic objectives. The strategy may be set out in a plan, but organisational structures will determine how it is defined and executed. The activities of business units need to be coordinated and the skills and capabilities of each unit made available for the benefit of the organisation as a whole. Think about how this can be achieved – perhaps by individual directors championing a particular strand of the business across the organisation. Alignment assists in clarifying the strategy and in coordinating the activities of those who put it into action. It also ensures consistency of purpose from the top of the organisation down to the operating level as strategy is embedded throughout the organisation.

Ongoing and proposed projects also need to be aligned with strategic objectives. To achieve this, each project must be evaluated to determine whether and to what extent it will contribute to the achievement of strategic objectives. This will inform decisions as to which projects should be resourced and carried through to completion. Review points should be built into implementation plans.

7 Align people

Effective people management is a critical issue in the successful implementation of strategy. The work of employees needs to be aligned with the strategy, so that their efforts contribute to the achievement of organisational objectives. Organisations should define the behaviour required throughout the organisation. It may be necessary to ask employees to change the way they work, in which case cultural issues need to be considered. For example, in organisations where internal collaboration has traditionally been weak, employees may need to start working cross-functionally.

Organisations need to create a cohesive strategy that employees can understand and engage with. Employees need to know that they are making a meaningful contribution to the success of the organisation, and senior leaders must make sure that employees at all levels can articulate and evaluate how their personal job roles help to achieve specific strategic objectives.

Organisations should think about the skills and capabilities they need to meet their strategic aims, both now and in the future. For this reason, leaders should attempt to anticipate how the organisation and the strategy are likely to evolve in the foreseeable future and identify skills that will be of greater or lesser importance.

8 Communicate the strategy

All employees should have a clear understanding of the core elements of the strategy and how it is to be executed, so it must be effectively communicated. This will encourage employee buy-in, commitment and engagement and should have a positive impact on productivity. Develop a communication strategy that will promote the overall vision and strategy of the organisation and formulate a set of well-defined goals. Avoid vague statements and make sure that objectives are expressed in concrete and measurable terms with tangible results and expected time frames.

Issues to be considered include the messages to be communicated, audience to be reached, behavioural changes needed, communication channels to be used and measures to evaluate the level of success or failure. Simply giving employees a copy of the strategy plan is rarely effective. Instead, prepare a separate document, providing a clear, concise summary of the most important points. Remember to include information on why this particular strategy has been adopted and explain the rationale for the priorities that have been established. Avoid jargon and aim to make the message clear, concise, consistent, and as convincing and compelling as possible.

To ensure that the message becomes embedded, be prepared to repeat it often, possibly using different channels, media and formats. Aligning your communications with organisational objectives will make them more relevant and effective, and help you make a convincing case for the resourcing of communications activity within the organisation. In the case of a long-term strategy, identify some quick wins to demonstrate the success of the new strategy and increase the visibility of the changes at regular intervals.

9 Review and report on progress

Progress should be reviewed regularly to check that the strategy is being implemented as envisioned. Strategy reviews allow managers to track progress, reflect on priorities and identify any issues that may need to be tackled. Remember, though, that strategy reviews have more to do with whether the strategy is producing results than with controlling performance.

Review meetings must be held often enough to keep the implementation process on course and enable leaders to take decisions about any strategic adjustments that need to be made. Initially, this may be weekly, fortnightly, monthly or quarterly. Frequency can be scaled back later when it is clear that the implementation process has been established and is working well. More frequent meetings may be necessary if the strategy is introducing major organisational change or if the business environment is evolving rapidly. There must be sufficient time for meaningful discussion to take place. Meetings may be time-consuming at first but the need for frequent meetings will decrease. Time spent productively in the early stages will save time later on.

The regular reporting and reviewing process should be supported by an effective tracking system that describes and measures performance. Such measures, or KPIs, can be developed using a framework such as Kaplan and Norton’s balanced scorecard. This uses financial and non-financial perspectives to describe progress in consistent, insightful operational terms and to translate strategic objectives into measurable performance. The use of such a framework can facilitate improvements as the effectiveness of the strategy is tested in the real world.

10 Make strategic adjustments as necessary

Strategy implementation is a dynamic process that takes place against a background of changing economic, social and competitive circumstances. This is where the leadership skills, capabilities and judgement of managers are needed to steer the organisation, underlining what was said in point 2 about the importance of building a good leadership team. This will involve decisions on the allocation of resources for optimal benefits as the competitive context evolves, and judgements as to when changes are warranted. A balance between frequent changes of direction, which may result in loss of organisational momentum and coordination, and rigid adherence to plans, when these are manifestly not achieving results, needs to be found. Just as important is the need for managers to align people, communicating changes, explaining how individual and team efforts contribute to outcomes and how engagement with the strategy will help them to achieve personal goals and aspirations, and effectively motivating and energising employees across the organisation.

11 Develop an organisational culture that supports the strategy

Organisational culture plays a significant role in translating strategic plans and initiatives into action. No matter how good an organisation’s strategy may be, implementation will be hindered if the organisational culture does not support it.

Culture is to an organisation what personality and character are to individuals. It consists of the assumptions, values and beliefs that employees share and that influence their activities, opinions and behaviour at work. A culture that is aligned with organisational strategy will help organisations implement strategy successfully, as a shared belief in organisational aims and objectives will promote commitment. Conversely, an organisational culture that is not aligned may stand in the way of adjustments to changing business needs and weaken the ability of an organisation to achieve its strategic aims.

As a manager you should avoid:

 

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Gary Hamel

The search for a new strategic platform

Introduction

Gary Hamel (b. 1954) is one of the most respected contributors to the debate on strategy of the late 20th century. His fresh and often hard-hitting approach to organisational innovation and reinvention has brought wide acknowledgement from academics and practitioners alike.

Hamel’s reputation developed from the early 1990s when, with C. K. Prahalad, he began to communicate his revolutionary views on strategy, in the process creating the concepts of organisational core competences, strategic intent and strategic architecture. In an article in Sloan Management Review (1998), ‘Strategy innovation and the quest for value’, he said:

Gastric upset is at least as likely to produce a strategy insight as attendance at another interminable planning meeting.

Life and career

Hamel worked as a hospital administrator until 1978, when he began to study for a PhD in international business at the University of Michigan. There he met Prahalad, who later became his mentor, collaborator and colleague in research, writing and business. Hamel first came to prominence through journal articles in the early 1990s and as the co-author of a book, Competing for the Future (1994), written (like most of the articles) with Prahalad.

Now at the forefront of thinking on strategy, Hamel is visiting professor in strategic and international management at London Business School, distinguished research fellow at Harvard Business School and chairman of Strategos, a strategy services company he set up with Prahalad in 1995. Hamel is also a fellow of the World Economic Forum and the Strategic Management Society.

Together with Julian Birkinshaw, Hamel led a project to build the Management Innovation Lab (MLab). In collaboration with leading organisations and management scholars, MLab aims to create ‘tomorrow’s best practices’ today and make a significant contribution towards the evolution of management knowledge and practice.

Key theories

Why a new approach to strategy?

At the beginning of the 1980s, Hamel argues, organisational development was no longer driven by strategic forces but by incrementalism. Companies were concerned with getting bigger and better through downsizing, delayering, re-engineering and continuous quality improvements, and their goal became to mimic best practice. The result of these incremental improvements was to squeeze cost efficiencies to the point where there was nothing left to gain.

At the same time, there were various new forces at work that were changing the nature of competition and the base of traditional industries, which had enjoyed primacy in the past. These forces included:

Strategic questions to address

Hamel argues that a compelling view of the future is necessary if businesses are not to be tied to the orthodoxies of the past, and highlights the number of companies that lost money because they stuck too long to the same game instead of trying to get ahead of it. While no view of the future can be accurate or perfect, a view of some sort is essential. This can be developed through addressing questions about how it would be possible to unleash the corporate imagination, turn technicians into dreamers, turn planners into strategists, and create an organisation that really lives and makes its decisions in the future.

In a 1996 article in Strategic Management Journal, ‘Competing in the new economy: managing out of bounds’ (written with Prahalad), Hamel agrees that while we can all recognise a great strategy once it has proven successful in action, we find it difficult to generate a great strategy in the first place. He argues that strategy generation is not a purely analytical process but is multifaceted, involving risk, gut feel, intuition and emotion, as well as analysis.

Strategy as core competence

The concept of corporate competencies was highlighted by Hamel and Prahalad in journal articles and in their book Competing for the Future. In the latter, they argued that, for too long, the organisational focus had been on the returns from individual business units as opposed to the conditions, processes and competencies that enabled those returns. Hamel and Prahalad define ‘core competencies’ as the collective learning in the organisation and, especially, the coordination of diverse production skills and integration of multiple streams of technologies. They ask organisations to look upon themselves as portfolios of core competencies by analysing what it is that they do better than others. Viewing the organisation as systems of activities and building blocks means asking:

  • How does activity X significantly improve the end-product for the customer?
  • Does activity X offer access to a range of applications and markets?
  • What would happen to our competitiveness if we lost our strength in activity X?
  • How difficult is it for others to imitate activity X and compete with us?

To realise the potential that core competencies create, an organisation’s people must have the imagination to visualise new markets and the ability to move into them, ahead of the competition. One of the keys to core competencies and effective competition is, therefore, the process through which an organisation releases corporate imagination. One of the words that recurs increasingly throughout Hamel’s writing is revolution.

Strategy as revolution

In a seminal Harvard Business Review article, ‘Strategy as revolution’ (1996), Hamel sets out ten principles which strategy generators should bear in mind:

So how do we begin to put these principles into a framework for creating strategy as a systemic capability?

Creating strategy

In ‘Strategy innovation and the quest for value’ (cited above), Hamel said:

Strategy innovation is the only way for newcomers to succeed in the face of enormous resource disadvantages, and the only way for incumbents to renew their lease on success.

While some strategies result from analysis and others from inspiration and vision, many strategies also evolve and emerge. To achieve strategies that are neither too random nor too ordered or ritualistic, Hamel suggests we should look to the roots of strategy creation, which he regards as a relatively simple phenomenon amid the complexity of organisational life. In ‘Strategy, innovation and the quest for value’, Hamel turns his revolutionary principles into action points and urges organisations to adopt a new stance through the following:

  • New voices – top management relinquishing its hold on strategy, and introducing newcomers; young people and people from different groups bringing richness and diversity to strategy formulation.
  • New conversations – the same people talking about the same issues over and over again leads to sterility; new opportunities arise from juxtaposing formerly isolated people.
  • New passions – people will go for change when they can steer it and benefit from it.
  • New perspectives – search for new ways of looking at markets, customers and organisational capabilities; think different, see different.
  • New experiments – small, low-risk experiments can accelerate the organisation’s learning and will indicate what may work and what may not.

An agenda for management innovation

Leading the Revolution (2000) is a book about innovation. In it Hamel explores where revolutionary new business concepts come from and identifies the key design criteria for building activist-friendly and revolution-ready organisations. It is about throwing away the old rulebook, imagining a future that others have not seen, and then taking the initiative to act on it.

A later book, The Future of Management (co-authored with Bill Breen, 2007), also deals with innovation, setting out a bold agenda for 21st-century management transformation. Hamel suggests that modern management may have reached the ‘limits of its improvability’, being originally developed as a social technology to ‘solve the problem of inefficiency’. Now, faced with an environment of constant change, organisations need to become ‘as strategically adaptable as they are operationally efficient’. Hamel identifies three ‘do or die’ challenges facing organisations today and in the future:

  • Dramatically accelerating the pace of strategic renewal in organisations large and small.
  • Making innovation everyone’s job, every day.
  • Creating a highly engaging work environment that inspires employees to give the very best of themselves.

Hamel believes that the most successful organisations in the years to come will be the ones that have taken the lead in tackling these capstone challenges.

He goes on to identify new 21st-century management principles that he believes will be the key to the future of management. He considers these to be more effective than 20th-century principles of modern management in creating organisations that are adaptable and engaging. Hamel identifies the new principles by analysing aspects within an organisation that are already adaptable, innovative and highly engaging. Taking adaptability, for example, he draws inspiration from life, markets, democracies, religious faith and the world’s most vibrant cities, all of which he sees as more resilient than large organisations.

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In perspective

While it is not possible to pigeonhole Hamel, we can place him roughly in the progressive (if sometimes ragged) line of strategic thinking stretching back to Chandler and Ansoff, and including Porter and Mintzberg, as well as Hamel’s collaborator and colleague Prahalad. Hamel continues to enjoy challenging convention and remains one of the most important contemporary business thinkers.

 

The role of the board in strategy

The board has a legal and commercial duty to promote the long-term health and stewardship of the company to the benefit of all stakeholders. Its role is a strategic one, ensuring full discussion and sound decisions on the major issues facing a company, such as regions and markets, technologies, appetite for risk, acceptable debt levels, and so on.

It is increasingly recognised that the role of the board in strategic management is of fundamental importance. There is an emerging consensus about its proper role within many businesses in the pages of Harvard Business Review, in the textbooks of leading governance advisers such as Ram Charan and Bob Garratt, and in the view of many successful board directors.

Nonetheless, there is research and anecdotal evidence that the strategic board is far from being a universal practice. Much of the difficulty lies in achieving a balance, making sure that the board is engaged and informed about the company’s operations, but keeps to its strategic brief and does not dive into the day-today minutiae. The amount of legislation that companies have to comply with – not just corporate governance guidance, but the Sarbanes-Oxley law on financial compliance – means that it is easy for board meetings to become long exchanges of detailed information, rather than strategic discussions about market changes, product development, identifying necessary resources, emerging risks and scenario planning.

The role of the board has become particularly high-profile following spectacular failures of strategic risk management in the past few decades, especially in financial services, and earlier in accountancy. There has been much criticism that reaction to scandals has focused too much on regulation and not enough on developing genuine strategic capability. Some aspects of corporate governance codes prescribe structural factors such as the proportion of ‘independent’ directors (those without executive responsibility), separation of the roles of chief executive and chairman, and so on. Many critics point out that compliance with these arrangements has little or no bearing on performance. The board’s overriding priority should be the strategic direction of the company, good judgement and sound risk management.

The few research studies that have sought to identify the characteristics of effective boards strongly indicate that such boards are strongly engaged with the company but keep their intervention at the strategic level. It is possible now to talk in terms of a consensus on the characteristics of the strategic board, which this checklist sets out to summarise.

This is a simplification, but attitudes towards the role of the board have evolved over the decades. In the mid- to late 20th century, the idea of the powerful chief executive became popular, with the board’s role seen as being somewhat arm’s-length, even passive. Since the 1970s, growing concerns about the effectiveness of corporate governance have led to pressure on directors to play a more active role. Many commentators, however, say that this has resulted in engagement that is overzealous (too much intervention in day-to-day operational matters, too much discussion of the financial accounts), or too narrow (concentrating only on stock price, viewing the board’s role as solely one of policing the executives). A consensus has evolved that the board should be engaged, but at a strategic level, considering the health and success of the company in the round.

Action checklist

1 Keep discussion strategic

This can be easy to conceptualise but hard to maintain. A strategic discussion concerns, for example, the opportunities and risks of expanding into new markets, rather than the logistics of a supply chain down to the smallest details. This can be hard to maintain, however, because sometimes board directors will need some level of detail if they have genuine concerns about an operation and want to be reassured on key aspects.

It helps to keep discussions at a strategic level if presentations by the executive team are succinct and focus on the big picture. CEOs can invite too much discussion of day-to-day detail by giving presentations consisting of numerous slides, heavy with financial and operational information.

2 Create a workable information architecture

Papers for board members should provide a clear summary, giving a strategic overview, but also include relevant detail and indicate where more information can be sourced.

Information should be qualitative as well as quantitative, including current information and future prospects as well as historic data. There should be information on employee engagement (and where possible more detailed analytics linking people-related investments to performance), on the customer experience, on competitors, and on technological and market developments. These reports should be as prominent and detailed as the traditional financial reports.

Executives should commit to keeping the board informed with regard to the implementation of strategy and the achievement of performance objectives.

3 Promote the concept of a ‘learning board’

Companies continue to thrive if their rate of learning equals or exceeds the rate of change in their markets. Although a board role is part-time, it is nonetheless a professional task in its own right. Non-executive directors should commit to learning about the sector, its technology and market dynamics; and executive directors should see their board role as stewardship of the whole company, not as a means of representing their department’s interests.

4 Encourage board members to commit to the company, not an interest group

The commercial and legal duty of the board is to the future health of the company. This is enshrined under company law in most jurisdictions, and reiterated in the UK in the Companies Act 2006. The board is not a representative of the shareholders or any particular interest group, although it does have a duty to promote the company’s commercial success.

5 Directors have considerable responsibilities and equal status

Company law does not distinguish between ‘independent’ or non-executive directors and others – all have equal status. Garratt recommends that executive directors have two employment contracts: one for their executive responsibilities and one for their board responsibilities. All board members are equally responsible for the long-term stewardship of the company. They have considerable and specific legal responsibilities as board directors. It is advisable, therefore, that managers within the company who are not on the board do not have the term ‘director’ in their title, to avoid ambiguity.

Board members should commit to the company and set aside time commensurate to their responsibilities, not just show up for the meetings.

6 Facilitate and encourage communication between meetings

While board members should refrain from ‘peering over the shoulders’ of executives on a day-to-day basis, the most effective boards have communication between the executive team and other members between meetings. One means of facilitating this is a monthly letter – but again, it must stick to strategic matters.

7 Create space for deep strategic discussion

Meaningful strategy development involves an in-depth and informed discussion, which may be structured around the traditional SWOT (strengths, weaknesses, opportunities, threats) analysis. A common mistake, especially when there are many external or non-executive directors, is to focus too much on the externals (opportunities and threats) and not enough on internal matters. There need to be sufficient skills and resources to support bold strategic initiatives.

8 Discuss alternatives

Strategic discussion also involves choice. If a major strategic departure is considered, the merits not only of this but also of other courses of action should be discussed in depth. The danger of failing to do so is to fall victim to the latest business fad: ‘Everyone’s doing it; we should join in.’

9 Be prepared to challenge the ‘difficult’ board member

One of the most difficult matters to address in boardroom dynamics is the wasteful and time-consuming distraction of members who see board meetings as an opportunity to demonstrate their knowledge or create gratuitous conflicts. A strong chair should be capable of keeping the discussion to the principal strategic agenda and instilling a shared commitment to the company’s well-being. Other discussions and debates can take place over lunch or evening drinks.

10 Create multiple objectives for CEO performance targets and pay

It is widely accepted that tying the chief executive’s pay solely to movements in the stock price has created too much of a short-term focus, and probably also contributed to damaging and unethical practices such as mis-selling and, in financial services, excessive speculation. Multiple performance objectives, including some relating to qualitative matters such as the integrity of the company and the brand, help to encourage all-round leadership, and also to ensure that the board honours its overriding duty towards the company.

As a board member you should avoid:

 

Brainstorming

Brainstorming is a technique for generating ideas, developing creativity, or solving problems in small groups through the free-flowing contributions of participants. Several variations of brainstorming and related techniques have emerged, such as brainwriting (where individuals write down their ideas), nominal group technique, electronic brainstorming and buzz discussion groups.

The purpose of this checklist is to enable a manager without previous experience of the technique and with a minimum of preparation to introduce brainstorming to a group and then go on to brainstorm a specific problem or opportunity.

Brainstorming can generate numerous fresh ideas and novel approaches, and can be fun and easy to learn. Despite controversy about the effectiveness of brainstorming groups compared with individual efforts at problem solving, brainstorming has many supporters. The use of a well-trained facilitator can overcome most difficulties or limitations and achieve additional benefits, such as enhanced member involvement and group interaction.

It is worth noting that to avoid offending people with conditions such as epilepsy, other terms such as ‘thought showers’ or ‘cloud bursting’ may be adopted, but the term ‘brainstorming’ is still widely used.

Action checklist: preparation

1 Select the problem or opportunity to be brainstormed

Select a topic important enough to justify the participation of others. This is likely to be something of particular importance to your organisation, perhaps a new product or strategic initiative. It should also be one with a number of possible solutions and where imagination and creative lateral thinking are required to identify these and assess their relative value.

2 Think about structure, aims and objectives

Although a brainstorming session has usually been thought of as an open, no-holds-barred event, establishing where you are going, what you want to achieve and broadly how you hope to get there is likely to provide a helpful framework. Some brainstorming sessions give participants some constraints to help them focus their minds, work more effectively and discover workable solutions. Whether or not you provide guidance and/or restrictions, it is important to consider how to phrase the original question or topic. A clear and thought-provoking question can make a real difference to the quality of responses from the brainstorming group.

3 Choose a facilitator

Choosing the right facilitator is crucial. This should be an open, outgoing person with enthusiasm and the ability to stimulate interest and enjoyment. They need not be the most senior person at the session, but they will need to set the scene by creating an open atmosphere, controlling dominant people while encouraging participation from the more introverted group members, getting and keeping participants on track by highlighting the issues, and creating a sense of fun. Perhaps most importantly, they should be adept at keeping ideas flowing and be able to ‘go with the flow’ themselves.

Should the facilitator be internal or external? An external facilitator can be especially useful when senior managers are involved or confidentiality is required, but if the issue is not too complex or contentious, an internal facilitator may be used, provided they have some experience.

The facilitator should feel comfortable running activity-based sessions, and should have clear plans and tactics for arriving at particular outcomes or targets. The facilitator must also ensure, as much as possible, that the group members work as a team and take ownership of the ideas they come up with.

4 Select an appropriate venue

This depends largely on the time set aside for the session and the budget available. Somewhere away from the routine place of work is often more suitable and can help bring a fresh perspective to the discussion. Depending on the length of the session you may wish to provide refreshments at the venue – these can also act as an incentive to attend.

5 Consider the mix of participants

As well as people with a specialist contribution to make, include some who have little or no knowledge of the topic to be brainstormed. They will not be as familiar with the detail and will offer a fresh approach. Consider introducing outsiders, although this can backfire if they are seen as intruders or spies. A mix of representatives from different cultural backgrounds could be valuable to provide a range of perspectives on the issues to be discussed. Work on getting the group dynamics right in order to put the group at ease, avoid snide comments or put-downs, and create a blame-free atmosphere. All participants should be seen as equals and treated as such.

6 Decide on the number of participants

There is no right number, although more than ten might be unmanageable when ideas really start to flow and less than four might not be enough to generate creativity. Having a large group can inhibit participation by quieter members of the group and allow unwilling and unenthusiastic participants to avoid making a contribution. Four to eight is usually about right, although this will depend on the style of the facilitator and the nature of the issue to be tackled.

7 Get the equipment right

You will need some method of recording the ideas that come up. Audio and video recording may seem to be ideal for this, but participants can find these devices off-putting and recording can inhibit the free flow of ideas. A traditional flipchart and a plentiful supply of felt-tip pens are often adequate, with completed sheets tacked to the wall in full view to help stimulate further ideas. Consider also using technology such as laptops and projectors or interactive whiteboards, but make sure that all participants are clear on how to use the technology before the brainstorming session begins.

8 Get the layout right

Do not use a room with fixed rows of seats. Something more relaxed, even random, is preferable – a circle or U-shape is fairly common. The facilitator should check the room beforehand and prepare it appropriately.

9 Get the timing right

Reflect on your own powers of concentration and remember that in brainstorming sessions people can move from being dynamically engaged to feeling exhausted and back again. At least 10–20 minutes may be needed to get people relaxed. Two hours can be a long time to brainstorm – stop for a while if people show signs of tiredness. Arrange for a twenty-minute break after an hour’s uninterrupted flow, or if and when the flow slows to a trickle. The break may be enough to stimulate an active restart, perhaps with a change in the seating of individuals.

10 Get the time of day right

It is difficult to give hard and fast advice on timing, as people differ. Some will function better after their routine work has been completed, when their minds are less preoccupied and they feel they can be more relaxed; others may prefer the morning when collective mental energy is at its highest.

11 Consider the role of pre-session brainstorming

Although brainstorming is often perceived as a spontaneous activity, you should provide sufficient notice of the session and, if possible, an outline of the problem to be tackled. This approach is likely to help people who like to have time to think through an idea and find it difficult to think on their feet.

You may also wish to ask participants to submit some initial ideas before the session begins. This can be done easily and anonymously using cloud computing technologies such as Google Drive. As well as being a preferred method of communication for introverts, doing this may help get the ball rolling at the official brainstorming session.

Action checklist: the session

1 State the topic or opportunity to be explored

State the topic and explain it to the group. Make sure everyone participating has a clear understanding of the issue and the objectives of the session. Ask participants if they have any initial questions and encourage them to behave in a courteous and constructive manner towards one another.

2 Restate the situation

Encourage the group to stand back from the topic, walk around it and see it from every angle. Suggest rewording it in ‘how to’ statements. Some restatements may be close to the original; others may illuminate new facets. Display these new statements on flipcharts, projectors or whiteboards for everyone to see.

3 Brainstorm the problem with guidelines

4 Closure

Give a warning about five minutes from the end of the session. Participants will want to know what happens next. Explain that the lists will be circulated and do this within 24 hours, if possible, to retain freshness and familiarity. Provide contact details or a way of submitting additional ideas or further background information after the session and set a deadline for doing this. You may find that some participants have their best ideas after the session, when they have had time to think about it.

Inform participants that they will be notified of the ideas chosen or recommended for further action. Ask one last time for any comments, ideas or further thinking and thank members of the group for taking part.

Action checklist: evaluation

1 Get the team to scrutinise all the ideas to pick out any instant winners

Rank ideas giving three points for those that stand out, two for those that have possibilities and one for those that appear unsound, require too many resources, or do not meet the original objectives.

2 Reduce the number of ‘twos’ to a minimum

To reduce the number of ideas rated as ‘two’, apply criteria such as cost and acceptability, and consider whether the timescale is appropriate.

3 Apply ‘reverse brainstorming’ to the ideas

4 Apply the key evaluative criteria

While the main brainstorming session should be free of negativity, there is a need for critique and evaluation at this stage to make the session constructive and useful. Brainstorming should ultimately provide solutions that are both original and workable, rather than a stream of unfeasible suggestions.

As a manager you should avoid:

 

Making rational decisions

Decision-making is the process of choosing between alternative courses of action. It may take place at an individual or organisational level

This checklist provides an outline for making rational decisions and includes a simple decision-making framework. It is therefore relevant to all managers.

The nature of the decision-making process is influenced by an organisation’s culture and structure, and a number of theoretical models have been developed. One well-known method for individual decision-making was developed by Charles Kepner and Benjamin Tregoe in their book The New Rational Manager, published in 1981. Specific techniques used in decision-making include heuristics and decision trees. Computer systems designed to assist managerial decision-making are known as decision support systems.

The rational model for decision-making:

It is worth noting that information-gathering should not be confused with facts. A key feature of successful decision-making is that you identify preconceptions and assumptions, ask why they exist and what their use is, and treat them as valuable information.

There can, however, be drawbacks because the method:

It is extremely useful and rational behaviour for managers not to ignore their gut feelings. But it is important to note that this is not equivalent to acting on those feelings.

Action checklist

1 Define the decision to be made

Be clear about the exact decision to make. This first step helps to clarify thinking, aids communications and provides a record for the future. It may lead to the discovery that assumptions have been made previously which have muddied the water.

For example, a decision needs to be made on which computer to buy.

2 Establish the objectives

The objectives (which are different from goals) are things that are desired from the decision and should be measurable wherever possible. At this stage it is not necessary to worry about any apparent incompatibilities between the objectives. This stage involves consultation, information seeking and checking, including establishing all the stakeholders who have an interest/objective in the matter.

Your objectives may be: a computer which can access the internet anywhere, run CD-ROMs and DVDs and do word-processing, spreadsheets and graphics; has a large hard drive; and is affordable. So it must have: wireless internet access, USB ports, a CD-ROM/DVD drive, adequate RAM, a large hard drive and standard software packages and be within budget.

3 Classify the objectives

Differentiate between the essential (the ‘musts’) and the desirable (the ‘wants’) requirements. The fundamental difference between musts and wants is that if one of the decision alternatives does not meet a must, that option should be rejected. Failure to meet a want should not mean automatic rejection. The process for considering wants is dealt with in point 5.

4 Define the ‘musts’

To be a valid must, an objective should have a quantitative measure or an objective standard. Assign quantitative measures to the musts: maximum price £600; minimum 1GB RAM memory; minimum 100GB hard drive. This means that if an option presented for purchase is either over £600 or less than 1GB RAM, or has less than a 100GB hard drive, it should be rejected.

5 Define the ‘wants’

Examine the wants for importance and give a numerical weighting out of 10 (10 for the most important, less than 10 for something less important). For example, if the software packages are the most important feature after the musts, software would be weighted 10. If an option includes spreadsheet, database, graphics and word-processing, it may well score 10 out of 10; if one is missing, it might score only 8. An extremely fast modem with built-in error correction may have a weight of 10; an option with a modem not so fast or sophisticated may score only 6 out of 10.

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6 Generate the alternatives

With information requirements established, next seek and obtain the appropriate information. In this case sources may include PC suppliers, the trade press and informed colleagues.

7 Apply the alternatives to the requirements

The information – or options obtained – should be recorded for each alternative against each must objective.

8 Test the alternatives against the ‘musts’

Reject those options that do not meet the musts. Do any of them not match against the musts on price, storage or processor? If negative, it is logical to reject that option.

If you do not wish it or something else prevents rejection of an option that has failed on musts, the musts are either proving unsatisfactory or you are not adhering to the rational process. In either case you should restart at point 3.

9 Score the remaining alternatives against the ‘wants’

Score the remaining options against each of the wants in turn. The one that meets the want best should be scored highest and others allocated proportionate scores. For example:

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10 Multiply the weights by the scores

Weights should be multiplied by scores and the results added for each alternative. For example, as in points 5 and 9 above:

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11 Come to a provisional decision

The totals will enable you to come to a provisional decision. With the totals compared it is usually possible to make statements such as:

12 The final decision

The analysis will not provide an automatic decision, unless all options but one fail to meet the musts. Where several options have similar totals, it is particularly important to re-examine scores and weights and the evidence on which they are based. The analysis will provide a sound framework for clear examination. It is not always necessary to use the entire process described above, especially for simple binary (yes/no) decisions. However, each element in the process can be used separately to improve the efficiency of a decision. Some initial assumptions have to be made in the decision process. Make sure you review all the assumptions before proceeding to the analysis described above. In the computer example, a technological assumption we make at the beginning is that we need 4MB RAM maximum. Once the assumption is made, it will condition our choice and we need to be sure the assumption is correct.

As a manager you should avoid:

A simple decision-making framework

For less complex decisions or when qualitative data are considered, you can use the following table.

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