Strategy? Shouldn’t you be asking top management about this?

Every company director will maintain that his company has a well thought-out strategy. But what is this strategy exactly? Is every member of staff aware of this strategy? Does everyone understand the strategy in the same way? Has the strategy been properly implemented? What can a company do to increase the chances of successful implementation and how important is the famous Balanced Scorecard for such implementation? Kurt Verweire, Professor at the Entrepreneurship, Governance and Strategy Competence Centre of Vlerick Leuven Gent Management School, leads the panel discussion in the right direction.

Agreement at the discussion table is a rather rare phenomenon but not if it concerns the need to explain the concept of strategy. Werner Bruggeman, Professor at the Competence Centre Accounting and Finance of Vlerick Leuven Gent Management School gets the discussion going. “Every organisation has some sort of strategy. There is something going on but it is often not made explicit. This implies that a clear and inspiring vision is being developed. Clear means that the strategy is given a specific structure with a clear terminology and a clear framework. The methodology needed to formulate a structure is non-existent in many companies. Often a
strategy only contains nothing more than a few trendy management concepts such as innovation, customer orientation, efficiency or stakeholder orientation. If you ask a management team what customer orientation actually means to them, they are often at a loss for words.

“All too often strategy remains locked up in the brains of a few managers.”

Moreover, a strategy must be inspiring. It must be alive and come from the heart. It must be genuine and not copied from someone else. An important aspect of this is the visioning process, a brainstorming about the long-term strategy of the entity to be implemented at all levels. Often too few people are involved and management tends to operate from an ivory tower.” Hein Heuvelmans, Director of the Dutch consultancy Oasis1, supports Werner Bruggeman in this. “The strategy remains locked in the brain of a few managers. There is no consensus and the management teams do not explain the strategy to each other. In this way, everyone is busy with
his own little world and the strategy can never be implemented.” According to Werner Bruggeman, training is extremely important. “What are strategies? What are objectives and how should they be formulated? These are all things that can be learnt. It is not always obvious but in practice we see that values are propounded which are not understood by everyone in the same way. And if you don’t understand something then it is difficult to believe in it. The strategy therefore has to be structured, preferably with a wide basis and an understandable terminology developed. If names and terms are defined, they can be understood by everyone.”

Carel Boers, Director of the Rabobank in The Hague, believes that passion is a major catalyst for a strategy to be a success. “What I sometimes miss with managers is passion. If the management of a company does not exude passion, it won’t be found in the lower divisions. Passion also means that you must be prepared to communicate in a certain way. As a leader, you must dare to appear vulnerable.

“I see egos at the top actively engaged in many things except in motivating people.”

Wrong strategic choices must be analysed and discussed with the people with whom they were developed. And this is where it often goes wrong. I see egos at the top actively engaged in many things except in motivating people.” Werner Bruggeman recognises the importance of impassioned management. “If you are passionate as a leader due to a particular vision and you organise a visioning process for your managers in the form of a brainstorming or a strategic workshop where you try to pour in all your passion, then you almost automatically end up with a group that has become inspired. And this is needed, otherwise you are on your own with your vision. The ‘microbe’ must spread to ensure that a vision is passed on and implemented in other processes.” According to Hein Heuvelmans, not only the top but also middle management and even the work floor should be involved in the strategy process. “In order to run your business well and to implement your strategy, you should involve your best salesperson in the field. I also believe that management should ask a great deal of critical questions and give people from middle management or from the field the chance to help come up with an answer. Carel and his management team are a good example of this. They were, and still are, an ideal catalyst for the company because they are close to the work floor and are capable of dealing with specific problems quickly. They are always asking critical questions about how they are dealing with things. It is useful to ask these questions as the answers often come from people who should be passionately inspired by the strategy and who have to work with it on a daily basis.” Carel Boers discovered the importance of passion when implementing the strategy at Rabobank. “In the Private customer department, everything that emerged from the various strategic discussions filtered down to a lower level and was re-examined with much enthusiasm. At a given moment I came into contact with a customer who complimented the company on its nononsense attitude. This was exactly what we had discussed in the sessions a few months before. It is great if you see that a particular strategic decision is spot on and due to the enthusiasm and commitment of staff filters down to all employees. In the Companies department, there was no filtering down to the lower levels and therefore no lasting power. In this department, managers were so honoured that they were allowed to participate in the discussions and felt therefore so exclusive that they did not want to share information with the lower orders.”

The success of strategic implementation depends in many cases on the extent to which staff are given the opportunity to assume responsibility in the process. However, this implies an adjusted type of evaluation and control. Carel Boers introduced a new evaluation method at Rabobank. Carel Boers – “The sales department was divided into small units with considerable social control. The sales people evaluate themselves on a weekly basis and then tell me how it went. At the end of every week, they send me a report with details about what they have sold and why they think it is good or bad. By measuring achievements over very small periods, not only does management realise in time whether things are going well or not but this also applies to the employees themselves. If there is a crisis, then staff see much earlier that a crisis exists and they are more motivated to help solving it.”

“I regard this as a large construction site with various pits. You can either concentrate on the construction work or on the litter scattered around the site.”

Hein Heuvelmans has had the same experience. “It starts with raising awareness, people on the work floor signalling that things are not going well. As they write it down themselves, something happens to them mentally. They will be more motivated because they have an obligation with regard to what they have written.” Carel Boers, “I see this as a large construction site with various pits. If you are busy working then you can do one of two things. You can concentrate on the construction work or on the litter scattered around the site. Many people come no further than seeing the litter. You must therefore make sure that things collate properly and that everyone can see the building work. While we were busy constructing, there were some people who saw the work grow and grew along with it. We tried to give them the opportunity to grow and, where necessary, to assume responsibility. And yet there were others who could not seem to get further than the building site. In such a case, you must help them and help them constantly.”

The Kaplan Balanced Scorecard is presented as the ultimate miracle cure when implementing a strategy whether or not it is suitable. It is a tool which is all too often misunderstood or used wrongly with the result that it bypasses its goal. Werner Bruggeman is an expert in problems related to the Balanced Scorecard.

“If you see strategy as a project and not as a process that has to be dealt with on a daily basis, if it remains a one-off action of a few people, then you can have a good Balanced Scorecard till kingdom come but nothing will change in the organisation.”

“The main aim of the Balanced Scorecard is the extent of being able to follow strategy implementation in measurable terms, i.e. measuring what has been set out to be achieved. The Balanced Scorecard is not about little boxes. Kaplan himself was disappointed because his creation was parodied. He never stated that the world had to be divided into four segments. He made this division due to practical considerations because managers wanted a structure to their reporting in order to remember achievement scales better. Whatever structure is given is not so important. In principle, everyone should be able to work with it. Strategy is everybody’s job. The Balanced Scorecard concerns the contents of a strategy and the contents of measurements and action. It is a means that must be fitted into an integrated strategic management process. You need the Balanced Scorecard to be able to continue the strategy process.” Hein Heuvelmans regards this continuation as very important. “Many strategy processes are projects that come back every year. If you regard your strategy as a project and not as a process that must be dealt with every day, if it remains a one-off action of a few people, you can have a good Balanced Scorecard till kingdom come but nothing will change in the organisation. The idea that strategy is a project must therefore be discarded. The Balanced Scorecard is only useful if it is seen as part of a continuous process.” Carel Boers used the Balanced Scorecard to introduce radical change at Rabobank, “Rabobank in The Hague was not operating well. I knew that everything had to be changed and that I would have to use new means to achieve this. In order to create a shock effect, I opted for the Balanced Scorecard. Some people could not accept this change and left the company. Others were pleased that finally some-thing was going to be changed. In this way, I lost a third of my managers and yet I knew there was no other way forward. A lot had to do with the immaturity of some of the leaders and managers at the time. If you have a high level of selfreflection and you dare to discuss your own functioning, then you have to be prepared to tread on ground which is normally off limits. The impossibility for some leaders to create this transformation in themselves, leaders who were stuck in childish behaviour, made it some-times impossible to bring a project to a successful conclusion.”

What should you do with strategy and its implementation? Werner Bruggeman swears by a complete visioning process. Nevertheless, in economically difficult times the strategy process is disturbed. Werner Bruggeman: “Most of the time the cause is with the organisation of the company. Little can be done by people locally. The company is taken over by a company with a completely different vision. Another cause could be the economic situation collapsing. The occupancy rate goes down and the strategy process stagnates completely. The emphasis is temporarily more on the short term and less on the long term.” According to Hein Heuvelmans, companies react in three ways to a crisis. Hein Heuvelmans, “You have a group that sticks to the strategy, does a bit of adjustment and carries on reasonably well. Then you have a group that
is fixated on the Balanced Scorecard and doesn’t understand that they should lower the sail or run up an extra sail. Lastly, you have a group that runs along and plays. The whole strategy is abandoned as if it had never existed and a climate of panic is created.” According to Carel Boers, it is important that a company adheres to the strategy even in difficult times. Carel Boers: “We are experiencing economically difficult times. At least that’s what they say. However, the bank for which I work is doing better than ever. If managers keep their head cool and their heart warm, there is every likelihood that the damage won’t be as bad as we thought. You mustn’t let the market drive you crazy. For example, the mortgage market went bottom up but our market share rose by 25% this year. We didn’t distance ourselves from our strategy. On the contrary, we finetuned
everything even more and concentrated on workable solutions. Most companies go berserk and start doing crazy things.” It is clear that good strategy implementation depends on various factors such as a valid visioning process, adjusted control systems, and the right employees and managers. According to Kurt Verweire, the success of the Rabobank in The Hague is also due to the fact that managers have a very good idea of the state of play of processes. Is there any kind of process control?

“We are living through economically difficult times. At least, that’s what they say. If managers keep their head cool and their heart warm, there is every chance that the damage will be limited.”

How can this be improved? How can processes of a particular department be linked to processes of other departments? All these matters taken together determine whether or not a company will be successful. For this reason, a more integrated approach is needed for strategy implementation. Vision and strategy must be linked to specific processes and an adjusted control system must be available that enables the company to see if it is going in the right direction. At the same time, attention must be given to behaviour. Are my employees and managers convinced of the direction in which we want the organisation to go? In the spring of 2004, a new book by Vlerick Leuven Gent Management School will be published in which an explanation will be given of what the strategy implementation process means exactly. The book provides some innovative insights into what implementation means, not only for very mature organisations but also for organisations that still have a long way to go.

Article from the book ‘? In Management – The Art and Science of Management’ published because of the 50th anniversary of the autonomous Management School of Ghent University
and Katholieke Universiteit Leuven, in 2003.

Hein Heuvelmans is managementconsultant en oprichter van Mercator Management Advies. Hein is ruim zeventien jaar actief als managementconsultant, manager en docent op het gebied van besturingsvraagstukken. Mercator Management Advies helpt managers met de implementatie van Strategiegedreven Performance Management op alle niveaus in de organisatie, op maat toegesneden Coaching&Training, diverse Top en Master Classprogramma’s en bijzondere netwerken: Genietschappen. Daarnaast geeft Hein lezingen en workshops over resultaatgericht(er) sturen en de vitaliteit van managers en organisaties. Voor meer informatie: www.mercatorma.nl.