Is Your Business Ready for the Ultimate Test?
Posted by Marbenz Antonio on February 1, 2023
The effectiveness of alignment as a metric is limited because not all strategic objectives have equal importance.
Organizations don’t exist simply to exist. Every decision made within the organization should be evaluated based on its ability to achieve prioritized strategic objectives. This means that before considering any improvement initiatives, such as programs or projects, the organization must first determine how it aligns with its overall strategy.
This also includes determining the metrics and indicators that will allow for a fair assessment of its impact. As Tilley (1963) stated, “strategy is a representation of the organization’s goals and aspirations. Both the attainment of goals and growth as an organization are critical for successful strategy implementation.” This becomes increasingly relevant when considering that in 2020, only 52% of organizations achieved at least two-thirds of their strategic objectives.
Therefore, as Stephen Jenner says, “what’s important is not the alignment of strategy, but rather its ability to bring value”, particularly in terms of realizing benefits. Benefits are quantifiable improvements that help achieve one or more strategic objectives. It’s crucial for the strategy to be clearly defined so that these benefits can be consistently measured.
To put it simply, contribution refers to the role or impact of an individual or element in producing an outcome or facilitating progress. On the other hand, alignment refers to the arrangement in a straight line or proper relative positions (Oxford Concise English Dictionary 1999). Hence, determining the impact of each proposed spending within a portfolio on achieving strategic objectives is central to effective benefits management.
The saying “you can do anything but not everything” holds true in strategy implementation. Many organizations allocate resources, such as personnel, funding, equipment, materials, technology, property, and other essentials, on a large scale without having a clear understanding of their strategic priorities. Despite an organizational strategy being a crucial factor in determining the organization’s future in an evolving digital economy, if the organization is unable to achieve its strategic objectives, the strategy becomes ineffective and the organization’s purpose remains unachieved.
The purpose of strategy contribution should be to advance the organization and its business model toward its desired outcomes, such as growth or transformation. On the other hand, relying solely on strategy alignment is unlikely to bring about these results or deliver the desired benefits, and may even result in digital disruption, especially when resources are mainly focused on maintaining the daily operations of the business. For instance, Kodak failed to capitalize on the potential of digital photography, a technology it invented in 1975.
According to researcher Marcus Buckingham, “ordinary organizations play checkers while exceptional ones play chess.” In checkers, all pieces are identical and interchangeable. However, in order to win at chess, you must understand the strengths and weaknesses of each piece and why each one is unique. This means that strategy contribution should lead to the proper allocation of funds to various spending proposals, both in progress and planned, in order to reflect the priority and importance of the organization’s strategic objectives.
Merely mentioning “strategy alignment,” as is common among many organizations, particularly in program and project business cases, is not sufficient. Stephen Jenner suggests that a spending proposal can easily be aligned with any strategic objective without specific measures and metrics. Alignment alone is not a reliable indicator as not all strategic objectives carry equal weight. It is important to prioritize and rank the strategic objectives to show which are the most important.
Strategy contribution is vital because the purpose of portfolio and benefits management is to enable the accomplishment of strategic objectives, not just alignment. A portfolio may seem aligned to a certain cause by expressing belief in it and discussing it, but without taking any actual actions. In other words, “alignment” is a misleading term in performance management that leads to inadequate strategy implementation. To be comprehensive, the business case should include a benefits map and benefit profile that clearly explain how the proposed spending will contribute to the organization’s strategy and performance.
The major flaw in portfolio management is the widespread “checklist” approach to strategy alignment, which gives organizations a false sense of measuring the portfolio’s strategy contribution. This bureaucratic and externally imposed approach, also known as “tick-box culture,” creates a gap between official perception and actual outcomes and results. Too often, strategy alignment is used as a default excuse when the benefits of a specific idea cannot be clearly expressed. Essentially, strategy alignment is frequently cited as the reason why the benefits cannot be communicated more effectively.
According to the Praxis Framework, portfolio management involves the choice, classification, ranking, and improvement of an organization’s programs and projects to align with its goals and available resources for delivering benefits. A comprehensive portfolio and benefits framework should be established by every organization to provide a uniform and effective method for estimating the expected strategy impact from all work proposed for the portfolio. Mature organizations align their portfolio categories with the benefit categories defined in the benefits framework, which ensures the portfolio and benefit categories match and facilitates benefits identification and quantification. This also creates a fair environment for comparing business case options, evaluating investment opportunities, and prioritizing the portfolio, especially when optimizing the portfolio for maximum strategy contribution.
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