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Systematic Planning and Execution

Developing and Deploying Strategy

Strategic planning refers to defining the long-term objectives of an organization and allocating resources to their accomplishment. A strategy determines the direction in which an organization needs to move to fulfill its mission. A strategic plan serves as a roadmap for carrying out the strategy and achieving long-term results; it bridges the gap between ambitions and current results. To boost performance, people must feel ownership in the strategy. A stronger, more capable and efficient organization can be realized simply by defining how its employees can support the overall strategy. Strategic planning is different from long-term planning. Long-term planning builds on current goals and practices, and proposes modifications for the future. Strategic planning, however, considers changes or anticipated changes in the environment that suggest more radical moves away from current practices. When doing strategic planning, the organization should emphasize team planning. By involving those individuals affected by the plan, the manger builds an organization-wide understanding and commitment to the strategic plan. The five elements of a strategic plan are:

• Mission statement, the “what”
• Strategic analysis, the “why”
• Strategic formulation, the “where”
• Long-term objectives, the “when”
• Operational plans, the “how”

Policy Deployment

Hoshin kanri is the Japanese term for control-of-direction or management-by-compass. Hoshin planning refers to policy deployment, i.e. the strategy involves applying a systematic and disciplined focus on a few breakthrough objectives that create a competitive advantage. The policy deployment process cascades strategic goals down through all levels of an organization and aligns them with its tactics, programs, projects, and daily activities. Hoshin planning systemizes strategic planning while taking into consideration the following: economic projections, corporate objectives, customer preferences, quality requirements, current trends and other insights about the future. It is based on the concept that employees are the experts in their jobs and that the collective thinking power of all employees makes an organization the best in its field. The prerequisites are: (a) cross-functional planning that promotes cooperation along value streams and (b) the willingness of managers to delegate decision-making authority to people closest to the action.

Following Deming

Policy deployment and problem solving processes use the Deming cycle “plan-do-check-act” (PDCA) to (1) develop shared goals, (2) communicate and cascade those goals, (3) involve people in planning, (4) hold participants accountable for their role in the plan, and (5) drive focus down into the organization to meet critical objectives. Because Hoshin planning is a cyclic process, the review of the previous year’s performance becomes the basis for the next year’s plan. Managers and work teams alike use Hoshin reports to assess their performance; each table includes a header that shows the author and scope of the plan, a description of the situation that gives meaning to the plan, milestones and objectives that define what needs to be achieved and by when; as well as the tactics, priorities, metrics, and tasks that make the plan actionable and the progress measurable.

The X-Matrix

To get people involved and committed, the management process must align the organization with its strategic objectives, resources, and activities. This alignment is part of the policy deployment process, and the degree of alignment is mapped visually in the X-matrix, a tool that links strategic objectives to operational targets, and those targets to functions and processes. Planning horizons vary widely between cultures and companies; one to two-year plans are common in the United States, while Japanese companies prefer to plan 10 and more years into the future. The matrix translates breakthrough objectives into operational targets. Then teams work bottom-up to identify the required resources, skills, and structures to achieve those strategic objectives. Once this information is available, targets and timelines are refined and the process starts once again for the next planning cycle.

Building the X-Matrix

The strategy deployment matrix consists of four components: objectives, strategies, tactics, and measures. Breakthroughs are the long-term objectives derived from the strategic plan, such as: “Attain a 30% return on assets”. Those long-term objectives are then translated into strategies and annual targets, such as: “Improve margins from loss to breakeven”. Tactics are cross-functional priorities that directly support strategy; they are tracked monthly. Here are some examples: optimizing process flow, researching how competitors achieve a two-day delivery, developing a virtual community, or selecting a consulting firm to assist with a new project. Measures are specific programs, projects, and processes that support tactics; they are reviewed weekly to keep them on track. Examples are automating the order confirmation process or implementing a new charter template.