When Strategy Execution Marries Risk Management — A Practical Guide to Manage...

8/13/2019 When Strategy Execution Marries Risk Management A Practical Guide to Manage Strategy-to-Execution Risk (E

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When Strategy Execution Marries Risk Management

A Practical Guide to Manage Strategy-to-Execution Risk

Executive Summary

Patrick Ow

The complete ebook can be downloaded from

https:www!smashwords!combooksview"##$$"
https://www.smashwords.com/books/view/377443https://www.smashwords.com/books/view/377443


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Smashwords Edition

Copyright Patrick Ow 2013All rights reserved.

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yo& %or respecting the hard work o% this a&thor.

)S,!" -/(0(--23-2(1(0


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Table of %ontents

&reface

%hapter ' ( )ntroduction

%hapter * ( +ll in the strategy execution, risks, and controls

%hapter " ( +gile mindset and iterations re-uired in uncertainty

%hapter $ ( .oundations for strategy execution

%hapter / ( .ramework for strategy execution

%hapter 0 ( +n integrated management system for strategy execution

%hapter # ( &rocess for strategy execution

&ostscript

+bout the author

References


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Strategies most often fail because they arent executed well. Things that are supposed to

happen dont happen. Either the organizations arent capable of making them happen, orthe leaders of the business misjudge the challenges their companies face in the businessenironment, or both. ,ossidy and Charan* 2002

!"# of $E%s said they dont hae full control oer their companys direction. $E%s

want to be in control but know that organizations are complex entities with lots of

moing parts. &ost $E%s dont want a strict 'command and control( organization butthey do want to feel like they are steering the ship.apta* 2013

The media has been full of stories of organizations negatiely affected by catastrophic

failures ) not because they took on too much risk, but because the risks simply werent

put into perspectie and properly managed.Ernst 4o&ng* 2013

Strategic and business risks pose greater threats to shareholder alue than operational,compliance, or financial risks *... + strategic and business issues are the most common

means by which alue is destroyed ) responsible for !# of alue loss ) with

operational issues driing another -# of the loss. Pricewaterho&seCoopers* 200-


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&reface

People and organisations manage risk each day as part o% how they make decisions. 5isk

management is already integrated nat&rally in what we all do $e%ore we decide to dosomething. Some are $etter at this than others* $&t all can improve the 6&ality o% riskmanagement and decision(making* res&lting in improvement in achieving o$'ectives and

improved per%ormance and con%idence.

As an e7ample* a pilot knows the plane+s destination andplanned flight path. 8hen the

plane is in %light* the pilot m&st constantly monitor the plane+s per%ormance and ad'&stthe heading or the direction that the plane+s nose is pointing to compensate %or the wind

and other e7ternal %actors to %ollow the act&al path over gro&nd. )% the wind is di%%erent

%rom the planned %light path* the pilot must immediately ad1ustthe plane+s headingaccordingly to $ring it sa%ely to its planned destination.

Pilots are clear a$o&t their destination and key o$'ective e.g.* to reach 9el$o&rne

sa%ely. )n sharp contrast* organisations have so many :goals+ that it is di%%ic&lt to clearly

artic&late what the act&al destination is* let alone how and when to get there.

Pilots also know that their plane will $e o%%(co&rse -;< o% the time and are prepared torespond constantly $y making the appropriate ad'&stments or agile course correctionsto

get the plane $ack on the act&al path over gro&nd. #hey %&lly &nderstand that risk

management is intrinsically intertwined and constantly takes place. Pilots make '&st(in(time decisions at partic&lar points in time d&ring %light time $y"

a Systematically identi%ying ha=ards e.g.* changing winds or adverse weather

that may impact the achievement o% their o$'ective e.g.* to reach 9el$o&rne

sa%ely.

$ Constantly assessing the degree and pro$a$ility o% known &nknowns or riske.g.* degrees o%%(co&rse* air tra%%ic conditions* weather conditions* etc..

c Appropriately determining and e7ec&ting the $est co&rse o% action in real time

given the accepta$le level o% risk and $est availa$le in%ormation e.g.* re(pointing

the plane* landing on a wet r&nway.

Pilots nat&rally integrate risk management into what they do. )t is an integral part o% their

real(time decision(making process that will ena$le them to reach their intended

destination sa%ely.

Organisations* on the other hand* get con%&sed or hyped(&p $y changes $eca&se plans*

systems* and processes have $een designed and implemented as i% they are permanent andeverything sho&ld go smoothly as planned or ass&med. 5ather than a$sor$ing the

sit&ation calmly* responding to changes systematically* and making appropriate co&rse

corrections to the way things are done* organisations over(react and introd&cenervo&sness and controls that are co&nter(prod&ctive and over(engineered.

Plans* systems* and processes are a means to an end. Organisational agility re6&ires

plans* systems* and processes to $e constantly adapted to changing circ&mstances and


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conte7t %or organisations to achieve their o$'ectives.

>,&sinesses m&st $e e%%icient* %le7i$le* and driven $y c&stomer and economic realities.

8e $elieve that there are three $asic components o% strategic agility" process e%%iciencywithin and across $&sinesses* improved insight and decision(making %or $etter

colla$oration* and %le7i$ility to respond 6&ickly to changing inp&ts and create new

$&siness processes that align with operations and strategy.? #apscott and ,arter* 200-

#he easier part %or organisations is to decide where they want to go d&ring the strategy%orm&lation or planning processes $y doc&menting their corporate strategy. #he harder

part is to get the whole organisation and everyone in the organisation to $e committed

and implement the doc&mented corporate strategy i.e.* strategy e7ec&tion where

organisations contin&o&sly act on new priorities 6&icker than their competitors witho&ttaking on too much riskand closely re(aligning employees+ economic interests to those o%

the organisation.

@ere is a per%ect ill&stration o% the pro$lem organisations constantly %ace in their p&rs&it

to deliver on their pro%it %orecast or improve on their per%ormance. >Strategies are

approved $&t poorly comm&nicated. #his* in t&rn* makes the translation o% strategy intospeci%ic actions and reso&rce plans all $&t impossi$le. ower levels don+t know what they

need to do* when they need to do it* or what reso&rces will $e re6&ired to deliver theper%ormance senior management e7pects. Conse6&ently* the e7pected res&lts never

materialise. And $eca&se no one is held responsi$le %or the short%all* the cycle o%

&nderper%ormance gets repeated* o%ten %or many years.? 9ankins and Steele* 200;

Organisations are &s&ally not s&ccess%&l in translating and implementing what looks goodon paper i.e.* doc&mented corporate strategy into speci%ic and meas&ra$le actions that

yield positive o&tcomes and s&perior per%ormance. 8inston Ch&rchill 1/ to 1-B;

once declared* >@owever $ea&ti%&l the strategy* yo& sho&ld occasionally look at theres&lts.? #he written corporate strategy has the intrinsic val&e o% the paper it was written

on &nless there is e7ec&tion or implementation. This has resulted in a widening strategyexecution gapbetween documented corporate strategy and its execution!

As with pilots*formalisedrisk management within the conte7t o% strategy e7ec&tion is animportant management practice and discipline that will ena$le organisations to per%orm

reg&lar agile course corrections$y identi%ying potential $arriers or &ncertainties internal

and e7ternal that co&ld a%%ect them and the achievement o% their o$'ectives. Agile co&rse

corrections sho&ld never $e an area where organisations have the greatest di%%ic&lty.

n%ort&nately* many organisations have considered risk management as something that

slows them down rather than making them grow or move %aster and adding val&e to their

$&siness. #his sho&ld not $e so i% we take this e7ample" A car can accelerate i% it is sa%e

to do so and slows down when there are potential dangers that may stop the car %romarriving at its destination e.g.* $eing involved in an accident* skidding o%% the slippery

road* etc.. Ask the 6&estion"ow fast are you willing to drie a car to your intended

destination if you knew that the brakes in the car are not working/:Dery slowly indeed+wo&ld $e the right answer.

#he reason* o% co&rse* is that $rakes slow down or stop a car when it is re6&ired so that

the driver and the passengers can arrive sa%ely at their destination* within the planned


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time and d&ration* and witho&t contravening any road r&les and losing demerit points.

ike risk management* $rakes are an integral and insepara$le part o% a car.

8hen organisations &nite strategy e7ec&tion and risk management as an integrated

management discipline* there is creation or preservation o% stakeholder val&e* e7ec&tion

o% doc&mented corporate strategy* and achievement o% organisational o$'ectives and

growth. #his discipline can assist organisations in managing the %ollowing risks"

a poor &nderstanding o% strategic o$'ectives poor or non(e7istent o$'ectives

$ adhering to the corporate strategy %or the long(term witho&t &nnecessarychanges mid(way knowing0doing gap

c poor strategy(to(e7ec&tion strategy execution gap

c not achieving their strategic o$'ectives* vision* and mission poor per%ormance.

#he in%ormation contained in this e$ook is s&ited %or larger and comple7 organisations.

!evertheless* it does not stop smaller organisations %rom &sing the in%ormation contained

in this e$ook.

#he practical approach contained in this e$ook is no &niversal panacea. )% yo&r ind&stry

is sta$le and relatively predicta$le* yo& may $e $etter o%% sticking to the traditional

so&rces o% advantage and contin&e doing what yo& are c&rrently doing. @owever* i% yo&r

competitive reality is &ncertain and rapidly changing* as is tr&e %or an increasing n&m$ero% ind&stries and organisations* yo& need an agile* dynamic* and s&staina$le integrated

management discipline and approach to stay ahead and per%orm well.

#his e$ook* which is a %ollow(&p %rom a&thor+s %irst e$ook1eeping Scores2 &easuring

3erformance, 4ewarding 4esultsp&$lished in 200; now withdrawn* re%lects theimportance o% risk management in strategy e7ec&tion. 9any ideas and approaches %rom

the %irst p&$lication have $een adopted and revised in this e$ook.


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%hapter ' ( )ntroduction

8hen organisations %ail to deliver on their promises or pro%it %orecast* the most %re6&ent

reaction is that the chosen corporate strategy was wrong. >#oday* we %ace never(ending*rapid(%ire change* incl&ding constantly shi%ting priorities* sweeping advance intechnology and comm&nication* %l&ct&ating markets* and heightened glo$al competition.

et+s %ace it. )t+s to&gh to stick with anything in this kind o% environment. 4et this is

precisely the reason why adhering to your strategyis so vitally important to long(terms&ccess? emphasis added F call this the knowing-doing gap. Colan and Gavis(Colan*

2013

@aving a solid corporate strategy gets the organisation into the game. ong(term

adherence to the corporate strategy and the disciplined e7ec&tion o% the strategy are whatpropels the organisation into the winner+s circle.

nnecessary changing* chopping* or tweaking a corporate strategy mid(way witho&t

giving a chance %or a proper e7ec&tion can $e disastro&s. #here is a common reaction to

shi%t strategic direction mid(way* regardless o% whether the previo&s corporate strategywas working. E7ec&tives can $e too 6&ick to ass&me that the strategy is %a&lty rather than

the e7ec&tion. 8in the game* not $y constantly creating new strategies* $&t $y having the

discipline to adhere or remain with the c&rrent strategy and e7ec&ting it r&thlessly andwell.

#here is a gap $etween the $est(laid doc&mented corporate strategy and their act&al

realisation and implementation F call this the strategy execution gap. Organisations

m&st e%%ectively e7ec&te what looks good on paper.

#he reality is that organisations that stick with or adhere to their corporate strategy in the

long(term and e%%ectively e7ec&te this strategy have a s&staina$le competitive advantagethat is di%%ic&lt to imitate. #his is important %or today+s $&siness environment. Solid and

so&nd strategies %ail d&e to poor e7ec&tion.

aplan and !orton %o&nd that over two(thirds o% %ail&res were not ca&sed $y poorstrategy* $&t poor e7ec&tion. aplan and !orton* 200

Strategy is a$o&t deciding what to do i.e.* choice* intended destination. >5isk is created

or altered when decisions are made. ,eca&se there is almost always some &ncertainty

associated with decisions and decision(making* there is almost always risk. #hoseresponsi$le %or achieving o$'ectives need to appreciate that risk is an &navoida$le part o%

the organi=ation+s activities that is typically created or altered when decisions are made.

5isks associated with a decision sho&ld $e &nderstood at the time the decision is made*and risk(taking is there%ore intentional.? )SOH#5 3100"2013

Strategy e7ec&tion is a$o&t getting the right things done thro&gh people or how well

strategic choices made are prioritised and e%%ectively carried o&t and implemented $y

employees within an organisation.

Strategy e7ec&tion represents a disciplined process or a logical set o% inter(connectedactivities that ena$le an organisation to take a %orm&lated corporate strategy* stick to it*


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and systematically create val&e %or its stakeholders within a given or accepta$le level o%

risk and risk appetite* which is per%ormance. )t is a >systematic process o% rigoro&sly

disc&ssing hows and whats* tenacio&sly %ollowing thro&gh* and ens&ring acco&nta$ility.?,ossidy and Charan* 2002

n%ort&nately* most management literat&re talks a$o&t the what and whyi.e.* strategy

%orm&lation on paper and not the how and wheni.e.* strategy e7ec&tion in conte7t.

#here are always risks inherent in strategy e7ec&tion or in any $&siness. Iovern thecorporate strategy $y the organisation+s willingness to accept calc&lated risk in p&rs&it o%

val&e creation or preservation and per%ormance* as well as the organisation+s capacity to

$ear that risk given its risk appetite and accepta$le level o% risk.

A s&ccess%&l $&siness model e7ploits to a signi%icant e7tent areas in which theorganisation e7cels relative to its competitors* incl&ding &nderstanding and actively

managing risks inherent in e7ec&ting the strategy and r&nning the $&siness.

#his practical e$ook seeks to provide the how o% disciplined and systematic strategy

e7ec&tion %rom an integrated management perspective within a given level o% risk andrisk appetite. #his allows e7ec&tives to make $etter $&siness decisions $y systematically

identi%ying risks known &nknowns* ena$ling the organisation to achieve their o$'ectives

within an accepta$le degree o% resid&al risk and avoid taking on e7cessive or &nnecessary

e7pos&res to risks in their 6&est to satis%y stakeholder e7pectations or to meet pro%it andper%ormance %orecast at any cost. A stakeholder is a >person or organisation that can

a%%ect* $e a%%ected $y* or perceive themselves to $e a%%ected $y a decision or activity.?

)SO I&ide 3"200-

Taking a different but practical approachOrganisations today %ace a stark choice" change or %ail. Contin&o&s trans%ormation and

transition have $ecome the only constant in today+s $&siness landscape. 8hen e7ec&ting

their corporate strategy* those organisations that cannot adapt to their changingcirc&mstances and competitive environment are doomed to %ail.

Organisations m&st have the a$ility to e7ec&te in dynamicways acc&rately $&t

constantly perceive or sense changes to their operating conte7t and environment test

possi$le responses and implement changes and trans%ormations in prod&cts* technology*operations* str&ct&res* systems* and capa$ilities as an integrated $&t whole system o%

ro&tines. Agile co&rse correction and constant adaptations are a given.

#he organisation+s p&rpose or mission o&tcomes other than pro%it or growth and$&siness model how organisations make money sho&ld $e widely shared $y allemployees* where shared p&rpose and val&es drive positive $ehavio&rs that are

per%ormance($ased and risk($ased.

Organisational per%ormance is dependent on the s&ccess%&l cascading o% &nam$ig&o&s

corporate strategy to every individ&al in the organisation where there is"

a strong employee involvement* $&y(in* and commitment


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$ a disciplined %oc&s on only a hand(%&ll o% e7ec&ta$le o$'ectives

c close alignment o% employees+ economic interests with those o% the

organisation.

E7ec&tives e%%ectively delegate and empower s&%%icient a&thority to employees so that

the organisation can e7ec&te strategies and respond to changes with s&ccess where thereis no second g&essing %rom the corporate o%%ice* only alignment with $asic* strategic

intent or o$'ectives.

Cond&ct reg&lar $&t di%%erent strategy and operational review meetings with employeesto disc&ss the impact o% key risks and controls on strategy* per%ormance* $&dgets* and

%orecast. Per%ormance management in the %orm o% clear* &nam$ig&o&s* accepted

per%ormance meas&res and targets reward positive and accepta$le risk(taking whereeveryone* incl&ding the CEO* receives the same share o% the dividends and $on&ses.

#he management o% risk is an integral part o% each cascaded and conte7t&alised o$'ective

at all levels o% the organisation. 5isk management* $eing the %o&ndation o% the

organisation+s risk($ased control and per%ormance environment* develops cost(e%%ectiveval&e(creating risk treatment plans that are at the same time key controls associated with

the achievement o% each o$'ective. An e%%ective system o% risk management that is

integrated with planning* $&dgeting* and reporting processes ena$les employees to make

$etter $&siness decisions. #his is done $y systematically identi%ying risks and e7istingcontrols* and implementing risk treatments that sho&ld collectively ena$le the

organisation to achieve their o$'ectives within an accepta$le degree o% resid&al risk and

risk appetite.

inking conte7t&alised controls to the achievement o% o$'ectives ens&res thatorganisational activities incl&ding decision(making processes are e%%icient and e%%ective*

where $est availa$le in%ormation is relia$le and timely* and the organisation is compliant

with applica$le laws and reg&lations.,y actively involving employees in the activities that they are acco&nta$le %or d&ring thestrategy %orm&lation and cascading processes* the diversity o% vario&s organisational s&$(

c&lt&res* per%ormance management systems* and individ&al risk appetites can also $e

aligned and managed appropriately. #his avoids or limits &nnecessary risk(taking that hasca&sed organisations to %all or %ail e.g.* ,arings* Enron.

5eporting against conte7t&alised key per%ormance meas&res and targets %or each

o$'ective is also a report on the e%%ectiveness o% the corporate strategy* controls* and the

risk management process %or that o$'ective. )ntegrated reporting sho&ld drive e%%ectiveval&e creation or preservation %or the organisation.

Contin&o&s learning* improvement* and employee coaching* teaching* and cons&ltationare norms* where employees %reely contri$&te and share their knowledge and skills with

others. ,est availa$le in%ormation re6&ired %or e%%ective strategy e7ec&tion* decision(making* and risk management %low vertically and hori=ontally across the organisation.

An e%%ective corporate governance %o&ndation can $e conte7t&alised* designed* and

implemented thro&gh the strategic &tilisation and com$ination o% %ive lines o% de%ence

that are provided $y line management* independent s&pport %&nctions i.e.* riskmanagement* %inance* h&man reso&rces @5* in%ormation technology* independent


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reviewers or ass&rance providers i.e.* e7ternalHinternal a&ditors* e7ec&tive management*

and the $oard.

An enterprise(wide approach is re6&ired %or integrated strategy e7ec&tion and riskmanagement where the organisation"

a responds dynamically and conte7t&ally to e7ternal and internal changes in atimely manner $y relying on the work o% employees where they determine the how

$ operates e%%ectively and e%%iciently within the approved level o% risk and risk

appetite

c maintains clear line(o%(sight $etween individ&al per%ormance and theachievement o% corporate strategy and strategic o$'ectives thro&gh conte7t&alised

management0by0objectieswhere the organisation determine the what

d prioritise and allocate limited reso&rces to strategic areas and initiatives that

matters most and adds tangi$le val&e %or stakeholders

e identi%y and manage risks and controls at di%%erent levels o% the organisation and

within the conte7t they operate in* given the internal and e7ternal circ&mstancesand availa$le reso&rces

% meas&re* eval&ate* and report on per%ormance to key stakeholders

g comply with applica$le laws* reg&lations* and policies.

)mplementing the integrated approach sho&ld involve the %ollowing activities"

a Getermine and conte7t&alise the organisation+s capacity* capa$ility* and appetite%or the re6&ired per%ormance level and level o% risk needed to deliver on the

corporate strategy and strategic o$'ectives.

$ Conte7t&alise* &nderstand* and cascade the corporate strategy and strategic

o$'ectives into operational and individ&al scorecards and o$'ectives that arespeci%ic* meas&ra$le* achieva$le* reasona$le* and timed($o&nd S9A5#.

c )denti%y opport&nities and threats risks or known &nknowns that may threaten

the achievement o% organisational o$'ectives and growth.

d )denti%y and eval&ate the design and e%%ectiveness o% key controls intended tomanage these risks and create a risk($ased control environment that drives the

achievement o% o$'ectives.

e O$tain appropriate independent ass&rances on the e%%ectiveness o% key controls

across key areas o% risk.

% Prioritise and allocate appropriate and s&%%icient reso&rces to activities andpro'ects that add real val&e to the achievement o% corporate strategy and strategic

o$'ectives.

g Eval&ate per%ormance and report against the achievement o% corporate strategy

and o$'ectives* $&dgets* risks* controls* and reg&latory compliance.

h Contin&o&sly improve* adapt* and change $ased on %eed$ack and lessonslearned.


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What about public sector organisations2

P&$lic sector organisations may %ind it di%%ic&lt to artic&late their o$'ectives clearly %or

vario&s reasons. One o% the reasons co&ld $e political.

O$'ective is >a thing aimed at or so&ght a goal.? o7%orddictionaries.com )t is a speci%icres&lt that a person* an organisation or system aims to achieve within a time %rame and

with availa$le reso&rces. )n general* o$'ectives are more speci%ic and easier to meas&re

than goals.

8hilst the concept o% an o$'ective is commonly known in the private sector* p&$lic sectororganisations can $ene%it enormo&sly $y having clear statements o% :5hy their

organisation exist/+ and :5hat the organisation is 6actually7 seeking to achiee/+.

Concept&ally* o$'ectives are applica$le to all organisations. )t is the level o% speci%icity in

artic&lating the o$'ectives or goals that will determine the level o% analysis that can $e

per%ormed on the organisation and to assess whether the organisation has o$'ectivelyachieved what it said or promised it wo&ld do.

)n %act* o$'ectives are more relevant %or p&$lic sector organisations as they seek to show

higher acco&nta$ility and transparency %or spending or &tilising p&$lic %&nds. Arg&a$ly*p&$licly listed companies PCs %all into the same category as p&$lic sector

organisations* where shareholders demand greater transparency and per%ormance.
http://www.oxforddictionaries.com/http://www.oxforddictionaries.com/


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%hapter * ( +ll in the strategy execution, risks, and controls

,ased on a sweeping 10(year st&dy o% more than 2*000 technology* service* and prod&ct

organisations in a variety o% ind&stries* >one simple %inding that s&rprise most e7ec&tiveswas that only a$o&t one company in ten achieves even a modest level o% s&stained andpro%ita$le growth on average over ten years de%ined as ;.; percent average ann&al

reven&e and pro%it growth* while earning the cost o% capital. Over -0 percent o% $&siness

plans aspire to this per%ormance today* yet the tr&th is that %ew will achieve it thepercentage is going down every decade and '&st took another nosedive.? Jook* 2001

#his is hardly s&rprising when nearly nine in 10 e7ec&tives s&rveyed $y #he Economist

)ntelligence nit in 2013 say e7ec&ting strategic initiatives s&ccess%&lly will $e

:essential+ or :very important+ %or their organisation+s competitiveness over the ne7t threeyears. >4et B1< o% respondents acknowledge that their %irms o%ten str&ggle to $ridge the

gap $etween strategy %orm&lation and its day(to(day implementation. 9oreover* in the

last three years an average o% '&st ;B< o% strategic initiatives has $een s&ccess%&l. S&chpoor implementation means that a company+s stated strategy %ails to shape what happens

in practice" only a small minority o% respondents say that their $&siness model is

e7tremely well aligned with strategy. !ot s&rprisingly* companies that are poorly alignedwith strategy also report weaker %inancial res&lts than their peers.? Economist

)ntelligence nit* 2013

)nterestingly* $ack in 1-/2* >%ewer than 10 percent o% e%%ectively %orm&lated strategies

were s&ccess%&lly implemented? iechel* 1-/2. !othing has changed since* really.

Other research >s&ggest that companies on average deliver only B3< o% the %inancialper%ormance their strategies promise? 9ankins and Steele* 200; and organisations have

>made little attempt to identi%y areas o% non%inancial per%ormance that might advancetheir chosen strategy? )ttner and arcker* 2003.

)t is hardly s&rprising then that the top two CEO challenges in 200/ and 2010 were>e7cellence in e7ec&tion? and >consistent e7ec&tion o% strategy $y top management.?

#he Con%erence ,oard* 2010

Some strategy e7ec&tion o$stacles incl&de" @re$iniak* 200;

a ina$ility to manage change e%%ectively or to overcome internal resistance to

change

$ trying to e7ec&te a strategy that con%licts with the e7isting power str&ct&re

c poor or inade6&ate in%ormation sharing $etween individ&als or $&siness &nitsresponsi$le %or strategy e7ec&tion

d &nclear comm&nication o% responsi$ility and acco&nta$ility %or e7ec&tion

decisions or actions

e poor or vag&e strategy

% lack o% %eelings o% ownership o% a strategy or e7ec&tion plans among keyemployees


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g not having g&idelines or a model to g&ide strategy e7ec&tion e%%orts

h lack o% &nderstanding o% the role o% organisational str&ct&re and design in the

e7ec&tion process

i ina$ility to generate $&y(in or agreement on critical e7ec&tion steps or actions

' lack o% incentives or inappropriate incentives to s&pport e7ec&tion o$'ectives

k ins&%%icient %inancial reso&rces to e7ec&te the strategy

l lack o% &pper(management s&pport %or strategy e7ec&tion.

>!early all C(level e7ec&tives recogni=e risk management as an important ingredient in

their organi=ation+s overall $&siness s&ccess. An overwhelming ma'ority /B percent o%

s&rvey respondents said that risk management considerations are to some degree %actoredinto strategic planning decisions. ,y the same token* companies will have di%%ic&lty

developing a strategic plan witho&t knowing their appetite %or risk* and whether they are

taking on too m&ch risk %or a given level o% ret&rn or too little.? P9I* 2013 )t is

there%ore di%%ic&lt to make strategic decisions witho&t developing a risk appetite

statement that will help e7ec&tives make decisions a$o&t how m&ch risk they are willingto take on when e7ec&ting the corporate strategy.

Go not &ndermine the role o% $oards in strategy e7ec&tion and risk management. >8hile

respondents say their $oards are taking more responsi$ility %or strategy* risk managementis still a weak spot F perhaps $eca&se $oards and companies are increasingly

complacent a$o&t risks* as we move %&rther o&t %rom the 200/ %inancial crisis. #his is the

one iss&e where the share o% directors reporting s&%%icient knowledge has not increased"2- percent now say their $oards have limited or no &nderstanding o% the risks their

companies %ace. 8hat+s more* they say their $oards spend '&st 12 percent o% their time on

risk management* an even smaller share o% time than two years ago.? 9cinsey and

Company* 2013>Kaced with growing legal and $&siness responsi$ilities* ,oard mem$ers are $ecoming

%&lly engaged in &nderstanding the link $etween risk management and strategy. #hey

e7pect reg&lar &pdates %rom management and are engaging in a dialog&e with thedesignated risk owners and not relying solely on disc&ssions with the Chie% E7ec&tive

and Chie% Kinancial O%%icers. #hey sho&ld not only eval&ate risks to the enterprise now

and ne7t year* $&t also the risks that may emerge several years+ o&t. )% there is opencomm&nication $etween the ,oard and senior management* companies will $e a$le to

&se risk management as a tool that ties long(term strategy with short(term

implementation.? P9I* 2013

*!' Strategic management and strategy execution

9anagement involves coordinated activities that direct and control an organisation inp&rs&it o% its o$'ectives. )t is the >process o% coordinating work activities so that they are

completed e%%iciently and e%%ectively with and thro&gh other people.? 5o$$ins and

Co&lter* 200/ E%%iciency is doing things rightF that is* getting the most o&tp&t %rom


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least amo&nt o% inp&t. E%%ectiveness is doing the right thingsF that is* prioritised work

activities that will help the organisation achieve its o$'ectives within a given level o% risk.

Strategic management is a$o&t"

a Analysing the vision* mission* strategic o$'ectives* and environment. ,asic

6&estions incl&de"iow do we objectiely define success/

ii 5hat is our compelling customer8stakeholder alue proposition/

iii 5hat things are going well now/

iv 5here and how could things be better in the future/

v9re there issues with performance, morale, and culture/

$ Gecisions a$o&t two other $asic 6&estions on competitive advantage"

i 5hat business should we compete in to differentiate ourseles, gien that the

essence of strategy is differentiation/

iiow should we compete in those businesses to implement our corporate

strategy/

c Prioritising actions to e7ec&te the corporate strategy that re6&ires the allocation

o% s&%%icient $&t necessary reso&rces to $ring intended val&es to reality that isper%ormance.

*!* 3isciplined and systematic strategy execution creates value

@igh per%ormance is possi$le i% management is serio&s and committed a$o&t val&ecreation or preservation thro&gh disciplined and systematic strategy cascading ande7ec&tion* which is m&lti(dimensional. >0< o% those organisations that had a %ormal

Strategy E7ec&tion process in place reported s&perior per%ormance. #hese organisations

are also eight times more likely to &se technology sol&tions that a&tomate process areas

s&ch as $&dgeting* per%ormance reporting* and operational %orecasting.? !orton* 200

Dal&e is >an attri$&te o% an entity determined $y the entity+s perceived &se%&lness*

$ene%its and importance? A&stralian Standard AS 1/3"200 Dal&e is created thro&gh

generating improved o&tcomes in a more cost(e%%ective manner.

4444444

-.-.: ;enefits of an effectie strategy execution

An e%%ective strategy e7ec&tion sho&ld res&lt in the %ollowing"

a All employees sho&ld clearly see the alignment o% their 'o$* per%ormance* andpositive contri$&tion to the achievement o% corporate strategy and strategic

o$'ectives F where there is a clear line(o%(sight %or val&e creation or preservation

and per%ormance.


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$ Per%ormance reviews o% all employees who have personal per%ormance and

development o$'ectives and plans that are linked to the corporate strategy*

enhanced thro&gh the appropriate h&man reso&rce reward and per%ormance(recognition systems.

c S&pport %&nctions and core processes are tightly aligned with the corporate

strategy and %&lly s&pport the $&siness &nits.

d K&nctional* operational* and $&siness &nit plans %&lly s&pport the corporatestrategy.

e #hreats and opport&nities risks a%%ecting the achievement o% strategic

o$'ectives are managed %rom an enterprise(wide perspective* where risks are known

&nknowns e.g.* lack o% sta%% competency may in%l&ence the e%%ectiveness o%strategy e7ec&tion.

% All employees know on a reg&lar $asis more than ann&ally the progress they

are individ&ally making in contri$&ting to the overall achievement and per%ormance

o% the corporate strategy.

g Organisational policies* proced&res* systems* and processes are aligned withand complement each other %rom an integrated management perspective and %&lly

s&pport the corporate strategy.

4444444

-.-.- Organisations don+te7ec&te &nless the right people* individ&ally and corporately* %oc&ses on the right details

at the right time.? ,ossidy and Charan* 2002

Organisations can &nleash creativity and innovation $y recognising that individ&als are

the &ltimate so&rce o% val&e and $y creating an environment where they can make apositive di%%erence and contri$&tion.

>Only 1< o% respondents say their companies provide s&%%iciently skilled personnel to

implement high priority strategic initiatives. 9oreover* '&st 1/< say that the hiring o%

people with the necessary $&siness skills or leadership talent to drive strategyimplementation is a very high priority at their %irms* and a mere 11< say the same o%

developing those skills among e7isting e7ec&tives. L...M #he s&rvey data also indicate a

correlation $etween companies that do $etter at implementation and those that %oc&s moreheavily on o$taining the re6&isite $&siness and leadership skills.? Economist )ntelligence

nit* 2013

*!" What is re-uired for an effective strategy execution2

An e%%ective strategy e7ec&tion re6&ires the %ollowing"

a +gile mindsetand iterations! Chapter 3.


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$ !ecessary foundations%or strategy e7ec&tion. Chapter

c A so&nd frameworkChapter ; within which the integrated managementsystem%or strategy e7ec&tion Chapter B and strategy execution processChapter occ&rs* where"

i #he process consists o% actions taken to achieve an end.ii #he integrated management system $rings together* as common and

integrated to&ch(points* several disparate management practices or

components re6&ired %or strategy e7ec&tion.

Kig&re 2.1 $elow shows the relationship $etween agile mindset and iterations* and the%o&ndations* %ramework* process* and integrated management system %or strategy

e7ec&tion.

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-.>.: $ontextualised management0by0objecties

#he management approach taken to e7ec&te strategy is contextualised management0by0

objecties. E7ec&te the corporate strategy within the given conte7t and systems. @ave a

good &nderstanding o% the conte7t and systems when applying management($y(


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o$'ectives.

9anagement($y(o$'ectives* also known as management($y(res&lts* is a process o%

de%ining o$'ectives within an organisation so that management and employees agree onthe S9A5# o$'ectives. 8hen employees themselves have $een involved with the

o$'ective setting process and choosing the agreed co&rse o% action* they are more likely to

commit and %&l%il their responsi$ilities.

#here are %ive mat&rity levels o% per%ormance"

a evel 1 F K&nctional separation o% work%low is not present. Organisationalchart is not &p(to(date. 8orkers are individ&alised and do not interact

colla$oratively to achieve common goals. Personal o$'ectives are not aligned with

management o$'ectives.

$ evel 2 F Organisational chart is present and posted. K&nctional tasks areclearly de%ined. 8ork%low interaction is clearly &nderstood $y all employees.

Per%ormance is meas&red as pass or %ail against deadlines.

c evel 3 F #op(management o$'ectives are clearly de%ined and $roken downcascaded as individ&al o$'ectives %or all employees. Employee per%ormance isreviewed $iann&ally.

d evel F Employees achieve personal and strategic o$'ectives thro&gh process

improvement* teamwork* and colla$oration.

e evel ; F Employees create strategic o$'ectives that s&rpass corporate strategy

where meeting stretch per%ormance targets are the norm.

Strong leadership is re6&ired to lead people towards achieving their strategy(%oc&sedo$'ectives. #he com$ination o% strong leadership and S9A5# o$'ectives drives strategy

e7ec&tion and per%ormance.


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%hapter " ( +gile mindset and iterations re-uired in uncertainty

>/2< o% CEOs %eel like their team isn+t acting with eno&gh &rgency and this was

a%%ecting the company+s a$ility to get things done. !ot $eing nim$le and 6&ick can sink acompany. #he CEOs we talked to %eel like they are always h&stling* so why can+t theothers keep &pN? apta* 2013

>#he ma'ority o% s&dden negative val&e shi%ts were driven $y a %ail&re to adapt to

changes in the $&siness environment* c&stomer mismanagement and poor investor

relations.? O7%ord 9etrica and Ernst 4o&ng* 2002

9oreover* >in the world o% constant change* the spoils go to the nim$le.? 5eeves and

Geimler* 2011

Agile is $eing >6&ick and well(coordinated in movement? dictionary.com or

>characteri=ed $y 6&ickness* lightness* and ease o% movement nim$le?

the%reedictionary.com. )n today+s competitive and &ncertain $&siness environment*agility* or the state o% $eing agile* is re6&ired o% organisations to provide e7pected val&e

to their stakeholders $y s&ccess%&lly e7ec&ting their strategy. #he a$ility to respond

6&ickly and appropriately to change drives competitive advantage %or the organisation.

A mindset is a %ilter thro&gh which we e7perience and make sense o% the world. )t is a

vehicle %or control* coordination* and commitment to strategy e7ec&tion and

per%ormance.

+gility is about embracing constant change and making the appropriate decisions

by the right people at the right time in the right context based on the relevant

situation5dependent information becoming available at particular points in time!)t

is taking ajust0in0time approachwhere right amo&nts o% relevant in%ormation areprocessed when re6&ired* not in large or ins&%%icient amo&nts o% in%ormation that res&ltsin $iases i.e.* cognitive and gro&p(think.

>A timely approach signi%ies that the risk management process is applied at the optim&m

point in the decision(making process. L...M )% the risk considerations are made too early or

too late* either opport&nities co&ld $e lost or there co&ld $e s&$stantial costs o% revisingthe decision.? )SOH#5 3100"2013

Organisations cannot predict the %&t&re with certainty d&e to lack o% relevant in%ormation

at the time o% planning and decision(making. #hey may not know what lies ahead.

@owever* they sho&ld $e prepared to actively cons&lt with key stakeholders e.g.*

c&stomers* reg&lators reg&larly and colla$oratively to make timely* necessary* andparticipatory decisions when the relevant or $est in%ormation $ecomes availa$le. #his

re6&ires contin&o&s adaptation o% plans* processes* and policies to s&it the changingconte7t or circ&mstance $&t %oc&sing on the organisation+s vision* mission* and corporate

strategy.

>CEOs %ace co&ntless decisions. #he $est e7ec&tives &nderstand which ones they need to

%oc&s on and which ones they can delegate. #hey also know when to make a decision.And they+ve de$ated the risk o% not doing it. Any change in the landscape creates


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opport&nities %or some$ody. #he decision to gra$ a $ig opport&nity can $e destiny(

changing. )% yo& don+t do it* someone else will. ook at how Ama=on* Apple* and Ioogle

move ahead o% everyone else.? Charan* 2013

n%ort&nately* >traditional approaches to strategy ass&me a relatively sta$le world. #hey

aim to $&ild an end&ring competitive advantage $y achieving dominant scale* occ&pying

an attractive niche* or e7ploiting certain capa$ilities and reso&rces. Ilo$ali=ation* newtechnologies* and greater transparency have com$ined to &pend the $&sinessenvironment. S&staina$le competitive advantage no longer arises %rom positioning or

reso&rces.? 5eeves and Geimler* 2011

%hange is good

)n %act* change is very good. 8inston Ch&rchill 1/ to 1-B; once declared* >#oimprove is to change #o $e per%ect is to change o%ten.? And Charles Garwin 1/0- to

1//2 once declared* >)t is not the strongest o% the species that s&rvives* nor the mostintelligent that s&rvives. )t is the one that is the most adapta$le to change.?

,y shi%ting the traditional mindset to managing* responding* and adapting to change and$eing %le7i$le or nim$le* organisations are %ree to e7plore new possi$ilities* avoid $iases*

innovate* p&rs&e new reven&e streams* and take on immediate competitive advantage o%

any new opport&nities coming their way. ,y shi%ting attit&des and em$racing a mindseto% change and accepting this as a given* this may mean %ewer &ne7pected twists and t&rns

along the planned path where organisations can ens&re that their prod&ct or service will

$e %it %or its intended p&rpose $y satis%ying the c&stomer or stakeholder.

Em$race change rather than opposing or avoiding it. Go not con%ine the organisation $y

its plans* especially when plans no longer deliver the re6&ired or e7pected val&e d&e tochanging circ&mstances* competition* or c&stomer pre%erences. 5emem$er that plans are

a means to an end* not an end in itsel%.

Agility is a$o&t contin&o&sly adapting the plans and activities to the conte7t and adaptingorganisational policies* processes* and systems to create val&e* satis%y the c&stomer or

stakeholder* and s&pport the corporate strategy.

A good analogy is that o% sailing a $oat rather than driving a train to the destination. On a

train* passengers m&st go where the tracks take them. Changing a train ro&te is a ma'or&ndertaking that will re6&ire re(planning and a lot o% work laying new tracks. @owever*

when sailing a $oat* the sailor can 6&ickly react to the conditions* take a slightly di%%erent

ro&te to avoid $ad weather* or take advantage o% a 6&ick stop in a di%%erent port F while

still steering towards the %inal destination. And the %inal destination is* o% co&rse* theorganisation+s vision and mission.

A s&ccess%&l corporate strategy does not add $&t reg&larly replaces and reprioritise

e7isting work and activities in a systematic and meaning%&l manner %or the main p&rpose

o% achieving the organisation+s strategic o$'ectives. n%ort&nately* >most e7ec&tivesB


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9anagement sho&ld r&thlessly decide what initiatives to terminate and comm&nicate that

message or decision clearly and early. #erminate pet pro'ects that do not add any

strategic val&e and divert reso&rces to strategic val&e creating activities* pro'ects* andprogrammes. ,y speci%ying e7actly and clearly what the :new+ strategy replaces* work

$ecomes a positive and power%&l %orce %or organisational change* transition* and

trans%ormation* there$y increasing individ&al prod&ctivity* and organisationale%%ectiveness and per%ormance.

6avigating complex issues

)n an &nordered world* organisations m&st contin&o&sly navigate thro&gh comple7 iss&es

that lack visi$le ca&sality* where the relationship $etween ca&se and e%%ect can only $eesta$lished in hindsight. Cond&ct sa%e(to(%ail e7perimentations to systematically &ncover

the ca&sality relationship.

!avigating comple7 iss&es makes the organisation %ar more agile and resilient to thechanging and &ncertain environment in which it operates.

)n contrast* i% the ca&se and e%%ect relationships are not visi$le $&t can $e discerned withthe appropriate analysis or e7pertise i.e.* with the help o% cons&ltants or e7perts* then

the iss&e is knowa$le or complicated it is not complex.

7eing ob1ective5focused rather than plan5driven

#raditional managers operating in a sta$le world(view %oc&s on religiously following

planswith minimal or no change. #hey make and doc&ment advance decisions &p%ront*ready %or e7ec&tion. #hey %eel good when they %ollow the plan to the detail* regardless o%

the act&al o&tcomes or changes to the conte7t.

On the other hand* agile leaders operating in an &ncertain world(view alue objecties

achieement 6strategic outcomes7 as the ultimate goalwhere plans are constantly adaptedand $ecome the means to achieving strategic and organisational o$'ectives* not the goal

itsel%. #hey %eel good when they achieved their o$'ectives and have created or preserved

val&e %or their stakeholders where it is s&$stance over %orm.

@owever* the constraints and ass&mptions em$edded in plans are still important to $oththe traditional manager and agile leader plans g&ide the organisation and provide the

necessary planned path.,oth traditional managers and agile leaders plan* and $oth spend a %air amo&nt o% time

planning* especially d&ring the corporate planning or strategy %orm&lation stage.@owever* they view plans in radically di%%erent ways F $oth $elieve in plans as

$aselines. #raditional managers are constantly trying to :correct+ act&al res&lts to the

planned $aseline. Agile leaders* on the other hand* e7pect changes &ncertainties andrespond and adapt accordingly rather than %ollow o&tdated plans that no longer deliver

the intended val&e F they val&e responding to change over following a plan.


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Iiven the constant changes to the competitive and $&siness environment organisations

operate in* variations to and adaptations o% plans will $e common occ&rrences where

plans are not sacrosanct they sho&ld $e %le7i$le they are g&ides* not strait'ackets. Agileleaders there%ore emphasise what to do rather than what the plan says* and they totally

rely on people intangi$les rather than processes constraints to prod&ce the re6&ired

val&e and achieve their o$'ectives.Point to note a$o&t traditional managers and agile leaders. 9anagers allocate people andreso&rces to task within command(and(control str&ct&res and arrangements* whereas

leaders motivate and lead people to towards achieving goals thro&gh social in%l&ence*

relationships* and conte7t&alised management($y(o$'ectives. People :want todo thework+ %or an agile leader rather than :haing todo the work+ %or a traditional manager.

%lear alignment and strong leadership re-uired

Agile leaders m&st provide the re6&ired clarity* alignment* and leadership a$o&t theo&tcomes re6&ired and e7pected. #hey n&rt&re the vision and positively motivate peopletowards achieving the o$'ectives. ,y clearly aligning the organisation towards the

r&thless and disciplined achievement o% strategic o$'ectives* val&e creation or

preservation* and per%ormance* organisational priorities m&st $ecome clear so that

everyone can work e%%ectively towards the same organisational vision and mission. #hissho&ld res&lt in more colla$orative or team($ased decision(making and n&rt&ring o%

shared val&es* especially within an &ncertain environment.

#here is total reliance on people to e7ec&te the strategy within the given conte7t. #here is

less reliance on processes and %ormalities to str&ct&re work. )n doing so* there is also totalreliance on competent leaders to lead people towards achieving the conte7t&alised

o$'ectives.

8ust5in5time learning and decision5making

As the literat&re will attest* traditional command(and(control management is derived

%rom the principles o% Krederick #aylor+sscientific management. )n today+s world*however* there are tensions imposed $y command(and(control management on teams and

individ&als as knowledge workersare replacing the work%orce.

)n #aylor+s world* the traditional manager had specialised pro$lem(solving knowledge

and skills. )n today+s world* these key pro$lem(solving knowledge and skills reside withknowledge workers e.g.* employees and not the manager.

Agility re6&ires a large degree o% preparedness and %le7i$ility* and the contin&o&s sensing

o% the environment and conte7t. )t re6&ires incremental decision0making$y empowered

individ&als and teams that colla$oratively considers the conte7t and $est availa$lein%ormation at the time decisions are made thro&gho&t the corporate planning and

strategy e7ec&tion stages. Plans and processes are constantly adapted to the conte7t and


25/42

circ&mstances agility occ&rs when there are $arriers and o$stacles to overcome.

Adaptation is change with a purposeand working towards the achievement o% an

o$'ective e.g.* to create positive val&e %or stakeholders. )n contrast* chaos is change

without purpose* which is not agility.

)n an &ncertain world* plans are imper%ect. !o amo&nt o% so&nd adance decision0makingcan $e h&manly made &p%ront especially at planning stage with a$sol&te

certainty that will ca&se the plan to $e :per%ect+ prior to its e7ec&tion. Ass&mptions arethere%ore incl&ded into plans $eca&se the right in%ormation is not availa$le at planning

stage. )ne%%iciencies are incl&ded or $&ilt into plans to cater %or just0in0cases&rprises and

%orgamingthe allocation o% &nnecessary reso&rces. #his res&lts in an ine%%icient reso&rce

allocation and :gaming the n&m$ers+ %or personal sel%(interest.

@owever* with technology and social media* knowledge workers have instantaneo&s real(

time access to large amo&nts o% relevant in%ormation that will drivejust0in0time learning

and decision0making instead o% yesteryear+s '&st(in(case learning and decision(making.

#his is a nat&ral evol&tion on how the digital economy and knowledge worker makes

decisions.

As part o% the agile mindset* empowered $&t acco&nta$le team mem$ers e%%ectively solve

pro$lems rather than e7ec&tives* e7ec&te the strategy* and make timely decisions on

the %ly when the re6&ired in%ormation $ecomes availa$le to decision(makers andimplementers. #his will lead to greater &nderstanding o% the conte7t. #his will also

red&cejust0in0caseor opportunistic gaming behaiourswhere reso&rces can $e

o$'ectively and systematically allocated to val&e(creating activities.

+gile iterations: cascade5execute5adaptOnce the organisation+s vision* mission* and corporate strategy are approved and ready

%or e7ec&tion* an agile iteration as shown in Kig&re 3.1 is re6&ired to create val&e

incrementally %o&nded on contin&o&s adaptations and e7perimentations that areattri$&ta$le to reg&lar %eed$ack and changes in conte7t and environment. #he cascade0

execute0adapt iterationsare contin&o&s and will always $ene%it %rom reg&lar %eed$ack

received and e7perimentations. )ncrementally $&ild val&e to achieve the organisation+s

vision and mission.

#he agile iteration consists o% the %ollowing"

a %ascadethe corporate strategy* o$'ectives* and key per%ormance indicators* and

check %or alignment. Ask the 6&estions" 5hat will we do/ 5hat are our measuresof success/

$ Executethe strategy $y systematically creating or preserving val&e %or theorganisation+s stakeholders and cond&cting sa%e(to(%ail e7perimentations to

systematically navigate comple7 iss&es and &ncover the relationship $etween ca&se

and e%%ect. #he %oc&s"?ust do it=

c +daptand improve the organisation+s per%ormance and plans to the


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environment and conte7t. #hese are agile co&rse corrections $ased on reg&lar

%eed$ack* improvement* and e7perimentation. Ask the 6&estions" 5hat did we do/

5hat changes should we make to perform better or execute the strategy/

#his approach emphasises the %ollowing"

a %oc&s towards the achievement o% organisational vision* mission* and corporatestrategy

$ %le7i$ility and resilience the a$ility to recover positively %rom constant

conte7t&al and environmental changes

c $eing 6&ick and well(coordinated in movement and decision(making

d reg&lar* timely* and appropriate %eed$ack %rom c&stomers and stakeholders

e contin&o&s adaptations* e7perimentations* and transitions d&e to constant

conte7t&al and environmental changes

% contin&o&s improvements and val&e creation or preservation

g elimination o% non(val&e adding and non(strategic activities* pro'ects* and

programmes

h reg&lar and timely %eed$ack on the organisation+s and employees+ per%ormance.


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%hapter $ ( .oundations for strategy execution

Kor strategy e7ec&tion to $e e%%ective* an organisation sho&ld have the %ollowing

%o&ndational elements or conditions in place* given its internal and e7ternalcirc&mstances"

.1 comm&nicate and %eed$ack reg&larly and openly

.2 great e7ec&tion re6&ires great e7ec&ta$le strategy

.3 what gets meas&red* gets e7ec&ted

. know yo&r $&siness* yo&r people* and yo&rsel%

.; adapt and change or perish

.B strategies and plans are $&ilt to $e e7ec&ted

. e7ec&tion re6&ires vertical alignment and hori=ontal integration./ strategy e7ec&tion is everyone+s 'o$

.- &nderstand what yo& are acco&nta$le %or

.10 dynamic governance drives strategy e7ec&tion

.11 make h&man capital the creative core o% strategy e7ec&tion

.12 simplicity and $revity are keys to e%%ective e7ec&tion.


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%hapter / ( .ramework for strategy execution

Strategy e7ec&tion will depend on the e%%ectiveness o% a %ramework that comprises o% the

%ollowing components and arrangements* centred on an agile mindset Chapter 3 and%o&ndations %or strategy e7ec&tion Chapter "

;.1 management mandate* commitment* and leadership

;.2 &nderstanding the organisation and its conte7t

;.3 esta$lishing comm&nication* %eed$ack* and reporting mechanisms

;. implementing"

i an integrated management system %or strategy e7ec&tion Chapter B

ii the strategy e7ec&tion process Chapter

;.; monitoring and review o% the %ramework;.B contin&al improvement o% the %ramework.

Artic&late the %ramework in a dedicatedstrategy execution planthat sets o&t how to"

a manage the strategy e7ec&tion process within speci%ic conte7t* $ased on speci%icgovernance* 6&ality* and compliance re6&irements and e7pectations

$ integrate the strategy e7ec&tion process into the %a$ric and discipline o% the

organisation

c ens&re that the strategy e7ec&tion process and integrated management system

%or strategy e7ec&tion is s&staina$le* e%%ective* and e%%icient.

#ailor or c&stomise the %ramework andstrategy execution planto organisational conte7t*c&lt&re* and mat&rity.


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%hapter 0 ( +n integrated management system for strategy execution

Organisations &se some kind o% management system that provides a %ramework in which

the organisation can esta$lish management practices and proced&res to direct and controlits activities to achieve its o$'ectives. A management system is a set o% interrelated orinteracting elements o% an organisation to esta$lish policies and o$'ectives* as well as

processes to achieve those o$'ectives. Krom a $&siness management perspective*

e%%iciency is gained $y having one* integrated system o% management.

8hen the organisational str&ct&re is comple7* it is essential %or the organisation todevelop a ro$&st* practical* yet simpli%ied* integrated management system that will %&lly

integrate the relevant management practices and common to&ch(points o% the $&siness

into one coherent and synchronised management system that ena$les and drives theachievement o% its corporate strategy. )nstead o% :silos+ o% disparate systems and

practices* this is a gen&inely co(ordinated and synchronised system" one that is greater

than the s&m o% individ&al parts* collectively achieving more than ever $e%ore in terms o%its overall per%ormance and e%%ectiveness.

)ntegrating is a$o&t &nderstanding the common $&t essential elements or to&ch(points o%

each management practice* its conte7t* p&rposes* and o$'ectives* and com$ining or

integrating them into a single coherent* integrated management system that %&lly s&pportsand complements each other %or the sole p&rpose o% achieving the organisation+s

o$'ectives and key per%ormance indicators.

)ntegration does not simply involve introd&cing esta$lished and standardised

management tools and processes into e7isting management systems. )t re6&ires theadaptation and alteration o% those tools and processes to s&it the needs o% decision(makers

and their e7isting processes %or decision(making.#he integrated management system creates common tools* synta7* data str&ct&res*

processes* and meas&res %or e%%ective strategy e7ec&tion. #hese management practices area means to an end that sho&ld $e &tilised and ma7imised strategically %or $oth

organisational and individ&al per%ormance.

Some $ene%its o% implementing an integrated management system incl&de"

a a$ility to create &ni%ied o$'ectives and to %oc&s on achieving them

$ red&ced cost thro&gh red&ced d&plication and ma7imisation o% e%%ort and

reso&rces

c greater &nderstanding o% common control and reg&latory re6&irements

d de%ined $o&ndaries and acco&nta$ilities aro&nd &ni6&e roles* responsi$ilities*

and acco&nta$ilities

e increased e%%ectiveness o% timely decision(making

% enhanced levels o% organisational harmonisation* alignment* and

synchronisation* leading to increased prod&ctivity* 6&ality o&tcomes* and improvedper%ormance


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g enhanced stakeholder satis%action thro&gh more e%%ective comm&nication*

interaction* and con%idence in the strategy e7ec&tion process and organisational

per%ormance.

#he integrated management system %or e%%ective strategy e7ec&tion may comprise the

%ollowing management practices"

B.1 governance

B.2 planning and stakeholder management

B.3 o$'ective and P) setting

B. port%olio* programme* and pro'ect management

B.; reso&rce management and $&dgeting

B.B enterprise risk management

B. h&man capital management

B./ knowledge management

B.- ass&rance* a&dits* and independent eval&ations

B.10 per%ormance monitoring* review* and reporting

B.11 per%ormance management

B.12 compensation* $ene%its* and rewards

B.13 change management

B.1 compliance management

B.1; 6&ality management and contin&o&s improvement.

#ailor or c&stomise these management practices to the organisational conte7t andmat&rity. Organisational governance* str&ct&res* and arrangements sho&ld %&lly s&pport

and enhance the implementation o% the integrated management system.

Kig&re B.1 $elow shows the relationship and interdependencies $etween vario&s

management practices within the integrated management system %or strategy e7ec&tion.


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An integrated management system re6&ired %or strategy e7ec&tion sho&ld allow %or more

e%%ective and e%%icient comm&nication o% in%ormation in the %ollowing directions"

a vertically* either top(down or $ottom(&p* thro&gho&t organisational levels orlayers

$ hori=ontally with other $&siness &nits* departments* sections* pro'ects* andacross val&e(chains and organisational $o&ndaries

c holistically* %rom an enterprise(wide or port%olio perspective across the

organisation.

#hestrategy execution plansho&ld speci%ically address the incorporation o% relevant


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management practices into an integrated management system that will ena$le and %&lly

s&pport the strategy e7ec&tion %ramework and process.


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%hapter # ( &rocess for strategy execution

#he strategy e7ec&tion process is a key component o% the %ramework %or strategy

e7ec&tion and comprises the %ollowing activities that operationalise the integratedmanagement system"

.1 esta$lish governance over the process

.2 comm&nication* cons&ltation* and colla$oration

.3 esta$lish the conte7t incl&ding developing thestrategy execution plan

. stakeholder engagement and management

.; translate and cascade the corporate strategy and o$'ectives

.B determine capacity and appetite %or risk

. identi%y and assess risks./ meas&re pro'ect and port%olio per%ormance

.- develop an enterprise(wide view o% per%ormance* risk* and controle%%ectiveness

.10 improve governance* risk management* and controls

.11 contin&o&sly monitor and review per%ormance and strategic ass&mptions

.12 reward per%ormers and deal positively with &nderper%ormers.

#ailor or c&stomise these activities to the organisational conte7t and mat&rity. #hese

activities are not se6&ential. #he process %or strategy e7ec&tion sho&ld $e %it %or its

p&rpose and relevant to the achievement o% the corporate strategy and strategico$'ectives.


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&ostscript

#he title o% this e$ook 9When strategy execution marries risk management descri$es

how risk management is an insepara$le g&idance and control system that will ena$le anddrive organisations to artic&late and achieve their strategic o$'ectives and e%%ectivelye7ec&te their chosen corporate strategy within accepta$le levels o% risk. ,oth strategy

e7ec&tion and risk management are intrinsically intertwined. ,y doing so* it minimises

risky decisions. #he degree o% achieving organisational per%ormance targets is the keymeas&re o% the e%%ectiveness o% the organisation+s risk management practices.

,ased on the concept o% marriage* the ,i$le tells &s in 9atthew 1-";(B that es&s said*

>#his e7plains why a man leaves his %ather and mother and is 'oined to his wi%e* and the

two are &nited into one. Since they are no longer two $&t one* let no one split apart whatIod has 'oined together.? !ew iving #ranslation

8hen risk management:marries+ or is 'oined tostrategy execution* $oth management

practices are &nited into one seamless or integrated management activity. #his oneness or

integration with a common purpose of achieing strategic objectiesis vital %ororganisations to s&ccess%&lly e7ec&te their corporate strategy* per%orm well $eyond

e7pectations* and contin&o&sly meet their pro%ita$ility %orecast and organisational

growth.


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+bout the author

Patrick Ow* an e7perienced risk management pro%essional* has a keen interest in strategy

e7ec&tion and per%ormance management. @aving e7tensively worked in A&stralia*9alaysia* and Singapore* his specialisations incl&de"

a corporate planning* and strategy development and e7ec&tion

$ per%ormance management* $alanced scorecard implementation* and key

per%ormance indicator development

c integrating risk management with internal a&dit* planning* $&dgeting* and

per%ormance management and reporting.

@e is a mem$er o% CPA A&stralia* a 6&ali%ied lawyer* and a certi%ied trainer. Connectwith him online"patrickowQgmail.comor https"HHwww.linkedin.comHinHpatrickow.

Patrick has a&thored a n&m$er o% management articles that appeared in9ccountantsToday* a pro%essional maga=ine p&$lished $y the 9alaysian )nstit&te o% Acco&ntants" in

alpha$etical order

1 Aligning #raining to Strategy 9arch 200

2 ,eyond 9eas&rement Alone" Optimising Corporate Per%ormance !ovem$er

200;

3 ,&siness Process 9anagement" Connecting People* Process and #echnology

A&g&st 200B

Corporate governance is o&r response to risk 9arch 2010

; Griving Per%ormance with ,&siness 5&les Gecem$er 200B

B Em$edding 5isk 9anagement Practices %or )mproved Organisational

Per%ormance April 200/

Enterprise(8ide ,&siness Process 9anagement Grives Per%ormance &ne

200B

/ E7pect the ne7pected" 9anaging 4o&r Contin&ity 5isk Septem$er 200-

- Krom Strategy to Pro%it A&g&st 2012

10 )ncrease Pro%ita$ility thro&gh Employee Engagement 9arch 200B

11 )SO 31000 and the Principles %or 9anaging 5isk 9ay 200-

12 P) ,ased Compensation Kramework Ke$r&ary 200

13 P) Kramework %or S&perior Services &ly 200B

1 9anage 5isk Enhance Per%ormance in the 3rd Sector Septem$er 200/

1; 9anaging Climate Change 5isk an&ary 200-

1B 9anaging )nter(Organisational 5isks Ke$r&ary 2010
mailto:[email protected]:[email protected]://www.linkedin.com/in/patrickowmailto:[email protected]://www.linkedin.com/in/patrickow


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1 9anaging Per%ormance with P)s &ne 200B

1/ O&tper%orm $y inking Per%ormance and 5isk 9anagement Ke$r&ary 200/

1- Per%ormance is the ey Septem$er 200

20 #&rning 5isk into Opport&nities April 2010

21 Dal&e Grivers" 8hat 9akes One Company 9ore Dal&a$le than AnotherN

!ovem$er 200


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