This is the 13th part in my strategy execution series based on my PhD thesis. In this post I discuss the alignment of key processes to the strategy of the organization. Aligning business processes to the strategy is crucial in delivering value to customers and stakeholders. The strategy outlines the goals of an organization and how it is going to achieve those goals. Since business processes are the way in which work is done in an organization, processes must be tightly linked to its strategy. Especially the primary process is crucial and must be aligned to the strategy of the organization. Senior executives and managers must learn the details of the processes for which they are accountable.
ALIGNING PROCESSES AND STRATEGY
What are business processes? Organizations have primary processes and secondary or support processes. The primary process consists of the activities that need to be performed to produce a product or service and deliver it to external customers. Secondary processes produce products or services that do not come into contact with external customers but are required to the effective management of the organization (Rummler and Brache, 2012). The main purpose of secondary processes is to enable the successful execution of the primary processes. Processes are sequences of steps the must be performed to create value for customers and managed as a whole, not separately. To ensure that key processes are managed as whole it is key that one person is responsible for the whole process.
Organizations are only as good as their processes. Process effectiveness is crucial in the achievement of strategic goals. Strategy development and execution serve no purpose if they do not improve process performance and align it to the strategy. Processes must be improved in a way that creates the greatest value for customers and the company. If the business strategy focuses on delivering innovative products then reducing process cost may be less important than optimizing time-to-market.
Different strategies require different processes. The primary process of an organization must be tightly linked to its strategy. For example, organizations that pursue an operational excellence or low-cost strategy will need to focus on reducing costs and throughput times, and improving efficiency and effectiveness. Organizations with a customer intimacy strategy must focus on those processes that involve developing close relationships with their customers such as sales, marketing and customer relationship management. Finally, organizations following a product leadership strategy must focus on those processes that focus on product development and improve the quality of products or services. When the strategy of an organization is changed, it must be assessed what the consequences are for its key processes.
The silo problem. Despite the apparent importance of business processes are few organizations organized around processes. Most organizations continue to have a functional or divisional organization structure. Organizations are often organized vertically toward senior management while processes flow horizontally through departments, functions and even organizations toward customers. Such organizations are organized around discrete functional units such as operations, sales, human resources, marketing and finance, with each unit having their own goals and improving their own internal processes. It is not unlikely that improvements inside one functional area can actually be detrimental to overall organizational performance. In highly politicized organizations functional departments may even work against each other. Functional organization structures tend to result in suboptimal organizational performance. While functional structures may offer high levels of specialization and efficiency they may inhibit cooperation between functional units. Units may pursue their own best interests instead of the organization as a whole. Functional units tend to give more importance to the objectives of their own unit. This makes the coordination of activities across functional departments challenging. This is a major barrier to successful strategy execution as executing a strategy often requires coordinated efforts across functional units. Furthermore, employees who are part of functional departments tend to have more difficulty in understanding the goals and activities of the organization as a whole. This has a negative influence on their level of understanding of the strategy of their organization. A crucial task of leaders and managers is develop a shared understanding about processes among the involved departments.
LINKING STRATEGY AND PROCESSES
To execute the strategy successfully the primary processes must meet customer needs and must perform effectively and efficiently. Managers need to identify the gap between the performance of current processes and the performance that is required by the new strategy. In order to achieve this, 1) goals must be set for each process, 2) processes must be redesigned to achieve these goals, and 3) these processes need to be managed.
Identify strategic processes. When improving processes and linking them to the strategy, the organization should start with identifying the most critical or strategic business processes. Strategy execution requires the identification of those processes that are crucial to the strategy. This may also involve identifying new processes the organization needs to master to make the new strategy a success. Organizations must focus on those processes that contribute most to the strategy of the organization, are most important to the customer and most troubling to employees. Generally, this is the primary process of the organization.
Form a process team. After the most important processes are selected a process team must be formed. The process team consists of a process owner and those who are involved in the process such as customers, participating employees across functions and technical experts. The main goal of the process team is to align the process and the strategy, set goals for the process based on the strategy, improve the process and manage the process.
1. Setting process goals
Since processes are the way in which products and services are produced and delivered to customers, the goals of the strategy must be translated into goals for processes (Rummler and Brache, 2012). Setting process goals involves the following three practices.
Develop clear and measurable targets. The goals for processes that deal with customers must be derived from the strategic goals of the organization. Each process needs to have clear and measureable goals, which are derived from the goals of the strategy. Next, sub goals need to be established for each step or stage in the process. The goals must be ambitious but realistic. Once the process goals are set, functional or departmental goals can be developed. Process goals give employees something to strive for and allows for management control of the process.
Process goals enable management control. Without process goals it is impossible to assess whether the processes are performing as required by the strategy. Without process goals it is impossible to make adjustments when the process is not performing as planned.
Involve employees to ensure ownership of goals. It is crucial that employees understand and accept the goals and perceive them to be realistic. When employees believe that the goals are unrealistic or unachievable they will not even try to achieve them. Ensuring the acceptance of employees can be done by involving them in the goal-setting process.
2. Improving Processes
After developing the process goals, the processes must be (re)designed to meet the goals effectively and efficiently. Processes should be logical, streamlined paths to the achievement of the goals (Rummler and Brache, 2012). Improving processes involves the following four activities.
Understand the current process. Any good process improvement initiative needs to start with a solid understanding of the “as is” process and documenting it in a format that is easy to understand for employees. To do this, the process must be mapped as it currently operates from the perspective of the customer. Next, the description of the existing process or ‘current state’ must be shared with all the participants of this process discovery phase – normally a significant group of people from different organizational functions and stakeholders affected by or participating in the specific business process. The process owner must ensure that all participants agree that the process map is accurate.
Improve the current process. Once the end-to-end process has been documented, the process team can start improving it. The aim is to improve processes from the perspective of the customer. All activities must be examined to ensure that the add value to the customer. Everything that does not deliver any values in the eyes of the customer must be eliminated. Reducing all forms of waist is a crucial part of process improvement. Information and materials must flow smoothly through the process. Simulation tools allow the testing of process alternatives by mimicking reality and by providing an indication of the result in costs, cycle time, the allocation of resources etc. of a change in the design of the process. Improving processes should not be confined to the own organization but should also involve suppliers and end customer.
Map the new processes. Once the process has been improved it must be described or mapped. The process must be described in a simple and easy to understand way without the use of any jargon. The process manager must ensure that all participants agree about the key changes in the process.
Communicate the new processes. Going from the design of a new process to the actual implementation, requires communicating the new process to all participants in an unambiguous manner. All involved employees must have a thorough understanding of the whole process and their specific role in it. It is crucial that involved employees see the big picture enabling to execute and improve their part of the process in a way that enhances the process as a whole.
3. Managing Processes
After developing the goals of the process and improving the process the process must be managed to ensure that they perform in accordance with the goals of the strategy. Managing processes involves the following three practices.
Appoint a process owner. To effectively manage processes, a process owner needs to be appointed for at least each of the key primary processes. A process owner is a person who oversees the entire cross-functional process (Rummler and Brache, 2012). The process owner is responsible for the management of the process. The process owner is responsible for setting key performance indicators for the process and the continuous monitoring and improvement of the process. When an organization lack a process owner such a position must be created.
Create a culture of continuous improvement. A key capability of execution-oriented organizations is the ability to constantly improve their processes with the strategy in mind. To effectively manage and improve processes a culture a performance oriented culture of continuous improvement must be created. This requires a move from a ‘command and control’ management style to more participative styles of management. Such a participative management style should allow front-line employees to take much more responsibility for the management and improvement of their processes. A performance culture requires teamwork and activities that are transparent for everyone instead of individual employees largely working alone and working on batches at their own convenience. Clearly, this often requires a large shift in culture and work methods. In addition, employees must feel ownership of the process for which they are responsible.
Monitor and control process performance. In order to understand the true value of a process, its performance must be measured against targets that are aligned with the business strategy of the organization. Measuring the business performance of a process then provides the driver for launching a new cycle of process improvement initiatives and serves as an important part of the periodical strategy process. Organizations need to monitor their key processes with dashboards that provide feedback on process performance. The process team must regularly meet in highly structured meetings to discuss the performance of the process. When performance does not meet the goals or milestones, action must be taken. Such action must include the willingness to uncover and deal with deep-seated problems within the organization.
THE STRATEGY EXECUTION SERIES
This article is 12th part in a 22-part series on strategy execution. This series is based on my PhD thesis on Strategy Execution. My previous posts in this series can be found here.
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Dr. Arnoud van der Maas is a consultant, author and speaker in Strategy & Strategy Execution. He is owner of Strataegos Consulting – a strategy consultancy focussed on strategy execution. Received a PhD in Strategy from Rotterdam School of Management – one of the top business schools in Europe. His passion is to empower organizations to better develop and execute their strategy.