Don McKenzie

Why starting with strategy is a bad idea

Starting with “strategy,” or long-term planning in general, for any business that is more than a few years old, is generally not a good idea. “The company is lacking direction. The company is losing market share. There are cultural and operational problems. We need some strategic assistance to get back on track.”

This is where a “strategy” comes into play, to fix the issues that are present. It can be especially true for companies suffering long-term or significant cultural, operational or financial difficulties.

It’s not that strategic planning isn’t important - it’s incredibly important. However, it needs to be carried out in the right sequence. Strategic planning approaches that focus on changes to future

performance, without properly addressing the current issues, will impede successful execution.

The traditional approach

The organisation is somewhere today, but needs to be somewhere better tomorrow: more positive; better results; happier customers; or a higher performing culture; whatever it may be.

Often senior leaders will look at the goals, strategy, mission, structure, vision, values, etc., and plan into the future to fix today’s issues.

However, it is all too common that organisations will fall short on achieving the required goals. It’s “Groundhog Day” over and over.

Generally, the organisation will:

  1. Improve somewhat, but fall short of the target;
  2. End in the same position as last month/quarter/year; and or
  3. Be in a poorer position than before.

The reason this can occur is because there is an “anchor” of problems, challenges and conflicts around the neck of the business, often sitting below the waterline and hard to see.

It’s these anchors that stop an organisation from achieving its plans, goals, mission, vision, strategy - if they aren’t dealt with first. By releasing these anchors, the organisation is able to “flow with the current” and no longer be held back.

Strategic planning often assumes that today’s issues will disappear if the new strategies are implemented, rather than understanding that today’s issues may well stop the new strategies from being achieved.

Three key steps to take before looking at strategy

These steps, if followed in sequence, will ensure the organisation is able to resolve problems swiftly and capitalise on opportunities faster than competitors, irrespective of market conditions.

1. Identify

Talk to employees of companies that have gone broke or bankrupt, and often the most junior people can explain why the company failed. People at the lower levels of an organisation that deal with customers and suppliers as their primary role, are cognisant of the real problems affecting the organisation.

Harness these people. It’s these staff members who know the anchors and can clearly articulate them.

When looking at an organisational chart, knowledge of what is really affecting the business becomes less and less up the order. Senior leaders have a range of responsibilities that often take them away from operational issues.

The TV show “Undercover Boss” highlights this well. If the boss knew what was going on in the organisation all the time, there wouldn’t be a need to dress up in a disguise to find out what’s really going on.

What to do

Get together a cross-functional team that represents every level of the organisation to identify all of the organisation’s anchors.

Before doing so, make sure there are some rules in place. Imagine trying to play a sport where there are no rules.

Furthermore, how many team sports are there that don’t have a referee officiating the rules? Imagine the players trying to administrate a game by themselves. There would be constant conflicts.

Some rules to consider are:

  • Only identify issues that are controllable by the organisation. If it’s not controlled by the organisation or an individual, it’s not a problem. If there’s no plan or process to deal with issues that aren’t controllable, that is the real problem. For example, if it’s raining, this is not a problem the organisation or an individual can control. However, by not having a plan to keep dry, that is a problem that is controllable.
  • Have participants highlight one issue at a time, and don’t allow debate or disagreement. People want to express what they see and feel, but this is not the forum to get into disagreements. There will be time to drill deeper into issues later, but at this point, the goal is simply to put everything on the table.
  • Let the referee/facilitator do their job. The goal is to get everything identified so it can be dealt with. “When you are in the painting, you can’t see the whole picture” - and that is the primary role of the referee/facilitator. Sometimes this means senior managers and leaders will need to sit back and let the referee/facilitator deal with any conflicts that arise within the rules of the game, rather than jumping in themselves.

2. Categorise

Simply identifying a long list of issues isn’t helpful. Where to start? What is most important?

Some issues are normal, whereas others are abnormal. Some issues are manifestations of causality, and need to be separated between the two.

Normal vs abnormal

Similar to the human lifecycle, there are problems that are normal in one phase but abnormal in another. If organisations try and stop normal problems prematurely, they will waste energy and potentially prevent growth.

For example, a human that cries and doesn’t always sleep right through the night is exhibiting normal issues if they are an infant. The role of the parent isn’t to spend time and energy to stop these issues. The role is to help the infant develop to the next stage of the lifecycle where they are sleeping through the night.

If these issues continue through to when they are teenagers, then this becomes an abnormal problem. Such issues need to be dealt with swiftly or there will be significant impediments in progressing to the next stage of the life.

In organisational terms, a common example is structure. In a young company, it is normal to have people doing multiple roles and whatever needs to be done. At this stage in its lifecycle, the organisation needs to structure itself around its people just to get the job done.

However, as the company starts to grow, at some point being organised around people becomes dysfunctional. The organisation needs to transition from being organised around people, to being organised around tasks. This requires a new structure or accountability, responsibility, authorisation, information flows, and rewards.

As the organisation moves to this new task-oriented structure, there will be a big anchor on its ability to achieve future strategy/goals/ plans.

Cause vs manifestation

Manifestations by definition will not go away unless the cause is dealt with. Often however, the cause is difficult to see.

Look at the issue. Is it the cause of something or is it caused by something?

Issues around revenue performance, profitability, customer satisfaction, etc. are caused by other issues such as poor planning, information flows, styles, roles and responsibilities, authorities, etc.

What to do

Separate issues into manifestations and causes. Look at ways to “arrest” manifestations. How can these issues be fixed, or at least stopped from getting worse - how can they be improved?

Don’t try and fix or remove normal issues. To do so, can be a waste of time and energy. Try and move to the next phase of the lifecycle where these normal issues will disappear. In the meantime, focus on fixing or removing the abnormal Issues.

3. Prioritise

With the issues identified from a cross-functional team represented by every level of the organisation, and categorised into what is normal, abnormal, cause, and manifestation, it’s important to prioritise.

What to do

Again, use a cross-functional team, supported by rules and a referee, to reach agreement on what needs to be the “first cab off the rank.” When the team decides what is the most important issue and what is going to be done about it, the team will be far more empowered to follow through with agreed actions.

This is different to senior managers and leaders deciding what the most important issue is and imposing the solution on others. People generally follow through on things they truly believe in, compared with what’s been dictated to them.

The Firm

There’s an interesting book, “The Firm,” that talks about how global consulting firm McKinsey was built. After a while, James McKinsey (the founder) became tired of only giving organisations advice - so he took a job as the CEO of a client company to implement his own advice. In the

end, it killed him.

In the book, McKinsey is quoted as saying, “Never in my whole life before did I know how much more difficult it is to make business decisions myself than merely advising others on what to do.”

The author also writes, “The job took a serious toll on McKinsey himself. Contending with the day-to-day implications of his harsh prescriptions, he became depressed and physically run down.”

After only two years, McKinsey never returned to his consulting firm, as “the stress of retail turnaround led to a case of pneumonia, which in the age before penicillin, proved fatal.”

McKinsey, like others, missed the issue. It doesn’t matter what the organisation wants to do, or how genius the strategy, plans, goals, ideas, etc. are - there are always anchors that will get in the way.

Unless the anchors are fixed first, change will be very difficult, as McKinsey found out. The best way to start is for the organisation to identify its issues. People who identify the issues and prioritise these are much more likely to get these issues resolved.

How many great pieces of advice, detailed plans and great strategies have been written by consultants (or senior leaders themselves) that are still sitting on the shelf or in a drawer unimplemented?

It is normal to have issues or anchors to contend with - organisations just need to first identify and resolve these before moving onto new goals, plans, and strategies.

Case study - use all levels of the organisation.

There’s a relevant case study that came from following a process that engaged the entire organisation (not just senior leaders), in identifying and removing these anchors.

These days, most hotels around the world have a sticker on the bathroom mirror that asks guests to hang towels up, if they don’t require new ones. The sticker explains the reason for the request is that the hotel would like to be “environmentally friendly.” So, where did this idea come from?

In the 70s, the three key steps (identify, categorise, prioritise) were introduced into the Outrigger Hotel in Hawaii. In a conference room, senior leaders right through to maids and cleaners were present. Together, using a referee to maintain process and order, they worked through the different anchors present. One such anchor was the high laundry costs.

Normally, most organisations look to cost-cutting measures. Working with suppliers to reduce their costs. Changing materials for laundering. Reducing staff, etc.

One of the maids, who only spoke Spanish asked, “Why don’t we see if guests are happy to have their towels washed every second day?” From here, the team worked together on this idea, and decided that to reduce their own costs, and help save the environment, they would request guests to hang up their towels (if they didn’t require a new one).

This process has now been almost universally adopted worldwide by the hotel industry. The simple but highly effective removal of a major anchor to Outrigger’s business.

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