Strategic execution invisibility can lead to strategic non-delivery
Each business unit submitted its plans including the projects that would deliver their planned results. Executive management and the board signed them off and…at the end of the year only 26% of the proposed projects had been completed and around another 20% had been started, leaving over 50% still on the drawing board. However this lack of action, this non-delivery of the strategy, had been invisible. When things are invisible they cannot be managed. Meanwhile, many other non-strategic projects had been commenced and delivered. The organization was not focused on delivering its strategy.
The key is to make strategy execution (and non-execution) visible while avoiding wasting time, money and effort on strategically irrelevant projects. But how do you do this?
Every Portfolio Office, if it is doing its job, needs to be tracking andmeasuring the execution of the organization’s strategy. Finding out at the end of the year that a (large) percentage of the strategic projects were not started is too late.
NB The principal role of a PMO is to ensure the delivery of the strategy.
Strategic waste v strategic relevance
If you are intending to go West, why would you invest in projects that take you East? Yet this is what organizations do when they invest in projects that are irrelevant to their strategic direction. They spend time, money and effort on projects that are taking them away from their strategy. This is usually inadvertent, inherently wasteful and can be simply avoided. All projects need to be measurably strategically relevant to be worthwhile investing in.
The need for measured strategic relevance
The key word here is ‘measured’.
All projects need to measurably move you towards your strategic outcomes. All projects need to clearly specify and measure their strategic relevance and relative contribution. For this to be possible, each project’s strategic relevance must be clearly visible. But how?
But few projects measure their strategic relevance.
In many organizations projects may ‘tick’ a box against one or more strategy descriptions (“Reduce operating costs” or “Improve customer services”). While this does indicate that the proposed project has some alignment with one or more strategies it is not a measure of strategic contribution. A project that will save $10,000 and one that will save $1 million can both equally tick the “Reduce operating costs” strategy box—this is misleading.
The worst aspect of this all-too-common ‘tick a box’ approach is that it gives organizations the illusion they are measuring the portfolio’s strategic contribution when they are not.
Time, money and effort expended on strategically irrelevant projects can be a waste.
Now some will say, “But some projects are operationally imperative—we have to do them whether or not they are strategically relevant.”
Let’s say a piece of equipment fails that is supporting a product that is to be obsoleted next year and is not, therefore, part of the forward strategy. What do you do?
Assuming that you cannot bring forward the obsoleting of the product, you will seek to spend the absolute minimum on fixing the problem. Can you buy or lease second-hand equipment? Can you outsource this part of the process to someone with the right equipment?
My point being, as this ‘necessary’ investment is strategically irrelevant you want to absolutely minimize the time, money and effort involved. The solution needs to be a short-term tactical response so as to minimize the distraction from the strategy.
“Mandatory projects” are initiatives that are required for legal or regulatory reasons—projects that need to be done to maintain the organization’s license to operate. Such mandatory projects are automatically ‘strategically relevant’. However they may not be in areas that you want to focus on and can therefore be a distraction from executing your strategy.
The basic rule of thumb for mandatory projects is the same as for operationally imperative projects—you want to invest the absolute minimum in time, money and effort to become/remain compliant.
A bank required to report to the US tax authorities on US citizens’ banking transactions had a quote from its IT department of over $5 million to comply. However, the use of a temp-typist for two-days a month to compile an Excel spreadsheet and send it to the US met the requirements for less than $5000 a year.
Where it is decided to expand a mandatory project to deliver some additional benefits from the mandatory investment, this additional expenditure needs to show it is strategically relevant and financially worthwhile. Many managers try to add functionality to a mandatory project on the basis that it will ‘sail through’ the approval process unevaluated. Indeed, mandatory projects should be subject to rigorous scrutiny to ensure (a) it really is mandatory, (b) the solution will meet the legal/regulatory requirements and (c) this is the lowest cost solution.
Strategies and strategic imperatives
General strategy statements are useless for strategic contribution measurement. Often they are so general that almost any project can claim some level of ‘alignment’.
For effective strategic relevance scoring you need to ‘get behind’ the strategy to identify the strategic imperatives that will enable the strategy to be delivered. Strategic Imperatives are actions that need to be taken to realize the overall strategy. Each imperative is weighted (on a scale of 5 to 1) in terms of its relative contribution to the delivery of the strategy within a Strategic Contribution Matrix.
As all proposed projects need to measure and justify their strategic relevance you need to have a simple process by which they can measure their strategic contribution. Each project needs to clearly justify:
- Which strategies/strategic imperatives it contributes to
- How it contributes to the strategy
- How much it contributes—you need to be able to differentiate between contributions of $10,000 and $1 million.
Which strategic imperatives they contribute to
A ‘Strategic Contribution Matrix’ can take the strategy and convert into a series of weighted ‘strategic imperatives’ that each project can measure its contribution to.
This Strategic Contribution Matrix also enables organizations without a clear, stated strategy to identify its strategic imperatives for contribution measurement. Just making clear to staff and management what the strategies and strategic imperatives are (often for the first time), is a highly useful and valuable result of the Matrix generation process.
Every organization has a strategy even if it is not articulated—the strategy is embedded in what the organization does and does not do, what it sees as important and its areas of focus. A half-day workshop asking the right questions will quickly generate a Strategic Contribution Matrix even for organizations that claim to have no strategy.
A Strategic Contribution Matrix will have between 20 and 40 strategic imperatives—actions required to deliver the strategy—depending on the size of the organization. Each proposed project will then assess its contribution to each imperative. For most imperatives the project will make no contribution as even the most strategically relevant projects will usually only contribute to about 40% of the total number of imperatives. The less imperatives impacted, the less strategic relevance the proposed project has.
How they contribute to the strategy
Just ‘ticking a box’ to signify some level of contribution is inadequate. Each claimed contribution needs to be justified—“This is how the project contributes to this strategic imperative.” This contribution justification can then be assessed to ensure (a) the contribution is real and (b) it is intended. Claiming a possible side-effect as a measure of strategic relevance is not acceptable.
It is always interesting to see how many initially claimed areas of contribution are deleted when it comes time to justify the claim.
How much they contribute
Obviously, a project that saves $1 million in operating costs is more relevant to a “Reduce operating costs” strategy than one that saves $10,000. Therefore, it is necessary to differentiate these projects’ strategic contribution measures. But this needs to be done on a consistent basis so that all projects’ claimed contribution scores are comparable.
To do this is quite simple. For each strategic imperative three levels of contribution are defined. So, in our “Reducing operating costs” example they could be:
1 Reduce operating cost by up to $500,000 pa
2 Reduce operating costs by between $500,001 and $2 million
3 Reduce operating costs by more than $2 million.
These are standard scores. All projects that reduce operating costs by less than $500,000 will score their level of contribution as “1”. All very simple and easy to administer.
Calculating the project’s strategic relevance score
Determining each project’s relative strategic relevance is now simple—multiply the strategic imperative’s weighting (on a scale of 5 to 1) by the contribution score (0 to 3) and compute the total score.
Proposed projects that score under a certain threshold (which will be different for each organization) will be deemed ‘strategically irrelevant’. Normally, strategically irrelevant projects are just culled and go no further. They may be a good idea, but are not a strategic priority at this stage.
In all organizations where the TOP Strategic Contribution Assessment Tool has been applied to existing quasi-prioritized portfolios, several existing projects, including some in the top 10, have been found to be strategically irrelevant. Executive strategy-relevance estimates are no substitute for a simple, rigorous, objective process.
Measuring strategy execution
This detailed scoring of each project’s justified contribution to each strategic imperative approach equips you to:
1 Measure each project’s strategic relevance on a comparable, objective basis
2 Measure each strategic imperative and strategy’s execution.
When you have scored your whole project portfolio you can analyze:
- Which strategies and/or strategic imperatives are being over-delivered?
- Which are being under-delivered?
- Which, if any, are not being delivered at all?
You now have detailed visibility of your strategy’s execution—something that few organizations have today.
What you can then do is track and measure the delivery of each project knowing which strategic imperatives it is contributing to and, thereby, measure your strategy’s actual delivery. No more waiting until the end of the year to find out whether or not you have delivered your strategy.
How many organizations can measure the delivery of their strategy rather than just the delivery of the financial results?
The cost of strategic irrelevance
While there may be some ‘necessary’ and ‘mandatory’ projects to be invested in (to the minimum), any other non-strategically relevant projects undertaken are a waste of time, money and effort.
Our research has found around 20% of projects being undertaken are strategically irrelevant. Others, when including all of the enhancements and smaller upgrade projects, have found up to 80% of projects strategically irrelevant. Either way wasting between 20% and 80% of your investment on strategically irrelevant investments is a massive waste.
Some basic questions for you:
Do you have an agreed Strategic Contribution Matrix of 20-to-40 strategic imperatives and a standard contribution scoring process?
Do you objectively measure and score at the strategic imperative level each project’s strategic contribution on a simple, comparable basis?
Do you use this contribution score to cull low-score/strategically irrelevant projects?
Do you analyze how each strategy/strategic imperative is being delivered and by which projects?
Do you progressively report each strategy’s delivery through the measured completion of the projects with their specific strategic contributions?
If your answer to any of these questions is “No,” “Not really” or “Rarely”, then you can assume that more than 20% of your portfolio’s time, money and effort is being wasted on strategically irrelevant projects. That’s at least $200,000 being wasted of every $1 million invested.
A simple Strategic Contribution Assessment Tool will eliminate any such waste—immediately.
It really is that simple.
NB This is an essential tool for any and every PMO.
 Obviously where you don’t contribute to a strategic imperative the default score is ‘0’.