I think everyone will agree that planning what direction a company will take for the next few years takes a bit of effort.
After all the workshops, one-on-one meetings, risk and data analysis, and good old-fashioned brainstorming, it may be tempting to think the journey is complete and take your foot off the gas. It’s precisely at this juncture when companies need to settle in for the long haul—to go the distance needed to actually achieve the goals that were prioritized.
Executive SummaryFollowing up on an earlier article in which she presented a strategic planning framework for developing corporate goals, Carol Williams, a risk management and strategy consultant for P/C insurers, advises that establishing the “what” of strategic plans and annual initiatives is not the end of the road. Here, she delves into the “how-to” part of the process, drawing on the work of Donald Sull and others involved in the Strategic Agility Project at MIT to explain the main causes of strategic execution failures. One, which is particularly relevant in the P/C insurance world, is presence of siloed cultures.
The third-quarter edition of Carrier Management contained an outline of what the ideal strategic planning process should look like. I want to emphasize the word what because this is where you and other company leaders determine what you want the company to accomplish over the next three to five years. The timing of this topic coincided with when most companies develop their strategic plans.
Now that we’re getting close to the start of the new year, this process should hopefully be complete for your company, and there is a clear idea of what you and other executives would like to accomplish in the years ahead.
While this coordinated planning plays an invaluable role in ensuring a company’s success, it is nothing more than words in a document on a hard drive or shelf if it isn’t put into action. As put plainly by the venerable Steve Jobs: “To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.”
Implementation gets into the arduous process of how goals will be met. “Now comes the tough part—making it happen,” as C. Davis Fogg explains in his book, “Team-Based Strategic Planning: A Complete Guide to Structuring, Facilitating and Implementing the Process.”
This annual business planning is done on a short-term basis and determines the projects for the next year to aim the company in the right direction to achieve the long-term goals.
Despite its importance, the number of books, articles, webinars and other resources tend to focus on planning rather than execution or implementation. According to surveys cited by Donald Sull, MIT senior lecturer and director of The Strategic Agility Project (in a March 2015 Harvard Business Review article, “Why Strategy Execution Unravels—and What to Do About It”), execution of strategic plans is a struggle for up to 75 percent of large organizations. With that statistic in mind, it is safe to say that execution of strategic initiatives ranks right up there with escalating claim volumes, litigation and negative financial results as a top risk to P/C insurers achieving their goals.
Before getting into why execution is such a challenge for so many, I want to first briefly go over the core components of doing this successfully, along with some personal experiences thrown into the mix.
Relevance. Everyone in the company from the C-suite down to entry-level claims and underwriting personnel must understand how their work will be relevant to achieving the strategic goals you and other executives, managers, strategy personnel and any external consultants developed over the preceding months. Studies have shown, and companies have stated, that employees want to know that their work—whether strategic or day-to-day tasks—has meaning and helps the company and its customers. It is up to leadership to provide the identify between the strategic goals and employee work and communicate relevancy to its employees
Resources. This can include any financial, human, technology or other infrastructure needed to accomplish the goals. Not only are resources needed in the right amounts but also in the right place. And by human resources, this does not only mean people with the requisite technical skills, but also the flexibility to adopt, adapt and lead change. If a goal for your company is expanding into a new market, an important step here is to identify those key individuals in product development and marketing who will have the biggest role in accomplishing this goal. Also, are the services and infrastructure in place to support a successful entry into the new market?
Alignment. Any organization of any significant size will have disparate functions that “blaze their own path” as the saying goes. This can be dangerous, especially when it comes to strategic goals. Company leadership needs to share some backstory to the strategic discussion, so that the implementers of strategic goals can know why executives made the decision, as well as what tradeoffs can be made. This information share is what will keep the company on track with its projects and aligned with its leaders.
Actions throughout the entire organization, even seemingly unrelated business areas, should align with strategic goals. Let’s say improved service to policyholders is a goal. Would it make sense for the call center to focus solely on cost cutting at the expense of this goal?
Proper alignment ensures one area is not drifting off the established “strategic goal” path and putting the goals at risk.
Accountability. For anyone with any sort of role in implementing the strategic plan, there needs to be a straightforward and sustainable way to hold these individual accountable, even executives. This consists of having clear roles and responsibilities, developing milestone dates, and using success metrics that can be measured and verified by a third-party.
Whatever accountability methods a company chooses must be applied equally across the board to avoid devastating consequences to culture and morale.
Your company may be doing some or all of these things but still find it difficult to implement strategic plans effectively. If a breakdown does occur, it is common for companies to go back and examine one of these four areas. According to research by Sull, however, the answer to these breakdowns is a bit more nuanced.
Many executives try to resolve these issues by narrowing them down to a single source, which typically leads to an even tighter, more stringent focus on alignment and processes. Sull’s research shows that other behind-the-scenes sources—siloed cultures and a lack of agility—inhibit the company from effectively implementing strategic plans.
Siloed Culture is something to which larger companies especially can fall prey. There is certainly “too big to fail” in the insurance industry. One of Sull’s surveys shows that 84 percent of managers say they can count on their direct reports to meet commitments most of the time. However, when it is colleagues in other business units, this number drops to an abysmal 9 percent.
Managers say this dismal lack of companywide coordination and support makes it three-times more likely that milestones will be missed. The quantity of communication may seem sufficient, but just because people in other areas initially committed does not necessarily mean they will come through in the end.
Lack of agility is another roadblock to going the distance with strategic plans and annual initiatives. With change occurring at a pace unheard of even a decade ago, the ability to adapt as conditions demand quickly has become a must-have element of implementing a strategic plan successfully for any organization. Agility also means flexibility in modifying the plan should the need arise. Developing a strategic plan, along with the budgets and annual plans that go with it, is time consuming, so it’s not uncommon for executives to view any changes with suspicion.
In more extreme situations, companies may try to tighten the reins on alignment with even more meetings, impossible targets for performance metrics, etc., which ultimately leads the company into a downward spiral of micromanagement and decline in morale.
To avoid this disastrous outcome and implement strategic goals with relative ease, P/C insurers must start (relatively) small. This was especially the case when looking at one company that had zero strategic and annual planning experience. They literally took things one day, one week, one month at a time.
When first dipping its toe in these waters, the company kept strategic goals to a minimum—one goal—and planning initiatives to no more than a year at a time. Sometimes one strategic goal is all a company can and should handle at any one time. As processes and experience improved, more goals can be added.
For this singular goal, we discussed specific points around resources and accountability, including assigning sponsors of initiatives and owners of specific risks. A project manager was brought in to help ensure coordination between silos. This individual created a dashboard to provide a quick-glance status update on progress, budget and any upcoming decisions that need to be made to keep things on track.
Like strategic planning itself, the process of implementation will take some trial and error and will be unique for every company, even among firms in the same industry. The important thing to keep in mind is to not give up just because the company encounters some headwinds.
With the world experiencing radical change and upheaval both within and outside the P/C industry, companies need to be able to implement strategic goals in a way that breaks down silos; allows for agility in the plan and processes; provides clear milestones, roles and responsibilities; and holds individuals accountable for their conduct. Neglecting to do so could mean the difference between success and failure.
Where can you start improving your company’s processes for implementing strategic plans? Are you ready to go the distance?