Planning Doesn't Equal Results - Communication and Incentives Help

Researcher/Writers Robert Kaplan and David P. Norton in their article "The Office of Strategy Management," published in the October 2005 Harvard Business Review, talk about why strategy execution has a low success rate in companies:

Over the past fifteen years, we have studied the root causes of this disconnect between strategy and performance. We have learned that most organizations do not have a strategy execution process. Many have strategic plans, but no coherent approach to manage the execution of those plans. Consequently, many key management processes remain disconnected from strategy. We have also learned that:

(a) Many organizations don't have a consistent way to even describe their strategy, other than in a large strategic planning binder. We believe strongly that organizations need to find a consistent, coherent way to translate their strategy into operational terms.

(b) Sixty percent of typical organizations do not link their strategic priorities to their budget, virtually ensuring that key strategic initiatives do not get funded and resources may not be supplied to deliver on the strategic plan.

(c) Two-thirds of HR and IT organizations develop strategic plans that are not linked to the organization's strategy. This is extraordinary.

(d) Seventy percent of middle managers and more than 90 percent of front-line employees have compensation that is not linked to the strategy.

(e) Most devastating, 95 percent of employees in most organizations do not understand their [organization's] strategy.

In short, there is often a chronic disconnect in organizations between strategy formulation and strategy execution.

So it seems that strategy could be much more cleanly executed if there was clear communication about corporate goals, checks and balances to make sure departmental goals followed, and compensation, funding, and rewards linked to execution. The authors describe the use of a Balanced Scorecard to track results in the article - http://hbswk.hbs.edu/item.jhtml?id=5269&t=strategy&wkrss=y.

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Human Capital as a Part of Your Companies "Value Platform"

The overall value of a corporation is dependent upon three factors (accoring to many leading Intellectual Capital theorists, such as Hubert Saint-Onge and Lief Edvinsson): (1) Human
Capital (2) Organizational (Structural) Capital (3) Customer (Relational) Capital. The interaction of these is graphically represented below as the "Value Platform".

The high-level specfics of these factors are depicted below:

With regards to Human Capital here are some of the fundamental indicators on whether a company is excelling or failing in this area:

If you have employees that have a long tenure, are satisfied with their job, are active in making suggestions to the company, are actively being recruited, and you have a high revenue/profit return in proportion to money spent on salaries then you probably have the Human Capital side of the Value Platform model well under control.

Click here to view a related study.

Staffing Firm Ordered to Pay $5.7 Million in Back Wages and Penalties for Immigration Violations

Computech, Inc. was ordered by the U.S. labor department to pay $4.5 million in back wages and $1.2 million in fines for willful violations. The company violated wage requirements for the H-1B visa program's and provided inaccurate information on its H-1B application materials in violation of immigration laws. A national staffing company Computech will pay the back wages to 232 non-immigrant computer professionals. The Company brought non-immigrant H-1B workers into the country, often paid them nothing when there were no work assignments available, and also did not pay them the required wage rate in the areas where they were employed.

U.S. Leading Economic Indicators and related composite indexes

According to The Conference Board, the leading index of economic indicators increased sharply in January. It has increased in five of the last six months - 2.3 percent from July 2005 to January 2006 (a 4.7 percent annual rate). The main contributors to January's large gain were initial claims for unemployment insurance (inverted), real money supply, and building permits. "The Coincident Economic Indicators have been rising moderately but steadily in recent months, suggesting the economy is sustaining a relatively moderate pace. The Leading Economic Index, however, rose sharply in three of the last four months. That could be a signal of a faster pace this spring,” says Ken Goldstein, Labor Economist at The Conference Board.