Last week I demonstrated that Pen Fed’s tight strategic alignment occurs within a framework I called the 8 Pillars of Strategic Alignment. Today we are going to more closely examine how these pillars are used by Pen Fed’s leaders, employees, and systems to create focused strategic direction and speed.
First, a few quotes from my discussion with Pen Fed CEO James Schenck on this topic:
- “Laying out vision and having quantifiable measures around key drivers and drilling down throughout the organization is what makes it work.”
- “I love delivering the best products and services and inspiring the work force on strategy, focus, metrics, and driving execution. Focus and execution separates winners and losers in every organization.”
- “I’m always reinforcing our 6 strategic intents all over the organization so employees can see how they’re moving the needle at all times. We build our reward structure around this.”
- “Some CEOs and boards believe they can be everything at once, but no one can be all things to all people. Knowing who you are is the most important thing.”
- “We push the expectations for each product down to the individual branch, call center, and employee. The numbers roll up daily at each level as well as to the firm.”
- “We have to ensure that we have clear metrics for measuring success in creating a great member experience, and we must communicate with our employees about how the organization is doing against those metrics.”
- “Focus and execution in support of an over-arching strategy–having a strategy in place takes the guesswork out of operations by allowing employees to focus on their areas of responsibility related to the proper execution of day-to-day operations.”
You can tell James believes focused execution around Pen Fed’s core identity and strategy is critical to aligning leadership, employees, and systems in a way that delights members.
Notice his emphasis on identifying metrics that drive strategy. This is how an organization becomes efficient and effective because, as you know, what gets measured gets done. This system greatly reduces waste and incentivizes employees to execute strategy and innovate around it.
Using these strategic metrics to reduce cost has the positive effect of providing more capital for investment in technology that will improve the member experience, as the following quotes emphasize:
- “Knowing where and when to invest and knowing where and when to take well-evaluated and calculated risks are also critical components to the execution of any strategy.”
- “We invest in making sure our membership experience is fantastic. It’s so important to focus our workforce. We take on 5 or 10 big hairy audacious IT projects in a 12-14 month period that will bend the needle, and avoid the things that aren’t mature yet and which members don’t need.”
For strong alignment to occur, a business’ main components of leadership, employees, and systems need to operate in concert like a symphony. In Pen Fed’s case, the symphony is built around the 8 Pillars, and the musicians operate within that framework.
- It is a framework that allows each leader and employee to focus on Pen Fed’s identity, strategy, and members, and it pervades every level of the organization.
- Clarity is the most important aspect of the 8 Pillar framework, and clarity brings high performance at the individual and enterprise level as well as a great experience for members.
- However, clarity is not common in American business. According to Gallup Research, only 46% of managers and 37% of employees strongly agree with the statement, “I know what my company stands for and what makes our brand different from our competitors.”
- For clarity of identity and strategy to result in high performance, it must be translated by managers into required job functions and outcomes. Referencing Gallup again, the number one action a company must take to achieve high performance is hire great managers. Their research says managers account for at least 70% of the variation in employee engagement scores.
- Strong alignment between leaders, employees, and systems creates focused direction, speed, and momentum. To the extent that misalignment is present there will be hidden profitability.
Exercises on Alignment of Leadership, Employees, and Systems
Survey your management, employees, customs, and board on the following, then begin the process of aligning the answers to what your firm and customers really need.
- What are our company’s identity and core competencies?
- What is our strategy?
- What key metrics indicate how well we are executing our strategy?
- How well have we communicated those metrics to each business unit and job function?
- How frequently and accurately do we measure the metrics?
- How do we communicate the metrics and use them to improve?
- What are we doing that is not relevant to the key metrics?