Centering Strategy in Organizational Routines

How’s your day?

Think about how you’d answer that question. Now, consider your answer to this one:

How’s your day, relative to what you wanted it to be to achieve your goals? 

Last week, I started sharing the results of an exploration into why there’s sometimes a gap in the strategy processes of organizations. I think the difference between your answers to the two questions above is one of the differences between those teams and organizations whose routines are strategic and those whose are less so. 

To be clear, in many of the instances I’ve seen, there’s nothing wrong with the organization’s strategy. But the difference in the organizational routines affects their ability to effectively achieve their strategic goals. 

Let me provide some examples:

Financial reviews 

Have you ever read a financial statement and still had no clue what the organization actually does? For me, that’s a telltale sign of a not-so-strategic financial report.

It’s typically a result of using generic categories of revenue and expense and of failing to disaggregate the largest ones. Or, put another way, the information isn’t designed to drive a conversation about what’s working and what’s not for this organization. 

In contrast, in a strategic update, the data is granular enough to understand the underlying dynamics and is designed to provide intuitive hints about what to do next.  

Most importantly, the conversations in these updates go beyond simply what the financial reports say. Of course, by definition, financial statements are really the cumulative results of yesterday’s decisions. If the conversation doesn’t naturally pivot to what the organization should do tomorrow to drive better finances, the review is not strategic.

Budgeting, when the intended outcomes aren’t clear 

One of the frequent laments I’ve read in the strategy literature is just how much time organizations spend on creating annual budgets. First, it’s time-consuming, and no one enjoys it. But more importantly, it’s often an accounting and/or internal politics exercise that’s not tied to the overall strategy.   

This came up for me the other day when reviewing a nonprofit budget. I asked questions like, What are we trying to achieve with this budget? What are the critical choices—what’s in and what’s out, and for what reasons?

I asked because without identifying what the strategy is, there’s no way to identify whether it’s reasonable. For example, a “keep the lights on while we figure it out” budget will look awfully similar to a “everything’s great and we’ll just keep doing what we’re doing” budget, especially in service businesses and nonprofit organizations whose budgets are mostly just salaries and benefits for people. But the questions one would ask throughout the year about those two budgets are vastly different. 

Operational reports and project updates

Here, the key difference between a strategic routine and a less strategic one isn’t about the amount of detail provided. Instead, the strategic updates focus not just on what happened (i.e., the data) but what should have happened if we’re being successful. 

The differences in those conversations is similar to the distinction above between How’s your day? and How’s your day, relative to what you wanted it to be to achieve your goals? 

Again, in the strategy literature and across my experience with lots of companies and nonprofits, getting these conversations right is often the difference between effective and less-then-effective execution of strategy.

This is where strategic leadership comes in. So what can you, strategic leader,  do?

1. Center the strategy in all discussions.

It’s not that every meeting should be a detailed strategy review. But should every update start with a restatement of where we’re trying to go? I’d say yes.

That’s as straightforward as starting with statements like: 

• We’ve historically paid attention to five measures of success, but this year’s theme is Quality at Every Step, so we’ll want to spend most of our time today on that. 

• As a reminder, we’re working toward being able to manufacture 100 widgets per month to support next year’s expansion. Now let’s talk about what’s happened over the last month.

• As a reminder, our budget is only break-even this year, so we’re really focused on staying on plan in every category. Now let’s look at the quarterly financial report. 

The reason to start with strategy is that the conversation that follows is more likely to get to the heart of the matter.

(Re-)centering the strategy solves another problem: not everyone knows the strategy! 

For example, new team members don’t always know how things fit together. In nonprofits, board members only engage sporadically, so they might forget what the strategy is! And while senior leaders tend to engage in strategy discussions regularly, others may be caught up in the day-to-day operation of the business and need a nudge to get them thinking about the big picture. 

2. Make it a discussion. 

The least strategic routines I’ve seen usually have a dynamic of presenting information to a senior leader, often with the implied assumption that the senior leader is either the judge of the work or the provider of answers to problems. In contrast, the most strategic meetings tend to have a non-judgmental, problem solving discussion that engages all of the participants. 

In Playing to Win, A.G. Lafley and Roger Martin described how they transformed the strategy meetings at P&G along these lines. They write:

“Slowly but surely, though, the review meeting became what we hoped it would be: an inquiry into the competitiveness, effectiveness, and robustness of a strategy. In due course, the presidents came to understand that they wouldn't be judged on whether they had every aspect of the strategy buttoned up but rather on whether they could engage in a productive conversation about the real strategic issues in their business.”

The other way this makes organizations more strategic is that it supports the development of junior leaders’ strategic capabilities. 

Lafley and Martin continued: “As a result, P&G leaders began to do more strategic thinking, to have more strategic conversations—not just at strategy reviews, but in the normal course of the business—and the quality of strategic discourse improved.”

I work with a lot of nonprofits, many of which struggle to build a bench of leaders ready to step into more senior roles. Often, the knock on junior leaders is that they aren’t strategic or don’t see the big picture. Sometimes, these leaders don’t know if they’re ready because there are parts of the operation they don’t understand.  

Part of the solution to this challenge is creating organizational routines that are strategic and inclusive so that these leaders can build their skills,

3. Design the meetings to be strategic. 

When designing these routines, there are ways to increase the likelihood that they’ll support your goals.

• Set an expectation that subordinate leaders, when giving their updates, articulate why and what we’re doing to address it.

• Ensure that there’s enough time for each part of the discussion.

• End on Have we made a decision? This is meant to test whether the conversations are leading to action. 

A final note:

I first realized how significant the strategy process challenge was for organizations when I was helping them with the BIG strategy—i.e., the 3-5 year plan. And in those situations, I frequently found team members who had wildly different views of what was happening in the external environment and what the key challenges to address were. That divergence made the strategy development process more difficult and more time-consuming because, in many ways, they were having the strategy conversation for the first time. 

But by driving strategy into normal organization routines, it’s more likely that the teams would have a common view of their situation, enabling more robust conversations about what to do next.