When we translate strategic objectives into architecture, we blend assets such as people and technology that will work and interact in certain ways to deliver customer value and eventually financial outcomes. This path (Strategy Maps slightly modified) from assets to processes to customer value to financials seems obvious. However, only the last three are measured and therefore known. Financials are seen in the public domain in the case of public companies. Customer value is seen in news reports, articles, and in customer complaints and feedback. Process performance may be seen within the organization and in customer complaints and feedback. The contribution of assets is often not known.
People can make strategic contributions
Assets include people and technology. People can make strategic contributions. People devise processes and also execute processes. For these and the following reasons, it’s important to know the link between people performance and financials: (a) Define roles and profiles needed to drive targeted organizational performance (b) Hire and train people so they will have such profiles (d) Evaluate and reward people in the business context.
Why people-financials link is not understood
People can make a strategic contribution, but their performance gets little coverage in the public domain. Here are some reasons:
- Link to financials is not known: Balanced Scorecards were introduced to establish the link. Unfortunately, they are often used by departments or divisions that are themselves siloed and disconnected from corporate strategy.
- Belief that only collaboration matters: Collaboration is extremely important and as said earlier it is the blending of multiple factors that makes strategy work. However, performance of people – whether individual or group – matter a lot. Depending on the organization’s stage and strategy, even an individual person’s performance could be the key.
- Fear of the cost: Fear that too many employees will seek frequent promotions and raises based on their link to organization’s financials.
People-financials link: an example
A technology company was created as a spin-off of a large U.S company. Initially, it had a captive customer base, thanks to its parent, but soon had to (objective) acquire its own customers to survive as a separate company. The challenge was: many established companies offered the same services and had similar strengths and weaknesses. To disallow perception as a me-too coding factory and to get big fast (outcome), the young company must differentiate itself (strategy).
I am a former employee. And to differentiate the company, I devised three strategic themes:
- Differentiated customer value through software practice innovations
- Experiential marketing
To make these themes work, I set up two practice groups, one following the other. While we focused on the three themes, we recognized the importance of other talent in the company such as smart leadership, motivated customer-facing folks, technology skills and project management expertise. So, multiple factors (even other organizational initiatives) came together as is always the case with strategy execution.
We had or developed the capability to bring new methods and to use those methods in software projects. I also set up a culture of innovation. I banned best practices and benchmarks. And replaced the “Tell-us-what-you-want-us-to-do, we’ll-do-it” mentality with the “Here’s what we believe you need” capability.
We differentiated the company through software practice innovations. First we introduced user-centric methods. Then we introduced business-centric methods. We integrated the new methods into the company’s software practice, thus creating new value in the company’s core process.
To let prospects and customers experience value, we set up experiential marketing: (a) Usability lab that also doubled as a show-and-tell facility (b) Try-me interactive, which let them to use as-is and improved versions of a software and then computed and showed potential business outcomes (c) Outcomes proof-of-concept, which was a prototype of a prospect’s software that we created, demonstrating potential business outcomes.
Through activities such as publishing, hosting conferences, and giving media interviews, we demonstrated thought-leadership.
The new value we bring to customers has to be something that matters but not available at competing companies. Initially, it was great user experience. This was something that customer organizations always wanted, but did not get from the company’s closest competitors at the time. Then, it was new levels of business outcomes. Through our business-centric methods, customers got business process innovation and measurable business outcomes.
It started with people having specific capabilities and culture. People designed and executed processes. This delivered differentiation in customer value. Differentiation plus thought-leadership and the resulting positive media coverage elevated the company’s image. Add the experiential marketing and you have competitive advantage. Now it’s easier to grow big, fast – which is the targeted outcome.
So, coming up with people-financials link is not a science project. It’s about making sure you get strategy to drive your initiatives and then capturing the assets-processes-customer-financials path in a strategy map.