The third in a series of articles about the fundamentals of business strategy, published by Mortgage Strategy in March & April 2015. View the original article here.
As a strategy consultancy, we often get asked what the key component is of a successful strategy. It is hard to pinpoint one specific thing but a common feature of the most impactful strategies is they are inclusive for everyone they are relevant to.
If your strategy is not simple enough to be communicated to (and explained by) everyone in your company, then it is highly unlikely to succeed. The clear and consistent communication of the vision of a business aligns expectations, increases engagement and improves the chances of achieving the desired results. In short, if people do not get it, it is unlikely to work.
Having a clearly defined goal and a set of realistic ambitions helps prioritise decision-making and empowers the people in your teams to implement within clear boundaries for autonomy.
It is not always this straightforward, of course, and there are numerous components to go wrong between a strategy being developed and implemented in terms of day-to-day work.
Stephen Bungay, a former colleague at management consultancy BCG, has identified three ‘gaps’ that can cause significant problems:
- Effects gap – a difference between the expected outcomes and what actually happens.
- Knowledge gap – a difference between what you would like to know and what you actually know.
- Alignment gap – a difference between what people want to do vs what they actually do.
In each situation, the issues that arise tend to be the same: managers spend too much time on tasks, businesses become reporting machines, decision making becomes tactical, motivation and energy decline, and people focus on safe issues and do not take risks. Many of you will have experienced this type of situation at some point, as it is all too common. It is also not a great situation for any business to find itself in.
So what is the solution to avoid this happening? Here are Bungay’s tips:
- Effects gap – do not ask more than is necessary from your team or plan beyond circumstances you can foresee.
- Knowledge gap – communicate and engage with people as much about your overall intent as is needed to achieve the outcome you desire.
- Alignment gap – ensure people retain freedom of decisions and actions but within agreed and defined boundaries.
It is not easy being a business leader and whether you are a small brokerage or a big corporate, it is necessary to constantly look ahead and make plans while at the same time challenging the current situation and making the right decisions today. That is not an easy combination.
Lenders, for example, need to balance their immediate requirement to offer competitive products today while preparing themselves for the changes the European Commission’s Mortgage Credit Directive will bring. Brokers may face the challenge of encouraging some of their best clients to remortgage onto today’s long-term, low interest rate products while also then considering where their new business will come from in two or three years’ time when these clients have no need to review their circumstances.
These are very specific examples but the challenge is a much broader one. To give yourself the best chance of success as a business, it is important to constantly remind people of your strategy, drive the pace of change, celebrate success at every level when you see it, make brave decisions and challenge your people to align their everyday thinking and activity with your strategic goals.
These are five questions we suggest you ask yourself:
- Does your senior management team have a common view of the company strategy and are all pulling in the same direction?
- Is the company strategy communicated to and understood by everyone within the company?
- Is the company strategy communicated to and understood by all essential stakeholders outside the company?
- Are all business functions and departments working in harmony to deliver the company strategy and business plan?
- Do the company aims and ambitions have a positive motivational impact with your people?
If the answer to every question is ‘yes’ then you’re in great shape. If the answer to one or more of these questions is ‘no’ then it is virtually certain that your business has the potential to improve on the results you are currently achieving.