Alignment
Alignment is one of the most important tools available to a CEO and the entire governance and management team. Most of us know how important alignment is, but knowing how to achieve and sustain a broad level of alignment is a learned skill. In this series of posts, I will outline how I’ve come to think of the how and why of alignment.
Alignment means the environment, the team, the purpose, and the method are arranged in a coherent fashion consistent with the best thinking of the team on how to achieve the purpose. Alignment is fleeting. Complete alignment never really exists; it must be constantly strived for, adjusted due to changes in the environment, the team, and ongoing performance.
The benefit of alignment comes from the cohesiveness and synergy of teams pulling in the same direction. When everything is aligned, confusion and inadvertent counterproductive behavior are minimized. External stakeholders see alignment and are more simply able to either opt-in or opt-out making investments and sales move efficiently. The most profound effect is to culture and the inspiration that comes to a team working in harmony, making decisions and behaving in consistent ways. This effect shows in greater innovation, higher productivity, and reduced attrition. All of these together drive faster growth, lower churn, higher profits, and all of this benefits every stakeholder. These impacts can be profound, literally separating success from failure.
Achieving and maintaining alignment requires keeping a set of tools regularly updated and using the development and application of those tools across the organization in ways tailored to the organization. These tools and stakeholders inter-relate in the following ways:
Tools and Stakeholders:
Purpose:
Purpose is the core of who the company is. The Mission, Vision, and Values of the company are the most powerful alignment tool for the company, for their level of complexity. The development of these statements is a powerful alignment mechanism when a management team develops, socializes with the workforce and board, and finalizes them. The purpose of the company is then critical to attracting investors and customers and developing supplier / partnership alliances. To the extent the company lives up to its purpose, it serves as a powerful force for all stakeholders and can easily drive opt-in / opt-out decisions. Further, the extent that a company fails to live up to its purpose creates an equally powerful mechanism.
Purpose should be reviewed and refined yearly or when a substantial pivot occurs in early stage companies. For most companies, purpose should not change significantly very often.
Roadmap / Navigation:
Depending on whether the company is a venture backed, privately or publicly held company, or even a PE backed company, the Company’s roadmap is its corporate development plan, its investment thesis, or possibly its 5-year or 10-year plan. Not every company has such a plan, but it should. Despite a conception that long-term plans are of little use in the chaotic world in which we live, failing to develop an outline of a plan with long term goals and a few milestones along the way, deprives the company of having a common understanding of the path that is being attempted. The art of the roadmap is in recognizing it as a sufficiently high level enough document to avoid being constantly changed, and of sufficient detail to have meaning; it should include milestones that conceptually incorporate the uncertainty of the journey.
The roadmap is of greatest use among the investors, board, and management team. The greatest alignment benefit is this enables all of these stakeholders to have a common language and context for the company’s objectives. Admittedly, these are most important in highly dynamic companies with distinct phase and objectives for each phase, but they are of use in terms of identifying market-cycle positioning and evolutions around longer term trends and behaviors and the company’s evolution through them. Navigation is simply where the company is on the roadmap which helps to drive a common expectation of what’s important now and next.
Roadmap and navigation also serve as a great alignment tool for helping the workforce contextualize evolutions of the company. They do tend to be of less use in aligning customers, suppliers and partners, for the greatest reason that they are typically not exposed outside the company.
A good roadmap should be developed early in the company’s existence and generally should require annual or capital-raise driven tuning, but shouldn’t need a complete rewrite any more often than every 5-10 years or upon transformation of the company such as an IPO, PE buyout, acquisition, or divestment when the ownership stakeholders change substantially.
Strategy:
Strategy is the plan for how the company will reach its goals in the coming year to as much as 3 years. One could easily argue that the Roadmap is the long term strategy outline and the strategy is the shorter term, detailed exploration of that roadmap with specific goals, competitive analysis, product / service planning, activity planning, and resource allocations. Strategy includes activity and financial forecasts/ goals for the company in both routine operations as well as transformation operations for the coming year and provides for hard measures to drive alignment and measurement.
Strategy is most powerful as an alignment tool within the company including investors, board, management team, and workforce. An element of strategy will directly impact suppliers and partners through alliance execution and joint strategy panning, where appropriate. Customers are the direct beneficiaries of strategy through their perception of product / service as well as sales, marketing, and customer success.
The power of strategy as an alignment tool is largely in its ability to align the company in planning for a specific set of objectives in the coming year. The combination top-down/bottom-up iterative processes drives alignment of expectations and commitments. This process should be repeated at a detailed level at least annually with quarterly tuning.
Culture:
Culture is the behavioral norms of the organization. It is based on shared values, ideally the ones stated in Purpose as long as they are true to the team. Culture is visible in daily practices and rituals, as well as relationships within and without the organization. It is influenced by and affects all stakeholders within the company as well as customers and suppliers/partners. It is not determined by the Management Team or the Board, but by the total company organization. Management’s greatest capacity to drive culture comes from walking the talk: behaving themselves as an example the way they wish the rest of the company to behave as well as by rewarding the right behaviors.
Culture’s power on alignment is tremendous; it can drive behaviors and a strong level of cohesiveness within teams. The quote “Culture eats strategy for breakfast”, attributed to the late Peter Drucker, is a reflection of the power of this combination. Strategy, no matter how brilliant, can be destroyed by a team that isn’t aligned into a common culture that is also aligned to that strategy.
Management Systems
Management systems include infrastructure, organizational structure including key personnel, organizational capabilities, operational processes, performance measurement systems of all types, dashboards and reporting, resource and skill planning, risk management, project management, and product management processes among others. No team can perform to a purpose and strategy without the tools to supplement the team as needed, perform the job, and then measure the performance.
Management systems that aren’t aligned the purpose, navigation, strategy, and culture of the company create gaps that drive and the inability to measure marginal performance. The presence of appropriately tailored tools, enables teams to do the job, measure performance, identify issues, and then correct them as a team.
A key part of a CEO’s job is ensuring alignment through their own actions as well as those of the management team. The methods for driving alignment are many but they all involve the tools and stakeholders noted previously as well as spending the time to build relationships, understand your stakeholders, and model the behavior you wish to inspire. At a deeper level, the tasks for driving alignment includes:
Developing and managing the tools
Aligning people and organizational capability to strategy
Driving alignment with the board and investors
Aligning with customers, partners and suppliers.
Each of these will be discussed in future posts.
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