PACE Survey Results: Validating an Organization’s Strategy

Recently, PACE did a survey on an important issue involving strategy: What does your company use to validate its strategy before implementation?

No formal validation process 29% One-time analysis/study 40% A causality-based model 27% Other 4%

I find the answer percentages shocking!!!!

Developing an organization’s strategy is a critical management action. Strategy should define the primary workplan for a year or more, should be the foundation of performance metrics for employees and external stakeholders, and should be the primary recurring message and topic of conversation throughout the organization.

Yet 29% of the respondents felt their company had no formal approach to validating their strategic plan. To me this means, the board and senior management looked around the table at each other and either agreed, or perhaps more likely - didn’t disagree, then moved on to the next topic. Somehow it just doesn’t seem like such a strategy could become a core focus and mission of an organization.

40% of the respondents’ companies validated their strategy via a unique, one time analysis or study. We don’t know how extensive these were, but at least the strategy was validated in a thoughtful manner. The problem with “one-time” studies is they are typically unique and often done by different people or groups with different perspectives and experiences. I’m sure they all had good intentions, but the end result is they decided on the validation approach….and they did so knowing that bad news would require a great deal of rework by the board and senior management who had already created the strategy. Does this skew their evaluation? Are they prepared to answer tough questions about their validation approach? Will the board and management accept their evaluation? What are the consequences (for them) if it is not accepted?

Finally, 27% indicated their organizations’ strategies were validated using a causal model of the organization’s operations and monetary impacts. The advantage of a causal model is that it is built and designed to be a clear reflection of the resources and processes in the organization. It cannot be “dreamed up” because everyone can compare the model to the reality they know and see. Using causal models makes clear the cause-and-effect inputs, outputs, and outcomes. You can readily move between an action and a result or backward from a result to the causal actions. It provides a solid foundation upon which to validate and present the results. Naturally, in forward looking strategic models there will be assumptions, but they will be built into the model and where an unexpected outcome is seen, the assumptions around the causal factors will be readily identifiable.

The Profitability Analytics Framework is all about building causality into every element of internal decision support from strategic plans to daily decisions causal models should support logical decision making.