In order to bring about that often sought after, but rarely achieved, alignment of a business, you need to start by aligning the numbers. Aligning the numbers begins with having a clearly articulated financial plan. In order to create alignment in any organization, the financial plan needs to be translated down through the organization, so that every individual knows how the things that they are doing day in and day out affect the overall goal of the company. To illustrate the point, here is an example.
I ran a division of a large construction company. When I took it over, we had a goal to increase our revenue by 15%. When I asked our Director of Sales how we were going to get there, you would have thought I had two heads. He said, “What do you mean? We’ve got three new initiatives and our sales people are doing eight sales calls to potential clients every week.”
I said, “Can you show me specifically how and when those three initiatives are going to generate 15% more revenue? Or are we going to be more effective and win 15% more bids than last year? Or are we going to raise our price by 15% and keep our win ratio the same? Or is the market going to grow by 15%? Or are we going to do 15% more sales calls than last year? Or is it some combination of all of these that is going to lead to us generating 15% more revenue?”
That same puzzled look crossed his face, but this time it was because he didn’t know the answer to the question, but realized that he should. You can’t align your business if the people in your organization don’t know where you’re going and how to get there.
Accountability, a double-edged sword
When you align the plans of your business so that they are properly translated, you have now given your frontline leaders better tools and expectations to manage against. CEOs that I speak with who strive for accountability are drawn to this concept. Their financial plan is properly translated, now the leaders know what is expected of them and their people.
But don’t expect all of your leaders to use this newfound accountability in a positive way. Here’s a story to illustrate my point. I was the Vice-President of Operations for a company and I loved accountability. I thought it was the answer to performance improvement in organizations.
I would go around to the three plants that I was responsible for every day and follow up on the key performance indicators of the business, ensuring there were action plans for indicators that were not meeting the plan.
There was a Plant Manager who reported into me, who was responsible for purchasing material. One day my inventory manager came to me and said ‘I think we have a problem. The amount of material that we’re buying versus what is going into finished goods inventory doesn’t add up. There is 5% that is missing…’
After exhausting all possible explanations, I resorted to reviewing the back-up tapes of the company (for those that remember those days!). What I could see from the information on the backup tapes was that the numbers in the spreadsheets were changing every day as the Plant Manager was trying to manipulate the scrap rate.
My first reaction was anger. I felt that I had been wronged and that he had wronged the company. It wasn’t until four or five years later that I realized my role in not creating an environment where he felt that it was safe enough to ask for help.
Metrics and data should be used as information to make better decisions, not as a means to motivate employees. Managers roles should be to help their employees win, not beat them up when they lose.
So be warned: accountability, if it is not used properly, can actually be a double-edged sword and create misalignment in your organization.
Andrew Rush will be leading a session on May 7 at the IndEx 2019 conference on “Performance and Cultural Alignment and its Key Role in Value Creation”. To learn more about how to affect real change in an organization, Carpedia International has put together an ebook that outlines 52 targeted areas to improve performance in any business or industry. Download the ebook.