The business case for every department needing its own strategy

Key performance indicators are the goals and targets that are driven by Big Data and set by company executives to measure a company’s growth. While this was an exercise purely defined by revenues in the past, the amount of data at a company’s disposal means that KPIs can be set for almost every business function.

Because of this, companies must adopt a strategic approach towards achieving these targets. But do all departments need to have the same strategy? I recently read an interesting article on the Harvard Business Review (HBR) website that discusses this.

It provides a more relevant framework to act upon

The HBR article points out that corporate strategy is intended to focus an organisation on what should and should not be done to succeed — a department supporting strategy should do the same. Without one, department efforts can easily become a grab bag of initiatives, most of which are often repackaged versions of activities already underway.

Each supporting strategy should vary by department, but intentionally so. An accounting department, for instance, may view “superior service” as only a sales, marketing, or customer service effort, forgetting that they engage with customers too — mostly but not exclusively internal ones. How can they provide “superior service”, and what would that look like? What needs to be changed, added, or removed? More importantly, what boundaries need to be defined? The interpretation of “superior service” for accounts receivable likely shouldn’t be the infinite extension of payment terms, but a supporting strategy can outline how “superior service” should be delivered.

It opens opportunities for change and innovation

The HBR article adds that, typically, game-changing innovations are viewed as key to a strategy’s success, while routine innovations are of lesser importance. But that perspective is short-sighted. Supporting strategies provide the opportunity to uncover necessary changes which may be considered insignificant or unexciting but deliver an incredibly valuable competitive advantage, cost savings, or increased efficiency.

Take the accounting team again. Say they determine their strategic approach to “superior service” is speed and thoroughness of processing, whether it be applications, approvals, etc. This strategy exposes a series of infrastructure and process issues, including excessive switching between legacy systems which increases operational complexity and potential errors. While it may seem mundane, applying innovation to these fundamentals ensures the infrastructure supporting the strategy is sound.

It allows departments to complement each other’s efforts

The HBR article points out that, by having each department cross-compare its strategies, opportunities will arise to collaborate and solve problems spanning multiple areas simultaneously.

As our accounting team’s strategy looks to optimise application processing, let’s say the sales department’s supporting strategy focuses on shortening the time it takes from a customer’s first inquiry to receiving application approval. Because each department is addressing the same core problem, albeit from different viewpoints, they can work together to align budgets, resources, and efforts to achieve it.

Same, same, but different

The HBR article points out that many leaders would argue that there should be only one strategy for a company. Yet strategy is a team activity whereby multiple groups contribute to its success. Enabling each department to define their own approach to achieving it makes it far easier for them to connect to the overall strategy and shape their own contribution.

This means pushing departments to go beyond all-too-common generalities, such as “We must conduct training,” “We need to reduce errors,” or “We need better products.” Those are not supporting strategies. A supporting strategy establishes the “what” and the “how” in a context relevant to those who will have to implement it — an individual department. Without it, corporate strategy implementation will degenerate into what it usually becomes — the regurgitation of old approaches that failed to deliver before and will likely fail to deliver again.

While a strong case can be made for different departments within a company adopting a different strategic approach to achieving KPIs, it is important that these strategies still align with the essential elements of the overall company strategy.

While departments need to become self-sustaining and express an element of independence in performance, it is imprudent for departments to go rogue and miss the mark regarding the company’s overarching strategy. This impacts the company’s culture as well as its mission, vision and values.

Express individualism, but stay on script.