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September 4, 2005

Culture as Infrastructure for Strategy

Companies often refer to having and using a value system as the regular guiding influence of their culture on their operations.

We know that value systems are backgrounds for approvals, and it's easy to imagine a collection of associated approval processes representing the "system" of the values. In that case, regardless of the particular values targeted, the first purpose of the processes must be to manage the dynamics of approvals, dynamics that exist whether processes do or not. But how do processes get to know about those dynamics and thus recognize the inputs to use?

To identify and communicate about the dynamics, thus initially making them manageable, a value framework should already be in hand. But what does this framework look like?

I.

Creating the framework means taking a broad view of "approvals" -- we need to think in terms of what is accepted regarding the organization's actions and conditions. Naturally, this might involve a range of things like targets, standards and other definitions of desired states. In fact, determining those definitions is more important than the aspect of processes, because definitions must precede processes.

Nonetheless, the current surge of interest in performance management scorecards has everyone looking at a type of operational framework.

The good news is that performance is being talked about in terms of strategy being the value-definer for actions (operations). Seen by organizations as a driver of performance, strategy is wanted for its ability to define the difference that creates advantage -- the most high-level desired state.

But the bad news is that the actual results of actions -- which trigger followup decisions -- are often still not taken in a primarily strategic context but instead in a different (and strategically indifferent) way of defining value, such as cost control, timing, or compliance. The followup decisions -- especially about optimizing processes -- thus may not be aligned with the strategy although they are still reinforcing accepted notions of value.

Typically it's said that when strategy fails it is because of its execution, not because of its design. Organizations have plenty of hustle and flow, but evidently it's not enough. This makes us more deeply consider how it is that the execution would "make the difference" that strategy prescribes. What is it about the strategy and about the execution that makes their connection successful?

II.

This thought inspires us to consider the "quality" of the strategy in a certain way -- in terms of its effectiveness, its fit to its purpose, or in other words, its usability.

Since strategies don't just execute themselves, we have to examine the capabilities of the organization that is responsible for the execution -- both when we're planning before-the-fact and evaluating after-the-fact.

We can't take this notion of "capabilities" for granted: the most distinctive aspect of the word's meaning is "potential". What if the organization is not yet ready, or willing, or able?

Capability - A talent or ability that has potential for development or use... The capacity to be used, treated, or developed for a specific purpose. -- American Heritage Dictionary

Embracing this definition highlights an issue of compatibility between:
- the mechanism used to develop the ability -- namely, management;
and,
- the "raw material" to be shaped -- namely, the organization.

As a matter of strategy, managers direct the decisions and activity of their organizations according to objectives and policies. But even without a strategy, they manage that way as a matter of "best practices" in accountability. As a result, they not only exert a style but also formalize the operating environment in a way that we usually refer to as its "culture". The question is whether this culture results in appropriate organizational capability.

III.

Actual practice can easily fall short. Management style is usually expected to bringing energy, integrity and focus to execution. The natural focus is on maintaining a real-time match of requirements and abilities. And accountability for "performance" keeps the heat on management constantly. Unfortunately, accountability's concerns with "management style" can be counter-productive. Consider virtually any "Top Ten Management Issues" list from the last few years: too often it places heavy emphasis on the individual manager's activity inputs (awareness, decisions and intents) and hammers away on improvement there -- while comparatively neglecting the overall environmental outcomes also created (such as degrees of coordination, capacity, and complexity).

The complicated outcomes collectively called culture are so hard to grasp as a "whole" that we usually have to think of them the way we do a "climate". Climates require adaptation efforts, not control efforts. Through adaptation, some things are more likely to succeed in certain climates (or cultures) than in others. Here, the issue is the great extent to which management style (not the strategy) creates the climate -- through the way it handles objectives and policies.

IV.

Management intends to construct "effective" organizations. To count as a success, management style needs to make an organization that is compatible with the strategy but is also compatible with the climate that the management style itself creates.

We need to be able to discuss management's responsibility for adaptations -- for alignment -- as a counterpart to accountability for performance. Strategic compatibility -- a.k.a., alignment -- means that the culture must not inhibit the organization's approach to meeting objectives.

Pragmatically speaking, the "culture" is a description of how the management style has typically reconciled the opportunities to act and the approval of the actions.

Describing this reconciliation makes us consider both the nature of the organization's opportunities (in particular their sponsors, types, and locations) and the reasons for approving them (impact, importance, urgency). Here, the problem we encounter is that organizations have predispositions that are institutionalized largely through their managers, -- which creates potentialy high resistance to change. To illustrate that, the table below is a device for "mapping" the incumbent pragmatic culture, as typically under the control of managers.

Three aspects of approval make up the formula for describing, respectively, the sponsor, type and location of an opportunity. Each aspect represents a point of consideration and measurement, which may involve a precedent, a rule, a belief, a status, or some other quality that might function as a decisive criterion. Against the items in this mapping, both objectives and policies consider any potential change by asking the question "Why?" The terms shown within the table make it easy to see the many points at which existing objectives and policy could either frustrate or compete with new, different ones being introduced. Getting and sustaining "consensus" support across enough (much less all) of these points of precedent is never guaranteed. Where differences remain unresolved between the current and proposed circumstances, going ahead with the proposition carries risk. Therefore, to begin realizing the opportunity, someone must authorize and support the risk.

But this still leaves a gap to execution unless the organization is effectively mobilized.

V.

And to mobilize further across the gap to organizational effectiveness, management wants to deliberately rely on the culture as an "infrastructure".

Again, strategic compatibility -- a.k.a., alignment -- means that the culture must not inhibit the organization's approach to meeting objectives. That is, alignment needs management's combination of (reconciled) objectives and policies to provide a stable interface that the organization's members can use to consistently identify, anticipate and leverage opportunities and approvals for strategic action.

Strategy management -- through which execution is directed and linked to the difference that creates advantage -- faces the big question: Where does the consistency and stability come from?

"Architecture" is where we normally look to find a disciplined approach to building that compatibility. An architecture provides an integrated set of design and construction principles for developing a structure. Its principles guide the discovery and qualification of components needed to build a structure, and furthermore they guide support for the actual building effort. Those activities are commonly formulated into a production method.

When applied to making an environment conducive for (strategic) performance, the architecture's goal is to "produce" an infrastructure from that environment, which the organization will use as its interface for execution.

That's the hypothesis. Can the culture really be leveraged as a practical infrastructure, describing and guiding processes and agreements needed for desirable performance outcomes from the organization? If this is to happen, first the development of the interface must be managed.

VI.

An architecture in practical use is very often noted for, or even characterized by, both a style and method of construction that it generates. A challenge for managers is to use the architecture to find effective construction styles and methods, instead of imposing styles and methods exotically or incongruously on the organization.

One of the simplest forms of architecture is a framework, something that provides a neutral reference and gets its value from being that way. Arguably, a framework is most often used to guide a construction methodology, by providing all production participants with a common way to coordinate their different perspectives.

To provide guidance, a framework offers dimensions. A dimension is a perspective on the various different properties of something -- in this case on the various properties of that environment envisioned for executing the strategy. The purpose of the framework is to describe key dimensions in relation to each other -- which effectively evokes, classifies and arranges success factors for the properties, giving them higher recognition and attention.

That said, a dimension might be hypothetical (a "what-if"), or it might be discovered by trial and error. Accordingly, some of the framework might consist of theoretical factors; and some of it might feature empirically validated ones.

In the case of an organization's strategic alignment, the framework's job is to bring explicit consistency first to reconciling objectives withpolicies, and thereafter the various reconciliations with each other. In practice, a methodology exercizes this consistency, producing regularity (dynamic structure) in operations.

Managers work from that situation to develop the execution potential of the organization in that environment. Successful outcomes encourage repetition and reinforcement of their related management events; and the overall "learning" informs further progressive development.

VII.

The interpretation of the culture into an infrastructure provides the logical foundation needed for building execution that can focus on the differences that create advantage. Focused on making the difference, opportunities must be important, and approvals must be rational -- but they both must leverage the culture for sustained support.

That scenario depends on management's ability to associate opportunities and approvals with perspectives that coordinate the organization with the operational environment.

Guiding the construction of those associations, a framework offers dimensions for describing the terms of reconciliation that combine objectives and policies with each other. But the framework dimensions must account for the dynamics of the construction.

The diagram above highights the basic problem that management encounters in moving from opportunity to approval to action: - goals are the desired future conditions. They can represent the "why" of an idea, but they are constrained by the mandated support of the current state. - opportunities are the proposed "realization" of goals. They can represent the "how" of an idea, but the reality of opportunities is constrained by how the organization is allowed to function.

These realities of mandates and tolerances -- which come from various pressures including financial, political and intellectual ones -- complicate the (procedural) determination of just how "important" or "rational" things are.

The diagram above illustrates reconciliation -- showing the true direction of influences when the incumbent organization will be the resource for the execution of a strategy.

For strategic alignment, the picture raises the question of whether the objectives and policies initially in hand must be compromised or not on the way to execution. Although we intend to derive requirements from objectives and then execute on requirements, we can't get that done until incumbent policies and abilities have had their say.

VIII.

This multi-variable equation may go through many iterations of "if...then" before being resolved -- whereupon finally the resolution can be executed; but the question is whether the resolution is adequate to the task of realizing the strategy. Is the execution, as based on the resolution, capable of solving the right problem?

In that light, it's clear that the organizational ability finally offered to the strategy must be developed for the strategy in the intermediary stage.

In handling risks and priorities, a progressive development effort in "strategic capability" should incorporate four coordination practices:
- business analysis,
- change management,
- resource optimization, and
- assessment.

These each provide a perspective that is part of "framing the culture". Each of these steps brings the incumbent organization closer to alignment with the needs of the strategy, but all four of them must be directed at the particular strategy instead of merely at the desire to come up with something approved to do.

Meanwhile, each step also tries to coordinate the organization with the operational properties of the environment:
- rules,
- knowledge,
- events, and
- communication.

As part of the framework, the properties will complete the stable reference picture of the "cultural" dynamics.

Management can use the framework to research and specify expectations, preferences, responsibilities and roles that directly address the elements of the strategy. This provides an opportunity to formally communicate the value system that the strategy needs for getting organizational alignment.

Posted by Malcolm Ryder at September 4, 2005 8:38 AM

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