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September 04, 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. It's also evident that regardless of the particular values targeted, the purpose of the processes must be first to manage the dynamics of approvals, dynamics that exist whether processes do or not.

But how do processes get to know about those dynamics? 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?

In answering this, one thing we need to do is take a broad view of "approvals" -- we need to think in terms of what is accepted regarding the organizations actions and conditions; so this might involve a range of things like targets, standards and other definitions of desired states. In fact, the aspect of definitions is more important than the aspect of processes, because definitions must precede processes. This reminds us that the framework is more about definitions, and also that there may be various frameworks according to what is being defined.

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. Seen by organizations as a driver of performance, strategy is wanted for its ability to define the difference that creates advantage. But the bad news is that the results of actions are often still not accepted in a mainly strategic context but instead in a different way of defining value, such as cost or timing.

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, and 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?

I.

This thought indicates that we'd want 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 distinctive aspect of the meaning of capability 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 they also do that as a matter of "best practices". As a result, they not only exert a style but also formalize the operating environment in a way we usually refer to as its "culture". The question is whether this culture results in appropriate organizational capability.

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 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.

II.

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 (sponsor, type, location) and the reasons for approving them (impact, importance, urgency). Here, the problem we encounter is that organizations institutionalize their predispositions, largely through managers -- which creates resistance to change. To illustrate that, the table below is a device for "mapping" the incumbent culture, as typically under control of managers.

Against the items in this mapping, both objectives and policies ask 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. Someone must therefore authorize and support the risk. But this still leaves a gap to execution unless the organization is effectively mobilized.

III.

To mobilize across the gap to 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, it needs management's combination of objectives and policies to provide a stable framework that the organization's members can use to consistently identify and anticipate 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 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, architecture "produces" an infrastructure from that environment.

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?

IV.

An architecture in practical use is very often noted for, or even characterized by, its generating both a style and method of construction. A challenge for managers is to use the architecture to find effective construction styles and methods, rather than to impose them exotically or incongruously on the organization.

One of the simplest forms of architecture is a framework, something that provides a neutral (i.e., "style-less") 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.

Nonetheless, the framework's job is to bring explicit consistency to reconciling the opportunities to act and the approval of the actions. 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.

V.

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.

That scenario depends on management's ability to translate opportunities and approvals into dimensions that coordinate the organization with the operational environment. Opportunities must be important, and approvals must be rational.

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 complicate the (procedural) determination of just how important or rational things are.

The diagram above shows the true direction of influences when the incumbent organization will be the resource for the execution. In strategic alignment, it 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, we can't get that done until incumbent policies and abilities have had their say. 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?

VI.

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.

Summarizing a review of the above, 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 08:38 AM

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