Chronic Misalignment
Why leadership’s calls for better organizational alignment don’t work, and how a simple ‘value language’ can remove common barriers

By Gregory Dickinson and Michael Puleo
Illustration By Josh Cochran

Everyone knows that strategies are essentially useless if they don’t influence what actually happens across the company on a daily basis. Leaders increasingly expect that people throughout their organizations will “think like owners,” aligning their actions more directly with the strategies and priorities of the company. This has worked for some organizations, but for many more it has not. Why have some been able to create alignment, and why haven’t the others?

Many efforts have been made to explain the differences, and the vast majority of the resulting articles and books are insightful in both their diagnoses and their prescriptions. What can get lost, however, is that the simplest explanation of poor alignment is often the most useful: people cannot align their actions and decisions with the strategies and priorities of the company if they lack an accurate understanding of the company’s strategy, its performance, the resulting priorities, and the ways in which their actions affect the performance of the company.

Many companies simply do not build a sufficient understanding of the business among the levels of people who make operational decisions across the company. Consequently, asking people to align their activity with strategies and priorities is unlikely to produce results and may actually frustrate ambitious, well-intentioned staff.

So how well-primed is your company for alignment? Here’s a quick way to assess the readiness of your own organization. Have a look at the five questions in the sidebar and ask yourself:

• How much consensus is there among our executive leadership team around the answers to these questions?

• How far down in the organization do you have to go before there is little or no clarity around the answers to these questions?

If your answers leave you feeling confident and secure, your company is in the minority. Our experience suggests that there is frequently little common understanding around these questions, even at senior management levels, and that what common understanding does exist usually deteriorates rapidly one or two levels deep in the organization.

In a recent Deloitte Consulting LLP survey of financial executives, 78 percent reported their most pressing worries revolved around three related challenges: improving the understanding of causal relationships between operations and shareholder value; effectively communicating improvement plans and progress to all levels of the organization; and resolving the misalignment of project portfolios.

Also insightful were these executives’ perceptions of who within their organizations was most in need of a better understanding of the causal relationships between shareholder value, strategies, financial performance and change efforts. Eighteen percent reported that their companies’ top executives were most in need, while 65 percent thought middle management and line staff were most in need.

To be sure, some companies excel at creating a common understanding and focus. For example, call center sales representatives at one high-performing manufacturer understood that their company created shareholder value primarily through asset efficiency. Furthermore, they were able to explain how this fact impacted the company’s product strategy, manufacturing techniques and compensation schemes. This deep understanding of management-oriented concepts among line staff has almost surely contributed to the company's exceptional performance year after year — not to mention its above-average retention of highly skilled people.

Realizing the power of alignment efforts

One of the strongest and most sophisticated methods for creating better alignment is to define a set of key performance metrics (a “balanced scorecard” in the parlance of Norton and Kaplan)1 to keep attention focused on the company’s most important performance needs. The next step is often to tie investments and performance measurement to this set of metrics. Hoshin Planning goes a step further by creating direct ties between the metrics of the company and the performance measures for senior executives, division leaders, line management, and workers deeper within the operational areas of the company — all in a cascading, linked set of progressively more granular metrics.

“People cannot align their actions and decisions with the strategies and priorities of the company if they lack an accurate understanding of the company’s strategy, its performance, the resulting priorities, and the ways in which their actions affect the performance of the company.”

While these approaches have proven strong both in concept and application, their benefits can be negligible if they are not preceded by an improvement in the business awareness and understanding of the people involved. Management by metrics can markedly improve alignment and the performance of the company, but the reach, durability and flexibility of this approach will be severely limited if only those at the top of the organization understand the rationale for those metrics — i.e., if the workers deeper within the organization see the metrics as the outputs of a black box. Such a condition can create a myopia that grossly underutilizes the intelligence and motivation of large portions of the organization. It can also make it very difficult for people to work cohesively with colleagues across other business units or functions.

So how can companies create an empowering understanding of the business deeper within their organizations? The answer often lies in creating a shared view of how the business works — an explanation of how the operations of the company ultimately create business value in bottom-line financial terms. This shared view of the company can help establish a common perspective and language for discussing business performance. With this common view and language in place, it should become much easier for leaders to communicate how the company is performing and in which areas the business most needs improvement.

It can also make it easier for leaders to understand and evaluate each others’ opinions and suggestions, because the shared language provides a consistent backdrop for what they think and why they want to pursue particular actions. Equally important, the shared perspective can help educate many people deeper within the organization which, in turn, can help improve their ability to contribute to the performance of the company.