Why good management information is crucial for realizing your strategy
The first months of 2020 are over and it is time to make the (first) balance with regard to the annual plan 2020. , to give a kickstart. Good execution of the strategy is characterized, among other things, by regular management. What is often missing is the tools and organization to obtain information to structure this control. Does your organization manage to steer the realization of the strategy with the right information?
You will not survive as an organization with only a catchy annual plan. Numerous studies focus on reasons why companies and organizations fail to successfully realize a strategy, in short 'Why strategy execution fails' (Forbes, 2019). Many companies conclude too early that their strategy has not worked and fall back on 'business as usual'. But, on what information is this conclusion based? Many companies do not know how they actually perform on their strategic goals and have therefore never been able to manage it. For example, they get management reports from two months ago, have no idea what the KPIs in the report mean, spend hours understanding a report and are left with no action points based on the results. The question then is how this company came to this conclusion and why they moved away from what may have been a successful strategy?
Create, monitor and adjust
The solution lies in setting up a structure where good decision and management information is produced. Unfortunately, we see that many of these types of management reports, if they exist at all, focus on the report of last month's performance. However, past performance is not always relevant and does not provide the desired information that is needed for future adjustments. In order to provide a manager with information that he or she can work with, it is in any case important that the information has the following characteristics:
1. Steering information is up to date
In a previous insight, we talked about successfully achieving objectives with the three R's: direction, space and regularity. And the R 'Regularity' means that the KPIs must be checked regularly (monthly). It is crucial that the figures are recent and up-to-date. This seems needless to say, but in practice this is not always the case. It often takes a lot of time to retrieve the right information and bundle it into a management report, so that the information that is presented is already outdated. So don't discuss the results of February until the end of March! It is not only important to ensure that there is recent data, but also that your process is well set up to provide information quickly when needed.
2. Steering information is a translation of the strategy
In addition to up-to-date information, it is important to display the correct information. Correct management and control information is characterized by a link with this annual plan. In the annual plan (where OGSM is an example of) the target KPIs (what is the dot on the horizon) have been defined that should lead to the realization of your strategy. It is also these KPIs that you should aim for, together with the financial KPIs. Focusing solely on financial KPIs will not lead to strategy realization.
3. Visual and Narrative
In a study conducted by Supply Value, the effect of narrative effects on a dashboard was tested. Keller and Tergan (2005) concluded that “data visualizations support data-driven decision-making by ensuring that the human processing system is used more efficiently”. It concerns both the amount of information and the mental effort it takes a manager to absorb the information. Therefore ensure a good structure as well as visual techniques to decisively bring the management information to the decision maker.
Want to make dashboards more effective? Create a running story through storytelling
4. Future-oriented and provides insights
If all three previous elements are met, one can really make the move from data to information. The last element that makes steering information useful is a view into the future. From experience we see that a lot of management information is reporting and descriptive. We believe that a manager wants to know what the performance of last month(s) means for the progress on strategy in the coming month. If the performance negatively influences the progress on the strategy, but remains within pre-agreed tolerances, there is no need (necessarily) to steer. However, adjustments will have to be made if the strategy realization is in danger. If a manager is not aware of this, the adjustment will always take place on the basis of incomplete information.
Good management information is characterized by offering the right tools at the target level to manage effectively on results. Monthly steering and the ability to iterate the execution of your strategy makes you very agile as an organization!