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According to research outlined in the Harvard Business Review , 85% of executive leadership teams spend less than one hour per month discussing strategy and 50% spend no time at all. The research also reveals that, on average, 95% of a company’s employees don’t understand its strategy. It’s no wonder, then, that 90 percent of businesses fail to meet their strategic targets. What sets successful companies apart is that they have a coherent strategy. They also have mechanisms to ensure that all their stakeholders (employees, suppliers, etc.) live the strategy every day. They carry it all the way through every aspect of their execution. Bottom line, execution without strategy is aimless!
The Importance of a Functional Strategy
Functional strategy often aims to improve the effectiveness of a company’s operations within departments. Within these departments, employees often refer to their Marketing Strategy, Human Resource Strategy or Innovation Strategy. When all the functional departments of a company work together in same direction, they ultimately achieve the business and corporate strategy. Hence, the goal of functional strategy is to align these strategies as much as possible with the business strategy.
If the business strategy is to offer new products to customers, the marketing department should design efficient marketing campaigns targeting innovators and early adopters through the right channels. Functional strategies are operating level of strategies. The decisions taken at this level are referred as tactical decisions. Hence, these decisions are very operational in nature and are therefore not really part of strategy. As a consequence, it is better to call them tactics instead of strategies. Nevertheless, the main purpose of a functional strategy is to enable the company’s strategy – not to achieve functional excellence.
Why Develop a Functional Strategy
Even in the best of times, developing the right strategy for your company can be a challenge. You have to worry about the now, while also planning for the future.
Macro trends, such as globalisation, digitisation, automation, outsourcing, increased competition, and process improvement have raised expectations for efficiency gains. Correspondingly, the business functions are often the first ones to suffer from the incoherent corporate and business strategies. Furthermore, in most companies, each business function has multiple, competing priorities. As a result, functional strategy is growing in importance and relevance. As the need for focus is growing, functional strategies help their organisation become coherent and fit for purpose. Functional strategies help enhance focus only on those value-adding portfolio of activities that are strategically important to the company. Thus, functional strategy also helps drive a company’s distinctive value proposition. Ultimately, functional strategy also helps shape the corporate strategy.
Because functional level strategy is so specific, it is usually more difficult to set than corporate and business strategies. But, taking the time to hammer out the actionable strategies of each department can help align goals from the top of your organisation all the way down to the individual employees. This will help the managers throughout your organisation get a better understanding of how their departments and employees impact the business and corporate strategies. When all these pieces fit together in achieving a singular goal, success is inevitable.
A Methodical Step-by-Step Approach to a Functional Strategy
The best functional plans identify select initiatives that will drive an organisation's ambitions and commit the capacity (time, budget, talent and technology) necessary to execute successfully. These nine steps provide a guide by which functional leaders can ensure a rigorous approach to planning, however adaptive their organisation’s strategy.
Step 1: Outline expectations
Clearly define the organisational and business context upfront for all stakeholders to prevent managers and executives from misunderstanding one another and derailing the process.
Outline for your function the responsibilities, process timelines and expected outcomes for each participant, especially in cases where the planning and budgeting processes cross functions. Identify which stakeholder(s) will ultimately sign off on your strategy and budget plans.
Step 2: Verify the business context
Make sure your function’s employees know how the mission and vision apply to their specific work. Be clear what impact business priorities, challenges and pivots will have on your function’s imperatives, opportunities, risks and priorities.
Step 3: Set goals and objectives
Organisational strategy translates business aspirations into:
Once clear on the organisational plan, you can evaluate the current state of your functional activities, identify the future state, and set goals and objectives accordingly.
Step 4: Develop an action plan
This is the stage at which you take your general assessment of goals and objectives and translate them into detailed action steps with assigned responsibilities. This functional action plan should be a formal document that summarises the sequence of steps or initiatives required to attain an objective. This is the primary source of information for how you will execute, monitor, control and close out objectives.
Action plans are subject to change as surprise events occur, so be prepared to respond with an adaptive strategy.
Step 5: Assess your capabilities
Identify key functional capabilities required to execute on your action plan. Ask business partners to assess how they perceive your function’s strengths and weaknesses. Your assessment and that of your business partners should broadly align. Regardless, generate a prioritised list of functional capabilities to bolster or gaps to fill as a result of your findings.
Step 6: Set measures and metrics
The terms measure and metric are often used interchangeably, but they are different.
Make sure measures and metrics are complete enough to account for a range of variables. For example, don’t only use customer satisfaction to measure engagement. Also track critical factors, such as discretionary effort and intent to stay.
Step 7: Put your strategy on one — yes, one — page
Simply and clearly state the key elements of your strategic plan: where the functional organisation is, where it is going and how it will get to the future state.
Capture an overview on a single page that communicates how you are adding value today and demonstrates how you plan to impact the business over the next year. Include a statement of strategy, a before-and-after description of the state of your function, one or two critical assumptions underpinning the strategy, and five to seven initiatives required to meet the functional objectives established to support business goals.
Step 8: Drive the plan home
Do this by evangelising the objectives and strategy across your function and company. The one-page strategy template is a helpful tool, as it makes the plan easy for others to consume, but you’ll still need a deliberate process for communicating the plan — and ensuring that key constituencies understand and agree with it.
You must develop a clear and consistent message that drives buy-in and commitment among functional leadership and engagement and motivation among the workforce, with all stakeholders clear on how your priorities are changing and why.
Step 9: Prepare to respond to change
Once the strategic plan is adopted and shared, it’s critical to measure progress against the objectives, revisit and monitor the plan to ensure it remains valid, and adapt the strategy as business conditions change. To do this:
Lastly, make sure you have an agreed-upon action plan for specific steps to take or decisions to make to increase the chances of success when monitoring triggers an alarm.
In essence, a functional strategy helps set objectives that guide the optimum allocation of resources among different business functions. This strategy also guides and facilitates coordination among the functions to maximise their outcomes. Functional Strategy is concerned with the question – How do we support the business strategy within functional departments, such as Marketing, HR, Production and R&D?
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