Communication system
Building a strategic organization requires more than communication, it requires a culture of communication. Li and Fung is a leading name in the fashion retailing industry where winning requires stocking only the hottest selling lines to maximize sales and avoid costly end-of-season mark-downs. Success requires a supply chain that provides an instant refill capability rather than waiting many months for supplies. Winning with this market approach requires an intelligent communication system that feeds information from the market in an instant. You can’t rely on people to communicate well here if you are planning on winning, you need a system that makes them communicate.
For Li and Fung, their advantage lies in their ability to develop an exceptional supply chain management system that gives them the power to respond faster than competitors in fashion production in the most cost effective way. For the company to profit, it has to supply what the markets want. But what is the most effective way of knowing this? Well the small retail chains that deal directly with the buyers need to stock what the markets ask for or go bankrupt. But since speed, coming to the market first is of essence, they are compelled to get the information and share it with the supplier that has the capability to deliver. They are thus compelled to communicate. That’s what a communicating system does.
A fundamental component of a strategic organization is a communicating system and as stated earlier the problem lies with how leaders manage communication. The result of effective communication is a clarity that results in conviction of what is right. All bad decisions result from lack of understanding about the right answer to provide or the right step to take. So the focus of communication should be enlightenment and not the ability to do a recitation of what was said. True communication enlightens the heart not the head.
In the case of Li and Fung, the small chain retailers know what is good for their business. They clearly understand they have to stock the hottest selling line fast enough. That’s how they think and that is because they have understood that. That is what any business aspiring to become strategic must ensure.
The key is to be clear about your strategy yourself as a leader. Clarity of approach is the foundation for creating a system that communicates. This clarity means you possess a complete picture of your strategy. A complete picture is that not limited by ignorance, doubts and I’ll feelings.
Clarity of approach will inspire a strategic description of duties and job responsibilities in a way that inspires the people and drives creativity naturally. Because everyone needs everyone, people ask the right questions, provide the right answers, seek the right support because they have the conviction that comes from clarity.
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So the question becomes whether or not you are clear about what your strategy is, the spirit of your strategy and the purpose of your strategy. Do you know how and what makes your strategy relevant? Do you know the market value of your strategy? If you lack clarity on these you cannot expect your people to be clear and if they are unclear, they cannot communicate. And as communication struggles, performance struggles too.
Communication means people are sharing ideas in a timely and useful manner. The truth is every organization communicates. Some communicate confusion, insincerity and deception. Communicating ideas consistent with the strategic direction of the organization among stakeholders- shareholders, employees, customers and others happens as a result of a carefully thought out system that everyone understands and is proud of.
Reward system
What gets measured gets valued and what gets valued gets rewarded. What gets rewarded affects productivity. In strategic organisations rewards are designed to motivate the right attitude and actions in the workplace. Most organisations are designed to reward people for their normal day job. Personal initiatives, innovative thinking, personal development could go unrewarded and even unnoticed yet strategic organizations are designed to recognize and honor them. Except the organization recognizes and rewards the attitudes and activities the strategy requires to work, the organization isn’t being strategic.
In strategic organizations, management is very clear about what attitude and behaviour that drives performance. Actions and attitudes not consistent with that are frowned at.
It is the day to day activities of everyone in the organization that creates value or destroys it. The organization is strategic if the activities that drive performance are identified and rewarded. Capital One rewards it’s people for seeking out high net present value customers. It runs over 50,000 credit card ideas yearly to find them. Because the people are rewarded for it, they take it seriously. This appears simple but it’s not. In the case of UK telecommunications company Energis, it’s strategy was focused on large customers with complex telecommunications need but the company instead rewarded sales people based on sales volume.
Since it takes many years to build relationships with the target audience which their strategy defined, they focused on high-volume, low-margin commodity services. At the end they drifted away from the strategy and went defunct.
Our actions as human beings are often driven by a desire to gain a reward. The incentive theory suggests that behaviour is motivated by a desire for reinforcement or incentives. With this in mind, successful organizations structure their organization in a way the reward system drives the actions consistent with their strategy. This is what Capital One achieved. By building a system that encourages the attitudes that support their competitive advantage.
For U.S based Nucor Corporation the key source of competitive advantage is its ability to operate steel mini-mills more cost effectively than the competition and. It rewards its people handsomely for achieving this.
The stroke can be different for every organization but the key is to be clear about what advantage supports your strategic direction and align your reward system with actions and attitudes that support your advantage. This makes the consequences of your people’s everyday interaction the desired organisational results. This is the pathway to superior performance.
Dr Brian Reuben works with governments and organisations around the world to strengthen institutions for superior performance.
