TAKEAWAYS
The first article of the series, published in the June issue of this journal, discussed what strategic planning is and introduced the Balance Scorecard (BSC) for small and medium-sized enterprises (SMEs) and startups. In this second article, we discuss how companies can implement a BSC and share some tips for the successful implementation of strategies from Chief Executive Officers (CEOs) and business leaders.
Figure 1 5-step strategy implementation process
Craft the company vision, mission and values statement
Developing your strategy
The development of a company strategy includes developing the consumers’ value proposition, and should consider breaking down the high-level strategic direction into three to four strategic themes (or goals).
In determining the three to four strategic themes, the company should understand its opportunities and risks, and the possible ways to address them. It can tap on common management tools including the SWOT (strengths, weaknesses, opportunities, threats) analysis, PESTEL (political, economic, sociocultural, technological, environmental and legislative) analysis, and ERM (enterprise risk management) tools. These tools will address key questions such as:
Implementing strategy framework
There are many management tools available, but we believe that for SMEs and startups, a good place to start is the BSC framework as it covers four perspectives rather than solely focus on the financial perspective. By doing so, a well-rounded approach is ensured, and management can establish their critical success factors in a structured manner. In the first article, we showed an example of how we can integrate the triple-bottom-line concept with the BSC framework.
Defining measures, key performance indicators (KPIs), action plans and critical success factors
At this stage, using two-way feedback (that is, a top-down and bottom-up approach) would be useful in understanding the on-the-ground context and setting of SMART (specific, measurable, achievable, realistic, timely) targets. To do this, workshops can be conducted by the head of department or by an independent facilitator. These workshops, if conducted effectively, will help identify the department’s critical success factors (CSFs) and relevant KPIs to enable success of the company’s goals. A good question to kickstart the thinking process of CSFs, KPIs and action plans (with reference to the BSC framework) would be, “To fulfil the company’s vision, what should be the objectives in terms of learning & growth; internal process; stakeholders, and financial perspective?” (Figure 1).
Figure 2 Department’s CSF/KPI setting (for FY202X)
Before we carry on, it would be beneficial to understand the difference between KPIs and CSFs (Figure 3). For one, the main difference between a KPI and a CSF is that KPIs reflect the level of success, while CSFs point out the cause of success. The table below further elaborates on their definitions and characteristics, with examples.
Figure 3 CSFs and KPIs: Definitions, characteristics and differences
CSFs and KPIs, if executed properly, would help close the gaps in the firm’s performance to hit targets and long-term goals. It would also be beneficial to the company to consider the dependencies of departments and their processes to link all the CSFs together as this would identify the order of the CSFs to be completed, to meet the company’s objectives.
Strategy implementation
Integrate steps 1 to 4 into an info sheet (which we recommend to keep within a single-page document) to be shared and used to set KPI expectations with your employees. The goal of this process is to create a holistic culture for employees and management to start thinking more strategically, taking into account the interconnection of the CSFs and KPIs.
Monitoring and measurement
As a business axiom goes, “What you want to improve needs to be managed. What you want managed needs to be measured.” Thus, there is a need for the periodic monitoring of performance against KPIs.
KPIs that are met by the responsible individuals or teams should be acknowledged with explicit recognition and/or rewards. If the company uses the BSC framework, we would recommend incorporating the BSC report with the personnel or team’s performance evaluation and incentives.
We interviewed five CEOs/leaders across five distinct industries (namely accounting, technology, consultancy, investment banking, real estate) to gather their best advice on effectively implementing a strategic plan. Specifically, they were all asked to answer a simple question, “What is the one takeaway for a successful strategy implementation in your company?”
“Strategy planning should take a ‘future-back’ approach which entails envisioning a future state and breakthrough imperatives to drive growth, followed by implementing initiatives to bring the strategy to life. The strategic plan must be inspiring, clear, bought-in and fully actionable.”
Max Loh
Former Managing Partner for EY in ASEAN and Singapore
“Change management is the long tail that turns strategic plans into reality. It takes time to build up change management competencies at all levels. Start investing in change management skills and processes early.”
Daryl Neo
Founding Director & CEO of Handshakes (a Singapore datatech company)
“Having the right strategy leading to corporate goals requires indepth knowledge of the industry and the wider economic outlook. The implementation of the various strategic goals requires the buy-in and commitment of all top and middle management.”
Ong Hwee Li
CEO & Founder of SAC Capital Private Limited (a Singapore investment banking firm)
“The insatiable Australian resources industry has enabled us to achieve significant levels of growth, where we’ve feasted on short-term opportunities without having to worry about strategy planning.
As we’ve matured as business owners, we’ve begun to realise the importance of sound strategy planning in order to build a business with sustainable value. The current market may not last, so we must continue to invest in a clear vision for the future with strategic growth in business units and relationships that are capable of handling what the future brings.”
Jonathan Vuong
Director of Aspect Engineering Solutions (an Australian engineering consultancy)
“A strategy should be inspiring and not fluffy. To ensure successful implementation, it should be clearly communicated and bought-in throughout the organisation. There should be focus on execution, with clear short-term and long-term targets for respective business units to achieve the overall organisation’s end goal. Top management should also ensure consistency in direction and provide the right structure and support for execution. Allow checkpoints for review and refinement of the strategy along the way.”
Joanna Gok
CFO, Far East Orchard Limited (a Singapore real estate company)
Regardless of whether the company chooses the widely used BSC framework or other frameworks, SMEs and startups would face different challenges compared to multinational companies and listed companies. Some of these common challenges for SMEs and startups include (1) professionalising the business, (2) establishing the appropriate governance structure, and (3) planning for succession.
SMEs and startups should evaluate whether these challenges pose potential risks to their operations in the short, medium, or long term. And if so, they should consider taking appropriate measures including defining KPIs, designing action plans, and identifying CSFs, which were discussed in this article.
David Yeong is Partner of Consulting, SAC Capital Private Ltd; and Keith Tan is Director of Business Consulting, RSM Risk Advisory Pte Ltd.
© 2024 Institute of Singapore Chartered Accountants
