Who’s Responsible for Strategy?

Volume 10 Letter 8

How do you connect good strategy with good execution? Too often strategy is seen as something upper management creates and lower management and workers execute. Using this strategic model means that upper management is charged with coming up with all the good ideas – that’s stressful! A good strategy connects each level of management from the CEO to the factory floor or service centre.

Good ideas come from all over an organization not just upper management. A good strategy sets the groundwork and creates a culture that encourages each level of management and workers to constantly look at their business in unique ways and develop new ideas to capture more value for the business at every level of the organization. A farm tractor manufacturer, John Deere, recognized that good ideas could come from any level of management and built a strategy around a new cost accounting system that empowered all workers to make their European division a better company.

John Deere has an assembly plant for mid size tractors in Germany. I was given a tour of the plant and half way through the tour one of the plant workers approached my guide, who was a company manager. The worker had an idea to save the company time on their production line and was anxious to discuss it. Later my guide explained that any employee can submit an idea to save the production line time or money. All ideas go through a transparent vetting process and improvements must meet specific criterion; the idea must save money, can’t compromise quality, and can’t negatively impact any other process in the factory etc. The upside is that every accepted idea comes with a payback; fifty percent of the savings generated during the first year are paid to the idea owner. At the end of each year the company makes a big deal about handing out the cheques to the idea owners.

Recognize in the above story that each layer of management at John Deere Europe created a strategy that allowed the people below to develop their own strategy for their market. Notice how this worked starting at the European level and finishing with new innovations on the factory floor. First the European management team decided to invest in a new cost accounting system so they could track the costs of each tractor at each stage of production. Secondly the plant management team leveraged the new cost accounting system and put into a place a cost improvement program to encourage floor workers to find cost savings ideas. Thirdly the plant workers responded by developing innovative ideas to reduce cost for the plant and pocket some money for themselves.

As many of you return to work from your holidays consider this:

  1. Anyone who has control over discretionary resources needs a strategy.
  2. Strategy must be developed at each level of the organization.
  3. Each strategic plan regardless of the management level has the same components – it’s only the scope that narrows as you go down the management chain.
  4. People at every level of your organization need to be trained, and thus empowered, to develop a strategy.

The cumulative savings at the one plant in Germany were extremely significant. Think what this type of empowerment could do at every level of your organization?

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