Leadership

How to create an aligned enterprise

An aligned organization is one in which everyone understands what the company is trying to achieve, and every internal organization supports the high-level direction. Alignment is a powerful tool to get everyone focused on what's vital to success.

This article was originally published on our sister site, TechRepublic.

Alignment is about having all the resources in your company striving toward the same purpose. It comes from making sure that people and organizations know what is important to the company. It also means that people have incentives to move the company in that direction and not in directions that are counter to the overall goals.

Many IT professionals' roles in organizations have been on a tactical or management level. Often, when they're asked to create an organization with a greater sense of a collective goal, they’re unsure where to begin. Let's look at what you and your IT professionals can do to ensure that you're creating an aligned organization.

Mission statement, vision statement, goals
A company mission statement—the concise description of the business's purpose—usually speaks to the value the company is trying to deliver to its customers. On a practical level, a mission statement will:
  • Keep the company aligned and focused.
  • Serve as a marketing tool to help communicate to employees and customers what your company will achieve and where the organization will go.
  • Allow those working with customers a platform for touting your services.
  • Function as a motivator.

No matter how successful a company is, it's always striving to exploit new markets, increase market share, and provide more value to its customers. The company vision statement describes what the company would look like if it achieved a perfect state.

The company mission and vision are defined at a high level and typically don't change from year to year, unless a company has a major shift in business focus.

Each year, companies also create goals, the outcomes the company wants to achieve to help it fulfill its mission and move toward its vision. Goals are also at a high level and may take more than one year to achieve. Company goals can change from year to year, although they're written at a high enough level that they remain fairly consistent. Company goals provide more detail and guidance to the organization on what is important to achieve in the next one to three years.

As an example, let’s say part of your company’s mission is to be the leading supplier of high-quality computer components to the aerospace industry. One of your company goals might be to increase your market share of components in the aerospace industry, while another might be to have the highest quality components in the industry.

Aligned goals and objectives
One of the greatest challenges that company management faces is how to successfully achieve its mission, move toward its vision, and achieve its goals. It can only be done through a coordinated effort from the entire company. Each division creates high-level goals and detailed concrete objectives to support the company goals. Since objectives are written at a specific level, they tend to be measurable so that the organization can tell if they were achieved.

For example, the sales division might set an objective to increase sales by 10 percent, while the manufacturing division might have an objective to reduce the number of defects by 50 percent. Both of these statements have aspects that are measurable.

Strategy
After setting more detailed and relevant goals and objectives to support the company goals, each division also creates a strategy. The goals and objectives tell you what needs to be achieved. The strategy tells you how the goals will be accomplished. Organizational strategy provides a roadmap of how the goals and objectives will be met. For example, if the sales division wants to increase sales by 10 percent, one of the strategies might be to focus on increasing the level of training for salespeople or implementing a new CRM package. These are not goals in themselves but are ways to build capability in the organization so that sales can be increased.

Ultimately, the measure of success in this example is not going to be that all salespeople take a training class. The measure of success will be to increase sales by 10 percent.

Pulling in different directions
Without high-level mission, vision, and goal statements, a company runs the risk of its workers independently determining what is important to them, resulting in inconsistent goals. Even organizations that have overall company and division goals often don't do a good job of keeping them all aligned.

For example, your company may have an overall goal to reduce costs to become more efficient. The sales department might be focused on increasing revenue by implementing new products. These new products may cost the company more money in the short term.

Manufacturing, on the other hand, may be focused on building more capacity to support increased sales, which again may increase costs in the short term. The IT department may be trying to be more client-focused by supporting major initiatives from many divisions, which will require them to hire more contract labor.

You can see that each organization is striving for something good. However, it is doubtful that the company can achieve its cost-reduction goals since the division goals aren't aligned, and in some cases, actually require more money to meet their individual priorities.

The best example of nonalignment I've seen occurred when I worked for a major soft drink company. (This was actually a supply chain problem, but the example is still relevant.) The company’s sales organization was trying to increase sales and market share for a particular soft drink brand in the United States. However, our major bottler, the people who actually sell the products to our customers, had a big push to increase total sales.

I remember all of the frustration and grumbling at a sales conference. As the salespeople complained that they were trying to increase sales of one brand, the company bottler was actively promoting the brand of our number-one competitor. Talk about misalignment. “Partners” in the supply chain had incentives to work against each other, which made it doubtful that either company’s objectives would be met.

Alignment continues down the organizational structure
Depending on how big your company is, the alignment process ripples down into each lower organizational level. Each organization looks at the goals, objectives, and strategies of the organization above it, and then establishes a lower-level set of goals, objectives, and strategies to directly support the ones above it.

At the end of the alignment process, each person in the company works with his or her manager to create a set of realistic individual objectives. As we have seen, these personal objectives must support the organization, but they must be written at a very low level so that the actions are within the employee's control. In some cases, an entire team may create a set of common personal objectives that are then rolled down to each individual on the team.

Let’s look at a couple of examples of personal alignment. We'll use the simple example of the company that is trying to reduce costs. Many people don’t see how their jobs can contribute to this lofty company goal. They think that it is only the job of management to reduce costs.

Remember that each person only needs to align to the organization to which he or she belongs. This helps make alignment easier than it otherwise might be. Each lower level of organization has more direct and targeted guidance as to what needs to be focused on.
  • Let’s say your group has seven members and one of them is retiring this year. Your team may have an objective to continue to operate without replacing the retiree, saving the company the cost of the replacement. Each person in the group may have an objective to learn some aspect of the retiree’s job, and effectively take on the new work.
  • A team on the factory floor has an objective to look at its manufacturing process for ways to improve productivity. The objective is to produce 5 percent more product, using the same resources as today. Each person within the team then has a similar personal objective. All of them now have an incentive to make suggestions on increasing efficiency and reducing waste.
  • A marketing group realizes that it is inefficient to use five companies for its marketing campaigns. It sets an objective to reduce the vendor list from five to two, in exchange for receiving volume discounts from the two remaining vendors. Each person on the team then has a personal objective to assist in the evaluation, and to help in the transition of work to these vendors.

Align the rewards and recognition programs
The last part of the alignment process is to ensure that people are actually rewarded based on how well they achieve their personal objectives. There may be other performance criteria as well, but the achievement of objectives must be part of the equation.

Companies that go through the trouble of achieving alignment but don't also have the review and rewards process aligned are just kidding themselves. In other words, if cutting costs is a company goal, you can’t give full rewards to people that don’t contribute. This goes for the CEO, as well as each manager and employee. This doesn't mean people get no reward, since there may be a number of objectives that are important to each person. However, if a person doesn't reach objectives around reducing costs, that employee must get a smaller reward than he or she would have if this objective had been achieved as well.

Consistent focus will bring alignment
Think of the power of this aligned enterprise. Senior management maps the direction and then can count on every employee doing his or her part to help get the company there. If your organization has 50,000 people, you can count on 50,000 people to help. Need to cut costs? You have 50,000 people looking for ways to do it. Do you need to improve customer service and value? You have 50,000 people helping you.

Alignment is a powerful process. It’s not easy, which is why few organizations achieve it. In fact, it will likely take a few years. Like all culture change initiatives, it takes management focus, perseverance, and courage.
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