A Better Way to Set Strategic Priorities

A Better Way to Set Strategic Priorities
To understand a better way to set strategic priorities, we know from leadership simulation assessment data that you must first understand that strategy is fundamentally about two things:

1. Choices
   Making difficult choices about which big bets matter most
2. Resource allocation
   Intelligently stretching limited resources to make those big bets succeed

Not all strategies, markets, customers, investments, stakeholders, programs, resources, or approaches are of equal value.

Successful leadership teams agree upon which strategic initiatives deserve priority in terms of focus, investment, and duration.  We call this strategic decision making — a critical skill for any leadership team seeking higher performance.

Why Leaders Say Prioritizing Is Difficult
Prioritizing requires leaders to clearly identify, agree upon, and commit to what matters most to achieve the strategic objectives.  Prioritizing also requires leaders to stop doing projects that they and others may hold dear.  Our change management simulation data highlights three common strategic prioritization challenges.

• Trying to Do It All
  By far the biggest challenge relates to leaders trying to do it all.  While action is required to get results, most companies cannot handle more than two or three major initiatives at one time.  A bias for action and higher performance is good, but trying to do too much dilutes impact and spreads resources too thin.The highest performing leadership teams invest the time to figure out the critical few things that really matter most.
• Operating in Silos
  Research from Accenture found that 93% of leaders believe that functional silos are the biggest impediment to growth.  When leaders worry more about optimizing their own success rather than the greater good, it can become almost impossible to prioritize initiatives, uncover conflicting projects, or make tough choices.The highest performing leadership teams breakdown functional silos to make it easier to collectively work on strategic priorities.
• Needing Too Much Data
  Even when the stakes are high, executives rarely have all the data they need to make a perfect decision. Some leaders overthink a given situation which slows down the path towards making a specific decision within a reasonable time frame.  While a current state analysis is a critical step in any change process, do not get fooled into thinking that you need ALL of the data before moving forward.The highest performing leadership teams agree upon the data required to move forward in a way that everyone can feel good about.

How to Set Strategic Priorities
Many companies adopt the practice of ranking strategic initiatives during their strategy retreat. Some even set and communicate up to twenty five top initiatives. But too many priorities can dilute focus and performance. How can you possibly allocate limited resources to twenty five priorities with the confidence that they will all be accomplished on time, on budget, and at the right quality?

A Better Way to Set Strategic Priorities
Here is a better way to set strategic priorities that keeps limited resources strategically focused on what matters most while taking into account the day-to-day realities of running the business. We recommend sifting agreed-upon strategic initiatives into three different priority categories: Big Rocks, Pebbles, and Running the Business. Actually, as you begin your strategic analysis, there may be a fourth category — an initiative that belongs “on the shelf.”

• Strategic Big Rocks: The Critical Few
  These are the top 2-3 initiatives that deserve topmost priority because they have the greatest comparative correlation to success. Together, the Strategic Big Rocks should account for 50% or more of the probability for strategic success, command the greatest attention, and receive ALL of the necessary resources.  If successful, they should double or triple the value you create.

  The Strategic Big Rocks should be at the top of your strategic dashboard, monitored weekly, and directly tied to your performance management, succession planning, workforce planning, and compensation plans.

• The Pebbles: Significant but Not Crucial
  The pebbles are important initiatives that, even though they are less important comparatively than the Strategic Big Rocks, can have a positive impact on overall business performance. They deserve designated resources, but their objectives and time frames may vary depending on the shifting needs of projects in the Strategic Big Rocks category.

  In other words, the Pebbles should only be completed if they do not negatively impact the Strategic Big Rocks.

• Running the Business: A “Given” to Keep Things Going
  Strategic Planning Sessions often identify the big initiatives but fail to account for what is required to run the business on a daily basis. For example, an HR team cannot focus on attracting top executive-level talent if current interviewing practices are illegal or if payroll is incorrect.  A CEO cannot focus on a game-changing acquisition if current margins are not up to par.  And the head of sales cannot focus on selling new solutions if the current pricing and compensation plans are not aligned with the new go-to-market plans.

  Do not underestimate the need to allocate resources toward ensuring things do not break or create toxic levels of misalignment.

The Bottom Line
Strategic categories force prioritization, create transparency, and drive workforce alignment. Every employee should have a clear line of sight regarding how and why their unique contributions fit into each of the categories. At the end of the day, the Strategic Big Rocks must get done and the business cannot have any big failures. Then the pebbles should fill in the remaining space if you have the time and resources to make them happen.

To learn more about a better way to set strategic priorities, download 3 Big Mistakes to Avoid When Cascading Your Corporate Strategy