You’re Doing It Wrong: Strategic vs. Operational Goals

¨A goal is a dream with a deadline.¨ Napoleon Hill 

Any organization needs to have a strategy and respective strategic goals, however, on most strategy maps the focus is on incremental operational objectives that can rarely result into sustainable profitability. 

[Infographic] You’re Doing It Wrong: Strategic vs. Operational Goals

Strategic vs. Operational

Intuitively anyone recognizes the contrast between operational and strategic:

  • Operational” is something that helps things to work smoothly today, and requires constant attention, while
  • Strategic” is something from the world of top managers, defined for a longer-term, often less tangible, but still very important.

Can we call “15% increase of the market share” a strategic goal? Is “Implementing new technology” strategic or operational?

Is strategic/operational defined only by planning horizon or by something else as well?

6-Point Checklist: Strategic vs. Operation Goal

In order to answer these questions and have a point of reference for the following discussion, we can build a checklist that compares a “strategic” goal vs. an “operational” one.

Strategic Goal Operational Goal
1 Doing things differently. Doing the right things. Doing things better. Doing things right.
2 Long-term (2-4 years) Short-term (week, month, quarter)
3 Aligned with mission/vision Aligned with strategic goals
4. Gives coherence to the operational goals Allows achieving strategic goals by giving workable execution plan
5. Sustainable advantages. Long-term profitability. Best practices. Short term profitability.
6. Game of top managers Game of line managers

If you have more ideas for the checklist feel free to share in the comments!

How to Find Out if the Goal is a Strategic or an Operational One?

According to my experience, the checklist above is generally well accepted by any auditory. Why not then try to use some examples to see how it works in practice. Let’s start with these 3 goals, and do a quick analysis:

Analysis Classification
Goal A: Answer customer queries regularly This looks like a classical operational goal. Company needs to keep doing what it was doing. Operational Goal
Goal B: Answering customer queries faster Company is improving here on the best practices, so again, it looks like operational goal. Operational Goal
Goal C: Improving customer support service during 5 years This one is too broad to be operational goal, so it fits into the concept of strategic goal. Strategic Goal

Now, let me ask some tricky questions…

Is a Strategic Goal Aligned with the Company’s Mission/Vision?

Just because “Improving customer support service during 5 years” is a long-term broad goal, it doesn´t make it a strategic one! 
The main question is

  • If the company actually needs to have a better customer service (point 3 in the checklist) or
  • Everything is just fine now…

In other words:

Does improving customer support service lead a company to where it wants to be in its dream-future?

That’s a good question to ask.

If the company actually needs to have a better customer service?

View View IT KPIs online in BSC Designer IT KPIs online - sign-up with a free account for immediate access to 16 scorecard templates.

What if the answer is “No, it is not aligned with our mission/vision!” (like on the strategy map for IT above). Then this is not a strategic goal, at least not for your organization.

Does a Goal Require Incremental Improvement or a Critical Change?

Another thing that we need to look at is the degree of the change that the goal implies.

Let´s take “Goal B: Answering customer queries faster” as an example.

What exactly stands behind this goal?

Is it about training some additional staff and adding more articles into the knowledge base, or it is about re-investing the whole idea of customer support?

The goal, as it is formulated now, is not specific enough to answer these questions.

We need to take into account its business context:

  • For a start-up company “Answering customer queries in 24 hours rather than in 48 hours” might be a good operational goal, as it is something achievable for a small team,
  • For an international company with a complex structure and a certain way to do things the same goal might result in radical changes in the organization, and will be more than strategic. For sure, we are not talking here about outsourcing everything to a cheap call center.

The essence of the problem was well formulated by Keith Hammonds in the article “Michael Porter’s Big Ideas”[1]. He wrote:

“[companies that] produce the highest-quality products at the lowest cost […] They’re just trying to improve on best practices. That’s not a strategy.”

That’s what happened to Nokia’s mobile phone business: the company produced great phones, the design was nice, the battery lasted for a 1 week, there was no need for a protective case… but it has missed the smart phones market.

Here is how Harvard Business School[2] described the improvement on best practices:

[…] rarely are “best practice” advantages sustainable.

Focusing on Best Practices and Quality is not Necessary a Sigh of Myopic Strategy

Henry Ford once said:

Obstacles are those frightful things you see when you take your eyes off your goal.

From some point of view his approach to the business might look like incremental changes (focusing on quality, reducing costs, reducing prices), but behind these operational goals there were a bigger strategic one that gave a sense to all other operational objectives. That´s a positive example of how good a strategic goal works.

Another positive example is the focus on safety is Alcoa[3] company that gave a sense of direction to all supporting operational goals. In their case, achieving highest safety levels is a great strategic goal.

Short and Clear: the Difference Between Strategic and Operational Goals

I´d like to share the explanation of what strategic goal is that I use during my talks:

  • It is big enough to give you a sense of direction for a long period,
  • It is aligned with your mission-vision,
  • It is outside of your comfort zone, so you are forced to reinvent things rather than just improve,
  • It is measurable, so you can find one or two good KPIs for it,
  • It is achievable. You know how to divide it into smaller operational goals, or at least where to start.

A Long List of Goals vs. a Strategy

We discussed the difference between operational and strategic goals. Probably, you already have a long list of the goals of both types. So, what’s next?

There is nothing bad about having a long list of goals; it’s a good way to keep a record of interesting ideas and action plans. But still, any business needs a strategy:

  • A strategy helps to keep a direction towards the “north.”
  • A strategy helps to filter goals that don’t fit, and it gives  coherence to the ones that are left.

The Differences Between a List of Goals and a Strategy

Do you already have a strategy for your business? Keep reading and make a short self-test for your organization, probably there are things that you can improve.

1. The Difference is not About the Quantity

Having 100+ goals on your list doesn’t make them a strategy. A strategy might be just one simple idea about what you want (or don’t want) your business to be like.

The purpose of the strategy is to give your team a shared vision, and explain how you want to achieve it.

2. The Difference is not About the Package

Phrases like “leveraging growth opportunities via leadership” make goals sound smarter, but they don’t help with a strategy formulation and execution.

A good strategy is formed by clearly defined goals. The word “clearly” in this case means “no different interpretations.”

3. Strategy is Formed by “Strategic” Goals (sorry for tautology)

Before we discussed the differences between strategic and operational goals. Most likely, a good strategy will be formed by “strategic” goals, e.g.:

  • Goals focused on change, not just on improving things
  • Goals aligned with vision.

Some goals are just not big enough for the business in the long term.

4. A List of Strategic Goals is Still not a Strategy

The problem with strategic goals is that there are a lot of them, and most of them are excellent, but contradictory ideas:

  • You might want to enter Brazilian market, or
  • Implement a new CRM system that will do all marketing job for you, or
  • Attract funding from a venture funds and create another Uber.

Normally, you cannot do all this at the same time. A strategy brings some systematic approach to this chaos.

Strategy is about choices, and to make those choices we need to take into account many factors:

  • What do our stakeholders want?
  • What value do we create or could create for our clients? How do we make money?
  • What threats and opportunities are there (a good old SWOT)?
  • Why are we in the current situation? What constraints do we have? What do our competitors do?
  • What are our priorities, goals, and how are they connected?

There are various frameworks to describe a strategy, and for sure Balanced Scorecard is one of the best and recognized.

An Example of a Balanced Scorecard Strategy Map for Customer Service

An example of strategy map for a customer service - it provides coherence for the strategic goals and indicators

View View Customer Service Scorecard online in BSC Designer Customer Service Scorecard online - sign-up with a free account for immediate access to 16 scorecard templates.

5. To-do Lists & Gantt Charts vs. Strategy Maps 

The most valuable part of the BSC approach is a strategy map – make sure you have a good one for your strategy.
There are two signs of a good strategy map:

  1. It actually exists (and you can show it to your employees)
  2. It is a few pages only (1 page for a map, 2-3 pages to explain the supporting ideas)

Having 80+ pages document and calling it “Organization’s strategy for 2050” is fine, but consider making an “executive summary” version of this document as well.

In this context, we often hear complains like

  • “It’s hard to maintain a strategy scorecard in Excel/PowerPoint.”

You can create a prototype of a strategy map in any office software, but for a real project I’d suggest using professional software like our BSC Designer.

Here is what James Creelman, an independent Balanced Scorecard expert, said in this context in one of the interviews:

Start with office tools, etc. After a year or so, migrate to a scorecard automation tool.

What about keeping goals in order?

The tool might be as simple as a list of things to do, or a professional project management software will Gantt charts and other useful functions.
Once more, before searching a software tool, get a clear understanding of what you are actually looking for.

A typical confusion that we discussed before is when people are looking for strategy execution software, when they actually need a simple project management tool.

6. Goals are About Actions; Strategy is About Actionable Hypothesis

There is a less obvious difference between a list of goals and a strategy:

  • When we have a list of goals, in the many cases we have in mind a specific set of actions with the expected results.
  • In a case of strategy, we have a number of hypothesis that we want to try. Those hypotheses are for sure actionable, but the results are not guarantied.

That’s why there are leading and lagging metrics aligned with most goals on the strategy map.

Leading metrics help to quantify our actions, while lagging metrics help to validate achieved results (validate the hypothesis).

Validating hypothesis with leading and lagging metric
View View An Example of Contextual Indicator online in BSC Designer An Example of Contextual Indicator online - sign-up with a free account for immediate access to 16 scorecard templates.

In this case, our hypothesis is that to train a team, we need to invest certain time (“Training hours” leading metric), and if we achieve our goal, we will see the improvement in lagging metric “Sales team skills index.”

7. The Goals are the Steps Towards Success; Strategy is a Road Map Towards the “North”

What was the purpose of designing a strategy? That’s a good question!

Didn’t we create another document that will be used at annual meetings only?!

I hope this won’t be the case!

Thinking about a strategy, a good analogy might be a history of writing.
People were able to communicate before writing, moreover, they were able to share their ideas across generations, but having a formal way of writing multiplied the efficiency and effectiveness of the knowledge they were sharing.
A similar change happens in an organization that created and implemented a good strategy map.
The organization was able to work before without a strategy map or KPIs, but having a good strategy map helps to explain strategy to all the employees (find some facts here for a case you need to convince your boss), and helps to understand the priorities.

Feel free to share your thoughts in the comments block below or ask some follow up questions.

Planning is important, but execution is what really matters

In the end a little bit of wisdom from Chinese philosopher Laozi[4]:

A good traveler has no fixed plans, and is not intent on arriving.

This quote gives an interesting point of view on the balance between strategy execution (traveling in this metaphor) and strategic planning. What do you think? Share in the comments!

Online wizard will help even inexperienced users to create a professional strategy map with business goals, KPIs, and initiatives.

Strategy Map Wizard – Balanced Scorecard in 6 Minutes

Answer simple questions - build a professional strategy map in 6 minutes.

Strategy formulation and description might be a time-consuming project even for an experienced strategist. This Strategy Scorecard Wizard will make the whole process fast and intuitive. Learn more!

Start now!

References

  1. ^ Michael Porter’s Big Ideas, Keith H. Hammonds, Fastcompany, 2001
  2. ^ Operational Effectiveness vs. Strategy, Institute for Strategy & Competitiveness Harvard Business School
  3. ^ How to Find 1 Keystone Indicator that Needs to Dominate on Your Scorecard, Aleksey Savkin 2015, bscdesigner.com
  4. ^ Laozi, Wikipedia

Scorecard Expert | Speaker | Author

BSC Designer is a Balanced Scorecard software that is helping companies to better formulate their strategies and make the process of strategy execution more tangible with KPIs.

If you prefer to receive posts like these by email sign up to our newsletter.

Posted in Strategy Map

Thank you for sharing!

Whether you are looking for a professional Balanced Scorecard software, or just researching information about Balanced Scorecard and business strategies, we recommend you to download and try our BSC Designer software (no credit card is required).

We will follow up with you with lessons about the Balanced Scorecard and will keep you informed about the trending articles on bscdesigner.com

Follow us in Social Media