Factor in people-why people elments are import in strategy formulation

When we talk about strategy formulation, the scenario pops up in our mind is that cooperate planners are swamped by the analysis of financial and operation data, business forecasting, industrial trend, demand-supply dynamics, competitions and customers etc. Too often, people element in a strategic planning process is missing or downplayed because it is deemed to be unimportant or irrelevant factor. However, a lot of companies who don’t factor in people in their strategy formulation end up fighting an uphill battle in the implementation of their strategy which is thought flawless at the beginning.

So why people factor is crucial in the equation of strategy formulation? The answer lies on the simple but always elusive fact that in any business environment we need to cope with two complexity，institutional complexity and individual complexity.

Institutional complexity stems from strategic choices (such as which industry the company is in and what product the company is producing) and the external context (such as the regulatory climate and marketing condition etc). It grows as an organization adds units or increases the number or diversity of the interactions among them—for instance, by moving into a new geography, serving a new customer, or opening a new manufacturing location.

Individual complexity is the way employees and managers experience and deal with complexity—in plain English, “how hard it is to get things done.”

Institutional complexity is more related to strategic planning and external context. Whereas individual complexity is more closed to operational and organizational choice. In other words, how to organize people and carry out the strategy.

Two people issues must be included and addressed in strategy formulation. First, reshape people’s paradigm to accept and embrace the changes implied by the corporate strategy construction. Second, evaluate the availability of people that is able to successfully execute the strategy.

At any business level, a strategy formulation always entails major changes in the organization. When all kinds of business factors and risks are carefully calculated in order to handle the possible major “climate” shifts, one loop in the chain often missing, which is how do we educate our people to deal with the changes.

Individuals don’t have a natural aptitude to adapt. Resistance to change is inevitable. People see changes in different perspective other than what the strategic planners usually assume. When people hear strategy, it immediately creates the fears and doubts in the minds of employees: Will I lose my job? Will I be good enough? Where will I fit in? Who will I be in the new organization?

Employees will alter their mind-sets only if they see the point of the change and agree with it—at least enough to give it a try. If these fears and doubts were not ironed out, the strategy would face enormous challenge to push through. To tackle this issue, in the strategy formulation process, we must ask ourselves the following questions and prepare answers.

1. Is the organizational structure need to be changed to accommodate the deployment of the strategy?
2. How many people’s job might be risked? What is the exiting plan for them?
3. How can we communicate effectively to instigate buy-in and break the resistance?
4. Should we revamp our motivation system so as to align with our strategy?
5. Is our culture compatible with our strategy? Do we need a culture shaking?

A right strategy only means a quarter of the way toward success. Many excellent strategies veer off the road due to the absence of capable people to carry it out. Quite often, we assume that our labor force is able to undertake the tasks and achieve the strategic goal. And the result frequently tells otherwise. A new strategy demands a better or different skill which usually is not possessed by existing employees.

For instance, the strategy requires employees to be “customer-centric,” but if the company paid little attention to customers in the past, the employees will have no idea how to interpret this principle or won’t know what a successful outcome would look like. So even at the planning stage, we should put this execution capability into consideration. The job should be done include:

1. Evaluate the employees’ current skill and check whether it meets the requirement of the new strategy. If the gap is foreseeable at the horizon, company must prepare necessary trainings to close it.
2. Appoint a strategic execution officer. It is a key ingredient often overlooked but is pivotal. The position requires not only commitment and energy, but also the ability to command resource and make tough decision to remove any obstacles in the way.

3. Create role models. In any organization, people model their behavior on “significant others”: those they see in positions of influence. So at very early stage, company should plan to build an elite team which fully embraces company’s strategy and also has the ability to permeate its influence to the lowest organizational level. When the influence is getting bigger and bigger, the strategy will also aggregate its momentum to move forward.

Strategy formulation is the most important activity of any organization. It requires a lot of effort and resource to make a sound one. A strategic planning process will never be a complete one without putting people element under consideration.