What is Alignment and How do we do it?

Whether building a company from scratch or running an existing one, alignment is a factor that can make your life easy or thoroughly complicate it if you are misaligned.  Building in methods and policies that align with your mission and vision, and plans that lead to infrastructure, policies and processes that are consistent is extremely important.  While simple to state, it can be a complicated idea to implement effectively as your company grows or changes.  This article discusses how to maintain alignment throughout your organization and the downside of losing control of alignment. 

Introduction

If you are managing an organization, you hope that the people who work for you are all working in the same direction.  Many times leaders try to make sure that is happening with regular meetings and organization structures that provide “trickle down” sorts of directions to guide the employees in their daily work progress. 

Much like the telephone game and the now debunked “trickle down” economics, these strategies can only provide limited assurance of alignment toward the goals of the organization and can often go very awry.  The best organizations also use development and training, widely shared strategic plans and communications systems that provide regular updates on the organization’s progress toward goals. 

However, even the best communication plan cannot fix policies that do not align with the organization’s goals properly.  While exhorting employees to behave in one way, badly aligned policies and procedures can make it impossible for employees to attain those goals.  This results in high levels of frustration, notions that the leaders are completely unaware of what is happening and eventual loss of faith in the leadership.  While complete anarchy may not result, some loss of efficiency, effectiveness, turnover increases and other costly outcomes can result. 

How does alignment shift to misalignment?

In my experience, misalignment often occurs when the focus of leadership turns solely to bottom line profits.  The organization may be entering into some tough times and the leadership, in a well-meaning effort to keep the company profitable, begins to manage by reducing costs, reducing staffing and other cost cutting measures. Another possible reason for a shift is an expansion of the market.  Growing too fast or without plans for how the new product or customer will fit into the brand can gradually shift the value proposition and the company brand creating misalignment within the company.  Three examples of alignment shifts follow. These examples are based on real institutions but changes are made to disguise the real names.  

The cost-cutting program to misalignment

A university with an exclusive reputation, high-tuition and stellar credentials, under pressure because enrollments have fallen, began focusing on this issue by trying to increase enrollments.  Pressuring the enrollment group to bring in more numbers without considering what consequences might follow and the changes in the market caused the employees to begin to waive some of the entry requirements, thus meeting the enrollment numbers but overlooking the resulting effects on reputation and educational quality. 

The same thing happens in manufacturing organizations.  Let’s suppose that our company makes a high-quality, highly-valued part for the automotive industry; something for performance engines with close tolerances and highly polished and expensive metal/ceramic raw materials.  Sales have fallen in the last two years and the forecast is for a reduction in sales again next year.  As we have a high-quality product, we also employ many highly skilled craftsmen with years of training and education who produce this part for us.  The leadership began to look at cost cutting as a solution to the problem.  Since labor is a large part of the cost, laying off employees seemed like the quickest solution.  Inventories were also reduced.  Production began to have trouble making parts on time due to lack of inventory or missing skilled employees for the required shifts.  Using unskilled labor resulted in higher off quality products and some of them got shipped due to the rush to get the product out the door.  

In both these cases, the clear goal of the organization is high-quality and stellar reputation for product quality.  This strategic goal requires strong alignment of the whole organization in order to continue to achieve this outcome.  However, when pressured with policies that are formal or informal in the form of commands to provide “relief” might cause the costs to briefly reduce but the longer term effects or damage to the quality reputation may be difficult to overcome. Not simply a loss of reputation with the customers who will begin to notice quality problems but also for employees who were hired and inculcated with the pride of the high-quality mission and see it now being damaged by decisions that are unaligned with the mission.  Over time, continued persistence in this policy to reduce costs without concerns for alignment with the mission will erode the reputation of the firm and the loyalty of the employees. 

How can growth damage alignment?

The same small manufacturer above making high-quality high-performance parts has a very motivated sales team who believe they have found a new product opportunity to increase sales.  This product is similar to the current product but made with lower cost raw materials and lower tolerances.  This product will go into automobiles in China and India and the initial forecasts are for twice the volume of the current product but 1/3 the price with 5% margin. Currently the company is enjoying 15% margins.  Clearly the production process will become very busy and will have to triple production with two very different products.  The assumption by the sales force and reluctant agreement from engineering is that the same equipment and people can make product #2 easily.  The leadership was seduced by this significant increase in revenue and took a contract for this product for early next year.  The first pass of production was good for the new product but the repercussions were significant. Tools were dulled by the production and had to be re-sharpened; a major cost and downtime resulted.  Raw material storage tripled and cash reserves were eaten up by this storage requirement.   With sales delayed until next year, the purchasing department was told to reduce inventory for their high-performance product raw materials quickly because that resulted in restoring cash reserves faster.  As this draw down occurred, work stoppage of the high-performance line again occurred due to lack of supplier responsiveness to this new 5 day turnaround demanded by inventory declines.  Two missed deliveries of product #1 resulted due to these delays and customers began to complain. Leadership discussions of outsourcing the high- performance part #1 began because the company clearly was less able to produce it than in the past. Mistakes due to these changes in the production occurred because skilled workers were not accustomed to making the new parts. The mission to delight customers with the best performing parts in the business now looked like a pipe dream. Revenues were way up but there were cracks forming in the alignment to mission. Customers were complaining and talking to other suppliers.  

How to assure alignment?

So with these three examples of the lack of alignment, how then do we assure that alignment is not affected as we deal with decisions?  We obviously have to deal with demands for cost reductions at times and will want to investigate growth opportunities.  First and foremost, it is important to consider any major shift and whether this is consistent with the stated mission.  How does this decision affect that mission?  Does it further our outcomes or possibly damage it? What is the potential for damage and how can we deal with it remaining consistent with our mission?   In addition, in good times, the leadership needs to review policies and procedures in place to make sure they support the mission.  Engaging leaders and employees in discussions about alignment reinforces the mission and can help ferret out issues that have developed due to attempts at efficiency or effectiveness that may be creating actions that are contra to the mission.  

In addition, there are some methods that help assure alignment.  There is a system called 7S that was published in the Harvard Business Review that attempts to help business leaders review alignment.  The Baldrige National quality award system also works to help leaders become aware of alignment and how to maintain it across the organization.  See the references for more information on these methods. 

Summary

Checking alignment regularly during leadership meetings and board meetings should be a high priority.  Alignment can erode over time and making sure it is part of the agenda for discussion of the leadership will tend to preserve the mission and place a priority on the maintenance of the reputation of the organization.  Alignment can be tough to maintain in the face of competitive markets and financial pressures but it is well worth considering.  Sticking to your mission is extremely important during these events so that when the pressure declines, the reputation of the firm remains intact and the firm is then poised for growth. 

References

Written by Terri Friel



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