The Vector View: Organizational or Strategic? Should We Redefine Alignment?
Originally, I did a blog two or three years ago when I was questioning whether we should or should not redefine alignment. For almost 30 years as Vector Group Principals, we take pride in the fact that we do excellent work for our clientele and the basis of our work in organizations hinged on the concept of organizational alignment.
Awhile back, I met over coffee with a new colleague who has deep experience in business marketing and sales. When she asked me point blank what we do at Vector Group, I began my usual response of explaining our approach of organizational alignment. Our business tagline is aligning culture and infrastructure with business strategy. That makes sense to us so doesn’t that explain clearly what we do? Judging by the look in her face, I don’t think I hit the mark in clarity of purpose.
As I talked with her, I found myself wondering how I could craft a message explaining alignment to a 4th grader so he or she would have an understanding of our business. In our concept of alignment, we talk in terms of processes, procedures, systems, structure, values, practices, behaviors, goals, objectives, activities and results all of which adds to the creation and maintenance of the organizational culture. When we talk about alignment of all those things and then add in words like effectiveness, performance improvement or process improvement, there can be much confusion.
Organizations are complex entities not only because of various functions or processes they need to perform but also with the added dynamics involving people. When trying to get widgets produced and out the door, it can become a tangled mess of people and processes leading to dysfunction and a loss of competitive edge. This is where we step in. We help organizations achieve or re-establish that competitive business edge. We have a history of turning around poor performing organizations and making industry leaders out of our clients.
So the clearest message to that 4th grader would be when an organization doesn’t work like it should, we fix it. I routinely teach MBA graduate students about organizational alignment and explain to them that it is a means of getting all the elements of the organization working together, supporting and complementing each other. I routinely ask them to respond to a question as to how well they believe their organizations are aligned and I invite the students to look at their own organizations differently.
One major change in our thinking is that while culture is certainly a driving force, we cannot separate it from the rest of the mix. It is part and parcel of the entire organization and it touches all aspects of the organization within the four walls and even brushes up against the external environment. If aligning all these components into a more competitive company that delivers on the mission and strategic goals is what we do, why not call it strategic alignment? That is what we need to deliver.
Organizational leadership is also, quite obviously, a major force in the organization. The mission, vision, strategic goals and values all flow from executive leadership along with the infrastructure. From the top of the house, leadership defines a direction, sets strategic goals, builds the organizational structure, sets policy, acquires the appropriate talent to carry out the mission and initially determines how people might behave in achieving organizational intent. Each of those components needs to complement and support all the others. That, too, is strategic alignment.
In finding out how effectively organizations work, part of the challenge management faces within any organization is looking at things with relative objectivity. All too often, organizational members accept the way things are because they are too close to the situation. Anyone coming in from the outside brings a fresh set of eyes and a new perspective on day-to-day practices and behaviors. The same thing holds true with processes and procedures. Quite simply, if the organization does not align itself in terms of culture, infrastructure and strategy, the enterprise is not where it should be. It is functioning at a point somewhere less than desirable. This is a performance gap and where we step in.
For example, not too many years ago, we had a 160-year-old insurance company in the UK as a client and they had a notable performance gap. The recently hired Managing Director of this 3,000 member sales division invited Vector Group to investigate the current business reality. The Cost of Sales was soaring astronomically at 2.65: 1. This means that for every British pound brought in as revenue, there was £2.65 going out the door with the cost of sales. On the surface, the best advice that we could give this division would be to quit selling!
This was a classic situation of organizational misalignment that affected its performance. The organization was not functioning well enough to accomplish even the simplest goal of breaking even in sales. The organizational system encumbered the sales force with too many costly processes, rules and procedures that got in the way of even very simple sales. Additionally, they described their IT capabilities as “state of the art for the 1890s”. As a result, the overall system was stifling any sense of personal responsibility and initiative to take action.
Following an organizational scan (diagnosis), we launched concurrent multi-faceted interventions to transform this business. Overall, we reduced cost of sales 165%+ for this sales division while increasing sales channels. We guided concurrent projects re-building the infrastructure to support attainment of strategic goals. An international faculty delivered Leadership Mandate, a residential 360° feedback-driven leadership development program for the top 500 sales managers designed to transform the manner in which the sales organization was managed on a daily basis.
All totaled, we made 1182 process improvements throughout the organization. The final numbers showed cost of sales down 34.7%, sales productivity up 64.6%, internal processes down 29%, all while increasing the number of sales channels. This program focused 75% on leadership and management development, 20% process re-engineering and 5% infrastructure adjustments. The overall result over the course of 14 months was that we brought this 160 year old company into the 21st century
These interventions took place all across the division helping to close the performance gap. We helped them change strategies, reorganize HR, revise policies and procedures and transform the nature of daily leadership and management– all of which resulted in a new organizational culture. Managers and staff were held accountable for different performance measures leading to a change in organizational performance. This was strategic alignment in a classic sense.
Out of curiosity, I went to each of the Big 4 consulting or accounting firms’ websites (KPMG, E&Y, PwC and Deloitte, et al) and the term alignment shows up on each one. One just calls it alignment, another actually calls it organizational alignment but never clearly defines it, another does some references to strategic alignment and another makes references to alignment in different client situations. It seems to be a popular term. We do our best to speak a business language that our clients understand and make alignment real and pragmatic.
Despite the rolling of the eyes we get from some when we talked about organizational alignment, do we really need to redefine our terminology? In organizational terms, we can call it transformation, change, improvement, effectiveness or metamorphosis. Strategic alignment works for us….and will continue to work for our client organizations.
Perhaps William A. Pasmore best described what we achieve with our efforts: “Effective organizations are those which produce excellent results by any measure of costs, quality or efficiency while simultaneously enhancing the energy and commitment of organizational members to the success of the enterprise.” This is what we strive for in our work – to align those driving organizational forces so that the organization can deliver on strategic intent.
Strategic alignment brings competitive business advantage. Why change what we call it? Because it makes sense.
Gary
Gary W. Craig is Managing Partner and COO for Vector Group, Inc. You may reach him at [email protected]. Vector Group is a global consulting firm specializing in systematic organizational diagnosis and interventions to ensure that corporate strategy, culture, and infrastructure are aligned to achieve breakthrough success. Visit our website at http://www.vectorgroupinc.com or call us at (800) 566-0877.
