Performance Alignment

Driving superior returns through strategic alignment

In today’s volatile markets, aligning an organisation to deliver its strategic intent is becoming ever more challenging. PwC’s own research of more than 450 companies globally suggests that, despite most (80%) having the right strategic intent, vision, purpose and mission to achieve their performance objectives, just over half (54%) of organisations fail to execute their strategy. With traditional sources of growth drying up and agility required to meet ever changing demands, organisations can’t do things the same way as before. With growth now about the demands of the customer and unlocking value in integrated organisations, leaders need to do things differently.

A new approach is required to drive long-term growth and minimise the “alignment gaps” that threaten strategy execution

Why do so many organisations struggle to translate their corporate strategy into executable responsibilities for management? What often happens is that strategic planning, risk management, critical employee behaviours and performance management systems operate independently of each other.  Or organisations lack sufficient agility to quickly execute their strategies and stay ahead of their competition. Performance management frameworks can also hinder the execution of strategy when there is uncertainty around whether executives are truly rewarded for driving strategic outcomes. Change initiatives can also fail because leaders lack the emotional and intellectual buy-in required to embed and model the change across the organisation. This creates an “alignment gap”, or disconnect between an organisation’s strategic intent and what actually happens across the company on a day-to-day basis. The wider the alignment gap, the more likely it is that managers will cascade their own bias and experience of the strategy, threatening the execution health of the organisation.

PwC’s Performance Alignment Framework puts leaders in the best possible position to implement their strategic intent. Our approach focusses as much on the mindsets and behaviours of those delivering change as on the organisation’s hard-wiring elements: processes, performance management systems and metrics, and resource allocation. Our process calls out leaders’ existing biases or blind spots that threaten successful strategy execution. Through senior stakeholder interviews and our global Performance Alignment Diagnostic, we unpack an organisation’s strategic intent, identify areas of alignment and misalignment responsible for execution failures, and uncover potential alignment gaps that pose a risk to an organisation’s ability to successfully execute their strategy and realise their full potential. Armed with this information, we bring together the organisation’s senior stakeholders to have focussed and candid conversations about the reality of what is happening across the organisation and co-create a solution to get the organisation to its desired future state.

The alignment premium: Reaping the rewards of being aligned in strategy and operations

Organisations that are able to align strategic intent, role accountabilities and performance management systems are better able to execute their strategy. PwC’s own research and field experience has demonstrated the value of strategic alignment across a range of industries. We recently asked more than 245 Australian and Asian energy and resources executives to rate their company’s strategic execution capability. Our research revealed that energy companies that have strategically-aligned operating models earn higher returns of between 20-30% on their employed capital (ROCE). This relationship holds over multiple time horizons, suggesting that there is a return from investing in strategic alignment over the medium to long term. Leaders with the courage to highlight and address their company’s alignment gaps who also underpin their approach with a risk lens will be better positioned to achieve success in the long-term.

PwC’s approach to Performance Alignment brings deep subject matter expertise across a broad range of competencies and industries. Working with senior leaders in large organisations, our Performance Alignment framework delivers:

• A thorough diagnosis of the gaps between strategy and execution;
• A unified and consistent understanding amongst senior leaders of their contribution to successful execution so that this can be cascaded throughout the rest of the organisation;
• An aligned leadership – emotionally and intellectually committed to delivering the organisation’s strategy;
• An understanding of inhibitors to the organisation’s ability to achieve its full potential;
• A roadmap of the specific actions required for the organisation to execute, a delivery capability and tools that become part of your organisational muscle;
• A productivity dividend - when done well, it reduces waste and frees up capital.  The clarity generated is the basis on which to stop unaligned activity, with clear economic benefit;
• A competitive market differentiator – with so many organisations pursuing similar strategies, clarity on priorities supported by focussed execution is a clear differentiator; and
• It starts a movement that begins to shift deeply-rooted cognitive biases towards the desired future state.

That’s getting the extraordinary done.