The management review process is a well-established ritual at Indian companies but it rarely contributes to advancing firm strategy.
Every CEO and senior manager will be accustomed to the ritual of the monthly or quarterly management review meetings. Key financial figures are compiled and presented, each department shares their status update, and the discussion goes back and forth on why certain targets were missed and what will be done differently next time. Then one month later the whole process is repeated.
What is missing from this process is any clear connection between the review system and the firm's overall strategy. The financial numbers are typically presented in spreadsheets or powerpoints that don't immediately reveal important insights. While key metrics are usually buried deep in the data and fail to come to light during the deliberations.
Furthermore, the overwhelming focus of management reviews is on lagging indicators like last month's sales achievement rather than leading indicators like health of the sales pipeline and conversions. Which means most of the time is spent looking in the rear view mirror without knowing the real status of strategy execution and deciding corrective steps to be taken.
Based on our prior work helping companies transform their strategy review process, we have distilled five important elements that can turn your review meetings into an effective tool for advancing your firm strategy.
Make your strategy transparent
In many cases the firm's strategy has not been clearly defined and articulated in a way that creates a common understanding from C-suite to the frontline. If your managers don't have the same picture of the future then their priorities and actions will inevitably diverge.
Break down strategy into key initiatives
Once the strategy is clearly defined the next step is to break it down into the major strategic initiatives to be acted upon. When deciding initiatives it is important to ground them in the unique context of your organisation and real market insights.
Identify the most important indicators
With the strategic initiatives identified you then need to select the relevant indicators to track their progress. While linking metrics to business goals, it is important to ensure you have sufficient metrics to cover the key parameters but not so many so that you miss the big picture.
Recast your financial statements
It is important to appreciate that financial statements are typically designed to follow accounting guidelines. Therefore it is often useful to recast them as 'strategic statements' where costs and revenues are grouped under relevant strategic rather accounting heads.
For example, one manufacturing company selling its products through the dealer distribution channel recast its financial statements around three key strategic pillars of its business: Sourcing, Sales and Service to continuously drive execution of its strategy.
Train people to conduct the review
Finally, to form new habits around the strategic review process it's important that all the participants understand the metrics and the meaning behind them. Those messages then need to be continually reinforced and measures put in place to discourage falling back to old practices.