4-5-6 is a mnemonic reflecting the fundamentals to be respected to achieve continuous strategic performance.
*** 4 PILLARS
4 pillars must support your company’s strategy. If only one of these pillars is undermined or weakened, the company will be at risk and unable to reach its objectives.
First Pillar: Excellent Executive. Vision. The main responsibility of your CEO is to develop and sell the strategy and to ensure it will be fully supported by Operations and Sales. Additionally, the board must also be able to create or improve all other performance drivers such as expertise sharing, quality mind-set, incubators for innovation, enthusiasm and motivation...
2d Pillar: Organisation. Organisation must be aligned with strategic targets and be quality or cost driven. Organisations are often suffering from deadly diseases such as lack of visibility on processes, lack of ownership, silos… One of the most significant symptoms of this contagious sickness is reunionism. This disease can generate important structural and coordination costs. When the charts don’t properly mirror the who-does-what-where-when, staff has no choice but to continuously meet to clarify and negotiate the said who-does-what…
3d Pillar: Methods. Methods are the toolbox that you need to contain costs, mitigate risks, manage quality, boost innovation, monitor IT projects, increase and sustain operating performance: PMI, Lean Six Sigma… All methods must be implemented, maintained… and, and fully understood and supported by Executive! It could be challenging to get the management buy-in especially for tools that don’t have a direct and visible impact on your profitability. A supportive environment is created by education, ownership, pilot projects, continuity, communication plan, rewards for the drivers…and by success!
4th Pillar: Processes excellence and maturity. All business-critical processes must deliver the best possible performance. Primarily you need to identify the critical processes and clarify the assessment technique to measure their respective maturity. Sometimes company do completely underestimate the importance of processes such as: Management cockpit, HR management (recruitment, education), Billing. Processes map and process maturity dashboards are key elements of the management cockpit.
5 LEADING MANAGEMENT PRINCIPLES
The 5 represents 5 key management principles that have to be respected across all management layers.
P1: Service quality – Focus on clients. All staff should consider service quality as their top priority and organisation should be focused on external or internal clients... This mind-set is sometimes not fully supported or understood by supporting entities where the client is just a concept or an abstraction…
P2. Visibility. Full visibility is required to manage an enterprise. You cannot pilot a company without a clear and comprehensive picture of its strategy, business model, organisation, staff performance and skills, processes, capacity, risks…
P3. Ownership to fight entropy. You need one and only one owner for all performance drivers and operating components: clients and segments, processes, IT solutions, methods, data bases, risks… The ‘ownership’ principle must be applied on a global way. It has to be sustained by management practices such as the MBO. You need a ‘responsible driver’ for all these components. Be sure that orphan processes will quickly deteriorate and become depressive, following the entropy principle… Quality will become wishful thinking, databases will be turned into garbage data warehouse and so on.
P4. You cannot manage what you can’t measure, management cockpit. Starting with the strategy that has to be translated into accurate and clear objectives covering not only the net return but also the performance, quality, competitiveness, risks aversion, clients and segments, innovation, investments… And as in any airplane, company needs a management cockpit with a head-up display enabling real-time and global monitoring of the strategic objectives, with their correlations. “head-up” referring to all meetings where time is wasted by Managers trying to understand dashboards instead of contributing to the decisional debate.
P5. Metrology. Metrology is the science of measurement. You cannot measure volumes and activities without using standardized units that have been calibrated and specified, like metrics such as litters, volts, amperes, calories… The application of this principle is relatively easy for operational processes where outputs can be identified and counted in an automated way. It could be more challenging but still feasible for activities like business analysis, advisory… or for intangible assets such as the skills and education of your staff.
6 TYPES OF STRATEGIC TARGETS
Enterprise strategy has to be designed as a set of 6 equations, at least.
S1. Financial results at given deadlines.
S2. Clients’ satisfaction, typology and retention.
S3. Operational Performance of your processes, especially the ones that are business critical.
S4. Investments creating or improving performance drivers: IT solutions, innovation (new products, new segments), education, organisation...
S5. Risks aversion.
S6. Competitiveness (benchmarks).
These 6 dimensions are correlated and must therefore be simultaneously monitored, to properly manage all side effects and dependencies. As a basic example, you cannot put all your assets in the same basket during one fiscal year by simply considering the financial results, while freezing all initiatives to retain clients or mitigate risks… It would be a Pyrrhic victory!
Conclusion
The 4-5-6 framework is required to build sustainable performance. 4 Pillars, 5 principles, 6 strategic dimensions ... to be reflected in your 'management cockpit'.