Note: This post is the first in a series of posts from Robert Bradford’s article Strategic Alignment originally posted in Compass Points in November 2002. Part One introduces the topic and discusses the affect that the Purchasing and Accounting departments have on strategy.
Over the years, several companies have asked me how I would go about getting departments of their organizations to support the vision we created in the strategic planning process. To begin with, it’s important to recognize that this is a good idea: any department in your organization can either support your strategy by being aligned with it, or block your strategy by pushing against it. To see how, let’s take a look at how several different departments might affect strategy.
Purchasing — In many purchasing departments, performance is measured strictly by how well the department cuts costs. This is clearly useful for a company that is pursuing commodity customers, but it can be highly counterproductive when your target customer is a specialty buyer. The problem of measuring other values — such as the impact the purchase has on our operations or on our customers — sometimes makes purchasing a difficult department to align with the organization’s strategy.
Accounting — Accounting typically gives the company a way of measuring performance (financially) after the fact, as well as managing cash flow and, usually, budgeting. Some accounting departments also focus a good deal of effort on cost measurement and management. Naturally, the measurements that come out of accounting in most organizations are likely to be the easiest measurements to use for management. Since much of value creation is difficult to measure (except where it is efficiently translated into higher pricing), over-reliance on the easiest financial measurements for management can lead to commodity thinking, which is a potential disaster for companies who are targeting specialty customers. A general tendency caused by the ease of financial measurements is that accounting people like to focus on cutting costs and raising prices, which in turn can make the job of selling harder and harder.
The next post in this series will discuss the affect that the Operations, Sales, Human Resources and Customer Service departments have on strategy.
How do your Purchasing and Accounting departments affect your strategy? Attend the Simplified Strategic Planning Seminar for more instruction on how to achieve alignment from your departments as well as all other aspects of Simplified Strategic Planning.
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