Another question that I usually get from my clients is: How do we align our projects with the company’s strategy.

Well, I always suggest letting your projects naturally derive from your Strategy. For that, I will give you some tips:

Where do we start?

By now, you should have defined your Vision (where do you want to be as a company), Mission (how or why you want to be there) and your Corporate Values (what are you going to look for in your people and their actions).

Guided by this strategical philosophy and your market Value Proposition, you will then define your Strategic Objectives (SO) for the next 5 or more years. For example, “maintaining sustained sales growth of at least 20% for the next 5 years”.

Subsequently, you could use a Balanced Scorecard (BSC) approach to define a Strategic Map to achieve those SO. For instance:

In this example of one branch of the Strategic Map (remember that the sales volume not only depends on the customer satisfaction, the customer satisfaction not only depends on the perfect order rate, etc.) we are defining that as part of our strategy we need to:

• Increase our Customer Satisfaction (to 98%)
• Improve our Perfect Order Delivery rate (to 95%)
• Start the implementation of Lean / SixSigma in Operations

If you review a BSC, you will usually find corporate objectives related to improving Key Performance Indicators (KPI) and others related to implementing specific initiatives (Ex. Lean / SixSigma, or maybe installing a new manufacturing plant). These corporate initiatives should be directly transformed in Corporate Projects.

The KPI related objectives, would need an additional step to be divided into different departmental initiatives.

I always recommend that the Strategical Planning process concludes with the departmental areas translating the Corporate Initiatives into Departmental Initiatives. These initiatives will be used during the yearly business planning process as a base line for budgeting.

The Departmental Initiatives will include Departmental Projects: For example, to achieve the goal of improving the Perfect Order Delivery rates to 95%, the warehouse department could outline that a new WMS system needs to be implemented to replace the old one, so now you have a Departmental Project defined.

As you can see, your corporate and departmental projects have derived directly from your strategy definition.

We have too many projects. What do we do?

Companies will always have limited resources (human and financial) for project support. So, how do you prioritize all the projects that have been defined after your strategic planning?

The first step is to complete a general budgeting exercise with your Finance Department. Since you have defined your Revenue goal for next years (and most probably your Net Income goal too) as part of your strategic planning, you can easily define your projected CAPEX and OPEX for each year and consequently, define a cap for project investment both at Corporate and Departmental levels.

Then you can construct a simple project prioritizing matrix where you can evaluate dimensions like: Impact on Strategy, Complexity, Probability of Success, Return on Investment, Required Resources, etc. and of course, the estimated Project Investment. With these variables, you can define which projects you can implement each year, supporting your strategy and, at the same time, using the available resources.

Sometimes, if you are unable to fit your projects within the allocated budget, you can always go back to Finance and negotiate an increase with them. This certainly could impact your bottom line, but this could be strategically correct. This is a constructive analysis that Senior Management needs to perform.

IN CONCLUSION

The best way to make your corporate and departmental projects aligned with your strategy is to have them directly derive from it. This is a top-to-bottom exercise starting at defining Strategic Objectives and concluding at defining Departmental Initiatives.

Your Balanced Scorecard would directly define some corporate wide projects, and your related departmental initiatives would define your departmental projects.

Both corporate and departmental project budgets need to fit within the strategy delineated CAPEX and OPEX. For that, you need to prioritize your project portfolio selecting those projects which most directly support your strategy and that also fit within the allotted budget.

Juan Pablo Franco

General Manager