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How to drive effective strategy at fintech companies

Dubai - Ever heard of the 'Balanced Scorecard'? As its name implies, it can help you take better control of things

What does not get measured seldom gets managed. If the most important agenda for the CEO is to drive the strategy of the organization, then it's time that attention is paid to making the strategy measurable. And this is where the effectiveness of execution comes into play. Ultimately, effectiveness is about doing the 'right thing', and about prioritizing the more important areas over lesser priorities.
If you are the CEO of a medium to large fintech enterprise, chances are that you are already dealing with one or more of the following challenges, and quite understandably burnt some midnight oil over them too:
. The vision of the enterprise is shared by your immediate subordinates, but not cascaded across the enterprise
. Shareholder expectations are more financial in nature. Therefore, financial targets take center-stage, and operational objectives tend to get sidelined in review meetings
. Hard to make people own responsibilities - or make them accountable for results, as the expected outcome is vague, and not measurable
. Ownership to the strategy is not broad-based. Hard to make people see the linkage of internal initiatives to that of ultimate financial benefits
. Too many initiatives, with too little time. Your bandwidth is drained out
If any of the above sounds too familiar, take some solace. There may be some solution at hand. The 'Balanced Scorecard' precisely looks to drive the execution of strategy by bringing in the discipline of performance management into the day-to-day culture within the organisation.
The good news here is that there are eight simple steps to get your strategy working, leveraging the Balanced Scorecard. Considered as one of the most seminal concept in driving performance measurement, the BSC has been adopted by most Fortune 500 companies. While the principles are quite common and industry agnostic, there may be a few nuances that are more specific to fintech companies, that we will explore in this article.
 
Step #1: Articulate your vision using simple objectives
The clarity of thought is always defined by the simplicity of its message. Unfortunately, the problem starts right there. If you are unable to set the priorities, there can always be the confusion on the default mode of operation at a tactical level. Consider these examples:
. Drive profit faster than revenue, or drive revenue faster than profit?
. Grow domestic faster than international or the other way?
. Invest more in markets or in products?
. Develop in-house team or to build a third-party network.
. And so on...
It is obvious, that in most of the above situations, there cannot be a middle path. One may have to define the priority upfront, and set the course moving, especially if you are in a growth phase.
If we could articulate the top 20-25 objectives of the organization in simple, unambiguous and easy-to-understand phrases, then we have already set our foot on the right track.
Obviously, the easiest way to measure the success of the enterprise is by looking at its financials. Every shareholder meeting or board discussion will obviously be focused on that. However, the financials, are at the end of the day, only 'lag' indicators. It can only tell how the organisation performed in the previous year or quarter. And there lies the challenge.
In order for a successful measurement of organisational effectiveness, it is imperative to measure both lead and lag indicators. While the financials are lag indicators, the satisfaction levels and engagement with customers are the best lead indicators. Customer satisfaction is obviously directly linked to the effectiveness of the process framework of the enterprise, which in turn is delivered by people, enabled by technology. When we strike a 'balance' across both financial and non-financial objectives, and could measure them using an objective framework, we obviously have the essentials of the Balanced Scorecard in place.
 
Step #2: Develop the Strategy map
Once the strategic objectives are defined, it important that they are articulated in a way where the linkage across objectives are more pronounced, which makes the connects quite obvious for everyone in the organisation.
For instance, should there be no performance management culture (a learning and growth objective), it would be hard to drive an effective sales framework (process objective) impacting customer engagement (customer objective) and ultimately the revenue and profitability. More positively put, the strategy map not only brings in the linkage across the strategic objectives across the four perspectives, but also helps to drive interlinkages of functions within the enterprise and relate their respective contribution to overall financial growth.
 
Step #3: Define measures to make the objectives meaningful
In case you missed the first line of the article, here it is again for you. What cannot be measured, cannot be managed. Ultimately, the art of management is being able to tell if the job was done, and if it was done well. Unless there is a clarity on what is to be done, and how is it to be measured - both by the doer and the observer, it is always likely to be an area of discord.
And therefore the need to embrace the art of measurement. Having executed over 400 scorecards, the Cedar-IBS knowledgebase includes a repository of over 2,000 measures that are used for an accurate reflection of the objective being achieved. Unless the measure is appropriate, there is every likelihood for the objective being hijacked in the wrong direction. It is but a well-accepted phenomenon, that people respond to what is inspected, and not what is expected.
 
Step #4: Assign ownership to objectives
Every successful project has many parents, and every failed project is an orphan. Sounds familiar? Well, that's the reality and it pays to embrace it proactively. Making people accountable is the starting point of getting some action executed - or at least ensuring someone is monitoring the execution. Invariably, where the objectives do not have a defined owner, they all end up in the lap of the CEO, or go through a merry-go-round with fingers pointing elsewhere.
Ownership to the enterprise objective should not be misconstrued to be that of the individual performance measure. For example, the product development head is responsible for the roadmap and the upgrades of the products, and therefore will be owning the R&D objective from the executive review forum standpoint. However, the individual measure for the product head goes well beyond just the R&D, and would also include, for example, the budget management, adherence to process and timelines, training of the team, and so on.
 
Step #5: Align initiatives to objectives
One of the most common mistakes that occurs in strategy execution is where the means and the end get mixed up. The initiatives by themselves are not critical, unless they help to deliver a strategic objective. Setup of a new international office in itself cannot, for example, be an objective. That can, at best, only be the means to drive revenue or market share of a certain geography.
A cardinal principle when it comes to initiative definition is to ensure that there are no initiatives in the 'strategic radar' unless they directly impact or influence the objectives defined in the strategy map. Fifty per cent of the CEO bandwidth can be instantly saved, should this rationalization be taken seriously and executed ruthlessly. It only makes the focus and effectiveness of the critical initiatives deservedly get better.
 
Step #6: Define targets - measurement frequencies and units
Targets serve as the anchor-points in the performance for both individuals and organisations. The best performances - be it on the F1 circuit or on the tennis court or on business platforms are always when there is a target to beat or achieve. Which is why it tends to get harder at the top, to keep pushing to the next level.
It is important that targets are not just defined for the financial measures, but also for the non-financial measures (customer, process and organisational). Assuming there are 20-25 objectives, and each objective has one to two measures, the thumb-rule is to keep the number of measures less than 35-40. Else it gets hard to measure.
A performance management system would be most successful when these measures are distributed with targets that are a mix of easy, realistic, aggressive and aspirational. Should all targets go easy, then there is an atrophy of potential. Should it all get aggressive, well, nothing gets achieved. It's important to bring in the balance and push where it matters for that context. Measures also need to be supplemented with the frequency and the unit in which it has to be reported.
 
Step #7: Imbibe the discipline of monthly reviews
The benefits of yoga are derived only when you practice it. No matter how good your yoga instructor is, or no matter how good your Balanced Scorecard is, the value is zero if there is no discipline in imbibing it as a habit. It's hard to resist the 'snooze' button, be it in the morning wake-up alarm, or the monthly review discipline.
Bringing the culture of performance management is directly correlated to the sincerity and discipline of making it a mandatory process of review, with corrective actions being monitored. What is important to the boss is what is important to the subordinate. If performance measurement is not the CEO's priority, it can never be the organisational priority.
Repeated actions become a practice. Repeated practice is a habit. Sticking to the habit drives the culture. To make performance management the culture of the organisation, you got to make monthly review a practice.
 
Step #8: Follow the 'top-drawer' rule
Many years back, our chairman had shared an experience he had with an important client who was quite successful in managing his time. And the secret was the 'top-drawer rule'. It's quite simple, but very effective.
Whenever a subordinate had come into the office of this CEO seeking his time, the first point of reference was the one-page Balanced Scorecard that was kept in the top of his table drawer. If the discussion was not related to any of the strategic objectives, then the conversation ended there. It simply made the focus of vision and ruthlessness of execution far more razor-sharped.
It is quite easy to bend a little bit here and accommodate a little bit there. However, when it comes to effectiveness of strategy execution, it's always about focus, and being clinical in sticking to the agenda once the strategy is defined.
And a last word for those who believe strategy is meant only for the large enterprise. More than $18 billion has been invested in the fintech world just in 2016 alone, and it's a maze out there. You can easily get lost in the maze if you don't have a map by your side. Just that we call it here as the strategy map. Drive your execution with the map on your side. Happy execution.
The writer is a senior partner at Cedar Management Consulting International. Views expressed are his own and do not reflect the newspaper's policy.