Why must you re-visit your business fundamentals now?
“You go back to fundamentals when things start to go awry.” Bill Cowher
We have all seen our favorite athletes, entertainers, leaders, and teachers encounter and overcome challenges. In difficult times, they often turn to the fundamentals. Your strategic plan is formulated on core business principles—or fundamentals. As your teams struggle to adapt and cope with the disruptions from COVID-19, early emphasis between February and May 2020 was about surviving. What immediate changes must management make to survive in uncertain times?
As things settled, visibility on the impact such as loan defaults, canceled orders, increased refunds, etc., became apparent. The new reality surrounding your business has changed. COVID-19 has fundamentally impacted your employees and customers in different ways. Now is the time to re-visit the fundamentals—your strategy to understand the following:
- What went wrong?
- How where we blindsided?
- What must we do differently to plan and adapt to the new reality?
Unless, in extreme circumstances, COVID-19 did not and will not change your mission. The fundamentals—your business strategy needs to be evaluated. How you continue executing your strategy should change to help your teams identify and resolve misalignments, plan, and adapt to the current and post-COVID-19 business environment.
How do you get there?
Going back to the fundamentals requires a simple view of your strategic planning, strategy-formulation, and strategy-execution as an ongoing process. A designated and neutral Point of Contact should coordinate the re-evaluation process and provide support towards accomplishing the following:
- analyze the current environment and identify metrics,
- facilitate collaboration with management and stakeholders and learn during strategy formulation, and
- provide tools and support as needed for your management teams to execute the strategy during and post-COVID-19 and improve.
Mistakes to Avoid – Misalignment Misfortune
We’ve all heard the many clichéd ways to describe when multiple components are aligned in their goals or strategy: “We’re all in this together,” “we’re operating on the same wavelength,” “we’re rowing in the same direction.” And there are plenty more. Achieving alignment in a common goal is critical to the success of any group endeavor. Even one person marching to the beat of a different drummer can threaten the success of the entire group. This dynamic plays out in all facets of business activity. We’ve seen countless examples of when a business unit impacts strategy execution due to different objectives, not in alignment with the enterprise goals.
- Such misalignments (strategic misalignments) probably existed across organizations pre-COVID-19.
- Strategic misalignments further complicate the ability to develop and implement a plan to respond in the short-term and long-term to the COVID-19 challenges and other future events.
This quote by Sun Tzu, author of the Art of War, captures the difficulty in achieving success without getting what we call in the modern age “buy-in” from all those involved in the endeavor: “Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise; for the result is a waste of time and general stagnation.”
- Why does strategic misalignment exist and remain unresolved?
- What is the actual cost if not resolved over time?
- How will this impact your ability to implement long-term sustainable changes to adapt to the new realities during and post-COVID-19?
There are eight reasons why strategic misalignment occurs and why management and internal auditors fail to resolve those imbalances when they do occur. They include:
- Lack of awareness – No one recognized the misalignment.
- Management is aware and can’t resolve – Lack of adequate processes and controls with oversight.
- Competing and conflicting priorities – Lack of sensitivity towards resource constraints (capacity).
- Inappropriate tone and corporate culture at the enterprise or business unit and departmental levels.
- Continuous Process Improvement (CPI) projects, internal audits, and reviews performed, are not aligned with strategic goals and objectives.
- Inability to identify and mitigate risks – This includes emerging risks and the rapid pace of evolving risks.
- Lack of visibility understanding the long-term compliance implications and added cost from regulatory fines.
- Inability to execute strategy and meet changing customers’ expectations.
These eight-steps can help your teams identify misalignments between enterprise strategy and business unit priorities, as you re-evaluate and develop a long-term plan to adjust to the new realities during and post-COVID-19. Strategic misalignments should be identified and resolved as soon as possible to avoid long-term financial losses, reputational damage, and improve responsiveness to the changing business environment.
Our next post will elaborate on how you can continue re-evaluating your fundamentals, especially in difficult times. The post will provide suggestions on what your teams should focus on as the lockdown restrictions get relaxed, and most states continue re-opening for business.
Jonathan Ngah, CISA, CIA, CFE, CGFM, is a principal at Synergy Integration Advisors, a professional services firm providing internal audit outsourcing and internal audit co-sourcing services to government institutions, private-sector, and not-for-profit organizations in the US and the Asia Pacific (APAC) regions.