Strategy, process, structure.

The three levels

The strategy is the choices and the strategic goals. What you’re going to do, for whom, and just as importantly what you’ve chosen not to do. Without it everything that follows becomes arbitrary, since there’s no way to judge whether a routine is right when nobody knows what it’s meant to serve.

The processes and policies are how the work is to be done. The mandates sit here too, meaning who gets to decide what. They should follow from the strategy and be traceable back to it, so that anyone wondering why we do things a certain way gets an answer that holds.

The structural capital is what makes the process possible to follow day to day. Templates, systems, checklists, supporting material and the documentation that stays in the company when a person leaves. It’s also the part that makes the company worth something without its key people, which only becomes apparent the day somebody wants to buy it or somebody is away for a long time.

The order matters in both directions. Top down, each level builds on the one before. Bottom up, it lets you troubleshoot: if you find a template nobody uses, ask which process it belongs to, and if you find a process nobody can justify, ask which strategy it comes out of.

An example that goes all the way

Say the sales strategy settles four things, namely which customers you’re there for, what you sell them, what you charge and what you turn down.

The next level is the process. How a deal moves from first contact to close, what has to be registered and when, how a quote goes out and how it’s followed up.

The mandates belong to the process, and they’re worth writing down precisely. What may a salesperson or account manager approve on their own when it comes to price, discount, free shipping and payment terms. What sits with the sales manager. What has to go up to the CEO.

If that boundary is unclear, one of two things happens, and both cost money. Either the salesperson asks upwards about every deviation, which makes the deal slow and the manager a bottleneck. Or they guess, which usually turns into a discount somebody else has to live with for years. Unclear mandates are also unfair to the person who has to sell, since they can’t get it right without asking.

Then comes the structural capital, and that’s where most people stop too early. The website should say the same thing as the strategy. So should the sales presentation. The quote template should contain what you’ve decided you sell and have the discount limits built in. The contract template should hold up what you’ve promised. The follow-up template should ask after what you actually want to know.

Once all of that is in place, no salesperson needs to remember either the strategy or their own mandate, because every tool they pick up already points the right way. That’s the whole point of the three levels.

What happens when a level is missing

The symptoms differ depending on which level is absent, and they’re recognisable.

Strategy without process gives you a fine direction that nothing happens with. Everyone nods on the strategy day, and everyday work looks exactly the same in November.

Process without strategy gives you routines nobody can justify. They get followed as long as things are calm and are abandoned the first time there’s a rush, since nobody can say what it costs to skip them.

Process without structure requires somebody to remember. It works for exactly as long as that person is still there and still has the energy, and then it slides back without anyone having decided anything about it.

Structure without strategy turns into bureaucracy, meaning templates for the sake of templates. That variant is the hardest to get rid of, since every single template once had a reason.

Size decides how much, not whether

A company with twelve employees doesn’t need the same process map as one with two hundred, and shouldn’t have it either. But the three levels exist in both, the difference is how much needs to be written down.

In the smaller company a lot of it sits in the heads of a few people, and that works as long as they’re there and available. The gain there lies in writing down the little that makes the biggest difference, often the mandates and the two or three templates that get used every week.

In the larger company the question is more which of all the existing documents still connect to a strategy. There the gain more often lies in taking away rather than adding.

Something to try

Take one of your strategic goals and follow it downwards through the other two levels. Which process carries it, and which supporting material makes that process easy to follow. If you can’t follow it all the way down you’ve found the gap, and it usually sits in the last level.

Then do the same thing in the other direction. Take a template or a routine you use often and try to trace it upwards to a goal. If you find no goal, it’s worth asking what it’s still doing there.

A third test that tends to give an answer straight away: ask three of your salespeople where their mandate ends on discounts. If you get three different answers, the people aren’t what’s wrong.

In practice

In Genomlysningen, our review of the business, we go through the three levels in that order, and the usual finding isn’t that something is missing altogether. The usual thing is that the strategy exists, the process exists in somebody’s head, and the structural capital is a collection of files of varying ages with nobody quite sure which one applies.

The next part zooms out. The three levels are the lower portion of a bigger picture, and that picture shows where the strategy in turn comes from.