Resource allocation shapes strategy. That is to say, the way we spend our time, money and other resources each day has a greater impact on our company’s actual strategy than anything we might determine to be strategy in board rooms and high level discussions. This is true of each employee’s daily decisions whether she sits in a corner office or shares a workspace with fellow interns.
Sounds simple enough. But Clark Gilbert, CEO of Deseret News and Deseret Digital Media, would tell you it’s one of the most poorly understood aspects of strategy in any organization.
“If you want to understand how strategy is made in an organization or in our own lives, you have to understand how the resource allocation works,” said Gilbert, “If you don’t understand that, you won’t understand strategy.”
Gilbert was trying to help his employees understand how the decisions they make each day affect strategy over time during a DDM all-staff meeting one Thursday afternoon in January. Gilbert walked his team through an article he co-authored for Harvard Business Review that highlighted cases in which the resource allocation process shaped different companies’ strategies; some for better, some for worse.
Take, for instance, Toyota's plans to build a competetive ecomony car for younger drivers at the turn of the last century. The new Echo model flopped as employees at American dealerships steered customers away from the no frills, inexpensive car in favor of higher-priced models that brought in larger commissions.
Or there are the division managers of another large company who built an entire plant without the company controller or other executives being aware. They were able to break the building costs into small enough chunks that the massive, pricey project escaped corporate scrutiny until the final piece – a chimney that couldn't slip under the radar.
“Strategy is one word: choice,” Gilbert said. And it’s not merely the choices made at the executive level.
Gilbert explained that since knowledge and power are dispersed across an organization – each employee has differing degrees of expertise and latitude to make decisions – and since each individual’s role influences what he or she feels is most important – and therefore makes little decisions each day that reflect that prioritization – seemingly small, everyday decisions ultimately drive a company’s strategy.
“When you grow up in a world of consulting, when you grow up in a world of strategy departments, you think a decision’s made and now you just go do it. But decisions happen over time and they’re always embedded in a process,” said Gilbert, who restated, “decisions are made in process, not meetings, and they’re made over time.”
Whether it’s the article a news intern chooses to put in position two in a homepage rotator or which advertiser a salesperson chooses to call on, Gilbert says, “the very heart of our strategy is in play in this seemingly little decision.”
Understanding the impact our daily decisions have is important for company leaders so they see how well or poorly their team is executing on a stated strategy and can make better decisions about when and how to get involved. And it’s important for other managers and employees to realize how their smaller decisions can affect the company’s actual strategy and overall mission.