The Strategy/Operations Dividing Line

Organizations of every kind, from corporations, to religions, to governments, are organized to achieve desired results.  There is a simple inherent structure.

Strategy or what to do, Tactics the how to do it part and Logistics the actual doing of it.  Logistics has several parts other than the doing.  Supervision, accounting, purchasing and human resource management are important too.

The customers see only the logistics part.  When you or I buy a product, or call an 800 number, we interface with the organization.  We make assessments as to its usefulness based on what happens.  If it is an unpleasant or frustrating experience, we will have no recourse because the tactical layer, division managers, or the president of the subsidiary are well insulated from customers.  The strategic or executive layer are even better insulated.

Customers often end up dealing with people who don’t care much about the overall structure.  Partly because they don’t get paid enough to care and partly because they are remote from the reasons for the procedures they implement.  Higher level management is often surprised at the things that happen at the front line.

If it begins, the problem will increase for several reasons:

  1. Customers are more aware now than the once were.  You can no longer convince them that they are the only ones with the problem and possibly they are the real issue.
  2. Businesses cannot expect the customer’s bad experience to remain the bad experience of a single person and a few of their friends.  I recently saw a social media complaint regarding a guitar that was damaged by Air Canada.  It reminded me of this United Airlines mistake that so far has received more than 15,000,000 views.  Tiny operational errors defeat the best strategy.
  3. People like policy making (strategy) more than operations. Policy grows and takes resources from operations. Look at governments.  Many of the highest level people are academics with little real world time in service.  Policy is easier if you cannot be held accountable for its value in use.  Policy is a hands clean environment and some very suspect ideas hatch there.

Most businesses focus on the how to do it and the doing.  Most governments spend too little time on the doing and the how to do it aspects.  Simple transactions take months to complete.  Why do governments want six months notice of your applying for a government pension?  Possibly they don’t have bank account routing information, but they certainly have all the rest.  I think 26 minutes makes more sense than 26 weeks.

Some businesses have very few people at the strategic level.  Berkshire Hathaway has 25 of nearly 300,000 employees in corporate headquarters.  No doubt their subsidiary companies have a strategic layer embedded, but by example it is likely tiny as well.

Their tactical layer will be efficient too.  How to accomplish a task is a demanding job, but one that has precedents.  How big should a store be?  Walmart, Costco and McDonalds can tell you what works for them, why it works, and how it is changing.  Advertising is a known art.  Training, engineering and the trade off in manufacturing between buy or build are familiar.

Governments seem not to get the idea of using what works elsewhere and keeping track of inefficiencies and errors within their systems.  Their level of complexity vastly exceeds the demands of the transaction.  For instance, Canada Post has an electronic  service that is so overdone as to be near useless.  It is far more security aware in its setup and information retrieval than my online banking.  Maybe I should be concerned about the secure delivery of a bill for road tolls.

The line between strategy and operations is a difficult one to place, but you will generally be better off to emphasize operations at the cost of strategy.  90-10 favour operations makes more sense than 10-90.

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Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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