I strongly believe that business has a significant role to play in the advancement of sustainable practices during the mounting challenges facing the planet today and that through better strategic planning, more accurate measurement of outcomes, and encouragement of innovation, many of the world’s issues can more directly be addressed. People, planet, profits: There is a direct connection between the quality of life of people in companies and the community with the quality and condition of the environment and the economic stability and growth potential for that company and community. This interdependent relationship is a critical success factor for you in understanding the system of sustainability.

Consider every person and every organization to reside on a spectrum of sustainability and you are either at level 1, the lowest level—doing nothing, or at some other point along the spectrum. To survive and thrive, you must move from one point on that spectrum to the next based on the push and pull of stakeholder expectations and regulations. Moreover, you need to create a process for going beyond compliance and continually improving from any starting point along that spectrum to maximize the opportunities of an emerging green market.

Try something new: Rather than deploying your green initiatives in a spray and pray method, hoping something sticks with stakeholders and reclaim some of your cost, consider reflecting on a few questions and take a few baby steps first to prevent losing time, money, and possibly respect from employees, customers, buyers, and other stakeholders:

• Reflect on the implications of sustainability. Take the time to explore the meaning and implications of what sustainability will signify in your sector and the region you are in, especially in terms of availability of products and value to customers.
• Plan ahead. Consider the budget and time of yourself and others to ensure you don’t run out of either funds or energy before you’ve had a chance to complete your project. Take the time to reflect, plan, and ask advice from stakeholders to avoid an embarrassing or costly mistake and deploy green projects with confidence.
• Implement at the level of your ability. Instead of taking on all 100 things to go green—choose the right project, at the right time, and with the right outcomes. Whether it’s a company of one or thousands of employees, going green is fast becoming a competitive factor in strategic planning and it’s easy to fall into the trap of spray and pray—try everything and hope something sticks.

The commitment to community and its economic, social, and environmental well-being is evolving: It’s not just talk now but a critical success factor for sustainability to be part of the DNA of company. Each sustainability initiative has measurable financial value and contributes above the bottom line.

A recent energy audit for a manufacturing firm proudly displayed a tangible payback period for eleven sustainability initiatives after 2.5 years—not a bad turnaround for most industries. The catch is, the company has to shell out nearly three quarter of a million dollars during the first year to reach that carrot. So this is a no go, right? Wrong. We often consider each sustainability initiative on the same financial level: A recycling program is just as good as a new roofing system which is just as good as a new waste water treatment system. In fact, there are hundreds of things to go green but that doesn’t mean you implement the first five. That’s random and doesn’t make business sense. In my industry, we called it “spray and pray” which spells disaster. What you need is a plan for the right project at the right price.

Your sustainability initiatives are too important to freeze, especially when the expectations for greater compliance are increasing daily from consumers, buyers, investors, employees, and other stakeholders. Take another look at your Energy Audit. Where $780K may be a no-go investment in this down economy, consider instead investing $100K on those projects producing the greater return first. As illustrated in the graphic below, rather than folding cost savings back into the budget soup, never to be seen again, convince the CFO to reinvest the savings into strategically-selected projects that produce the greatest returns. Finally, relevant criteria to use when faced with a hundred things you can do to go green!

I call this “Sustainability Cash Flow Calibration.” It’s critical to understand and yes, you have to speak to the CFO or corporate accountant to get their buy-in for this process. They’ve been trained for this so they will understand. Now in the first year, you have $80K to work with which can be reinvested for the next couple of projects. Repeat for several years and your goals are achieved. Some of your projects will include reducing carbon, streamlining your supply chain, reducing fresh water use and reclaiming waste water. Each has financial value that can contribute above the bottom line. Plus you have time to learn, reflect, and make changes to your strategies as they evolve. It takes longer to implement but the investments are able to be made which is better than a no-go proposition. Stay competitive, save money, re-invest your sustainability savings, and grow your company successfully while making a difference for the planet.

Current indicators demonstrate an increasing demand for products developed with a sustainable process and in spite of this demand, there is a dearth of such products available. This condition creates an unprecedented opportunity for forward-thinking enterprises. Many business owners interested in a sustainable product model are seeking proof of profits, not just cost savings to mitigate their risk, which can be demonstrated through an analytics process of measurement.

More resources and examples are needed to illustrate basic business principles of how to integrate leadership development, measurement, and guidance for proving the profitability of environmental sustainability decisions.

While there is an increasing interest in sustainability in the business community, I’ve noticed there are few resources available that provide a practical guide and examples of sustainability and business success—a desire among many business owners I’ve spoken to who require less theory and more action. Here’s the need as I see it:

• How do we merge the current concepts of sustainability models with entrepreneurial approaches?
• How do we provide direction for new and current industries to explore sustainability issues while phasing in and innovating for maximizing cost savings and profitability?
• How do we utilize business intelligence and analytics to minimize risk?

With the increasing changes in the global marketplace towards more environmentally sustainable models for energy solutions and product development, business leaders and entrepreneurs are eyeing the opportunities for new or re-development of their products to meet this new demand. Current indicators demonstrate an increasing demand for products and services developed with a sustainable process and in spite of this demand, there is a dearth of such products and accurate information available. Moreover, as consumers become more discerning of sustainable options, they will begin pressuring for change through their pocketbook. This condition creates an unprecedented challenge and opportunity for forward-thinking enterprises to begin evaluating their energy sources, carbon footprint, and overall sustainability strategy. This condition is also an opportunity for energy providers to educate and encourage the corporate community to begin learning more about energy efficiency.

What would this social network look like? Each of the participating stakeholders in the initiative, for example, could benefit as follows: Energy providers could gain marketing notoriety, insights into the interests and motivations of corporations seeking to diversify their energy sources, and metrics for analysis to provide guidance to companies and consumers for better cost savings and return on investment. Corporations could potentially increase their positive marketing position to the ever-widening interest in sustainable practices and a better understanding of the implications of strategy and spending for energy for the greatest benefit to the environment while continuing to thrive economically. Consumers could make better decisions about services and energy choices by exploring corporation’s sustainability profiles. Advocacy groups could benefit by increasing the influence of its overall agenda to reduce carbon emissions and increase energy diversity that is less harmful to the environment, engage the business community as a force for change with up-to-date information and direct access through the social network site.

The main target group could be all corporations with more than 100 employees within the energy provider region. Smaller companies could be invited to participate through connections with the Chambers of Commerce in the same area. Consumers could be invited to participate as well. The purpose of developing a social network among the larger corporations would be to establish an early benchmark of change towards sustainable practices among the largest consumers of energy—the low-hanging fruit with the largest potential financial savings and resources available to explore a variety of options.

This social networking site could be developed in stages, targeting smaller groups and then expanding to reach a variety of sectors, types of companies, and geographical areas. Moreover, the long-term purpose of the site could include companies across the country and expanding into other environmental impact areas such as air, water, land, waste, etc.

Beyond the default social networking features of forming groups, live chat—much of what you would experience in FaceBook or MySpace, the main activity of the Social Network site is the development of corporate profiles with varying degrees of complexity and exposure of energy use as well as the interaction between peer individuals across many sectors about the application of sustainable energy. The following additional features assist in prompting additional discussion:

Sustainability Evaluation: Online tool to assess current thinking and approaches to elements of the triple bottom-line.

Energy Source Guide: Database and educational material on current energy technologies, current state of availability, and case studies of application of approaches.

Business and energy calculator: Assessment tools for calculating various indicators of energy use, carbon emissions, carbon footprint, cost/benefit analysis of energy diversification over time, energy efficiency, and other triple bottom-line indicators.

Energy Strategic Planning Guide: Information and tool for developing a sustainability strategic plan specifically designed for energy efficiency.

Transparency Profile Options: Users will be presented with a series of options for providing more or less information about the company’s energy output and changes from year to year.

Energy Cost Savings Reports: Tools for developing a business case for any size company towards energy efficiency and diversification.

Small Business Profiles and Tools: Adapted versions of the features mentioned above will be made available to small businesses.

Consumers: Resources, expert information, and profiles of local companies provide consumers with new discriminating insights in their product and services purchases. Basic functionality includes:

• Energy saving ideas,
• Energy diversification ideas,
• Energy planning guide
• Energy footprint report
• Green business networking
• New Ideas Box (plug-in vehicles, etc.)
• Green products that use less energy

Let’s get it started!

Measuring the business impact of strategy alignment interventions is based on understanding business value and its implications, which is always financial. Business value can be defined as: “The financial contribution of an individual or team that is measured as a return on investment and that achieves the strategic goals of the organization.” For a strategy alignment intervention, there is only one reason the investment is made: The value of the benefits the intervention produces for the organization exceeds the cost to the organization of having the team produce those benefits. Defining the formula for the business value of strategy alignment is deceptively simple:

Direct cost of intervention

However, calculating the benefits produced is difficult to obtain because there are often intangible outputs, it’s hard to measure in dollars, costs more apparent than revenues. But the implications of not measuring the business impact are greater than the difficulties and with the advent of new analytics software tools available on the market, statistically isolating the business impact of soft interventions such as strategy alignment is becoming easier and more economical.

Many employees don’t believe that their leaders truly want them to act strategically-to view their organization from the third position. Whenever a choice needs to be made between strategy and short-term cash-and it always does-most people feel irresistible pressure from management to go for the cash. They settle for a “savings on investment” definition of themselves because usually the message from leadership is clear: strategy can wait for tomorrow. Rather than leaders encouraging strategy perspectives among employees, they are often the biggest obstacles to the implementation of strategy. They need to realize that short-term paybacks, if not aligned to a long-term strategic value, will be short-lived. In The Balance Scorecard by Kaplan and Norton, they emphasize organizations needing to link their investments to long-term strategic priorities rather than tying them to narrow financial measures such as payback and discounted cash flows. Though senior executives deny it, most organizations allocate financial resources using incremental, tactical, capital-budgeting mechanisms that stress easily quantified financial measures of near term cash flows. A lot of this has to do with not being able to measure the impact of strategic initiatives, including the strategy alignment process itself. The metrics tend to be elusive, vague, broad, or inaccessible. These excuses are not longer valid as the need for demonstrating and maximizing business impact has become the new factor in determining competitive advantage.

What are the metrics to be used for measuring the business impact of Strategy Alignment Interventions?

Measuring intangible assets such as strategy alignment and their relationship to the overall strategy of a firm will inherently transform traditional accounting procedures that are bases on tangible assets. Most of the impacts of the strategy alignment process will be linked to financial goals of workforce performance and behaviors of the firm. Strategy alignment can’t help but be held accountable to the performance outcomes of the participants of the process. In fact, true strategy alignment implies that leaders must identify and be involved with those strategic implementation elements that create those results and the measurement system should provide a clear view of how each employee contributes to success and express those measures in terms everyone understands.

Data for these outcomes are usually stored in corporate legacy systems. Productivity data may be stored in one system that includes product output, error rates, and cycle time. Sales data may be stored in a financial software package that includes sales volume, time to close, and numbers of calls made per day. The human resources database stores all of the necessary employee information to help isolate those who received an intervention and those who didn’t in order to statistically isolate the business impact of those interventions. Firm must move from measuring only lagging indicators that tell what happened in the past such as previous performance metrics to including leading indicators that assess the status of success factors such as R&D cycle time and customer satisfaction.

The ideal metrics for Strategy Alignment Initiatives include four themes cutting across any or all of the core areas of the firm including Mission and Vision, Customers and Markets, Products and Services, Unique Competencies, and Values & Cultures. The four themes include: Identifying the Strategy Alignment deliverables, identifying and measuring the processes and interventions that generate those deliverables, developing a validated competency model that will focus on outcomes, and identifying Strategy Alignment efficiency measures that link costs and benefits.

Possible metrics to be collected:

1. Survey of those whose behaviors the intervention is designed to influence. Performance data of participating members in the intervention that could include:
   • Productivity
   • Satisfaction
   • Morale
   • Error Rates
   • Absentee Rates
   • Fewer Complaints
   • Retention
   • Innovation
   • etc.
2. Changes in value of specific processes that are directly impacted by the intervention.
3. Explore employees’ perceptions of alignment by identifying the key strategic drivers, identify the key elements that enhance the strategy implementation, and a paired alignment evaluation for all elements in the first two steps.

A new vision is required to demonstrate the business value of strategy alignment to move from a “line item”, cost containment, and “service provider” mentality towards being more strategically aware, involved, and focused on contributing to the overall success of the company, not merely their function or department. The main outcome of such a vision is to empower leaders and staff to become aware of their role as “Business Value Analysts”, learning how their unit’s business impact is proposed, delivered, measured, and reported more effectively to their clients and to management.

Facilities Managers who pioneer measurement of the ROI will have a tremendous strategic advantage, as well as a foundation for step-change in effectiveness. 86.5% of Facility Managers nationwide believe that it is possible to measure the financial impact of FM activities, according to a straw poll conducted through Building Operating Management. With the advent of sustainability initiatives being implemented in most industries, measurement of both cost savings and business impact is necessary. Moreover, companies will increase their competitiveness through increased innovation: “Along with efficient workplaces, companies are learning the value of building design that encourages innovation.” — Tom Peters

Measurement of return on investment by facilities managers requires more than just checking in with lines of business to see how things are going at the weekly planning meeting. It’s also not measured by how many trouble tickets are adjudicated or client-satisfaction sheets. Though helpful for improving quality of services, real value must be measured by statistical analysis or “analytics.”

Analytics is a methodology for measuring business impact using the principles of “intervention groups” and “control groups” to isolate the benefit from other possible inputs to the benefit, information which interviews, surveys, and line item budgets will not reveal. In contrast the cost orientation, the value analytics approach relies on greater connectivity and communication between interacting departments–a systems view–demonstrating alignment with the strategic goals of the organization. In addition, departments may experience increased creative breakthroughs as they consider strategic outcomes and gain a better understanding of the business drivers for internal clients.

Using an analytics approach, through careful identification of intervention and control groups, facilities managers can tease out additional information to optimize their strategies and deploy the projects across the enterprise for even greater return. Long considered too expensive, complicated, or impossible, measuring business benefit is not only possible, but it is fast becoming a business imperative.

Business Value

In this cost savings economy where the CFO reigns, demonstrating the value of any business initiative in financial terms is imperative. Individual employees, teams, and departments all must demonstrate the business value of their work or lose their jobs, lose their budget, or get dissolved and outsourced. Most units can’t define their value beyond cost savings and pull together data that makes a compelling business case to justify their team and their work towards a true return on investment. The metrics have traditionally been considered intangible, out of reach, or too expensive to measure. But the alternative doesn’t contribute to business impact either. Regardless of how much is saved year to year or quarter to quarter, there is always a diminishing return. This “Savings on Investment” approach, or SOI, falls short of demonstrating true business value. The focus needs to rather be on demonstrating a return on investment and maximizing business impact. The goal in this new “Delivering Business Value” environment is to become a high-performance, high-value contributor to the corporate strategies that can show decisively how its work is driving higher revenue, improved client satisfaction and greater operating efficiencies. To meet these needs, managers need a common understanding of value and how it’s created in the context of their business unit in relation to the rest of the organization; an accessible tool to communicate business value in financial terms; and a means to measure and monitor their success effectively.

Strategy Alignment

If “strategy” is defined as “a framework within which the choices about the nature and direction of an organization are made,” then strategy alignment is the complete integration of every organizational component to the mission, strategic vision, planning processes, day-to-day decision making, and human performance systems. As a dynamic process, strategy alignment facilitates continuous monitoring, review, and updating of the strategy, crucial in today’s environment of constant change.

The process of strategy alignment is often divided into five phases that are each linked with feedback loops for validation and adaptation to changes. These five include:

Phase 1: Strategy intelligence gathering and analysis which ensures quality, up-to-date information by which to make decisions;

Phase 2: Strategy formulation which includes exploring fundamental beliefs and assumptions to create a strategic vision, products and services offered, profile of targeted consumers, geographic scope, competitive advantage, needed capabilities, and financial goals;

Phase 3: Strategic master planning which encompasses the development of the implementation plan, prioritizing, defining steps and roles in detail, sequencing, scheduling, researching, executing, and monitoring strategic projects;

Phase 4: Strategy implementation which involves taking planned actions, monitoring implementation, and modifying the strategic master project plan as circumstances change. In this phase, the more strongly employees feel ownership of the strategy, the more they will committed to the strategies’ success. And,

Phase 5: Strategy monitoring, review, and updating which is a key input to regular review that evaluate the effectiveness of the ongoing implementation as well as examine the validity of underlying assumptions of the strategy.

To make this process successful, there is a necessary need for creating a “strategic culture” (the combined effect of behaviors, norms, beliefs, values, heritage, thinking, and relationships and the way they manifest themselves in an organization and its strategic performance) which is often the primary function of strategy alignment initiatives. When these align with, and support, an organization’s strategy efforts, strategic success is likely assured. This strategic culture concept is further validated by Per Christiansen and Jon Lund Hansen in Organisational Ecology and Strategic Leadership, Christensen & Lund Hansen 1993 where they describe a third view or systems approach of systemic thinking as follows:

It is easy to see the world from one’s own point of view, or first position as we refer to it here. It is more difficult to see it from the other’s – second position. Seeing relationships between one’s self and others is the most difficult of all – from the third position. This perspective: to see processes and patterns from an outside viewpoint, is also called system-perspective, or systemic thinking.

High performing organizations manage their workforce to create breakthrough results using four key aspects:

1. Align their workforce with the top-level business strategy
2. Actively engage the workforce in all phases of strategy implementation
3. Measure the business impact of the contributions of the workforce
4. Provide constructive feedback to the workforce on their results compared to the measurements.

For strategy alignment to achieve the greatest business impact, it’s vital to involve as many people as possible in the process of implementing, if not actually setting strategy. Energizing and motivating people to action is easier when they feel involved, rather than being imposed on from above.

Conference speakers and articles in industry journals are replete with calls for demonstrating ROI among a variety of interventions including IT, training, and facilities management, as well as strategy alignment consulting services. Harder to find, however, are case studies that describe specific examples and metrics in the context of measurable organizational outcomes for strategy alignment interventions. A new model is required that breaks away from standard forms of planning and that incorporates the business value concepts with those of strategy alignment as follows:

Strategy alignment with a business value focus is a key element in creating and sustaining value in business. Yet there is still no standard for recognizing, developing, managing, or measuring this intangible asset. It’s not enough for OD professionals to be able to explain why and how they implement their approach. They need to be able to transcend the SOI mentality, measure performance, and link Strategy Alignment contributions to the mission of the organization and define its impact in financial terms.

In the current climate of a down-turned economy, cost savings is king. Upper management gravitates towards cost containment because of the perceived benefit of saving immediate cash. It may indeed be necessary to maximize profits and downsize in response to economic pressures, but there is an excessive tendency to sustain a “Cost Orientation” throughout the enterprise as the prevalent status quo. Oftentimes managers select line items for cuts as an across-the-board percentage, regardless of the prohibitive impact that such random cuts will have on quality and risk avoidance. Moreover, once departments show they can absorb the hit to the budget, they tend to educate management that it can be done again and again, until some managers find themselves coming in at 4:00 am to compensate for the gaps they have created in the employee headcount! These across-the-board line item cuts can be averted for greater benefit to the organization when managers and teams within targeted departments are able to evaluate and demonstrate their value by more accurately defining their return on investment (ROI). By creating a “value orientation” of their contribution to the bottom line, cost centers can strike a more logical balance between cost savings and business impact.

Savings on Investment

One great misconception about ROI is that cost savings on the budget are considered a return on investment when in actually a Savings on Investment (SOI) is being realized. If I give you a dollar and you deliver services for $.80, the $.20 saved by investment terms is not an ROI which reflects the way true “value” is defined. The typical SOI approach impacts the organization in two basic ways: cuts to the budget and improvement of organizational processes-known as the “cost savings orientation”. The highest form of SOI activities include reliance on the discovery of mass economies of scale, hyper-efficiencies, and business processes that reduce waste and time, such as Six Sigma initiatives.

Though a necessary step for maximizing available resources, this “cost savings orientation” is a process of diminishing returns that seeks to solve short-term goals, but may misinterpret business needs that drive clients, and potentially fail to inspire break-through value for the organization. If the leader and team considers budget dollars to be a line item to fulfill or beat and the goal is to make the client happy, the emphasis is often steered away from generating greater value. The results are entirely different if the same budget dollars are considered an investment to make the client successful. An often more productive alternative to an isolated SOI mentality or “cost savings orientation” is an ROI perspective or a “value orientation” that assumes that all spending is an investment that requires a cost/benefit analysis and business case, including measurable outcomes and alignment with company strategies for success.

Return on Investment

The ROI of a project or groups of projects assumes a measurable financial return that is connected to the overall success of the organization. Through the “value orientation”, leaders and teams seek a longer-term, strategic benefit, which interviews, surveys, and focus groups will not reveal. Measuring business impact requires statistical analysis to isolate the benefit from other possible inputs to the benefit. In contrast to the pure “cost orientation”, the “value orientation” relies on greater connectivity and communication between interacting departments-a systems view that is aligned with the strategic goals of the organization. In addition, departments could realize stabilized or increasing returns as they educate management about their documented value propositions. They may experience increased creative breakthroughs as they consider strategic outcomes and gain a better understanding of the business drivers for internal clients. Measurement of ROI is much more than the typical historical look at the benefits of a current project. Using an analytics approach, through careful identification of intervention and control groups, departments can tease out additional metrics to optimize their strategies and deploy successful projects across the enterprise for even greater returns. Long considered too expensive, complicated, or even impossible, measuring business benefit is not only possible, it is fast becoming a business imperative—especially with the ever-increasing interest and demand for sustainability-related projects.