From the July/August 2010 edition of the Harvard Business Review to the group discussion forums on LinkedIn, a lot of attention has been paid to the “strategy execution challenge” lately.
This activity has probably been prompted by an old statistic that simply won’t go away. It suggests that, in any given year, between 70% and 90% of business strategies won’t be successfully executed. Unfortunately, this fact hasn’t changed much since it was first reported in Fortune Magazine in the 1980’s. Facing an apparently serious problem, many books have been written on the topic of strategy execution. One of the key assumptions behind several of these books has been that companies are good at strategy formulation and that strategy execution is the root cause of the strategy failure problem.
I’m not so sure about that. Just because companies have been doing strategic planning for decades, can we automatically assume that they are good at it?
When you look at the reasons for poor strategy execution listed by business leaders, strategists, experts, and consultants, they look something like this: no strategy or plan to implement; an unrealistic strategy with no real chance of success; managers putting themselves and their own ambitions ahead of the company (a leadership problem); poor prioritization; lack of detailed planning to support plan goal achievement; poor communication and coordination; strategy and culture misalignment; accountability missing from plan goals; poor planning governance; and ill-defined strategic goals.
I realize that this is not an exhaustive list and I would add the following based on my experience: failure to create an actionable strategy; not cascading strategy below the corporate level to business units, departments, and teams; failure to align processes, projects, and resources with strategy; and not lining employee goals with company goals.
When I look at all of these items, I would argue that they suggest that the true problem lies with strategy formulation and, as a result, strategy execution challenges are a symptom of the problem. It is critical to resist the temptation to fix symptoms to achieve long term change. So, to solve the strategy execution challenge, we must address the root cause problem: strategy formulation.
If companies have been “doing” strategic planning for so long, why haven’t they built robust skills and capabilities for completing this activity? I think that the problem is with the approach traditionally taken by organizations to plan. The bottom line is that the traditional approach to strategic planning has several “fatal flaws” that produce a plan that provides a weak foundation for strategy execution success. Let’s take a look at the three most critical flaws:
1. The traditional strategic plan is not a true strategic (i.e. long-term) plan
While supposed to be long-term looking in nature, in practice, the traditional strategic planning process is primarily used to produce short-term (i.e. 1 - 3 year) work plans. This is in contrast to a real strategic plan that outlines the value creating objectives required to deliver the company’s mission and the strategic priorities required to achieve the vision (a “short list” of the value creating objectives that the business will place an enhanced focus on over the next 3 to 5 years).
In addition, the traditional strategic planning process tends to mistake goals for strategy. The problem is that when you focus on goal-setting, as opposed to strategy formulation, you end up with goals that may stand alone but, when looked at with all of the other goals, may not be relative and additive. That is, they may not combine well together, resulting in execution challenges and a less than optimal overall, big picture result. In the worst case scenario, the goals that are established for the short-term plan work at cross-purposes and/or the resulting plan does not move the organization forward from a long-term, truly strategic perspective.
2. Local strategic action is unclear
The traditional strategic planning process, and the resulting strategic plan, is frequently used to communicate leadership’s strategic intentions and, in many situations, to lay out a list of corporate actions to be completed over the upcoming year (i.e. the operating plan). Unfortunately, the traditional strategic planning process is not generally used to form, adjust, and implement the activities that will be completed at the business unit, department, and team level (i.e. the local level) to put those intentions into action. As a result, employees find it difficult to relate to the strategic plan. This is due to the fact that they cannot see how what they do at the local level connects with, and contributes to, the business strategy. When this happens, employees do not see the strategic plan as a tool that has meaning to their every day work life and does not have a direct impact on how they manage their work. This is a critical problem because, without everyone in the organization making daily work decisions that contribute positively to the execution and implementation of the business strategy, achieving the organization’s mission and vision effectively and efficiently will be difficult to do.
3. Meaningful manager and employee involvement in the process, and buy in, is low
In most organizations, the traditional strategic planning process is completed by the Board and/or the executive team. While groups of employees may be asked to participate in the process of gathering pre-session information and data, most traditional strategic planning processes do not include the participation of a cross-functional group of employees in the strategy formulation phase of the process. Generally, employees receive the strategic plan after it has been finalized and are then asked to implement it – few questions asked.
Excluding managers and employees from the strategic planning process increases the risk that the strategic plan will suffer from lack of manager and employee buy in – which absolutely will have a significant impact on the successful implementation of the strategic plan.
While there are other flaws in the traditional strategic planning approach that contribute to strategy failure, these are the most important ones.
The way to solve the strategy execution problem is to adopt a better approach to strategy formulation that:
● Concentrates on creating a true strategic plan – one that identifies the critical drivers behind the achievement of your mission and details which sub-drivers or objectives the organization will focus on over the next three to five years to achieve its vision without sacrificing the achievement of its mission;
● Creates an actionable strategic plan in the form of a strategy map;
● Defines the roadmap to get from here to there by aligning key business processes and projects with strategy, identifying gap-closing projects, and creating a robust accountability framework for strategy and action completion;
● Defines the framework for “real time” strategy management (including a strategy-based indicator set and a strategy management/governance framework); and
● Includes the participation of a cross-functional, employee-based strategic planning team with an executive-based steering committee to create the strategic plan.
This approach to strategy formulation offers organizations an improved process that maintains the valuable elements of the traditional strategic planning process while effectively eliminating its fatal flaws.
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