Why Corporate Strategy Breaks Down
That wonderful, elusive thing leaders around the world covet. What a dream to develop a corporate strategy, institute it with discipline and clear communication and watch our teams adapt, allocate resources, track progress and deliver results. Unfortunately, only 33% of leaders reach this organizational nirvana, with the latest estimate that 67% of strategies fail because of poor execution.
The issue with “strategy execution” as terminology used to describe strategic success or failure is that it masks a multitude of other issues behind one. It’s an oversimplification. Simply saying “we failed at execution” doesn’t get to the why of the difficulties experienced in attempting to execute.
In their best-selling book, The 4 Disciplines of Execution: Achieving Your Wildly Important Goals, authors Chris McHesney, Sean Covey and Jim Huling present four primary reasons strategy breaks down. Presented below are these reasons, and our own research to show how they are roadblocks to success.
1. Employees don’t understand the corporate strategy.
- Only 5% of employees are aware of and/or understand their company’s strategy.
- Even in top-performing companies with “clearly articulated strategies,” 71% of employees cannot recognize their own company’s strategy in a multiple choice question.
- A mere 27% of employees and 42% of managers have access to their company’s strategic plan.
- Almost 90% of middle managers believe leaders frequently communicate strategy to employees – but communication is measured in the outputs of communication, not how well the communications are understood.
If employees don’t know or understand their company’s strategy, they cannot be expected to know how they can contribute to its delivery through their daily work. The responsibility to continuously communicate the strategy lies 100% on the shoulders of top leadership – and to do it in a way that resonates with their employees. Quantity, quality and format must be considered in terms of effective communication on strategy to ensure people understand where the company is going and what’s expected of them. The power of repetition when combined with various formats (for example, talking about expected results in an organization-wide email and in a town hall meeting) should not be underestimated.
2. The organization does not know how to execute the strategy.
- Just 20% of managers think their organizations do well in allocating people across business units to support strategic initiatives.
- Over half (61%) of senior executives acknowledge their organizations do a poor job bridging the gap between strategy formulation and day-to-day implementation.
- Only 40% of employees strongly feel their manager really understands their organization’s strategy or goals.
- Two-thirds of IT and HR functions are not aligned with their corporate strategy.
Too many people don’t know the activities that will deliver results, and this is true for management and employees. This is in part due a breakdown that happens often after a strategic plan is developed. It might be easy to align on prioritizing new product development for the back half of the year, but what does that really look like? What does it mean? It means changing behaviors and allocating or reallocating resources and accomplishing this successfully requires a roadmap. Utilizing action plans, charters and a comprehensive strategy execution tool like myOGSM will help clarify the activities required to deliver results.
The act of cascading the strategy from the corporate level down to the functional level will provide a great amount of clarity for your teams. Seeing the activity that must happen at their level – and how that activity connects back to the overall plan – is critical in aligning the organization.
3. Organizations don’t track progress.
- 85% of leadership teams spend less than one hour per month on strategy, and 50% spend no time at all on strategy.
- Only 20% of organizations review strategy execution on a monthly basis.
- In companies that consistently meet their strategic plans and goals, leadership teams meet once a month for 4-8 hours.
- A majority (92%) of organizations reported that they do not track the key performance indicators to tell them how well they are doing in competition.
Once the plan has been developed and implemented, if measures are not put in place to track progress, corporate strategy execution falls off. Most employees don’t know what the key measures of success are so it’s hard to track their own specific behaviors that lead to accomplishment. It’s easy to understand both why leaders aren’t looking at strategy more regularly – we spend most of our time in the work vs. on the work. Discipline on metrics must be instituted. The most successful companies we’ve seen in strategy execution make strategy reviews at least a monthly event and leaders never lose sight of where they are. It’s helpful to use a dashboard or other tracking mechanism to see all progress in one place.
4. People aren’t held accountable for performing strategic activity.
- 70% of middle managers and more than 90% of front-line employees have compensation that is not linked to the corporate strategy.
- Fewer than 10% of organizational leaders exhibit strategic skills.
- Two-thirds of managers say that past performance is the biggest factor when making a promotion decision–but a culture that promotes strategy execution must reward teamwork, ambition, agility and a willingness to change.
This is probably the biggest change management effort that has to happen in regard to strategy execution – the measures utilized to hold employees (and leaders) accountable must be connected to strategic success. If there is no incentive (or penalty) for employees to actively contribute to strategic initiatives, why would they spend time there? Instead of doing just what you are paying them to do?
A management routine consisting of a meeting calendar, reporting protocol and communication schedule should be developed to drive a culture of accountability and execution. Managers with direct reports should be tasked with continuing to check progress on strategic activity on a regular basis. RACI can be a helpful tool in identifying who is responsible for what activities, as can making sure strategy initiatives are incorporated into performance reviews.
We at onTarget are passionate about helping organizations beat the statistics and successfully execute their strategy to reach their goals. Contact us today to see how we can help.