A poor strategy that is vigorously executed beats the best strategy that isn’t executed every time. Stew on that for a bit…
Far too many companies expend significant time and money developing a great strategy only to see it fail because they fail to execute. This happens for several reasons:
- Leadership is not fully committed to the strategy
- All levels of the organization do not understand their role in executing the strategy
- The focus is on financial results, not on the drivers of those results
- Strategy is viewed as a once a year event, not an ongoing process
Unless those causes are understood and addressed, a strategy will be poorly executed at best, and never executed at worst.
Is strategy execution really important?
The idea that execution is important is not new; much has been written on the topic. A recent study by the Economist highlighted the importance senior executives placed on execution. That study explored the gap between how executives viewed their ability to develop their strategy versus actually executing it. The study found while 88% of the executives surveyed said successfully implementing the strategy as critical to success but 61% reported they struggled to bridge the gap between the strategy and day to day operations.[1]
Executives are clearly concerned about the execution gap; so what must be done to close it?
Leadership commitment to the strategy
We’ve all been to that strategy retreat – we go to a fancy resort, get caught up with old friends from our different locations, eat a few good meals and get in a round or two of golf. The price we pay for that is having to sit in on some meetings where we discuss what happened last year, talk about what we want to do and dust off the old strategic plan, make some minor changes and call it a day. As a result, the strategy not discussed in depth, differing opinions on what must be done are not resolved, and executives leave with no real commitment to the strategy and thus continue doing whatever they have been doing prior.
Building commitment to the strategy is hard work and requires understanding that there may be differing opinions on what the organization should do; and resolving those differences so the end result is a strategy every executive believes is the right path. The first step to doing that is to understand what each executive views as the right strategy. This is done by interviewing executives individually to gain insight into their point of view. Once you have that, you are ready to hold a very different type of executive retreat. Instead of a broad discussion, the meeting focuses on where executives differ on what should be done. The results of interviews are presented without attributing what was uncovered to any specific executives, because the point is to address and resolve the differences to gain consensus on what will be the strategy for the coming year. Each point of view is discussed and agreement is reached on whether or not is is part of the organization’s strategy. As a result, consensus is reached on what must be done, which creates a commitment to carrying it out because it is their strategy and they own it.
Driving the strategy down through the organization
Executive commitment to executing the strategy is not enough, each level of the organization must understand their role in executing it. Simply telling everyone the strategy is not enough. Strategic alignment is accomplished by creating a line of sight connecting the overall strategy to the day-to-day operational activities they carry out. Dr. Kaplan and Dr. Norton, creators of the Balanced Scorecard, refer to this as aligning the organization.[2]
Alignment is the process where the strategy is cascaded to each level of the organization to identify what must be done at each level to carry out the strategy. Alignment starts by taking the organization’s strategic goals and breaking them done into discrete goals to be accomplished at the next lower level of the organization, this is referred to as cascading the strategy. This clarifies what needs to be done as well as how each part interacts to carry out the overall strategy. It also allows measures to be developed that provide insight how well each part of the organization is executing the strategy and to drive strategic discussion and decision making.
To better understand how cascading supports alignment, consider a port that is focusing efforts on becoming greener with a strategic goal of reducing emissions. A number of areas within the port play a significant role in achieving this goal. As a result, the cascade identified a specific goal for various areas across the port:
- Container Operations – Increase Use of Shore Power and Reduce Truck Wait Time
- Cargo Operations – Increase Use of Shore Power and Reduce Truck Wait Time
- Trans Shipping – Reduce Truck Emissions and Increase Use of Intermodal Freight
- Port Police – Improve Traffic Flow
- Facilities – Reduce Building Energy Consumption
Figure 1, Figure 1: Aligning the Strategy via Cascaded Goals, illustrates the relationship between the overall strategic goals and the cascaded goals.
Figure 1: Aligning the Strategy via Cascaded Goals
By cascading the strategic goal, each of the areas that impact overall emissions has clear goals that must be achieved and are aligned with the overall goals. In order to achieve those goals, each area now develops its own initiatives and cascades their goals further down in the organization. In this manner, the entire organization’s efforts are aligned with the strategy and there is a clear line of sight between what they are doing and the overall strategic goals.
[1] “Why good strategies fail: Lessons for the C-suite” Economist Insights, July 2013 http://www.economistinsights.com/analysis/why-good-strategies-fail
[2] “Managing Alignment as a Process” HBR Working Knowledge, April 2006 http://hbswk.hbs.edu/item/managing-alignment-as-a-process
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