Is Poor Strategy Execution Delaying the Economic Recovery?

It seems that each month we hear how economic indicators point to the beginnings of a recovery only to hear the following month that economists misread the tea leaves? Today the WSJ has a headline, Bernanke Says Recovery to Start Off Slowly, in it he says the economic recovery "is likely to be relatively slow at first, with unemployment declining only gradually from high levels,". NO KIDDING?! Could he have played that any safer? But this is not about Bernanke or whether or not the recession should be labeled a Bush Recession or Obama Recession. This is to argue that poor strategy execution is delaying the economic recovery.

While many are looking for a magic pill to kick-start the economic recovery, like "Going Green" or "Cash for Clunkers", we should be looking at improving strategy execution of corporate America. There are many statistics from reputable sources that point to poor execution. Here are a few…

"62% of more than 1,500 executives describe their organizations as mediocre – or worse – at strategy execution"

- 2006 American Management Association Survey

"82% of Fortune 500 CEO's feel their organization did an effective job of strategic planning. Only 14% of the same CEO's indicated that their organization did an effective job of implementing the strategy."

- Fortune Magazine

    "Only 12% of companies successfully execute their strategy."

                    - Harvard Business Publishing

    "Excellence and consistency in strategy execution are the top two concerns of CEOs worldwide."

                    - The Conference Board's CEO Challenge Survey

So what is preventing you from executing your strategy? For some companies it could be the wrong strategy. For those that have an achievable strategy, I believe they fall short in how they manage their strategic assets: human, financial, and information capital. In short, companies fail to align their organizations horizontally as well as vertically to the corporate strategy. Companies go through an exercise of goal cascading, but do they really know what drives performance and success? Are the goals identified correctly? Are they prioritized so that the entire organization is working together towards achieving those goals or are they working in silos towards their own objectives?

While I do not as of yet have the empirical data to support this argument, I have enough experience working with companies to see this lack of alignment. No one is effectively managing or avoiding the conflicting resource requirements put on strategic assets and support functions to deliver results for front line units. Strategic Alignment is more than goal management or goal cascading. That just deals with vertical alignment, but does not keep the organization cross-functionally aligned. Companies need to prioritize across the organization to ensure all resources are used effectively to achieve their strategies. This helps avoid the resource conflicts so many organizations struggle with today. Those who follow the Baldridge Model for performance excellence would call this integrating the strategy into the organization. In order to effectively align all parts of the organization leaders must identify the following:

1. What each org unit does to achieve core strategies
   
2. Drivers of performance for each activity that supports those strategies
   
3. Metrics that measure those drivers
   
4. Barriers to achievement (human, financial, information, political, environmental, etc.)
   
5. Required employee behaviors, knowledge, skills, and abilities for success.
   

For item 3 above, leaders must understand how to act on those metrics. In other words, they must understand what they mean and the levers to push or pull to move the needle in the right direction. Robert Simons describes this brilliantly in his book Performance Measurement and Control Systems for Implementing Strategy. In it he discusses the importance of understanding either the input, the process, or the output of.

Once companies have this information they should look at the impact each strategic initiative has on the performance of the organization and the time/resources it takes to successfully execute. With this information they should be able to map out or prioritize the initiatives to ensure effective utilization of strategic assets to accomplish those strategies. This information combined with a capability assessment of their strategic assets will reveal whether or not the strategies defined for the corporation are achievable. If not, of course the planning process should be refined into something that is still a stretch but also realistic.

This is a quick high-level discussion of improving alignment, which leads to improved execution, and of course requires more detail. The point is most companies are not doing this even at this high-level. In order to achieve sustainable breakthrough performance, the kind of performance that would kick-start an economic recovery and possibly prevent another recession of this magnitude, companies need to be laser-focused on improving strategy execution. Strategy execution is dependent on alignment.

Are you bridging your strategy execution gap or building a bridge to nowhere? Is your business aligned to effectively execute strategy? Are your business processes clearly defined, documented, and understood? Are you organized effectively to execute your business strategy? Is the critical business information you need available, timely, relevant to support execution? Do you know what chasing your current strategies is costing you?

If you answered 'No' to any of the above, you may be building a bridge to nowhere and delaying the recovery your company needs to sustain or improve its competitive position. Take the Strategic Alignment Questionnaire™ at https://www.cncincsolutions.com/questionnaire and find out how you can start improving your strategy execution.

 

-RH