The single greatest barrier to strategy execution is a lack of adequate resources. Not only does the proper allocation of resources increase a strategy’s chances of success, it’s a clear sign from leadership that the strategy is viewed as a high corporate priority. The Keys to Strategy Execution, a global study commissioned by Canadian Management Centre, along with our world wide affiliates at The American Management Association International and conducted by the Human Resource Institute, identifies the leading obstacles that hinder strategy execution and what companies can do to overcome them.
Business organizations’ interest in strategy execution has grown in recent years and will continue to do so. A global report from the Conference Board in 2005 found that consistent execution of strategy by top management is one of the top 10 challenges facing CEOs, with a third choosing it as the challenge “of greatest concern.” Overall, consistent execution of strategy by top management ranked third of 91 challenges (Conference Board 2005, 2006). Clearly, the ability to transform strategic plans into action is a universal concern.
What’s more, the focus on execution is expected to endure as a critical business issue. When strategy+business magazine surveyed subscribers and thought leaders in 2005 about various concepts addressed by the magazine over the past decade,“execution” prevailed as the number-one theme as well as the idea most likely to sustain interest for another 10 years (Kleiner 2005).
But exactly what is strategy execution? After all, if it’s seen as virtually everything that an organization does, then it becomes so broad as to be unmanageable. To learn more about the subject, Canadian Management Centre (CMC) commissioned the Human Resource Institute (HRI) to conduct a literature review and a global survey focusing on the execution of strategy. Within this study, the research team defined strategy as “a major plan that an organization makes to attain a defined and positive business goal,” and it defined strategy execution as “the process of implementing such plans and achieving such goals.”
The CMC/HRI team specifically wanted to find out what drives execution and what its primary components are. We also wanted to know if there are significant differences in how higher-performing and lower-performing organizations execute their strategies. Therefore, we made an effort to identify which companies—based on self-reports—are best at strategy execution and which excel in the areas of revenue growth, market share, profitability, and customer satisfaction. Although it is impossible to attribute causality in any survey, the data suggest that some
approaches to execution are more valuable than others and that higher performers use those strategies to a greater extent than lower performers. The following is a quick review of some of the main findings:
Higher performers tend to be better at executing strategies. That is, companies that enjoy higher performance (based on the aforementioned four factors) also tend to be better at executing strategies (based on two different survey indicators).
Clarity is crucial to the execution of strategy. “Creating a clear strategy” was ranked as the single most important strategic action for companies implementing strategies.What’s more, out of 57 different approaches to strategy execution, “defining clear goals to support strategy” was ranked second in importance, “ensuring clear accountability” was fourth, and “having a clear focus on implementing/executing strategy” was sixth.
Overall, organizations are not achieving clarity to the degree they should. Although clear strategies and clear goals were of top importance, they were ranked only 11th and 10th in terms of the extent to which companies use those approaches. There is a particularly large difference between the extent to which companies value a clear strategy and the extent to which they actually deliver on such a strategy.
Higher-performing companies are much more likely than lower performers to provide clarity. In fact, out of the top six major areas of difference between higher and lower performers, three of them (clear strategy, clear goals, and clear focus) deal with clarity.
Alignment practices are widely used and highly valued. Alignment practices account for four out of the top 10 most commonly used strategy execution methods. They are also among the top 10 most highly valued practices. Among the top 10 are“aligning strategy with the corporate vision/mission statement,” “aligning organizational goals with strategy,” “aligning business unit’s goals with organizational goals,” and “aligning business units with strategy.”
Higher-performing organizations are considerably more likely to use certain alignment strategies. Specifically, higher performers are more likely to align organizational goals with strategy and to align incentives, rewards, and recognition with strategy.
Speed and adaptability are differentiators. The practice representing the largest difference between higher and lower performers is “demonstrating the ability to quickly and effectively execute when new strategic opportunities arise.” Another strategic action representing a large difference is “having an adaptive organizational infrastructure.” These two items suggest that adaptive organizational infrastructures— in combination with strategic clarity—help organizations react more quickly to new strategic opportunities.
Decision-making speed remains a major problem. The largest difference between the extent to which or ganizations take a strategic action and the extent to which they consider that action important is in the area of “ensuring appropriate decision-making speed.” This means, in essence, that companies value such speed much more than they can actually attain it.
Employee engagement is a concern. “Ensuring employees at all levels feel engaged in and motivated by the execution process” was ranked 52nd of 57 practices in terms of the extent to which companies do this. But it was ranked 25th in terms of its overall importance.
Leadership development seems to be a deficit in the area of execution. Companies do not build “execution-focused leadership capabilities” or use “succession planning to develop leaders who are good at strategy execution” to a sufficient degree, given the relative importance of these practices.Moreover, higher-performing organizations are considerably more likely than their lower-performing counterparts to use these practices.
Customer needs/demands and worker capabilities are the most important drivers of execution today. Over the course of the next 10 years, technological changes are expected to overtake worker capabilities as the second most important influencer of strategy execution.
A lack of resources and the presence of government regulations are the primary barriers to strategy execution today. Over the coming decade, however, unfavorable economic conditions and competitive pressures are projected to become the primary barriers.
Below are other noteworthy survey findings:
- Organizations with CEO tenure of five years or more tend to be better at executing strategies.
- Global organizations are better than multinational or national organizations at executing strategies.
- Most planning for strategy execution takes place at the corporate level, but much also occurs at the strategic business unit level.
- Organizations tend to execute multiple strategies simultaneously, with 48% of respondents saying their companies are executing two to three strategies.
- The primary goals of execution efforts are to become more customer-focused, more innovative, and more of a leader in terms of quality.
The survey data, the literature review, and the experiences of members of the CMC/HRI research team all indicate that strategy execution is a multidimensional process. There is no panacea for achieving success. Strategy execution is the ultimate test of managerial orchestration skills.
Strategy execution is also an evolving art. The methods for achieving excellence in this area are changing as the larger business environment changes. The CMC/HRI team expects that technology and measurement tools will improve the execution capabilities of organizations in the future, but success will always depend on the people who make up the bedrock of any organization.