Strategy is important. But it's not enough.
If you’ve been following our posts for a while, or if you’ve attended one of our Executive Briefings, the odds are good that you’ve heard us take the position that “Culture trumps Strategy”, day in and day out.
The point we’re making (and it’s reiterated in a clip on our site) is that it doesn’t matter how brilliant your strategic plan is; it’s not worth the paper it’s printed on if you don’t have the right people aligned and equipped to deliver on it.
MBA libraries are replete with business cases that present the plight of an owner or a CEO whose organization is simply unequipped and unable to deliver on “the plan” they have sold to the Board. It’s not an enviable position to be in, but it’s also not uncommon.
It shouldn’t come as a surprise that Execution occupies two of the top three concerns consuming the minds of CEOs:
Source – The Conference Board CEO Challenge 2009
Research indicates that defining a winning strategy only accounts for 15% of your financial performance against your competition; the balance, a whopping 85%, boils down to execution. That fact should not come as a surprise; a winning plan can be pretty easy to steal and adapt, but translating that plan through organizational layers and across silos and into action is an enormous challenge.
Berggren and Dalgaard are co-authoring a book they’re calling Return on Execution, in which they make a case for RoX , the ability to translate strategy into action, as the ultimate business metric that will separate the winners from the losers. The evidence they have amassed to support their position is compelling.
The stakes have never been higher. Consider the following:
- Labour cost has never been higher. When you factor out Cost of Goods from the P&L, Payroll and Related Expenses can easily represent 70-80% of the remaining operating expenses. There’s a lot riding on securing a return on that investment, and yet it’s been estimated that 23% of payroll dollars are wasted.
- Company valuation models have shifted significantly over the years, giving more and more weight to ‘intangibles’ such as talent. According to Success Factors’ report Comparing Price to Book Ratio for S&P 500 companies over time, ‘intangible value’ in a company’s valuation increased from 20% in 1980 to 80% in 2005. Bricks, mortar and other capital assets alone only tell a small part of the story of a company’s health.
There are two levers available to a business owner, CEO or senior line manager as it relates to building executional excellence:
- Right person, right job
It should go without saying, but unfortunately most organizations have done a dismal job of productively matching talent with opportunity. That much is evident in the statistics that surround us – lower than ever levels of engagement, and higher than ever levels of stress, conflict and turnover at work.
In order to win at the execution game, organizations have no choice but to start by aligning people correctly against the work that’s there to be done. Setting them up to work from their strengths and innate talents, working alongside others who are committed to the same high standards of performance.
And, at the same time, managers need to be managers of people first, and doers of tasks second. Too many are in the job for altogether the wrong reasons. Managers’ most important task is to give their people the time, the tools and the support they need in order to feel adequately equipped to perform. They need to set high standards, communicate clearly, be authentic and transparent leaders, and be willing to hold themselves – and those around them – accountable for superior results.
- Sound management practices and leadership alchemy
According to Kaplan and Norton in The Balanced Scorecard, 95% of people don’t know what their job is. That doesn’t mean they are lazy or stupid, only that we’ve done a lousy job of aligning their activities around shared objectives and well-understood priorities.
How would your customer-facing employees articulate your vision and mission? How much do they understand about your strategic imperatives, the three, four or five overarching priorities they need to be focused on and working towards? Never mind alignment – in most organizations, those at the front line just shrug when asked. Whether it’s because they don’t know or because they don’t care is immaterial; the root cause is usually the same.
Clear line of sight is critical to executional success. Once the strategic plan is complete and has been given the green light, it needs to be broken down into manageable chunks and communicated in a cascading manner seamlessly down through successive layers and across functions. All employees at every level and in every function should have their activities and goals focused on the same set of imperatives with targets that roll up and roll down seamlessly in such a manner that the sum of the parts meets or exceeds the corporate objective.
Cascading objectives are simple in design. Regular, effective two-way communication is critical to making it work.
Strategy, regardless how brilliant, is nothing more than a good idea if the organization can’t deliver on it. You can grow executional excellence, but is starts with an unrelenting commitment to fit first, and to installing a sound management process.
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