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A Clear Path to Strategy Execution

Posting Date: February 07, 2007

A mere 3% of respondents to a new global survey said their organizations are “very successful” at executing strategies. The survey, which included responses from 1,526 business professionals, was conducted by the Human Resource Institute and commissioned by American Management Association. It found that 62% of participants rated their organizations at 3 or lower on a 5-point scale, where 1 equals “not at all successful” and 5 equals “very successful.” In other words, most participants view their organizations as only moderately successful or worse at executing strategies.

The companies that reported relatively high success at executing strategies, however, seem to reap real dividends. That is, organizations that were good at executing strategies were also more likely to cite success in the marketplace, as measured by self-reported revenue growth, market share, profitability and customer satisfaction.

The survey gauged respondents’ ability to implement strategies in two ways: by asking them to rate their execution success and by asking them about the extent to which they use and value 57 different strategy-implementation practices. The AMA/HRI research team found that, above all else, clarity is crucial to the execution of strategy.

The pivotal role of clarity was demonstrated by the fact that “creating a clear strategy” was ranked as the single most important practice. 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.

The problem is that organizations are not achieving clarity to the degree they should. Although clear strategies and clear goals were of top importance, they were only ranked 11th and 10th in terms of the extent to which companies use those approaches. There was a particularly large difference between the extent to which companies value a clear strategy and the extent to which they actually deliver a clear strategy.

As might be expected, companies that perform better in the marketplace 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.

Another major finding of the survey is that alignment practices are widely used and highly valued among responding organizations. 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 most highly ranked practices are “aligning strategy with the corporate vision/mission statement,” “aligning organizational goals with strategy,” “aligning business units’ goals with organizational goals,” and “aligning business units with strategy.”

Higher-performing organizations are considerably more likely than other organizations 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 also differentiators between higher and lower market performers. To a much greater extent than lower performers, higher performers demonstrate “the ability to quickly and effectively execute when new strategic opportunities arise.” Another differentiator is “having an adaptive organizational infrastructure.” These findings suggest that adaptive organizational infrastructures—in combination with clarity and alignment—help organizations react more quickly to new strategic opportunities.

Leadership practices also influence strategy execution, but there seems to be an overall leadership development deficit in this area. Organizations 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 importance that respondents attach to these practices. However, higher-performing organizations use these practices to a higher degree than their lower-performing counterparts.

In what could be a related finding, the survey discovered that organizations that have the same CEO for over five years say they’re better at strategy execution than organizations with less seasoned leaders. An analysis of the survey’s Strategy Execution Index shows the same trend. Therefore, it appears that stable leadership is linked to strategy execution, an important finding at a time when CEO “churn” rates are at record highs. An alternate interpretation of the data is that leaders who are good at execution are more likely to retain the top job over long periods of time.

The single greatest barrier to strategy execution, the survey found, 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.

Of course, every organization has different execution challenges. The AMA/HRI survey suggests, however, that mastering certain basics such as clarity, alignment, leadership, adaptability and resources goes a long way toward enabling companies to turn their best strategic plans into organizational successes.