In their book The Balanced Scorecard, authors David Norton and Robert Kaplan note that 90% of organizations fail to execute their strategies successfully. That is an alarming statistic — one that likely includes, or will include, your organization.
Before you dismiss this claim as too unbelievable and not something you could possibly fall victim to, think about the consequences of being one of these companies. Presuming you have clearly-defined strategic objectives and measures of success driving your business, what would be the impact of failing to meet those targets?
As a strategic management consultant, I battle this problem every day. It’s a dismal statistic with devastating consequences. The good news is the reasons for failure are well-understood and the solution is proven. Learn the common reasons for failure, and the keys to success, so you can avoid being a statistic.
3 Reasons Why Strategies Fail
The bottom line is management does not give strategy the same level of commitment, focus, and leadership as other functions within the organization.
1. Lack of Interest in the Strategic Process
Some managers don’t believe they need a formal planning and execution process. Despite how serious some organizations take strategic planning, many within the organization assume strategic planning and execution is only for management. Across the spectrum, there’s a broad lack of interest in strategic management. Here’s why.
Strategy is time-consuming and everyone is too busy.
It’s a catch-22. If the organization has enough strategic focus, perhaps there will be fewer fires to react to, yet it’s the overwhelming workload keeping organizations from making strategy a regular part of daily business. Not having enough time is an indication the organization is trying to do too much; it lacks strategic direction, and would benefit from taking it seriously.
Strategy is complicated and not well understood.
How can we expect people to understand and be good at strategic planning and execution when they spend no time on it? To be successful, you need a framework, training, and a routine. It takes time and energy to learn it, do it, and get better at it.
Reality rarely matches the plan, so why bother?
With a 90% failure rate, I understand this sentiment. A history of failed attempts may discourage participation. After all, it’s complicated and requires time and energy, so why pursue the process if it’s going to fall short of reality anyway?
Seeing the process unfold in a more promising manner could break down some resistance. The goal is to avoid being a statistic and make what matters come to life — meaningful, audacious, and inspiring goals people can rally behind.
Strategic plans are obsolete in an Agile world.
This excuse lacks an understanding of what Agile is and the role it plays in the organization. If you don’t know where you’re going, and why, how will you ever get there? Organizations can be very effective and efficient at delivering the wrong things. Without strategic direction, you may do great things short-term, but you will never achieve what you need to sustain long-term growth and success.
“We are stubborn on vision. We are flexible on details.” — Jeff Bezos
This sentiment that strategic planning is no longer useful is often tied to the memory of 50-page strategic plan documents that no one ever sees. Those are a primary reasons most fail to execute their strategies. A good strategic plan is conveyed in a handful of slides and is as flexible as the business needs.
2. Lack of Strategic Awareness
A Kaplan and Norton study, published in the Harvard Business Reviewarticle “The Officer of Strategy Management,” suggests less than 5 percent of employees have a basic understanding of company strategy. How can an organization expect to execute its strategy when no one knows the strategy?
One school of thought presumes strategy is management’s responsibility. Managers tell their teams what to do, and in doing that work, the strategies will be achieved. The employees don’t need to know those pesky details — the managers will drive strategic success.
One company, according to the Harvard Business Review article “Why Strategy Execution Unravels — and What to Do About It,” did an internal survey of their middle managers. The survey found that 50% of their managers could not name one of their top five strategic objectives. For management to drive strategic success, they will first need to be aware of the strategies.
Do you have a strategy documented? I’m not talking about the large document no one will ever read, but it does need to be documented. Is it available for all to reference? Has it been reviewed with everyone?
Ask the people in your organization to name your strategic objectives and measures of success. Can they name them? Do they know where to find the plan? Is the strategy regularly discussed at all levels of the organization?
When strategic planning is an infrequent activity, for the select few, plan quality suffers and execution loses focus as the day-to-day fires take precedence. Awareness rates drop drastically following the day you announce the plan if it’s not part of the daily conversation.
3. Lack of Commitment to Strategy Execution
According to The Economist white paper “Why Good Strategies Fail: Lessons for the C-suite,” sponsored by the Project Management Institute (PMI), 61% of executives acknowledged that their firms often struggle to bridge the gap between strategy formulation and execution. This lack of attention to strategy leads to a lack of intentionality in execution.
The Kaplan and Norton study also suggests that 85% of leadership teams spend less than one hour per month on strategy, and 50% spend no time at all on strategy. Given this lack of focus, it’s no wonder strategies fail to be executed.
Does each person in your organization have objectives and targets aligned to the overall organizational strategies? Is there transparency and accountability around those objectives? Is there a review cadence and execution framework in place to give proper attention to execution and progress? If the answer is “no,” you may not be giving proper attention to strategic execution.
3 Keys to Strategic Success
Successful organizations view strategic management as an ongoing, dedicated function rather than as a periodic activity. Effective strategy execution requires the strategic management function to be built into the culture — it requires leadership.
1. Strategic Management Frameworks
Having a solid process like the Balanced Scorecard or Objectives and Key Results (OKRs) is vital. I like to combine them. I use the Balanced Scorecard to look a year or so ahead, and OKRs to focus on the quarterly execution against those bigger objectives. The key is alignment and involvement down to every employee.
Frameworks help focus on the right things for the right reasons. Good objectives are outcome-driven. We often have ideas about what we want to do and about what we think will be valuable. Keep in mind, value isn’t in what we do, value is in what is achieved as a result of what we do. Frameworks help us understand our “why” and build plans around achieving those outcomes.
2. Shared Ownership
Share ownership of the strategy is crucial. It’s not good leadership to shield your people from strategy execution details — it’s good leadership to include them in the process.
Ideally, each strategic objective and its measures and targets is owned by one person. Shared ownership spreads accountability across the organization, creates leadership growth opportunities, and allows you to maximize your human capital.
Who is most suited to drive a particular objective? Who has expertise or the passion to push the limits of what seems possible? This isn’t always someone on the management team. Opening up ownership to anyone capable will open up leadership development opportunities, get the right skills behind the effort, and create a culture people can get excited about contributing to.
3. Transparency and Accountability
Transparency and accountability facilitates cooperation and collaboration — it’s not about shame or punishment. When all objectives and targets are visible, everyone has an opportunity to see where they can best support, and offer that support. Talking about progress and obstacles allows others to identify ways they can pitch in and help achieve the objective. The goal is to make the organization’s top priorities known so everyone can contribute.
Failing to execute organizational strategy is common — 90% fall short. The consequences are devastating. The failure rate should be no surprise given few people are aware of what their organization’s strategy is and little to no focus is given to strategy on a regular basis. Strategy doesn’t execute on its own simply by publishing a plan and continuing to operate as normal.
Successful companies give strategy a seat at the table — they make it important in the daily rhythm. Successful managers lead the execution of the strategy by involving everyone around them.
It may feel like you have a handle on strategy, and that the strategy is understood and being worked throughout the organization, but I encourage you to test that assumption. Do you see the 3 reasons for failure within your organization? If you do, you’re not alone, but there is hope if you’re willing to lead.
This is my passion. I’d love to hear your stories — leave me a comment. Tell me what resonated most with you about what you just read.
Join my mailing list for weekly insights on strategic management, product management, and leadership. Visit jimmiebutler.com.