Why Strategy Execution Fails: Some Unsettling Insights
We all know that strategy is crucial to business growth, but strategy ultimately gets you nowhere without proper execution. Unfortunately, that appears to be a problem for many organizations around the world.
A few years ago, a survey of more than 400 global CEOs found that executional excellence was the biggest challenge facing corporate leaders in the U.S., Asia and Europe, topping a list of some 80 issues. Execution beat out all other challenges, including innovation, geopolitical instability and top-line growth. Other studies have found more evidence of the problem of execution, with two-thirds to three-quarters of large organizations saying they struggle to implement their strategies.
These are clear signs of how difficult it is to successfully execute strategies, but they don’t reveal why execution is such a problem. To understand that and figure out how to execute strategies more effectively, a team of researchers from the MIT Sloan School of Management, the Hult International Business School, and Charles Thames Strategy Partners conducted more than 40 experiments, along with a survey of nearly 8,000 managers in more than 250 companies.
Their findings revealed a fundamental issue at the heart of poor execution: several common beliefs about how to implement strategy are simply wrong. These include five persistent myths that work against executional success.
The 5 Myths of Strategy Execution
1. Execution Equals Alignment
2. Execution Means Sticking to the Plan
3. Communicating Equals Understanding
4. A Performance Culture Drives Execution
5. Execution Should Be Driven from the Top
Donald Sull (MIT), Rebecca Homkes (Hult) and Charles Sull (Charles Thames) delve into the details of these five myths and how to replace them with a more accurate perspective in their article on Why Strategy Execution Fails—and What to Do About It.
But our team at Graphite found a number of their findings particularly shocking, and we’ve outlined some of those big takeaways here:
The Problem of Other Departments
In many companies, strategy execution is all about alignment. Executives typically translate strategy into objectives, make sure that strategy is aligned with business activities throughout the organization, and then measure progress and reward performance. This often takes the form of management by objectives and using a balanced scorecard.
As it turns out, most companies do this well. More than 80% of managers say their goals are limited in number, specific and measurable, and they have the funds to achieve them. In other words, strategy is aligned with objectives, action and rewards throughout the business.
Why, then, do so many companies struggle with execution?
As it turns out, it’s not all about alignment. Things break down in the coordination between departments, functions and units. Whereas 84% of managers say they can rely on their boss and their direct reports all or most of the time, only 9% say they can rely on colleagues in other functions and units all the time, and just 59% say they can rely on them most of the time. In fact, commitments from these colleagues are typically not much more reliable than promises made by external partners, where 56% of managers say they can rely on all or most of the time.
Moreover, when asked to identify the biggest challenge to executing their company’s strategy, 30% of managers cite a failure to coordinate across units, which was second only to the failure to align (40%). Managers also say they are three times more likely to miss performance commitments due to insufficient support from other units, rather than their own teams’ failure to deliver.
These problems occur despite the fact that more than 80% of the companies have at least one formal system for managing commitments across silos, including cross-functional committees, service-level agreements, and centralized project-management offices. Unfortunately, only 20% of managers believe these systems work well all or most of the time.
A Failure to Adapt
Another major flaw in strategy execution is the failure to adapt quickly enough to changing market conditions. As markets change, organizations may need to shift funds or people across units to support strategy, or they may need to exit declining businesses or unsuccessful initiatives. But few do this effectively.
In fact, only 30% of managers say their organizations effectively shift funds across units to support strategy, and only 20% say their companies effectively shift people across units when needed for the same purpose. Knowing when to exit a declining business or unsuccessful initiative is also a problem, with only 22% of managers say their organizations do this effectively.
Ultimately, that means companies aren’t agile enough and aren’t doing what’s needed to adapt to changes in the market. Instead, they often continue to waste resources on units or activities that are no longer relevant or as strategically important, and executives often devote disproportionate time and attention to businesses with limited upside, sending in top-performing managers who burn out while trying to save a lost cause.
These mistakes alone can undermine any strategy, no matter how smart and informed it may be at the outset.
Investing in Non-Strategic Projects
Another startling figure from the managers survey was the fact that only 11% of managers said that all their company’s strategic priorities have the resources they need for success. But 51% said they could secure resources to pursue attractive opportunities outside their strategic objectives.
Earlier, we heard from managers that over 80% say they have the funds to reach their objectives, but funds don’t always equate to resources. To execute strategic priorities, they may also need people. But, as we saw earlier, organizations are not effective at shifting people across units to support strategy.
Instead, it seems that it’s almost five times easier for managers to secure resources to pursue non-strategic objectives. It’s an illogical and puzzling finding, but it shows that decision-makers aren’t properly screening opportunities against company strategy and may be depriving resources from the initiatives that are most critical to strategy execution.
How On-Demand Talent Can Help
In exploring these findings, we couldn’t help but think about the role that on-demand talent can play in addressing some of these issues. While there’s no quick fix or easy path to abandoning the five myths of strategy execution and reinventing a company’s approach, the ability to augment teams and add resources with highly qualified on-demand experts is a tool available to any organization.
We’ve seen first-hand how companies are able to adapt to changing conditions, find and allocate the new sources they need, and execute strategies more effectively by tapping into our pool of top-tier global business talent.
In an age when 73% of executives say that corporate bureaucracies are stifling productivity and innovation and 85% of business and IT executives are increasing their use of independent workers, it’s a strategy that deserves execution in its own right.
The good news is that executing it is much easier than trying to implement a company-wide change. It’s as simple as logging into our website to search for the expertise you need, or contacting our team to get personalized assistance in finding top independent talent in finance, sales and marketing, research, analytics, IT and much more.