Recent studies have shown that organizations that have gone through the effort of developing a written strategy fail miserably at execution. According to Paul Niven in his book "The Balanced Scorecard":
• Only 10% of organizations execute their strategy
• Only 25% of managers and executives have incentives linked to strategy
• 85% of executive teams spend less than 1 hour per month on strategy
• 60% of organizations do not link budgets to strategy
Those are pretty dismal facts about commitment and results as they pertain to strategy execution. Why are companies so poor in doing what they say they want to do?
According to an article in the Sloan Management Review in the summer of 2000, most of it has to do with leadership. The Sloan report listed "Six Strategy Killers":
1. Ineffective senior management teams 2. Top-down management style 3. Unclear strategy and conflicting priorities 4. Poor vertical communication 5. Poor coordination across boundaries 6. Inadequate leadership skills down the line
These are all related to leadership and vision of senior management. In over 35 years' experience as a CEO and business coach, if I had to pick one of the strategy killers, it would be unclear strategy and conflicting priorities.
I've worked with numerous companies developing a vision and a strategic plan to achieve that vision. In most every case, the executive team knows that change is needed and indeed inevitable. They develop a strategy to put their organization in the best possible position to be proactive to the anticipated change, and then they freeze. Day-to-day priorities set in and they lose focus on why the plan was developed.
Developing a strategic plan is a worthwhile effort, but the work does not end there; it's just beginning. If all internal processes and management incentives are not aligned with plan achievement, the real message is business as usual.
Senior management must take the lead in driving change and that lead needs to be in visible as well as compensatory forms. If we look at the statistics above, that simply is not happening.
The real question is: Why is not it happening 90% of the time? I believe it has to do with short term incentives linked to quarterly and annual financial performance. It all sounds great when a company plans to invest in technology or human resources to strengthen their market presence in the next five years, but when it comes to spending money that impacts now, for something that may or may not happen later, it just doesn 't compute.
They often rationalize that the problem has not happened yet; we'll have time to deal with it later. Of course by the time later comes they are scrambling trying to make a five-year plan happen in one year.
Long term strategy implementation takes strong leadership, a clear vision, and absolute accountability for results. If you accept these as facts, you have to accept that these attributed are in short supply in all but 10% of organizations in the United States.