What’s the Real Reason Nine out of Ten Companies
Fail to Execute Their Strategies?

by Timothy Swords

After hiring consultants and spending lots of corporate resources on developing a new strategy, why do 90% of companies throw it all away by failing to execute their plans?  Some consultants say it’s a failure to align strategy with operations. Others say the main culprit is poor communications at all levels of the company. 

But the real reason is much more basic.  It’s because senior management – the group that is responsible for developing the strategy in the first place – doesn’t really take ownership and champion the cause. This article discusses the foolproof ways to get senior management to stay passionate and accountable throughout the implementation stage.

Strategic planning in many organizations has become a staff function, with senior management coming in late in the game to approve the ideas their junior staff members have authored.  I observed this dynamic recently at a 200-person hedge fund company that manages assets of $3 billion.  I’ll call this company “Alpha, Inc.”  Alpha had hired a large consulting firm to help it draft its five-year plan. Two junior consultants were tapped to work with a team of junior client members on the new plan, with periodic updates to the CEO and his direct reports. The results were quite predictable: at the update meetings the senior team acted as auditors of the junior team’s plan, analyzing and criticizing what was drafted but failing to focus on what the plan really meant for the firm’s future.

Even after approving the plan, the leadership team never really took ownership of it.  In fact, they often made decisions contrary to the plan objectives.  As a result, the execution of the strategy never stood a chance.  Months into the new plan, so many important financial targets had been missed that key employees began to defect, sending the hedge fund into disarray and generating poor publicity in the Wall Street Journal.

Let’s contrast this example with another, more successful company: “Travel Inc.”, a pseudonym for a luxury travel company that offers guided tours throughout the world.  We worked with their leadership team in an entirely different mode to produce their strategic plan and implementation approach.  First, the entire leadership team actively took on the planning tasks.  Second, we incorporated the implementation approach into the strategy planning effort.

As a group, the team created the vision and overall strategic direction for their three-year strategy.  Four key themes emerged from this effort: Operational Efficiency, Growth in Select Markets, Smart Selling, and Best Tour Experience. In turn, the CEO assigned ownership of each of these themes to one leadership team member who would be responsible for both the planning of the theme—but also for its implementation. This ownership approach built in accountability for results.

The process included identifying what the strategic and operational goals would be for his/her theme across four dimensions—financial, customer perceptions, internal process capabilities and employee skills & climate. By taking this balanced perspective, the themes cut across functional lines, and also focused on how value is created.  For example, they agreed that, firstly, they hire and train the best employees they could find because motivated and skilled employees ensure that internal processes, such as operating a tour, are well executed. This, in turn, creates highly satisfied customers who return regularly to buy the next season’s tour—ensuring strong financial results. 

In addition to identifying the theme goals, each leader considered what amount of effort and investment would be required to meet these goals.  If new initiatives were needed, these had to be planned out in enough detail that both financial and specific human resource requirements could be estimated.  Milestones had to be time-boxed for each initiative. By taking these key steps, the strategy became fleshed out into an implementation plan.

Each leader/theme owner developed his/her theme and then shared these drafts with the rest of the leadership team in a series of offsite meetings. You can imagine that each leader took this process very seriously, as each was on the hook for a key element of the strategy, and would be presenting his work in front of the entire leadership team.  Presenting is perhaps too passive a work since key decisions were debated vigorously on a peer-to-peer level at the offsite meetings!  There was no reliance on junior staff at this stage, except for contributing required data and analytics.  This process generated terrific passion for the strategy and built in accountability for results among the executive team. 

This passion can be seen by the stretch goals the team set for themselves and Travel, Inc. 

  • They set profitability goals that were much higher than historical benchmarks, even those prior to the 9/11 attacks that had decimated the travel industry!
  • The team grappled with distribution channel issues that heretofore were considered too political and sensitive for public discourse.
  • Substantial investments were quickly made in performance management of human resources. 
  • Ultimately, the financial results underscored the validity of this approach, as Travel, Inc. began to hit its aggressive targets.

Travel, Inc. demonstrates the powerful results that can be generated by a passionate leadership team if there is clarity of purpose and accountability.  Whenever key executives act as owners and champion the cause of strategy design as well as the on-going execution of the strategy, the result is solid customer loyalty and superior returns.

Timothy Swords is the Managing Principal of T. Swords & Associates, a consultancy group that helps executives generate superior results by improving their company’s strategy implementation capabilities. With offices in Boston, Dallas and Salt Lake City, the firm serves clients nationwide.  He can be contacted at timothy@tswords.com .

Many more articles in Strategic Planning in The CEO Refresher Archives


Copyright 2007 by Timothy Swords. All rights reserved.

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