The key issue isn’t having a strategy, it’s getting it implemented! ~Jack Welch
One of the most difficult areas of business is not developing strategy, but actually delivering on strategic objectives. Every business has a strategy (some developed with expensive consulting support and others developed by the business leaders themselves), but a large majority fail to implement effectively. Numerous studies, including one by McKinsey&Co (one of the premier strategy consulting firms) claim that 70% of companies fail to execute effectively on their strategic objectives.
In most cases it’s not bad strategy or lack of money, but poor execution internally. And 75% of CEOs who get fired from office leave as a result of an inability to deliver on a strategy sold to the Board.
One of the bright spots in this rather bleak landscape of business execution is a robust strategy execution business process called the Balanced Scorecard with its strategy mapping and governance processes. First developed by Harvard professors Robert Kaplan and David Norton in a 1992 Harvard Business Review article and subsequently in a groundbreaking book, The Balanced Scorecard: Translating Strategy into Action (Harvard Press, 1996)
Fast forward some 30 years later and the use of the Balanced Scorecard and Strategy Map frameworks are ubiquitous in many organizations around the world. In fact, in 2000 Kaplan and Norton established the strategy execution Hall of Fame to honour those companies who delivered exceptional performance results through the use of strategy maps and the Balanced Scorecard framework. Just scanning the list of Hall of Fame companies from across the globe reveals some iconic brands as well as some highly successful small companies.
While the use of strategy maps and the framework tends to improve company performance upwards of 50% compared to peer group companies, those in the Hall of Fame delivered a whopping 150% increase in shareholder value.
The Leadership Factor:
What accounts for the huge difference between Balanced Scorecard users and Hall of Fame users?
The key difference is Leadership! But what kind of leadership are we talking about? A charismatic CEO? More meetings? More and better KPI’s? More charts on the wall? CEO speeches to show commitment? An Office of Strategy Management?
As you look into the several hundred Balanced Scorecard Hall of Fame winners over the years, there are a couple of key elements of leadership that are evident in nearly all the Hall of Fame companies. And the leadership factor is so much about individual leadership, but about the workings of the senior leadership team. The senior team in most cases has signed up for a major focus on “Shared Objectives” as opposed to trying to drive separate functional objectives. In other words the delivery of the overall business strategy is more important than meeting departmental or functional budgets and objectives.
Conventional business practice states that by delivering on all the functional objectives will roll up into delivery of the overall strategic objectives. But reality has proven time and time again that to be a fallacy. Why? First of all, there is no perfect strategy and even if there was, the external business competitive an economic landscape keeps changing, calling for shifts in strategic focus. These shifts must be delivered through internal company resources, usually time, talent and money. But no company has enough available cash to fund everything it wants to do internally plus respond to shifting external market conditions. So something needs to give. And 90% of the time, senior managers fight fiercely to hold on to their budgets and talent in the belief that making their functional budgets and targets is optimum for the company. Actually it may be optimum for their personal bonuses, but just the opposite for overall strategy execution.
Hall of Fame companies put the delivery of the overall strategy first and leaders are willing to share talent, resources and even budgets across the organization when required. If one key strategic initiative needs more talent or additional budget money, there is an open willingness to give up in certain areas in order to deliver on the overall strategic objectives. The essence of this refocusing of thinking about budgets, and personal success versus company success lies in the following mindset:
Not everyone gets what they want, but everyone wins!
What’s the primary focus of your senior leaders? If it’s not a shared objective of delivering on the overall company strategic objectives, then you are missing a huge performance improvement opportunity.
And it’s all about leadership!
Written and Posted by: John R. Childress
Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid
John also writes thriller novels!