In a strategy retreat some weeks ago to review the annual performance of a firm, some interesting results and revelations came out. Based on the targets agreed in January 2019, the firm on average achieved 61 percent using financial and non-financial measures broadly categorized into revenue and profits, customer satisfaction, process/system improvement and utilization, and employee engagement. While they achieved 85 percent of revenue, 52 percent of profit, 64 percent of customer satisfaction, 67 percent for Process/system improvement and utilisation, and for employee engagement and satisfaction, it was only 36 percent. As revealing and disturbing as the results are, what is even more worrying are the differences in the understanding of the reasons for the above outcomes across the firm.
While the CEO and the Senior Management were unimpressed and maintained that a better outcome should have been achieved, the middle management and frontline employees celebrated the outcomes with a caveat that any problem with the performance can be attributed to the senior management.
Expectedly, the CEO was most worried. “I thought we prepared a good strategy plan and my executive directors kept assuring me that a better outcome will be achieved. While we had a few challenges at the beginning of 2019, I ensured that we provided most things required for better performance, at least close to 100 percent of our targets. How will I present this poor performance with increasing cost to my board? A comprehensive organizational restructuring is most needed and urgent as we cannot repeat this kind of performance this year”, the CEO lamented!
In formulating the firm’s strategy in January 2019, the key critical questions were asked. These include: Do we have the right RESOURCES? Do we have the right PEOPLE? Do we have the right PROCESSES? Do we have the right CULTURE? Do we have an execution ROAD MAP? While these questions were answered largely in the affirmative, the one that I further questioned was the culture of the firm. In agreeing on the execution road map especially on sharing of tasks and information to ensure effective execution of the strategy, the enthusiasm from senior management was limited. Even though I was assured that it was not really a problem and will be attended to as I emphasised and advocated, I observed that the assurances were muted. While we will share tasks as required, we must be careful the way we share information to ensure that our strategy is not revealed to our competitors, one the Executive Directors maintained.
As research reveals that 9 out of 10 firms always fail in their strategy execution even when they supposedly have a properly formulated strategy, the question is why it should be so. What factors can be responsible for such high failures in strategy execution? In agreement with Neilson, Martin and Powers (2008), a key challenge in strategy execution is the emphasis on the wrong factor and limited attention on the main important factors. While many firms like the one we reviewed their performance always jump to organizational restructuring as a solution to strategy execution and performance challenges, the main solution resides in two main factors- detailed and clear decision rights, and proper information flow. When these two important factors are properly addressed, and combined with other factors such as proper incentives and restructuring (if needed), the chances of effective strategy execution of firms are significantly very high.
During my interaction with the middle, junior managers and frontline employees of the firm, it was abundantly clear that the senior management maintained an enervating control of their respective units. As middle, junior managers and employees were significantly disempowered to make decisions, costs increased with limited or no innovation. Moreover, as senior management rarely delegated, decisions on important issues were delayed making the firm more of a reactive firm than a proactive one. Another major problem stated by junior managers and employees is the limited information flow disposition of the senior management. “You are only told the basic information you need to do your specific task with even the details and interconnection to other units somewhat hoarded.
Outside this, any other information is through gossip which cannot be verified. A typical example is the inherent fight between my team, the business development unit and risk management team. While we look at the risk management people as business stoppers, they (the risk people) see us as inconsiderate people that are only interested in the commission they can make. To be honest, that is true, many of us are still with the firm mainly because of commissions. That is why our engagement level is even as high as 34 percent. It is not like this in my previous firm due to the proper flow of information between and across units,” an employee lamented!
While formulating a good strategy is important, what is more important is the effective execution of the strategy.
In analyzing the firm described above, there is no question that the problem is more with the CEO and Senior Management and not the employees. Senior management must appreciate that sustainable and superior performance of firms can only be achieved through effective execution of their strategy. As the effective execution of strategy can only be achieved mainly from the junior managers and frontline employees of the firm, it is important to ensure that all employees especially middle, junior managers and other employees are clear about their respective tasks to the strategy of the firm, the connectedness of different units and the strategic importance of proper information flow especially how their actions and inactions contribute to the bottom line of the firm.
With these two important factors properly achieved and then combined with other factors like reorganization and proper incentives, targets will most likely be surpassed.
Franklin Nnaemeka Ngwu
Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.
