The strategic organization (1)
Many companies have a big problem with meeting their goals. For example, research shows that on the average, companies deliver only 50% to 60% of the financial performance that their strategies and sales forecasts have promised. These companies had the discipline to design a strategy and even implement the strategy yet failed at meeting the goals and sales forecast based on the strategy. In another study of 163 CEOs by Forbes Insights it was discovered that nearly a third of all business strategies never reach their mark.
Now understand clearly, effectively executing on strategy is the only basis for expecting a superior market performance because strategy gives an organization the ability to create a competitive advantage. Managers clearly understand that, as demonstrated in the interest the subject of strategy generates among business executives. A search with the keyword ‘strategy’ on www.amazon.co.uk generates over 100,000 results. A search with ‘strategy’ as the keyword on Google generates 2,270,000,000 search results. This shows how much interest managers whether of small, medium or large organizations devote to strategy. One would expect that such level of interest will translate to knowledge leading to better decision making, which should result in superior performance. But the results suggest otherwise.
According to an Effectory research with some 300,000 responses from companies worldwide, less than 50 percent of employees say they understand their firm’s strategy. In another study by Booz & Company, a survey of more than 1,800 executives, 56 percent say their biggest challenges are making daily decisions in line with strategy and allocating resources in a way that supports the firm’s strategy. The effect of these findings are reflected in another study by Marakon which showed that less than 20 percent of even well-formulated strategies are executed successfully and, on average, firms deliver only 50 percent of the financial performance their strategies promise.
So we can identify two reasons why organizations fall short of their performance expectations: lack of clarity about the business strategy and ineffective execution. Of course it is impossible to expect effective execution when the people lack clarity about the strategy. Solving the problem of clarity about the strategy is the easy part. Effective communication can quickly take care of that when leaders learn how to communicate, which is something very different from what most leaders do. You see, effective communication is very different from what a lot of leaders can even think about.
Davina Jones is the CEO of a London based professional services firm who understands the importance of communication. The management team met once a week and she ensured they began by reciting their company strategy and their key priorities for the year. She was convinced her efforts paid off when an in-house survey showed 84 percent of her staff agreed that they have clarity on the company’s top priorities. But the ‘clarity’ could not translate to performance. So she engaged a consulting firm to carry out a survey. To her surprise, less than one-third of her employees could name even two of the company’s top five priorities in their own words.
Engaging with Managers at all levels to ensure that performance objectives are in alignment with the strategic direction of the organization is one of the most effective ways successful leaders achieve this.
I have a duty to empower people, to transform De Beers Consolidated Mines such that each and every manager is empowered, and they have the freedom to exercise their creativity for the good of the business and themselves – David Noko
The reason for this is simple. To start with, most leaders measure communication in terms of input. Nothing can be more deceptive than that. Effective communication is measured in terms of feedback. This goes beyond the ability of your people to repeat what they have been taught but their ability to make decisions based on what is being communicated. Understanding is measured in terms of actions. So when people understand the business strategy they will execute it.
The key is to become a communicating organisation. A communicating organisation is the organisation that communicates. It is not just about the tools, it is more about the attitude. It is about a culture of willingness to pass information in a timely, coherent and comprehensive way to ensure people have the ability and passion to make the right decisions in a timely manner. If you want to know more about communicating organizations, please request the workbook on the Communicating Organization through email@example.com
So if strategy is clear, people can make decisions that are in alignment with it. The result will be effective execution. To achieve this, the CEO has to rethink his/her responsibility. There will have to be a commitment to the success of the people ensuring barriers are removed for them so that they can be successful in what they do. Engaging with Managers at all levels to ensure that performance objectives are in alignment with the strategic direction of the organization is one of the most effective ways successful leaders achieve this. This is an approach that has worked for organisations like AlliedSignal (now Honeywell), Google and others.
*Davina Jones is not the real name of the Executive.
Reuben works with governments and organisations around the world to strengthen institutions for superior performance. He is the Director of Brian Reuben Organization, United Kingdom.