By Pietro Micheli, Warwick Business School (WBS)
Studies have found that companies use many different methods to devise a strategy and even more ways in trying to implement them. But a lot of research has also found the majority of strategies are never actually implemented or only partially. Why is that? How can something so fundamental to an organisation’s future not get implemented properly?
The problem is that many business leaders suffer from the misconception that strategy is the prerogative of five people sitting at the top of an organisation. That it is the CEO and their senior executives’ job to come up with the strategy, and even at some firms that it is the sole job of the CEO.
But if companies keep thinking strategy is the remit of very few individuals, who quite often never visit the shop floor or interact with customers, then they will not get very far. When such strategies are handed down from up high they are often greeted with confusion and a fair amount of indifference. Nobody knows where the strategy has come from as it arrives as a pdf in their inbox, or what they are supposed to do with it, while many simply can’t make sense of it.
A second assumption is that the way people understand strategy is purely cognitive; so executives naively believe that once staff understand the message then action will follow, but this is wrong in two ways.
First, staff need to understand where the strategy has come from and the reasoning behind it to truly start to absorb it and be able to interpret it into new behaviours and practices. Secondly, even if they understand it are people going to be inspired and motivated enough to actually put the strategy into action? Most times the answer is no: simply saying sales need to improve by 30 per cent is very difficult for people to actually put into practice on the ground.
To solve these misguided assumptions, strategy needs to address three important areas:
1. Open the strategy to more people
Strategy needs to be more participatory and involve internal stakeholders, suppliers or even critics. Organisations don’t need to involve everybody, but they need to ask: who is going to be involved? Who from inside and outside the business should be involved in informing the strategy?
It is often assumed that because the CEO and the executives are paid the most then they should be the strategists. But not involving other stakeholders means important perspectives and information are lost.
Executives can’t dream up a strategy in isolation; that is very dysfunctional and gives a lot of responsibility to very few people. Some corporations have a strategy department, but it still does not take into account that it has to be implemented by staff in the real world.
Yet, this is not a question of ‘the more the merrier’. That can lead to over-complicating matters and an overwhelming deluge of data that can lead to no decisions being made. Organisations need to be very intentional in which stakeholder they bring in and then manage their expectations, as somebody, usually the executives, need to make decisions on what to prioritise.
For instance, if an organisation’s strategy includes reducing costs then it has to involve its supply chain, or the demand for lower costs will simply see suppliers reduce the quality. Suppliers need to be engaged in a meaningful way so that their perspective is understood, rather than just squeezing them and causing quality issues in the future. A recent example is car manufacturers suddenly suffering a shortage of semiconductors, because they always treated suppliers in an adversarial manner and when demand outstripped supply, chip manufacturers decided to prioritise their more important customers, like Apple.
Organisations need to be much more inclusive and become network-based. Car manufacturers can’t enforce what they want, they need to better understand their suppliers and their position in their network to foresee and work around such bottlenecks. One way to decide on who to invite is to devise a stakeholder map, a simple tool that can prioritise who needs to be involved.
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2. Communicating the strategy
Once the strategy has been decided, there needs to be different ways of communicating it, such as using strategy maps, so it is visually appealing. It is important to engage the different functions of an organisation in a way that they understand. For example, a strategy goal to increase margins by 10 per cent needs to be interpreted so it is relevant just as much for those in the legal department as it is for finance.
The strategy also needs to be user-centred. The organisation needs to provide examples of how it will affect staff and clients, and what new behaviours are needed for it to be implemented. This is where people need to be creative so that strategy comes to life and is illustrated to make it easier to understand. Strategy maps are a good way of doing this and show how different individuals’ roles play in the bigger picture. People struggle to see how strategies are relevant to them, so the map needs to spell out different individuals’ new roles.
3. Measuring its success
It is vital once the strategy is understood by staff and implemented that there are tangible ways of measuring if it’s working. If one of the strategic goals is to reduce costs, the organisation needs to devise efficiency measures. Financial measures don’t give the whole picture though, and organisations should use staff appraisals to see if behaviours and actions needed to implement the strategy are being done. They can give staff targets and review these in the appraisals, which will give them something tangible to work towards.
Handing staff a figure to work towards also provides them with a lot more clarity rather than long and woolly strategy documents. If workers are given challenging but achievable targets it also motivates them, and agreeing these targets together with them helps manage expectations and any fears of overloading them. These targets and KPIs need to be continually assessed and improved on if the strategy is to be fully implemented.
These three areas are vital for organisations to understand that devising a strategy document is not the end, but just the beginning if it is to truly lead a company’s future direction.
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