INVOLVING EMPLOYEES IN STRATEGY EXECUTION

Involving employees in strategy execution is crucial for successful strategy formation. Successful strategy formulation and implementation requires the involvement and commitment of managers and employees on all levels. A failure to involve key people often results in implementation failure.

During the whole strategy formulation and execution process it is essential to involve middle managers and key lower level employees in decision-making about the strategy and its execution. Successful strategy formulation and implementation requires the involvement and commitment of managers and employees on all levels. In the end, employees are to ones who have to execute the strategy. Top management may develop the strategy but needs to spend significant amounts of time discussing it with managers and employees at lower levels within the organization.

A failure to involve key people often results in implementation failure. One of the most effective aids to implementation is to involve people early on in the development and debate of a strategy. The strategy process should invite the participation of those affected by the changes. It is essential that leaders stimulate continuous participation in the process of everyone who is capable of contributing. Research has found that involving employees in decision-making has many advantages: better quality of decisions, better understanding of the strategy, better organizational learning, higher commitment to the strategy and organization, higher job satisfaction, less resistance to change and better adaptability of the strategy. My own research found that involving organizational members has the following five positive influences on strategy execution.

Participation increases the quality of the strategy. After the strategy is developed, it must be discussed with those who have to execute it, such as middle managers and key employees to assess whether the strategy is sound, realistic and feasible. A strategy that is formulated without much employee involvement is more likely to have major flaws. Employee participation allows top management to tap into the specialized knowledge of lower-level employees. Lower-level employees have specific knowledge about operational and day-to-day activities. This can improve the strategy and the way in which implementation tasks are performed.

Participation increases employee commitment to the strategy. Commitment of those who have to implement the strategy can be enhanced by their involvement and participation. Commitment to a strategy is essential. A common cause of failure in strategy implementation is that affected managers and employees are not involved from the start in the strategy formation process. The extent to which team members are committed or agree and cooperate with a strategy has a large influence on the manager’s ability to implement that strategy. By sitting down with employees and explaining the strategy to them and asking for comments increases their understanding of the strategy and their commitment to it. When employees feel that they have significant input in the strategy and see that certain ideas of their own have become part of the strategy they tend to be very committed to that strategy. The classic study of Coch and French (1948) found that stakeholders react more favorably and become more committed if they participate in the change process. Research has shown that organizational members accept a negative decision outcome more when they have a voice in the decision making process (Davy et al., 1991). This is especially important when the new strategy involves negative consequences for employees or other stakeholders such as layoffs, restructuring, closing down facilities or outsourcing of production.

Participation increases the self-confidence, motivation and performance of employees. A strategy that is developed without the involvement of relevant employees is likely to be resisted during implementation by the affected employees. By involving middle managers and employees, top management can try to formulate a strategy in which the goal alignment of the organization and employees is as high as possible. People are motivated more by their perceived self-interest than by the goals of the organization unless they coincide. Therefore, if the perceived degree of goal alignment is low, the individual’s commitment to the strategy will be low, and as a result, the amount of effort the employee would be willing to invest in implementing that strategy will also be low. When employees are involved in decision-making they get the feeling that they are taken seriously and that their opinion matters. This has a very positive influence on their self-confidence, which increases their motivation and work performance. My research suggests that organizational members become more motivated when they have more control over their job.

Participation allows management to stay in touch with lower levels of the organizations. It is important for top management to know what is happening in the organization on all levels. By allowing employee participation, management may find out where there is support for the proposed strategy and where resistance can be expected. This can be helpful for communicating the strategy to the organization and obtaining organizational member commitment to the strategy.

Involve external stakeholders in the strategy process. Not only employees need to be involved but external stakeholders as well. Besides managers and employees there is a potentially wider range of organizational stakeholders who may have vital and legitimate interests in the direction and extent of strategic and organizational change, such as customers, suppliers, investors, unions and governments. Consensus must often be achieved both within and outside of the organization in order to successfully implement a strategy. The organizations’ failure to at least ‘satisfice’ external constituencies such as governments, unions and other relevant stakeholders can seriously jeopardize an implementation effort if the constituency has the power to block or delay key elements of the strategy.

Involving employees and stakeholders takes time. Involving organizational members during the strategy process has many positives influence on implementation performance. However, involvement tends to take considerable time. Involving employees leads to more effective implementation but slows down strategy implementation. This combination of implementation effectiveness with slower implementation speed suggests that it takes more time to do something well. Therefore, such a participative strategy process may be more suited for relatively stable environments. A top-down strategy process with little employee involvement may be more suited for turbulent environments or when an organization is in crisis and something must be quickly. Top down strategy formation is less likely to be hindered by organizational politics, resistance, and alternations between the old and new ways of doing things. Top-down strategy formation with a short horizon may encounter less resistance, bring about more decisive transformations, and result in performance improvements faster than participative approaches. Hence, a top down strategy process may apply when the organization is clearly out of fit, or when the environment changes radically, and for the organization to survive, fit must be achieved in a short period.

HOW TO INVOLVE EMPLOYEES IN STRATEGY FORMATION

Organizations that excel at strategy execution place great emphasis on strategic involvement. These organizations use the following practices to involve organizational members in decision-making concerning the strategy.

Combine top-down and bottom-up strategy formation. My research and experience suggest that a combination of top-down and bottom-up strategy development and execution works best. Most effective is a leadership style that embraces the paradox of top-down direction and upward influence. Top management advocates the overall strategic direction but learns from the feedback of those lower in the organization and adapt the strategy of its execution when needed.

Involve employees in strategy formulation. This can be done by involving key employees in a sounding board group during the formulation of the strategy. Members of such a sounding board group do not have any decision-making authority but are involved to point out potential flaws in the strategy, provide a realism check of the feasibility of the strategy and to assess the support among employees for the proposed strategy. Another way to involve employee is to allow them to develop and submit proposals, which can become part of the strategic plan. Employees within the departments are allowed to come up with initiatives, which are communicated to higher management by department heads. Subsequently, management decides which proposals become part of the new strategy. After this organizational members are to implement the proposals. The ability to propose such initiatives often greatly increases their commitment to the strategy.

Discuss the strategy with employees. During regularly held formal sessions, higher management explains the strategy, asks employees for comments, and gains feedback on the strategy. When management perceives that these comments can improve the strategy or the organization, they are taken into consideration. Informal meetings, such as personnel parties and company drinks are even more effective than formal ones in soliciting the views of middle managers and employees. During informal meetings management explains the strategy and asks comments from employees. During such formal an informal meeting it is important to stress that it is a proposed strategy. This gives employees the feeling that the strategy is not finalized and that their input is not relevant anymore. If that happens it is often viewed as a strategy which is developed and executed in a top-down fashion. This greatly reduces the commitment of employees. By stressing that it is a proposed strategy, top management may convey that the opinion an input of employees is values and that valuable contributions will be taken into account.

Increase organizational member participation slowly. Organizational members are not always used to participate is decision-making and taking co-responsibility for decisions. Employees in centralized organizations with an authoritarian management style are often not used to be involved in decision-making. In this type of organizations people tend to think in a hierarchical way indicating that management should make the decisions, not employees. It can be hard for organizational members to abandon their old beliefs and values about decision-making, which may result in a very reactive stance. Furthermore, organizational members tend to be skeptical of empowerment efforts of managers.

Participative execution not suitable in all contexts. My research found that a participative implementation style may not be as suitable to other contexts as one may think. In some cultural contexts organizational members may not always be willing or able to participate in decision-making. My research found that there are organization cultures in which people are reluctant to make mistakes, take initiative, voice their opinions, and thus participate. In such a context, management needs to invest a lot of time and energy in organizational members to make them participate. Employee involvement needs to be implemented in a gradual and deliberate way. When organizational members are involved too quickly it is likely that they will not participate. By gradually involving organizational members, they become more accustomed to participation. Participation needs to be maintained for a long time to be effective. However, in time, when participation efforts are genuine and maintained for a considerable time, organizational members overcome their initial reluctance and often become very enthusiastic about participation and come to view it as very important.

Tackle complainers and cynics. When invited to participate in decision-making there are often a few individuals who complain a lot and do not provide constructive criticism. Employees can come up with a mountain of small problems when they are allowed to voice their opinions. When this happens, management must be steadfast in focusing on the bigger issues. Others will use the opportunity to vent personal problems or openly display cynicism about the new strategy. When this happens management must take these individuals very seriously and sincerely listen to them. If they are not dealt with in a respectful way, other more timid employees will not participate and voice opinions that may differ from those of management. However, if such cynics continue to argue against the strategy but do not come up with valid arguments they must be swiftly dealt with. A few cynics can really undermine the support of a work unit toward a strategy.

Avoid the trap of top-down strategy formation. Despite the widely accepted and apparent advantages of involving middle managers and employees in strategic decision-making, many organizations continue to develop and execute strategies in a top-down way. This approach is supported by the dominant view in the strategy literature to treat the strategy process as a rational and top-down process in which the strategy is implemented with the use of a diverse set of control mechanisms. The top management team formulates the strategy and then delegates implementation responsibilities throughout the rest of the organization. Strategy implementation views as a rather centralized process, in which the CEO, or top management team, conceives the strategy and imposes its implementation on the rest of the organization.

A major limitation of top-down strategy formation is that the approach fails to involve organizational members in the strategy formulation and implementation processes resulting in low employee commitment to the strategy and its implementation. Successful strategy implementation or organizational change is increasingly reliant on generating employee support and enthusiasm for proposed changes, rather than overcoming resistance to change. Employees with low or negative commitment to the strategy formulated by senior management create significant obstacles to effective implementation. Uncommitted members of a decision-making team can delay or even sabotage the execution of a strategy. This can result in strategic problems, as even slight delays can prove critical in highly competitive and dynamic environments.

THE STRATEGY EXECUTION SERIES

This article is based on my PhD research at Rotterdam School of Management, Erasmus University – one of the top business schools in Europe. Research has shown that most strategies fail in the execution phase. The aim of my research was to understand why strategies succeed or fail. This series of articles gives a comprehensive overview of the best practices that contribute to strategy execution success or failure. Collectively, the best practices allow executives and managers to successfully executie their strategy and achieve the goals of their organization.