Strategic success not only requires an appropriate strategy but also that the strategy is executed successfully. Even the best-made strategy is worthless without successful execution. Despite its strategic importance many organizations fail at strategy execution. Fewer than 15 percent of organizations are successful in strategy execution. Because of its high failure rate, achieving successful execution remains a continuing challenge for managers. This article presents the Strategy Execution Agenda – a management model that allows managers and executives to master one of the greatest management challenges – successfully implementing strategies. The Strategy Execution Agenda incorporates 9 key success factors for strategy execution. Collectively, these tools help organizations execute their strategy to achieve sustainable organizational success.
STRATEGY WITHOUT EXECUTION IS WORTHLESS
The successful execution of strong and robust strategies gives any organization a significant competitive edge. Strategy execution is even more important in current turbulent organizational environments. The ability to develop and implement new strategies quickly and effectively may well mean the difference between success and failure for organizations. However, well-formulated strategies only produce superior performance for organizations when they are successfully implemented. Even the best-made strategies are worthless if they cannot be successfully implemented. Strategic success not only requires an appropriate strategy but also that the strategy is implemented successfully, and timely.
MOST STRATEGY EXECUTIONS FAIL
Organizations often fail at strategy execution. Few intended strategies are successfully realized, despite its strategic importance to any organization. Fewer than 15 percent of organizations around the world report that they are successful at strategy execution (Harvard Business Review, 2006). Various studies have reported execution failure rates at 60 to 90 percent (Kaplan & Norton, 2005). As a result, survey after survey reveals that strategy execution is a top priority for executives (Harvard Business Review, 2006).
The majority of strategies fail in the strategy execution phase. After a comprehensive strategy or single strategic decision has been formulated, significant difficulties are often encountered during the following strategy execution process. Many organizations have a fundamental disconnect between the formulation of their strategy and the execution of that strategy into useful action. This has been called the strategy implementation problem: ‘the all too frequent failure to create change after seemingly viable plans have been developed’. Achieving successful execution remains a continuing challenge for managers responsible for executing strategies.
THE STRATEGY EXECUTION AGENDA
To contribute to the understanding of strategy execution at its reasons for success or failure, we conducted a qualitative survey of 55 executives with strategy execution responsibilities within 44 public and private organizations. The aim was to investigate strategy executions fail or succeed. In-depth interviews were held with executives and manager with strategy execution responsibilities from a wide variety of organizations. From this PhD research nine key factors emerged that positively influence strategy execution success. Together, these nine practices constitute the Strategy Execution Agenda (see Figure). Managers and executives need to take these factors into account in order to overcome the ‘implementation problem’ and successfully execute strategies within their organizations.
The Strategy Execution Agenda is a comprehensive management model that allows managers and executives to master one of the greatest management challenges – successfully implementing strategy. This powerful framework incorporates nine success factors for strategy execution. Collectively, these tools help organizations implement their strategies to achieve organizational success.
1 Appoint Competent Management
The presence of competent employees and especially management is the most important success factor for strategy execution. Inadequate capabilities of managers are a common cause of strategy execution failure. Without competent organizational members, implementing a strategy successfully becomes very difficult if not impossible. Organizational members with execution responsibilities need to have sufficient skills and knowledge to implement the strategy. Eventually organizational members are the ones who have to perform the execution activities to make the strategy a success.
Especially, having competent management is important. When top management is incompetent, the whole organization is affected and thus the strategy execution effort as well. Furthermore, when employees have little confidence in the ability of management to execute the strategy then their commitment to the strategy will be low.
Having incompetent members within a team has a negative influence on the performance of other organizational members. Well-performing organizational members have their motivation reduced when they have to work with or are dependent on poor performing colleagues. Especially the presence of incompetent managers has a very negative influence on the performance of subordinates. If a person is competent and that person’s manager is not, this is likely to have a negative influence on the level of motivation and execution performance. Successful organizational members tend to leave an organization where they have to work for incompetent managers and feel that their performance is not appreciated or often even worked against.
To increase the level of competence of organizational members several practices can be used such as training and education, coaching and counseling, increasing self-efficacy of organizational members, giving feedback about performance, giving compliments for good performance, addressing poor performance, hiring and firing of organizational members and bringing in external expertise.
2 Use a People-oriented Management Style
Having a people-oriented management style is a key practice for successful execution. As individuals go to work for both instrumental and social reasons, managers need to pay attention to both task performance and social relationships. Better social relations increase the cooperation, motivation, and effectiveness of organizational members (ibid). Organizational members have the need to be treated with the dignity of a human being – one with knowledge and free will. A manager with people skills listens, provides support and encouragement, coaching and counseling, develops social relations with subordinates, celebrates social activities and empowers organizational members during a strategy execution effort. People-oriented management consists of four main aspects.
A first aspect is coaching and counseling employees during the strategy execution effort. Employees eventually have to internalize the new activities, which are required to implement the strategy. Therefore, management must guide and coach the employees but they have to perform the execution tasks themselves. Moreover, organizational members are often quite capable of performing certain execution tasks but need help doing it. By coaching employees, they can become more confident of their abilities and can become more involved and less passive. In addition, managers can reduce resistance to change by being facilitative and supportive. This may involve giving employees time off after a demanding period and providing emotional support.
A second part of people-oriented management is to develop and maintain personal relationships with subordinates. Better social relations have a positive influence on the cooperation, motivation and effectiveness of organizational members.
Celebrating social activities with organizational members is a third aspect of people-oriented management. Organizing social activities are a good way to develop close and personal relationships among organizational members, can create a positive atmosphere within the organization, create more unity within the organization, reduce the distance between management and subordinates, and increase organizational commitment.
Empowering organizational members is a final aspect of people-oriented management. Organizational members can be empowered by making them independent, delegating responsibilities, allowing participation, giving them more control over their work, giving them information about the strategy and its execution, and organizing training and leadership courses.
Self-responsibility and self-empowerment of organizational participants makes them more motivated, more self-confident and more willing to take initiative, which is beneficial to the strategy execution effort. In addition, empowerment or delegation has potential benefits such as improves speed and quality of decisions, reduced managerial overload, enrichment of subordinates’ job, increased motivation of subordinates and provides opportunities for the development of leadership skills of subordinates. In addition, empowerment increases work performance and innovative behavior. This in turn increases the motivation of organizational members by making them feel more powerful.
Empowerment increases self-determination, which increases the self-confidence of employees. Furthermore, by giving employees more control over their work they feel more proud, important, and involved. A final reason for the delegation of authority to employees is that they are the ones who encounter the problems during their work and are thus the ones who are most suited to solve these problems.
3 Take Political Interests into Account
Politics and struggles over power and leadership are just a few obstacles that may undermine an execution effort. Strategy formulation and execution inevitably raise questions of power within an organization. The existence of conflicts, and the use of individual and group power needs to be taken into consideration. The very prospect of change confronts established positions, which may lead to resistance to change. Resistance to change may lead to passivity toward the strategy or even sabotage. Managers can overcome resistance to change by involving potential opponents in decision-making, taking their interests seriously and clearly communicating the new strategy and its advantages to them.
4 Develop a Strategy Execution Plan
After the strategy is developed, it needs to be translated into a concrete and well worked out strategy execution plan. Even the best strategy is worthless when managers cannot translate the strategy into operational reality. The strategy execution plan specifies the processes, activities and operational objectives that are required to achieve the goals of the strategy. The strategic objectives need to be translated into measurable operational execution sub-objectives and linked to departmental and individual goals. In addition, progress measurement points or ‘milestones’ need to be established. Measurable objectives provide an effective basis for management control of the execution.
Without concrete objectives and milestones, it is impossible to measure the progress of the strategy execution. This makes managing and improving the strategy execution impossible. Therefore, the execution plan needs to contain a clear set of concrete and measurable objectives or targets. Clear and specific tasks need to be defined which are required to achieve these targets. Everyone with strategy execution responsibilities needs to know what to do in order to implement the strategy and what concrete objectives they have to attain. Unclear objectives leave room for differential interpretation and discretion and may thus contribute to execution failure.
Effective strategy execution requires clear execution tasks, activities and responsibilities. Execution can only be successful when there is a clear and shared understanding of who does what, when, at what cost. Not only should the necessary actions to implement the strategy be identified and planned, responsibility for these actions should be allocated as well. By allocating clear responsibilities for the execution of the execution activities, progress can be measured and controlled.
Specific and ambitious but realistic goals, which are accepted by organizational members lead to the best task performance. People need realistic challenges to perform well. When organizational members have decided that it is impossible to reach a goal they will stop trying to reach that goal (ibid).
5 Align Structure to Strategy
During a strategy execution effort, a clear organization structure needs to be aligned to the strategy. It needs to be clear whom the authority has to make decisions. When possible, management must ensure that the organization structure is clear, relatively decentralized and relatively formalized. When the existing organization structure does not meet these requirements, it may represent a hindrance to strategy execution and needs to be changed. The main advantage of a decentralized organization structure is that it increases the commitment of organizational members to decision-making; decisions can be made more quickly, and may improve the quality of decisions as it makes more use of specialized knowledge of organizational members at lower levels in the organization.
Centralized decision-making, one-way top-down communication and lack of input from lower levels of the organization may inhibit strategy formulation and execution. A centralized organizational structure with rigid organizational policies combined with a perceived lack of control is related to maladaptive behavior in organizations. Individuals working in centralized organizations, tend to feel that management does not trust their skills and abilities resulting in a sense of incompetence.
Centralized control reduces self-determination, which in turn reduces the intrinsic motivation of organizational members. An explanation for this is that individuals tend to have a desire for personal control. In addition, an authoritarian management style can remove control and discretion from employees, which increases their sense of powerlessness. Contrary, decentralized control helps organizational members feel that they are contributing to the operations of the organization, which promotes their sense of having impact. Furthermore, it may increase the motivation of organizational members.
A moderately formalized organization structure has the advantage that it creates clarity for organizational members. Clear procedures, rules and responsibilities may give organizational members certainty during an execution effort. When problems arise and responsibilities are not clear, organizational members may blame each other.
A high level of formalization reduces the propensity to change. The greater the number of rules and regulations, the greater the rigidity and inflexibility an organization. A high level of formalization discourages new ways of doing things and reinforces the status quo. However, when formalization is low, organizational members have few rules or procedures to fall back on during the strategy execution. Thus, organizations must not be too formalized and become rigid but also not become too informal and become chaotic and uncontrollable.
6 Change the Organization Culture
A new strategy may require changes in the way of thinking and habits of organizational members. Old habits and ways of thinking can prove to be an obstacle to strategy execution. Fundamental organizational change often involves major uncertainty and can trigger intense emotions, such as anxiety and a fear for job security. As a new strategy can be accompanied by layoffs it, organizational members may perceive it as a threat to job security. Job insecurity is related to a variety of negative responses such as lower job satisfaction, lower organizational commitment, lower job involvement, increased psychological withdrawal, greater resistance to change, greater propensity to leave the organization, lower trust in management and withdrawal cognitions and behaviors including reduced work effort, increased absenteeism, and theft.
An existing organization culture can be characterized by fear for making mistakes, responsibility, participation, and change. When managers act in authoritarian and punitive ways, subordinates may become reluctant to make mistakes and engage in learning behaviors. Employees may become shaped by organizations with high levels of centralization, formalization, and rigid rules and may become passive and unable to be creative or exercise initiative on the rare occasions that it is encouraged and rewarded.
To implement a strategy successfully, proactive organizational members are often needed who participate in strategy formulation and execution. In order to participate, organizational members need to dare to take initiative, voice their opinion, and not be afraid to make mistakes. Therefore, an empowered and fearless organization culture needs to be created in which organizational members are able to make mistakes without being punished for it. When organizational member believe that well-intentioned interpersonal risks will not be punished, this fosters learning behavior.
To change an existing organizational culture several strategies and tactics can be used. First, a clear vision of the new organizational culture is needed. The vision needs to clearly describe the new culture and how it differs from the old culture what its advantages are. This needs to be communicated very clearly to the employees. Cultural change involves a lot of communication. Another tactic is to individually coach and council employees. This includes having open conversations with employees. Involve employees and give them feedback about their performance and the new culture. Providing training and education, especially motivational courses, can also be used to change the culture.
Visible changes, such as new uniforms and a new corporate logo can be used to make the culture change more visible and tangible to organizational members. In addition, hiring employees who have a better fit with the new culture and demoting or letting go of employees who not able to fit in the new culture are another tactic that can be used. Finally, leadership from top management is crucial in culture change. Top management need to serve as an example of the norms and values it wishes to convey to organization. However, changing the culture of an organization is a difficult and time-consuming process. It may take years to successfully change an existing organizational culture. Changing habits, which have been the same for a very long time is not easy.
7 Appoint a Strategy Execution Leader
During the strategy execution effort, there needs to be one clear leader who is responsible for the outcome of the strategy execution. The strategy execution leader serves as project managers and problem owner of the strategy execution. The execution leader needs to be board member, especially for strategic executions. The execution leader is responsible for articulating and communicating an attractive strategic vision that guides the strategy execution. A successful leader inspires followers through the communication of a captivating vision designed to motivate followers to ambitious goals. Effective leaders have the ability to inspire confidence and enthusiasm of the new direction.
Execution leaders need to be decisive during the strategy execution effort. Taking decisions may be considered to be is the primary task of management. When taking these decisions, a manager needs to be steadfast, resolved and not allow him or her to be influenced by others. Managers who want to execute ambitious and innovative plans need to be persistent in sticking the course through thick and thin. During reorganizations in which employees can lose their job or when established power positions are threatened, considerable resistance to change can arise. In such instances of considerable resistance to change, management has to be decisive and steadfast in taking decisions. Managers need to be able to take tough decisions when organizational members are not performing well.
Strategy execution leaders need to take decisions, which are perceived by organizational members to be fair. Research has found that organizational members are more committed to decisions, decision-makers and the organization when the procedures, which were used to arrive at the decision, are perceived as fair (Brockner et al., 2000). As Brockner et al state: ‘It’s not only what you do, but how you do it’. Finally, when leaders practice moral virtues such as fairness, integrity, honesty, loyalty, determination, courage and responsibility increases the willingness of followers to follow a leader.
8 Communicate the Strategy
After the strategy is formulated, it needs to be communicated to the rest of the organization, and especially to organizational participants who are directly influenced by it. However, no less than 95 percent of organizational members do not understand the strategy of their own organization (Kaplan & Norton, 2000). The objective is to make organizational members understand what the strategy is all about and what its goals are. Furthermore, employees need to know how the strategy influences their daily work. Communicating the strategy in a very simple way makes it easier to understand for organizational participants.
An important part of the communication of the strategy is the explaining and convincing of the strategy to employees. Not only needs the content of strategy to be clearly communicated, it also needs to be clearly explained in a way that employees understand and may become convinced that the strategy is sound and effective. This can be done by explaining the advantages of the new strategy in a clear and practical way. Organizational members are more willing to accept undesirable decisions when they have received clear and adequate explanations for those decisions.
Organizational members need to understand why the execution or the new strategy is necessary. It is especially beneficial if organizational members see in their daily activities that something needs to be changed. Furthermore, a perceived crisis may also be beneficial in establishing the need for change to organizational members. When organizational participants understand the need for the strategy execution, they are more likely to be supportive of it.
Communication of the strategy can be done through a wide range of communication means, such as magazines, email, leaflets, information, and publicity meetings. However, two-way communication sessions with organizational members are most effective. In these sessions, the strategy is explained and employees get the opportunity to voice their views on the strategy and its execution. It is not only important to communicate the strategy to the people but it is also important to listen to their reactions to the strategy. Extensive listening to comments from employees takes considerable time but builds commitment to the strategy.
9 Monitor and Adapt the Strategy
During the strategy execution, it is important to monitor whether the goals of the execution are being met and whether adjustments need to be made. During the strategy execution, the strategic goals translated into operational goals with performance indicators need to be monitored to assess whether the objectives are being achieved. As strategy execution plans are destined to change, execution teams need to regularly meet in well-structured, punctuated sessions to share information, reconfirm priorities and make decisions. This way, management can make adjustments when needed and thus control the strategy execution effort. To make these adjustments it is required to assign clear responsibilities for the achievement of those targets. When objectives are not being met, the person or persons responsible need to be held accountable.
When objectives are not being it is possible that the assumptions underlying the strategy are flawed or obsolete. When this happens, it must be decided whether incremental improvements will suffice or that a fundamentally new strategy is required.
Many organizations have accountability problems, which are the result of a lack of planning, the absence of a functional management information system, or the existence of cultural values which do not encourage holding persons, especially in high positions, accountable.
Finally, when a strategy execution is finished it needs to be evaluated. This way, an organization may learn from the execution, which can benefit future strategy executions. It is important to conclude and evaluate a project so that employees see what they worked for, creating a sense of closure.