Connecting Strategy to Execution

Connecting Strategy to Execution
Our focus thus far has been on tactical and operational issues, because frequently
they are the critical ingredients that allow a corporation to achieve its strategic aims.
Senior executives spend time crafting and refining a strategy, but ultimately what
matters is how well it is implemented. Most (81 percent) of our participants said
their company’s senior management has a well-defined strategy, but relatively few
(14 percent) said they manage to it well. Why is there a disconnect between
corporate strategizing and day-to-day execution? A clear statement of strategic
objectives is necessary, of course, but translating it into objectives for business units
and individuals is another matter.
Typically, executives use a combination of methods that may seem effective but in
reality fall short. The most common approach is to set specific, measurable
objectives for each business unit. But often these objectives focus too much on
financial measures and do not include nonfinancial objectives critical to achieving the
corporate goals. Fewer than half (45 percent) of companies lay out formal, strategydriven
objectives in a scorecard. Only one in five companies communicates those
objectives to individual managers.
Another aspect of knowing how to manage to the company strategy is understanding
how the objectives and actions of one part of the business affect the others. Since
most companies do not operate in a rigid command-and-control environment, it is
important for managers in one area of the business to be able to anticipate how their
shifts will affect other parts. An important goal of performance management in any
corporation is to ensure that strategy and objectives are aligned across departments
and business units. Yet only one-fourth of our participants said they have a clear
understanding of the specific goals of other parts of the business, such as sales
quotas, production targets or profitability, and how these affect their own area. This
finding helps explain other findings described above, such as why so few companies
react to changes in their overall business in a well-coordinated fashion – and why it
is so common for the left hand not to know what the right is doing.
Since in business the only constant is change, it is important for companies to ensure
that they maintain strategic alignment when managing that change. This often is a
challenge. Only 6 percent said that when things change, it is easy for their company
to adapt its plans. Many more said it’s neither easy nor hard or that it’s difficult (31
percent and 29 percent, respectively).
Not only does the overall business climate change, but often things change in one
part of the business that will impact the rest, such as when a new product release is
delayed, sales quotas are adjusted or new facilities come on line sooner than
planned. When this happens, a major challenge for large companies is to coordinate
actions across the enterprise. Often, it’s a case of the left hand not knowing what the
right hand is doing.More than one-third (37 percent) of participants told us that their company reacts to
change in an uncoordinated fashion; only 9 percent said they do so in a very well
coordinated fashion; half chose the middling response “somewhat coordinated.”
Improving coordination is an area where better communication across a company
and a clearer view of operations are likely to improve performance in a sustainable
fashion. Issues of coordination generally arise from a lack of communication or
information availability, both of which reflect what information a company gathers
and how it makes it accessible. When the problem is an inability to coordinate
actions, the underlying issue usually is an inability to share information easily. Here
again, having the means to bring together information from multiple data sources
can make it feasible to increase the visibility of actions and status across functional
silos.