Formulating strategy is a difficult task. Making strategy work—executing or implementing it throughout the organization—is even more difficult. This author, who has written several books on strategy and implementation, briefly describes what managers must do to overcome the impediments and achieve strategic success.
Some obstacles to effective execution
The road to effective strategy execution is full of potholes and dangers. What are some of them?
- Planning and execution are interdependent.
Strategy formulation and implementation are separate, distinguishable parts of the strategic management process. Logically, implementation follows formulation; one cannot implement something until that something exists. But formulation and implementation are also interdependent, part of an overall process of planning-executing-adapting. This interdependence suggests that overlap between planners and “doers” improves the probability of execution success. Not involving those responsible for execution in the planning process threatens knowledge transfer, commitment to sought-after outcomes, and the entire implementation process.
- Execution takes time.
The successful implementation of strategy takes more time than its formulation. This can challenge managers’ attention to execution details. The longer time frame can also detract from managers’ attention to strategic goals. Controls must be set to provide feedback and keep management abreast of external “shocks” and changes. The process of execution must be dynamic and adaptive, responding to unanticipated events. This imperative challenges managers responsible for execution.
- Execution involves many people.
Strategy implementation always involves more people than strategy formulation. This presents problems. Communication down the organization or across different functions becomes a challenge. Making sure that processes throughout the organization support strategy execution efforts can be problematical in a large organization. Linking strategic objectives with the day-to-day objectives at different organizational levels and locations becomes a challenging task. The larger the number of people involved, the greater the challenge to execute strategy effectively.
- Effective execution involves managers across all hierarchical levels.
Another problem is that some top-level managers believe strategy implementation is “below them,” something best left to lower-level employees. This view holds that one group of managers does innovative, challenging work (planning), and then “hands off the ball” to lower-levels for execution. If things go awry, the problem is placed squarely at the feet of the “doers,” who somehow couldn’t implement a perfectly sound and viable plan.
This view is wrong. It blames the wrong people for execution mishaps. The truth is that implementation demands ownership at all levels of management. From C-level managers on down, people must commit to and own the processes and actions central to effective execution. The execution tasks, jobs, and responsibilities vary across levels, but they all are interdependent and important. Execution is a key responsibility of all managers, not something that “others” do or worry about.
- Managing change is difficult.
Execution often involves change—in structure, incentives, controls, people, objectives, responsibilities. As we know, change can be threatening. The importance of managing change well is clearly important for effective strategy implementation. The inability to manage change and reduce resistance to new implementation decisions or actions can spell disaster for execution efforts.
- Other execution-related problems.
My research uncovered other problems that challenge strategy implementation. They include responsibility and accountability for execution activities and decisions that are not clear; poor knowledge sharing among key functions or divisions; dysfunctional incentives; inadequate coordination; poor or vague strategy; and not having guidelines or a model to shape execution activities and decisions. Space limitations prevent a complete discussion of how to overcome all obstacles to strategy execution. Let’s focus, then, on some of the decisions or actions that are critical to making strategy work.
Making strategy work
Table 1 summarizes what I see as important issues in making strategy work. Let’s consider some of them.
Table 1: Critical Issues in Making Strategy Work
- Having an Implementation Model to Guide Execution Thoughts and Actions
- Remembering that Sound Strategy Comes First
- Structure is Important to Successful Implementation
- Care Must be Taken to Translate Strategic Objectives into Short-term Operating Metrics
- Clear Responsibility and Accountability are a Must for Effective Execution
- Reward the Right Things—Use Incentives to Support Execution Processes and Outcomes
- Ensure the Development of Appropriate Capabilities and Managerial Skills to Make Strategy Work
- Focus on Managing Change
Use a logical approach to execution.
Managers need and benefit from a logical model to guide execution decisions and actions. Without guidelines, execution becomes a labyrinth. Without guidance, individuals do the things they think are important, often resulting in uncoordinated, divergent, even conflicting decisions and actions. Without the benefit of a logical approach, execution suffers or fails because managers don’t know what steps to take and when to take them. Having a model or roadmap positively effects execution success; not having one leads to execution failure and frustration.
Figure 1 shows the model of strategy execution derived from my research (see Hrebiniak, 2005). The model suggests or notes some of the key execution-related decisions and actions mentioned in Table 1. The remainder of this paper will focus on these.
Figure 1: Implementing Strategy: Key Decisions and Actions
Good strategy comes first.
Effective execution is impossible if strategies are flawed. Figure 1 begins with corporate strategy, which is concerned with the entire organization and focuses on areas such as portfolio management, diversification, and resource allocations across the businesses or operating units that make up the total enterprise. Business strategy is also shown in Figure 1. At the business level, strategy focuses on products, services, and how to compete in a given industry or market segment. What must be stressed additionally is that business strategy is important to the implementation of corporate strategy. Business strategy and corporate strategy are interdependent—each effects and is effected by the other. Consider for a moment the well-known portfolio approaches to corporate strategy. “Cash cows” generate cash. Corporate “milks” them and uses their cash to feed and grow other business units, including the “stars” with high potential. Corporate needs the “cash cows” to grow parts of its portfolio, consistent with its strategy. But what if “cows” fail to produce sufficient cash nourishment? Clearly, a corporate investment strategy would be harmed if “cash cows” didn’t play their part.
The point is that business strategy is essential to the successful execution of corporate strategy. Poor strategic performance at the business level detracts from corporate’s ability to achieve its strategic aims, while good performance helps make corporate strategy work. Inadequate attention to the role of businesses in the corporate portfolio and the performance metrics for which businesses are held accountable can dull or negate the execution process at the very start.
The impact of structure.
Figure 1 shows that the choice of structure is vital to the implementation of corporate strategy. To see this relationship, consider the age-old structural issue of centralization-decentralization. Over time, a corporation creates or acquires the businesses that make up the organization. Some corporate acquisitions become relatively independent, decentralized units competing in different industries. Yet there usually are activities or functions that cut across businesses and allow for centralization, reduced duplication of resources, and the scale economies so often sought by corporate management. Different businesses must be sufficiently independent to respond quickly to competitors’ actions and customer needs. Yet they can’t be so independent as to create an unnecessary duplication of resources and destroy all chances for synergies or scale economies across businesses. The corporation, then, must create the right balance of centralization and decentralization to achieve its strategic goals.
Structure is also important at the business level. Cost-leadership strategies, for example, often rely on functional structures to achieve not only expertise and critical capabilities, but also the scale and scope economies that result from the standardization, repetition, and volume associated with the functional design. Like their corporate counterparts, business leaders must also worry about the balance between centralization and decentralization and the costs and benefits associated with each. Structure again supports strategy implementation.
Need for integration.
The integration components noted in Figure 1 refer to the methods used to achieve coordination across the units comprising organizational structure. In a previous example, corporations employed centralized functions that allowed for scale economies and low costs of duplication across business units. To achieve these benefits, the work of the centralized units must be shared by decentralized businesses. The coordination or integration of functional expertise and knowledge laterally, across units relying on that expertise, is absolutely essential to the efficiency or market-related goals of the organization.
The same is true within businesses where different functions must be coordinated to serve customers or gain advantage in a particular market or industry segment. People in different functions often see the world differently: R&D, marketing, and manufacturing, for example, usually have different goals, performance metrics, and time frames for decision making. Coordinating these diverse units to achieve common goals can be difficult. Still, this coordination is needed and various methods are available—e.g. teams, integrating roles, matrix structures—to share knowledge and improve communication across the diverse functions. So, too, in geographically dispersed companies, where achieving global coordination to serve business needs while simultaneously accounting for country or regional differences is necessary for the execution of a global strategy. Integration mechanisms and structures (e.g. a coordinated global matrix) are again important.
Integrating strategy and short-term objectives.
Figure 1 shows that business strategy must be translated into short-term operating objectives or metrics in order to execute the strategy. To achieve strategic objectives, an organization must develop short-term measurable objectives that relate logically to strategy and how the organization plans to compete. Key issues, elements, and needs of strategy must be translated into objectives, action plans, and “scorecards” and this translation is an integral and vital part of the execution process. Performance appraisal and measurement of strategic progress simply cannot function without the existence of these critical metrics or measurable performance criteria.
Clarifying responsibilities and accountability.
Managers cannot create coordination mechanisms or integrate strategic and short-term operating objectives if job responsibilities and accountability are unclear. Clarifying responsibility and accountability is vital to making strategy work.
The problem is that job-related responsibilities are not always clear, and even authority is not always unambiguous. Responsibility and accountability are often blurred when people from different divisions, functions, or hierarchical levels come together to solve a problem. Matrix-like structures in global settings marked by lateral, hierarchical, and country influences often suffer from a cloudy picture of responsibility, accountability, and authority.
To execute strategy, responsibility and accountability must be clear. Use of a responsibility matrix or similar tool can help to define key execution tasks or activities and the people responsible for them. Without this clarification of roles and responsibilities for critical tasks, decisions, and outcomes, making strategy work is difficult, at best.
Developing effective incentives and controls.
The picture of strategy execution is not yet complete because the creation of strategy, objectives, structure, accountabilities, and coordinating mechanisms is not sufficient to ensure that individuals will embrace the goals of the organization. Some method of obtaining individual and organizational goal congruence is required. Execution will suffer if people are rewarded for doing the wrong things. Execution will fail when no one has skin in the game. Feedback on performance is also needed so the organization can evaluate whether the right things are indeed being accomplished in the strategy execution process.
What is required for successful strategy implementation is the careful development of incentives and controls, the last component of the model in Figure 1. On one hand, incentives motivate or guide performance and support the key aspects of the strategy-execution model. Controls, in turn, provide timely and valid feedback about organizational performance so that change and adaptation become a routine part of the implementation effort. Controls allow for the revision of execution-related factors if desired goals are not being met.
Making the necessary changes in the process of execution and overcoming resistance to them is the last step on the road to strategic success. This step requires unerring attention to detail, a focus on objectives, measurement of performance, and a strong commitment to the execution task at hand. Managing change is difficult, but successful execution depends on it.
These, then, are some of the important considerations or issues in successful strategy execution. The process of execution is challenging, but focusing on the issues identified above and following a logical model or set of guidelines definitely will help.