Are we really bad with strategy?

Recently, while having lunch with a friend who works as a senior leader at a major Fortune 500 company, my friend said to me, "My company does not understand strategy."

In my career, I have had many similar conversations like this with people of different specialties from companies of various sizes and industries. 

Similarly, I have heard many senior executives feel frustrated as they feel their employees are not working on the right things. The same is also true for senior leadership from government organizations. 

Is this because leadership does not understand strategy? I would say, No. Foundational works on strategy have been written and are widely available, the most important of which have been pioneered by Michael Porter back in the 1980s. Furthermore, in any given month, there are numerous articles on business strategy published by the best-known business schools, e.g., Booth, Warton, Sloan, HBR, and others.

Is it because leadership fails to seek alignment? No. Companies, at least the ones that I have seen, seek to align everyone’s efforts in the same direction. The leadership would work hard to establish three or four different corporate goals at the highest level. Each employee would then be asked to align his annual objectives along these goals. Of course, right? This is common sense. This kind of alignment ensures unity and productivity.

But what really happens?

Well, this doesn’t work very well. 

Studies show that "[a] mere 7% of employees today fully understand their company's business strategies and what's expected of them in order to help achieve company goals." [1]

In my experience, I see three key issues with this. 

• The objectives are non-inspiring. Usually, these objectives are "capture more market share", or "increase to the company back log", or "add breadth and depth to the workforce," or ‘be more accountable.” While these are legitimate objectives, they are also common-sense things to do for a business to function and grow. What business owner or CEO would say, “Let’s not increase market share this year?”
• The objectives are non-quantitative. What is good enough? What is success? These are common questions that you hear in meeting rooms. Increase market share by 1% is very different than increasing market share by 15%? What is good enough?
• The objectives are disconnected from reality. I remember in one company, in one strategy meeting, the CEO was emphatically asserting that the company will have a product for the market place within 6 months. The engineering team was stunned as the minimum viable product barley exists on paper, the physics were not yet validated, and financing was nearly non-existent. The late Andy Grove of Intel once said, “People in the trenches are usually in touch with impending changes early. Salespeople understand shifting customer demands before management does; financial analysts are the earliest to know when the fundamentals of a business change. 

How can we do better?

There are three simple things that jump to my mind.

• Transparency. What if we made goal setting more transparent? What if I knew what my boss was trying to achieve in his annual goals? And similarly, my boss’s boss. This would certainly ensure my goals are more specifically aligned to theirs. Just think, if the people in the same group shared their annual goals with each other, it may encourage increased collaboration and productivity. 
• Measurable. It still stuns me that people eschew making the goals measurable, i.e., put numbers next to them. Indeed, setting a quantitative goal does take more time and effort. However, if you can’t measure it, how do you know how well you have done?
• Employee Engagement. Often, a company’s annual goals are envisioned by the top leadership team and then cascaded down to the employees; you can imagine here Moses carrying the two tablets from Mount Sinai. But, pivoting off of the quote above from Andy Grove, perhaps some of the annual goals should be solicited from the people in the trenches. After all, they are “usually in touch with impending changes early.”

What does this do for an organization?  

The transparency disarms individual isolation and encourages collaboration. Since the goals are measurable, successes can be easily celebrated. Further, trouble spots are noticed and can get the right attention. The workforce is more engaged and aligned. As a result, this gives birth to an organization that is more agile, more productive, and more efficient. An organization like this is needed throughout a product lifecycle from innovation to prototyping to manufacturing to operations and maintenance.

As you wrap up this year's goals and think about next year, what are you going to do differently?

Reference

[1] Robert S. Kaplan and David P. Norton, "The Strategy-Focused Organization," Harvard Business School Press, 2001