Strategy is the way how things are done in a company, about values and measures at work, chosen markets and goods produced and even when leaders do not think actively about strategy themselves – their company still have one, although not always a self-chosen one (cf. Nagel et al. 2004, p. 9).
Then strategy implementation is the process of turning strategies into real actions in order to accomplish strategic objectives and goals . Implementing a strategic plan is even more important, than the strategy development process itself. However, the leaders neglect the topic of strategy implementation as they refer to it as a purely operational task and therefore delegable, less interesting and not important. The lack of specific knowledge concerning strategy implementation as well as time issues may also be a point here as the strategy development process is seen as much quicker and more clearly structured than the implementation process which has to be situational and reflect the companies’ special characteristics and realities (cf. Riekhof & Offermann 2006, pp. 34).
Most strategy execution programs miss timelines, run over budget and deliver disappointing – if any – outcomes for all stakeholders. Research indicates that about 90% (cf. DeLisi 2001, p. 2; Riekhof & Offermann 2006, p. 31) of organizations fail at strategy implementation and doing so waste time and money, discourage people involved in the strategy development processes and lose competitive advantage identified before (cf. Vermeulen & Ntuli 2011, p. 2).
This paper is focusing on the challenges while implementing a strategy. It gives a guideline in form of a checklist for a successful strategy implementation. It is a helpful outline for executives, leaders and managers as it simplifies the strategy implementation process and helps to make sure, the strategy is implemented properly at every decision level.
The objective of this paper is to give an overview of the most important issues while implementing a strategy and the proposition of a checklist for successful strategy implementation.
In chapter one there will be given an outline of issues which are leading to failing of strategy processes. This includes the key issues of failing of strategy processes in companies in general and the deficits of leadership in this process in special. Then the chances and limitations of the balanced scorecard as a tool for strategy implementation will be discussed.
In chapter two, the key factors of strategy implementation will be derived. In the first place two approaches will be introduced: the intuitive approach and the concept of Wheelen and Hunger. Then a résumé of them enriched by supportive issues will be given in form of a do’s and don’ts list.
The third chapter is a short empirical study of the main issues which have executive to face while implementing a strategy. It serves as a practice relevance check of the issues discussed before.
The fourth chapter gives a summary of the key factors for strategy implementation. The in chapter four presented checklist contains insides from literature review, empirical study and common knowledge and aims the support of leadership and management by strategy implementation. Finally, there will be given an outlook about how to perfect strategy communication with regard to strategy implementation.
In this paper there can be find answers to following questions:
Why do most organisations fail to execute their strategies?
What challenges are leaders facing while implementing strategies?
What can be done to improve the effectiveness of turning strategy into action?
“Every failure brings with it the seed of an equivalent success.”
1. Issues for Failing of Strategy Processes: People, Organization and Tools
In this chapter an overview of the most important causes of strategy implementation failure will be given. In chapter 1.1 the key issues for companies like impropriate planning, lack of reporting structures, low commitment and organization structures in general will be discussed. This is followed by the struggles of leadership and the necessity of different skills and abilities on leaderships’ site due to implement a strategy, in chapter 1.2. In chapter 1.3 the Balanced Scorecard and its chances and limitations as a strategy implementation tool will be presented.
“Without successful implementation, a strategy is but a fantasy.” (Hambrick & Canella 1989, p. 278)
1.1. Key issues of failing of strategy processes in companies.
[illustration not visible in this excerpt] People are seen as the one most important issue when it comes to failure of strategy implementation programs. Here are to highlight topics like: fear of losing position and influence and lack of strategy acceptance and therefore lack of commitment. Moreover, power struggles between stakeholders cause conflict potentials and instability. Furthermore, inadequate planning and preparation is one of the main causes of strategy implementation failure.
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Figure 1 : Key Issues of Strategy Failure (Sadowska 2012)
In figure 2 and 3 can be found a variety of reasons for failing strategy processes. Following, at four key aspects will be looked more closely.
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Figure 2 : 10 Most Common Strategy Implementation Problems
(Sadowska 2012 based on Alexander 1985, pp. 90)
- Impropriate planning
“A goal without a plan is just a wish.”
Planning is often seen as an annoying task and is being readily skipped or rushed through if only possible. Time lines and resources are then aligned by the rule of thumb without a feasibility check, just for the sake of having a plan (cf. Bossidy & Charan 2002, S. 195). Although that is not the rule, it is a quiet of an issue as one important part of the planning effort is to check the availability of resources as knowledge and manpower as well as financial funds are essential while implementing a strategy.
„An astonishing number of strategies fail because leaders don’t make a realistic assessment of whether the organization can execute the plan.“ (Bossidy & Charan 2002, S. 195) Therefore before the planning of strategy implementation process is completed it has to be performed a check of needed capacities, knowledge and budget for completing the process successfully. Furthermore, it has to be verified, if some external resources (e. g. consultants) are needed or the budget have to be stretched or even the strategy redefined due to fit to the company’s financial and non-financial possibilities. In some cases, the second best strategic alternative will be a better choice when it can be implemented successfully (cf. Riekhof & Offermann 2006, pp. 38).
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Figure 3 : Average performance loss
(Sadowska 2012 based on Mankins & Steele 2005, p. 214)
The best proof of implementation planning feasibility is to check the requirements and discuss them with all stakeholders in advance (cf. Mankins & Steele 2005, p. 213). This will also lead to a lower implementation resistance rate among people concerned through the new strategy. Employees feel more committed to a plan when they took part in its creation (cf. Delisi 2011, p. 3).
Another problem with the planning is that it is not revised on a regular basis, but frozen and not reactive to occurring and not anticipated before problems or environmental changes. The timeline for implementation completion can be too tight and the implementation may need more time and resources (e.g. people, money) than in the initial planning fixed (cf. Riekhof & Offermann 2006, pp. 36).
Thus, before an implementation plan can be conducted, the strategy has to be translated into objectives and measures with appropriate performance indicators due to be concrete and realistic. The balanced scorecard, which will be specified in chapter 1.3, can be of great help by doing this. Timelines must be aligned with tasks and resources. Financial and non-financial resources have to be planned properly and the plan has to be revised on a regular basis.
- Strategy understanding
A research reveals that less than 5% (cf. DeLisi 2001, p. 2) of employees really understand their organization’s strategy (cf. Reardon 2011). That implicates, that besides the leader, no one knows the strategy and the intention of some actions taken at the top management level. There is a lack of information and communication.
From the beginning of a strategy process, the strategy has to be communicated and information on the underlying implementation planning provided (cf. Neilson et al. 2008, pp. 145). When information is not provided, rumours are spread via grapevine as employees are starting to wonder about the future developments, especially their role in the company. A feeling of insecurity is then growing and a strategy implementation process is endangered. Also not well-informed employees will have trouble with
To be understandable for every employee, strategy has to be translated through operational measures (cf. Kaplan & Norton 1996, p. 75). The strategy should be specified, stated and communicated. But the communication should not be reduced to one-time events like giving out a brochure or sending one information mail (cf. Kaplan & Norton 2006, p. 80). A communication plan is indispensable for making sure no information diffusion is taking place. Only well informed employees are not afraid of the change and willing to take part in it.
But the information of employees is not the only issue here. The information flow in general is important while implementing a strategy. An exchange of information and knowledge and participation possibilities for the employees, like workshops, round tables, quality circles etc. should be ensured (cf. Kreikebaum et al., 2011, p. 174). When employees are taking part already in the strategy development process, the probability of understatement and commitment is enhanced drastically. Information should shift further to a two-way communication.
As well as information structures, predefined reporting structures are inevitable. To ensure a bilateral information flow, the employees have to know where and from whom they can get information and to whom they have to report their status on it. Without functioning reporting structures a continuous progress measurement and review is not possible and so the whole implementation process not manageable. A successful communication is the clue to strategy implementation!
- Low commitment
Major changes induce different reactions among management and employees. In figure 4 the typical attitudes towards organizational change are visualized (cf. Vahs 2009, p. 345). On the left side of the normal distribution figure is full of committed people while on the right side the commitment is relatively low or not existing.
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Figure 4. Typical attitudes towards organizational change (Sadowska 2012 based on Vahs 2009, p. 345)
A great hindrance are employees refusing the change processes and just going on with the daily business as the new strategy would not affect them at all and so delaying the execution as long as only possible, hoping it is just a passing
fad. Lack of clearly stated commitment from leaders and employees equally and in worst case setting barriers for the new strategy are the main failure causes at all, as strategy implementation stands and falls with the people around.
To prevent strategic plans from failing, there should be built up a variety of participation opportunities for employees, like planning committees, working groups, focus groups etc. with the intention to keep the discussion alive and giving the employees the feeling of being a part of the strategy process, not the victims of it (cf. Martinelli 2006).
Furthermore, incentive systems should be implemented. Incentives can align employees more toward a goal and have a positive impact on the goal achievement and therefore also on the strategic process. Incentives can be of material as well as non-material kind. Here non-material incentives are often more effective (cf. Kreikebaum et al. 2011, p.171). Particularly, the assignment of responsibility and exciting tasks with the opportunity to grow and learn are not only motivating factors but also and that is even more important they ensure a stronger commitment of the employees to the strategic process. Also the alignment of personal targets (quarterly, yearly targets) with the strategy is an important issue (Kaplan & Norton 2006, p. 76). But, research claims that only 30% (cf. Reardon 2011) of middle managers and less than 10% (cf. Reardon 2011) of front-line employees have compensation linked to the strategy. Aligning your employees’ goals, especially on the management level, with the new strategy pays on the strategy achievement. Therefore it is helpful to assemble a bunch of incentives which can be applied depending on the given needs of the employees (cf. Kreikebaum et al. 2011, p.171).
- Organizational structure
Organizational structures play a vital role when implementing a strategy as poor coordination among departments is one of the major hindrances while introducing new strategies (cf. Neilson et al. 2008, p. 160). Diffusing objectives of departments can lead to contradictory actions and working against each other than together (cf. Riekhof & Offermann 2006, pp. 36). In companies with divisions working as silos, where everyone is watching only its own outcome and not the whole company’s objectives, complex tasks reaching over the boarders of one division, are unlikely to be completed successfully. Competitiveness between the divisions and acting separately can be the outcome. As an example, two-thirds of Human Resource and IT divisions worldwide develop strategic plans that are not linked to organization’s strategy (cf. Reardon 2011).
Closed up division structures with established silo thinking can lead to information restraint. As result information does not flow freely across organizational boundaries, data is not shared across divisions and not getting to the headquarters quickly as they should due to (cf. Neilson et al. 2008, p. 161).
The organization is providing the environment in which the strategy has to be implemented and at the same time the strategy is make an adjustment of the current structure necessary due to be put into action. As the often cited phrase “structure follows strategy” indicates, with every new strategy, also the organizational structure has to be changed due to fit better to companies’ new direction (cf. Kreikebaum et al., 2011, p. 167).
1.2. Leaders’ Deficits while Dealing with Strategy Processes.
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Figure 5: Leaders' Deficits in Strategy Implementation Processes (Sadowska 2012)
In part 1.1 the key issues for failure of strategy processes were discussed. As leadership has a shouldering role within strategy processes, this chapter is all about the missing qualifications and skills of leadership, which can be a hindrance in performing strategy implementation.
For years now, management books doctrines the importance of soft skills especially in leadership positions. But, today’s leaders still lack some crucial skills when it comes to strategy implementation. As recent research indicates leader are lacking especially skills in leading people, strategic planning, inspiring commitment, change management, employee development, work-life balance and decisiveness (cf. Leslie 2009, p. 10).
“A true leader has the confidence to stand alone, the courage to make tough decisions, and the compassion to listen to the needs of others. He does not set out to be a leader, but becomes one by the quality of his actions and the integrity of his intent.”
- Gen. Douglas MacArthur (1880-1964) –
- Real Leadership and not only Managerial Skills
Often leadership titles are not going with authority and leadership skills. The difference between a manager and a leader is that managerial tasks are mainly administrative. He assigns tasks and resources. But in a strategy implementation process there is a great need for real leadership. A leaders’ task is to lead people, showing them the whole way of the strategy process, making them understand, follow and support it (cf. Riekhof & Offermann 2006, p. 36). Furthermore a true leader is a decisive person, who can easily find solutions to occurring problems, is not hesitating when making decisions to put them into practice and is ready to act when needed (cf. Leslie 2009, p. 13).
There is no change project without resistance and it is unlikely that in future the fact will change at all. Because of open or hidden resistance which is mostly caused through employees’ uncertainty and fear of unpredictable consequences, a lot of implementation processes struggle along. Therefore it is a vital role of the leader to lead and not only to manage employees (cf. Riekhof & Offermann 2006, p. 43).
- Strategic Thinking & Planning
When someone is a great strategic thinker it does not mean he is also a great planner and vice versa. But for a successful strategy execution both skills are essential. In many cases the people with the best ideas and strategies – the best future anticipators – are not the right instance for implementing their own ideas as they are everything but execution experts.
“Managers are trained to plan, not to execute.”
- Lawrence G. Hrebiniak 2005 –
The strategic planning skill involves the ability of translation of high level idea, like a vision, into realistic business strategies and long-term objectives as well controlling them with appropriate chosen measures (Riekhof & Offermann 2006, p. 44). Developing feasible plans for strategy implementation, anticipating future developments and revising taken decisions are also central skills (Leslie 2009, p. 11). Too abstract plans people cannot relate to their work and anticipate to the performed tasks. Also when the strategic plan is not translated to concrete action steps people have to take due to implement the strategy, the tasks will be not or not properly fulfilled (cf. DeLisi 2005, p. 4).
- Quote paper
- Monika Sadowska (Author), 2012, Successful Strategy Implementation, Munich, GRIN Verlag, https://www.grin.com/document/272411