TURNING GREAT STRATEGY INTO GREAT PERFORMANCE
Eliminate defects and breakdowns in planning and execution; thus not be limited to realizing 60% of potential of your strategy: revealing and troubling findings across 197 giant firms across various product markets and varied geographies.
The strategic plan looked wonderful on paper. However at a mid-term review, results weren’t as rosy. What should be done, redo the strategy or plug gaps in execution of original strategy? In absence of knowing the actual reasons for strategy-to-performance gap, leaders end up barking wrong corrective solutions.
- Only 15% companies compare actual performance with forecasts made over previous years; the remaining companies have results-and-forecasts performance disconnect.
- In case of multiyear strategies, the growth may be there, but it may be an underperformance on projected growth; this becomes a case of wishful thinking fueling the strategy further on. Thus ‘diagonal Venetian blinds’ effect is seen: all plans are prepared to show uninspiring projected growth for first year and better subsequently; so after 1st year when actual performance is better than subdued projection, all feel happy; thus drawing up new plans which again show moderated beginning projections, which again are excelled; …thus a sort of vicious cycle entraps management, where it is beating the cosmetically subdued 1st year plans but never touching actual growth of later years as in initial plans.
- Overall gap in true potential of a current strategy and its realization is a gap explained by a hybridization of poorly formulated plans, misapplied resources, breakdown in communications, and limited accountability for results. And this gap gets compounded with time.
- A culture of explaining away diminished performance vis-à-vis initial unrealistic expectations shifts commitment away from trying to fulfill the expectations whole-heartedly to one of distrusting the projections.
The strategy-to-performance gap can thus be closed by working simultaneously on better planning standards, superior execution levels and enhancing employees’ capabilities as per these simple yet powerful rules:
- Do not confuse strategy with vision and aspirations. Keep it simple so that it is not abstract and thus can be easily translated into action.
- Debate the assumptions, not the forecasts; forecasts are usually faulted with on emotional grounds, instead hitting at assumptions behind the forecasts is analytic.
- Have all people on same wavelength, adopting a rigorous framework for compiling aggregates from smaller units, each unit carefully benchmarked, thus let all speak the same language and concepts.
- Work out resource mobilization and application early in planning, involving the decision makers/ CEO.
- Have well-defined priorities, all tactics though important, can’t be equally important.
- Continuously monitor performance, not in bursts unevenly scheduled.
- Reward execution capabilities, but as measured against forecasts in planning.
Eventually a culture of overperformance shall emerge. To re-emphasize, getting 100% of a strategy’s potential is itself a great reward.
ref: HBR.org Michael C Mankins & Richard Steele