ORG 589-Turning Great Strategy into Great Performance

Highlights & Key Points

Reflective Thoughts/Application

• There are strategy-to-performance gaps during strategy implementation

• Better planning and execution can eliminate strategy-to-performance gaps

• Rules for successful strategy execution

• One of the common mistakes is the failure to track performance

• Performance loss in organizations

• The diagonal venetian blinds and subsequent problems

• Reasons behind performance gap

Strategy implementation is often hampered by performance gaps. During strategy development, organizational leaders often make projections regarding future performance and expected revenue streams. However, according to Mankins and Steele (2005), most organizations achieve only 63 percent of what they plan during strategy development phase. In addition, most organizational leaders are unable to highlight the causes of the strategy-to-performance gap. Organizational leaders are more likely to make wrong decisions in an attempt to make the strategy work. While at times, the main issue may be the strategy itself. At other times, the main issue hindering the organization from deriving benefits could be a poor implementation strategy. Leaders are likely to make the wrong decision when they spot strategy-to-performance gaps. This may lead to time wastage and loss of energy, which may worsen the organization’s performance. Organizational leaders should develop realistic plans based on careful analysis of markets. These plans can help in reversing underperformance if carefully executed.

Careful planning and execution of strategy is important in helping organizations avoid common pitfalls involving underperformance. Moreover, careful planning and execution can help leaders pinpoint the areas of weakness and take corrective action. There exists a strong link between strategic planning and execution. Organizational leaders should be keen during strategy development. The aim is to ensure that the new strategy will thoroughly address the current issues faced by the organization. Organizational leaders should make resource allocations in the appropriate time to avoid stalling during execution. Organizational leaders must ensure that the new strategy is simple yet providing solutions to the various issues affecting the organization. A key issue during execution is monitoring the performance. Organizational leaders should ensure that there is thorough monitoring of the implementation process. This can help in identifying problems and developing solutions within an appropriate time framework.

Mankins and Steele (2005) establish seven fundamental guidelines for successful strategy implementation. The first guideline is to keep the entire process simple. This involves making a clearly defined plan. The second guideline entails reevaluating assumptions. This helps to clarify issues and generate realistic plans that do not entail speculations. The third guideline involves ensuring that all stakeholders share a common framework for evaluating performance. This makes it easy for organizational leaders to make decisions concerning financial projections. Fourth, it is vital to discuss about resource requirements and deployment. Organizational leaders must plan concerning the financial, human, and material requirements during strategy execution. Fifth, it is critical for organizational leaders to prioritize. This involves deciding on which actions to take first, and which comes last. This helps employees in knowing what to focus on. Sixth, it is important to monitor performance. This is discussed in the next section. Lastly, organizational leaders must develop execution capacity by identifying a qualified and motivated execution team.

Performance tracking is one of the most important elements in strategy development. It is also part of the fundamental change guidelines. According to Mankins and Steele (2005), only a partly 15 percent of organizations make comparisons between their performance forecasts and actual results with regard to the strategic plans. This means that about 85 percent of organizational leaders do not pay attention to details concerning performance projections and the actual results. This disconnect in knowledge is amplified while making future investment decisions. Lack of performance comparisons is the major reason why organizations continue looking up to failed strategies, which worsens their financial position. The organization may continue supporting strategies that does not improve performance hence leading to time and resource wastage.

Still, questions linger on how organizations end up scoring poorly on strategy development and execution. Mankins and Steele (2005) conducted a survey to establish the actual causes of performance loss in companies. This survey was directed at managers. The findings indicate that lack of resource planning is the major problem contributing to performance loss. Resource problems account for 7.5 percent of performance loss. As such, it is important for organizational leaders to conduct resource planning during the early stages of strategy development. Another cause of performance loss is poor communication of strategy, accounting for 5.2 percent. The organizational leader must ensure that employees understand what is to be done in concise manner. Another issue concerns lack of clear definition of the particular actions required in execution, accounting for 4.5 percent in performance loss. Other issues include organizational culture that may hinder execution (3.7%), inadequate performance monitoring (3.0%), lack of rewards for success (3.0%), poor upper management leadership (2.6%), and among other reasons.

Organizations face the risk of experiencing “venetian blinds of business”. The venetian blinds of business describe a situation that occurs whereby successive year results fail to meet projections. The organizational may start on a higher note in terms of performance compared to previous year. However, this performance does not live up to expectations or the previous year’s projections. This leads to a performance graph that is similar to venetian blinds. This situation leads to a number of consequences. First, the organizational leaders cannot utilize the strategic plans because of the unreliable forecasts. This means that the organization has to rely on budgets to meet the needs in strategy development rather than relying on the financial forecasts. The second problem that emerges concerns portfolio management. Since management can no longer rely on the financial forecasts, there are problems with valuing the worth of the business. It is also difficult to make investing decisions that can maximize shareholder value.

Various factors contribute to the performance gap. Some of the factors include poor resource planning, communication breakdown, leadership issues, lack of accountability, and among other factors. Since most organizational leaders develop poor processes for strategy implementation, it is difficult to tell whether the problem is related to execution, strategy itself, or both. As such, most organizations end up abandoning strategy development initiatives when they realize they are not yielding required benefits. It is difficult for the company to implement strategy in future since there are no lessons drawn from the past.