Leadership consultant Gustav Puth explains why a good strategy does not necessarily amount to success.
Senior executives at many – perhaps most – large companies affirm that it is not a lack of strategy that causes them to lose sleep, but rather their organisation’s inability to execute the strategy, often long after they think they have expressed the strategy with near-perfect clarity.
The nervousness of such executives is not surprising. CEO and top management failures are caused primarily not by flawed strategic thinking, but by failure to execute the strategy. In many industries, the strategic challenge is relatively clear and well understood by all players. Nevertheless, these strategies by themselves often fail to markedly improve market and financial performance.
Contrary to the central premise of many strategy studies, it is usually not the unique strategy of a successful company that allows it to stand out. What sets the top performers apart is the “how” – the way in which they go about in making the strategy part of daily work life and in aligning every functional unit and every single individual with the desired outcomes.
In my work with large organisations in many different industries, I have often come across situations where fairly solid strategies still failed, despite the sincere intentions of the top leaders of the organisation. Over time, a clear picture emerged: The existence of a good strategy in itself is not sufficient to make an organisation successful.
In fact, most organisations do not fail because of insufficient strategy, but rather because the people of the organisation fail to execute the strategy. The secret of successful organisations is not to be found in the formulation of successful strategies, but rather in the successful execution of their strategies. I am even prepared to surmise that a mediocre strategy successfully executed is far better than a superior strategy not being executed.
However, there is a singular key that unlocks the secret of successful execution of strategies: The key to converting strategic intent into strategic execution is strategic alignment – the measure in which employees are enabled to align what they do on a daily basis as well as how they do what they do to the strategic intent of the organisation. The term strategic alignment presupposes that there is a strategic line – a clear overall strategic direction, intent, and a set of desired outcomes – a line that business units, divisions, and eventually every individual can align their actions to. The second implicit assumption of strategic alignment is that everyone is aware of this strategic line and that it is sufficiently “visible” for alignment to take place.
The only way in which true strategic alignment can be achieved in any organisation is through a shared mental model of leadership for strategic alignment.
Leadership and performance
The more I worked in large organisations across the spectrum of different industries, the more it became clear to me that the primary role of organisational leaders is fairly single minded and simple: The primary role of an organisational leader is to lead her or his followers forward in line with the strategic intent of the organisation.
After all, organisations essentially consist of people and operate largely by virtue of their functional teams of leaders and followers. In fact, an organisation comes into existence when the execution of its purpose requires more than one person to fulfil designated tasks to reach its intended outcomes. This becomes quite clear when you would ask an incidental group of men to carry a grand piano from one location to another: They would immediately start to organise themselves into a properly functioning team. Invariably someone will spontaneously take the lead. The resultant communication will quite naturally focus on allocation of responsibilities and then move on to what needs to be done and how it needs to be done.
Functional teams almost naturally work backwards from the required outcome of a task to determine what needs to be done and how it needs to be done. It is in this context that the leaders of functional groups need to play an essential role in directing and optimising the execution and performance of the team as a whole and of each individual member of the team in line with the required purpose and outcomes of the organisation. They need to provide leadership for strategic alignment!
What Is organisational performance?
In dealing with the top management of organisations I often ask them a simple question: “So, is organisational performance an important issue in you organisation?” This question is invariably met with some measure of surprise that I would even ask this and with the inevitable response that it is obviously an all important issue. Then I ask them what they think organisational performance is. At this stage they look me up and down as if to ask with their entire demeanour why I would ask such a stupid question and whether I know anything at all about the business of organisations. They would then enunciate my title and start to explain that organisational performance is all about profit before or after tax, market share, share prices, etc., etc.
Just to make a point I then show them a photograph of my daughter – the one with a fairly good resemblance to her father – and ask them who they think this is. They would look at the photo, look at me and then ask: “Is this your daughter?” I would then truthfully tell them that this is not my daughter, but merely a photo of her. She is not small enough to fit into my mobile phone, but in real life about as tall as I am and much more lively than the static image of the photo.
The point that I make is that the photo is simply a representation of my daughter, nothing more and nothing less. This also applies to all of the metrics that most organisations regard as organisational performance. The figures are not true organisational performance, but only a representation of performance. In my mind organisational performance is really quite simple: Performance is what people do and how they do it. So, the performance of an organisation for any particular day, week, month or year would be constituted by the “what” and “how” of all its people, working in functional teams of leaders and followers, rolled up and taken together for that period.
Naturally these two elements of organisational performance – what people do and how they do it – will have a huge impact on the metrics of the organisation. An obvious implication of this approach to organisational performance is that it is virtually impossible to manage or lead the metrics, and that organisational behaviour can only be impacted on the relational level between leaders and their followers. This is why it is so vitally important that leaders should lead their followers in order to align the “what” and “how” of their daily performance with the strategic intent of the organisation.
What is strategic alignment?
When advising clients on strategic alignment, I always ask them a seemingly redundant question: “What is your most valuable asset?” Their answer is quite predictable: “Our people!” I then ask them what their biggest expenditure is. After thinking a while, they invariably tell me that it is the same thing – their people. I then ask them whether this is a fixed or a variable expenditure. They usually tell me that it is variable, but when I explain to them that I am not referring to the size or amount of the expenditure, but rather the obligation of the organisation to regularly pay its people on a monthly basis, they then agree that it is a fixed expenditure. I then ask them whether people’s working behaviour is fixed or variable, to which they always indicate that it is variable. This allows me to make this extremely important point: If we say that our people are our most valuable asset, we really need to add that it depends what they do and how they do it!
My personal definition of strategic alignment is very simple: Strategic alignment is the measure of overlap between an organisation’s strategic intent and the organisational performance of its people (what they do and how they do it).
More important, however, is that in every single organisation there are some elements of performance (what people do and how they do it) that are unrelated to strategic intent. In view of my earlier statement that the assumption that our people are our most valuable asset depends on what they do, it should be clear from this graphic that it is possible that some people in any organisation may conceivably be routinely paid every month for doing things that are not supporting the execution of its strategic intent. Thus, when this portion of organisational performance becomes substantive, an organisation can have a situation where people can actually be a liability without knowing it! In fact, investing in leadership for strategic alignment will allow an organisation to truthfully being able to confess that its people are its most valuable asset.