The Execution Gap: Does Your Organization Have One?

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1 The Execution Gap: Does Your Organization Have One? Prepared by: Karim H. Ismail, MBA Author of: Keep ANY Promise: a blueprint for designing your future Founder and CEO, BlueprintPal Inc. and Avidium Inc. I karim@blueprintpal.com I x BlueprintPal Inc.

2 The BIGGEST problem in organizations today In this results-driven society most people would be shocked to find out the single most significant road-block that organizations face on their path to success: execution. That s right, while billions of dollars are spent each year on strategic planning and analysis, most plans never actually leave the conference room table. Where is all this strategizing getting us if we re unable to implement? The same place that exercise bike is getting us within our weight loss plan if we never get on it: nowhere. Many organizations are still caught in the strategy trap, and as a result, have a growing Execution Gap: the gap between setting goals and achieving them.... the ultimate difference between a stagnant organization and a successful one is the ability to execute Consider the following statistics: U.S. managers spend more than $10 billion annually on strategic analysis and strategy formulation for their organizations. Managers themselves report that less than 50% of the plans resulting from these efforts are ever implemented. Outside observers put the success rate even lower: less than 10%. Strategies that are not implemented constitute little more than academic exercises. The ability to implement strategies is one of the most valuable of leadership skills. Strategy, leadership development, and innovation are the sexier aspects of being at the helm of a successful organization. Actually getting things done never seems quite as glamorous. However, as Larry Bossidy and Ram Charan demonstrate in Execution: The Discipline of Getting Things Done (Crown Business, 2002), the ultimate difference between an organization and its competitor is, in fact, the ability to execute. So who is to blame for our lack in ability to execute? Interestingly enough the finger cannot be pointed at any one specific member of the team, including leaders of the organization. The only thing we can do is be willing to look at ourselves individually. But this is easier said than done. Because execution is the missing link between aspirations and results, making it happen is the business leader s most important job. Bossidy and Charan point out that without execution, breakthrough thinking on managing change breaks down, and they emphasize the fact that execution is a discipline to learn, not merely the tactical side of business.

3 Business leaders must therefore recognize the importance of teaching execution to their entire team so that the team as a whole can prosper. Consider this: the lack of expertise in execution can have serious consequences. In a recent survey of senior executives at 197 companies conducted by management consulting firm Marakon Associates and the Economist Intelligence Unit, respondents said their firms achieved only 63% of the expected results of their strategic plans. Michael Mankins, a managing partner in Marakon's San Francisco office, says he believes much of that gap between expectation and performance is a failure to execute the company's strategy effectively. Getting things done may sound simple in theory, but in reality it can seem almost impossible. Business advisors Ralph Welborn and Vince Kasten provide some insights on what goes wrong, and why.... more than 64% of C-level executives from 250 organizations said that being able to execute is critical for their success. Yet nearly 80 percent of them said that it is nearly impossible to achieve Here s what we need to do. Now let s get it done. We ve all heard these words from management. And whether such orders refer to a restructuring, a new product or service rollout, a brand expansion, an outsourcing effort, or any other change, we ve all too often been privy to the great-intentions-meet-brick-wall results. Why is it so hard for organizations successful organizations filled with very smart people to align their objectives with their activities? Why does getting it done seem so impossible? That s the question Welborn and Kasten ask and answer in their book, Get It Done! A Blueprint for Business Execution (Wiley, 2005). Conflicting organizational activities, silos, redundant processes, and confusing governance policies block effective, consistent execution, says Welborn. It s a big, big problem. Consider this: more than 64% of C-level executives from 250 midsized to large organizations in the United States and the European Union have said that being able to execute, to react quickly to changing business opportunities and technologies, is critical for their success. Yet nearly 80% of them said that it is nearly impossible to achieve. Clearly, there is a fundamental gap call it the Execution Gap between the best-laid plans and their realization. Karim H. Ismail I karim@blueprintpal.com I x 2 I I Page 3

4 Why is executing strategy so hard? Given today s economic challenges, strategy is critical. But surveys by various experts claim that as many as 70-90% of business strategies fail. According to a recent study, we may now know why Creating strategy is easy: you gather information, you conduct a leadership retreat to sort through things, and you set goals and create action plans. But then you go back to the office and you work on more urgent things (not the important things). Why? Because executing strategy is hard, and there is always something more urgent that comes up in daily operations. Maybe humans are just wired to react to problems rather than proactively set and take new direction Organizations manage strategy in fits and starts, says Robert Kaplan, Harvard professor and co-author of several books on the Balanced Scorecard and strategy execution. Though executives may formulate an excellent strategy, it easily fades from memory as the organization tackles day-to-day operations issues doing what Kaplan calls fighting fires. I think we can all relate: sometimes we all must react to issues within the business rather than managing the business itself. Think about it: we set New Year s resolutions, only to have 60% of them fail by late January, 95% by the end of March! Or we get our annual physical check-up and decide that we need to exercise more, cut down on unhealthy foods, and quit smoking. So we try for a few weeks (or months), but then eventually those entrenched habits start to creep back into our daily routines (the fast food, the shorter or skipped workouts, etc.). Maybe humans are just wired to react to problems rather than proactively set and take new direction. After all, we re creatures of habit that settle into natural patterns, rather than true change agents that set, implement, and sustain new courses of action that may, in fact, be healthier, more productive, and better for our overall outlook. So why should organizations (made up of humans) be any different? A recent study by Minnesota-based Digineer set out to answer the fundamental question: Why is executing strategy so difficult, especially during today s tough economic conditions, when strategy is really so paramount to long-term success? Digineer surveyed leaders from various industries in the Twin Cities, Karim H. Ismail I karim@blueprintpal.com I x 2 I I Page 4

5 representing a mix of industries and diversity of organizational levels (34% senior executives and other high level leaders, 30% middle level leaders, and 36% lower level managers). The study found that 69% of these leaders are NOT confident in their organization s ability to execute strategy. That is as disturbing as it probably is accurate about the business world at large: leaders at various levels in the organization fully recognize and are realistic about the challenges in implementing strategic actions within their organizations. The more interesting question, however, had to do with why When responding to the question of what was the number one barrier to effectively executing their strategy, we might first think of any number of external factors. However, most of the barriers reported by these leaders were INTERNAL issues, not external factors. They were:... 69% of these leaders are NOT confident in their organization s ability to execute strategy... Most of the barriers reported by these leaders were INTERNAL issues Past Habits, 66% Organization Culture, 64% Senior Management, 52% CEO/President, 50% Middle Management, 46% Economic Conditions, 44% Budget, 40% Way We Work Together, 34% Employees, 30% Government Regulations, 26% Competitive Environment, 24% Technology, 18% Lack of Confidence, 16% Customers, 10% Organization Reputation, mentioned by 4% of respondents Look at the top two factors: past habits and organization culture. These come up again and again organizational inertia, inability to take action on new initiatives, slow or indecisive decision making, lack of accountability, short-term focus ( chasing rabbits or finding the next big fad). A University of Michigan study also found that internal barriers were more constraining in general than external (Leaders Talk About Executing Strategy by Theresa Welbourne, Michigan Ross School of Business, March 2005). So these tendencies seem to exist in good times and in bad (and Karim H. Ismail I karim@blueprintpal.com I x 2 I I Page 5

6 maybe they have for decades or generations, which might explain why 70-90% of strategies are said to fail). But why? The Digineer study found several possible contributing reasons as to why internal dynamics and past habits get in the way of strategy implementation. Of the nearly 70% who were not confident in their organization s ability to execute strategy, here were the top reasons for that lack of confidence:... an inspiring vision, realistic strategies, an engaged and committed workforce with the right skills, high quality services and products, and customer focus are NOT enough to achieve successful strategy implementation Unclear accountability for execution, 52% Internal resistance to change, 48% ( we ve always done it this way ) Buy-in or agreement on critical execution steps or actions, 40% (perhaps because the right people were not involved in setting direction or action plans) Employees lack of ownership, 38% (lack of involvement) Lack of a model to guide strategy execution, 27% Organizational structure, 23% Inappropriate incentives to support execution objectives, 21% Poor or inadequate information sharing, 19%. A key role for leaders is to set and execute strategy to set a vision for the future and align organizational resources to move (and adjust) toward that vision. Strategy is critical to helping organizations: address their environmental challenges; leverage their core competencies and strategic advantages; address their marketplace and stakeholder needs; recognize and respond to risks, competitive pressures, internal weaknesses, shifts in technology or regulations; and in essence prepare for the future and sustain the enterprise. So what is the conventional wisdom about strategy execution? Usually, it s communicating an inspiring vision and realistic strategies, having an engaged and committed workforce with the right skills, providing high quality services and products, and focusing on the customer. You re probably thinking: but we have all this, after great effort! Karim H. Ismail I karim@blueprintpal.com I x 2 I I Page 6

7 Unfortunately, this is not enough to ensure great results even though these factors were present in many organizations and are necessary. Instead, in Closing the Execution Gap: How Great Leaders and their Companies Get Results (Robert Lepsinger, 2010), the author outlines five differentiating factors that organizations must have in order to guarantee successful implementation of strategy. These include: a strong ability to manage change effectively; a sound structure that manages execution well; employee involvement in decision making; alignment between leader actions and company values and priorities; company-wide cooperation and coordination of key actions. Does your organization have these factors in place? Ask yourself these important questions But achieving BIG goals need not be a struggle. Instead, it should be more like a ballet: fluid, planned, orchestrated, and seamless, if you have the right thinking and tools to bridge the Execution Gap. 1. Am I 100% confident of achieving my organization s goals? 2. Is my entire leadership team focused singularly on the top 4 or 5 goals my organization needs to achieve to fulfill its vision? 3. Can my leadership team benefit from setting much smarter goals than the SMART system we are currently using? 4. Is my leadership team clear about the top 10 obstacles preventing us from achieving our desired results? Do we have viable solutions? Conclusion As many studies have shown, the biggest struggle in any organization today is CONSISTENT EXECUTION: how to take the organization s vision, mission, goals and objectives and make them a reality. But achieving goals, especially BIG goals, need not be a struggle. Instead, it should be more like a ballet: fluid, planned, orchestrated, and seamless, IF you have the right thinking and tools to bridge the Execution Gap. Karim H. Ismail I karim@blueprintpal.com I x 2 I I Page 7