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A fairly significant body of research now clearly shows that the reason why a number of mid-to-large companies face is not that their strategies were not sound, but because they were unable to create a culture of strategy execution to perform well on those otherwise sound strategies. Successful teams find ways to bridge the strategy to execution gap.
Strategy Execution Gap Research Findings
Here is a quick summary of some of the research findings:
- A recent survey of more than 400 Global CEOs found that executional excellence was the #1 challenge they faced, coming at the top of some 80 other issues.
- In a study of 8,000 managers in more than 250 companies, respondents said they were three times as likely to miss performance commitments due to insufficient support from other units.
- Another study of 144 C-level executives found that only 10% said they implemented two-thirds or more of their core strategic initiatives in the year.
Clearly, there is a significant gap between the strategies that the leadership develops and the execution of those CEO growth strategies, as evidenced by the results achieved. Companies that successfully close the strategy execution gap far outperform those that don't. It isn't just about having an excellent strategic plan, it is about building a culture that has A-players that come into work every day wanting to see that strategy come to life and to successfully translate strategy into actions that the team can understand at a high level. Companies with good strategy execution see the results directly on their bottom line.
And yet, strategy continues to receive far more attention than execution. In fact, a quick search shows that books and articles on strategy outnumber those on execution by nearly ten to one. The strategy execution gap is where the real problem lies, not in creating a winning 3 year strategic plan. Good companies have a 3-5 year strategic business plan; great companies also have execution-ready quarterly plans to execute their growth initiatives.
It has always been assumed that strategy is what the executives do, and execution is what the rest of the company does. However, in today’s environment of continuous disruptions, CEOs cannot afford to assume anything. The company's strategy needs to be on the minds of every employee, not just the executive team, to build a high-performance accountability culture.
To close the strategy execution gap, the CEO must make a strategy AND execution what everyone in the company does. The rest of this article explores the problem and the solution in detail.
What Is The Strategy Execution Gap?
If a company does not achieve at least 90% of its strategic targets as defined in its annual plans, then the CEO has a strategy-execution gap problem.
How Is Strategy-Execution Gap Created?
Ironically, the strategy-execution gap is created primarily due to a company’s success and growth. In its early years, when the company only had a handful of people, everyone knew the strategy (“survive and thrive”) and their role. To achieve company alignment. As the company moves out of survival mode and thrives—and hires more people—the new hires are placed under “managers” in a “department,” the extent to which they know and understand the strategy depends on how well that manager communicates with them.
As more people are hired and more layers of supervision are added, the strategy gets boiled down to, “here is what I want you to do…”. Any questions will likely generate, “Let me worry about that. What I want you to worry about is…”
The more this happens, the more fragmented the company's resources become, and the more silos are formed and calcified. The organizational culture starts to fragment based on departments and teams unconsciously slowly.
The company has now reached a stage where it is far more concerned with efficiency than effectiveness—everyone does their job perfectly. They are doing things right, but they are not doing the right things.
At this point, the company has begun losing the shared sense of mission that united everyone in the early days. Whatever organic growth the company continues to show comes from a small minority of highly effective people who still focus their energies on doing the right things that matter. Creating a culture of strategy execution is a process that is well worth the investment.
CEOs typically turn to mergers and acquisitions (M&As) to generate more growth, as their organic growth has stalled. However, as surveys have shown, the vast majority of CEOs (over 70%) go through the complex transactions of M&As with no prior experience. Which only increases the difficulty of integrating two different companies with two different cultures. Ultimately, the very reason that slowed a company’s growth leads to a strategy that guarantees more silos and execution gaps practically.
This is a much bigger problem than CEOs typically understand it to be. Unless fixed quickly, the company can run into severe trouble and fall back into survival mode.
How Do CEOs Close The Strategy Execution Gap?
The challenge CEOs have is two-fold:
- Most employees in mid-to-large companies don’t know the vision or strategy.
- The CEO and Senior Management generally don’t know what the vast majority of employees are working on any given day.
The key to closing the strategy execution gap is ensuring that every employee is focused on effectiveness—doing the right things that make the most difference. In other words, they understand and believe in the strategy, and their efforts are focused on implementing it. Strategy and execution can differ between achieving your goals (and bonus!) and falling short of expectations.
The most successful companies use a software system or platform like Rhythm. Rhythm software is the only platform explicitly built for mid-market CEOs to confidently execute their growth strategies by ensuring that all employees in every department are working synchronously as a single team driving alignment and accountability. With Rhythm, CEOs, departmental leaders, and their leadership teams have complete visibility at the execution level and can focus on what is failing so they can mobilize the necessary resources to fix the problem quickly and what is working exceptionally well so it can be replicated. The execution gap can be closed with the right Rhythm of Work and the systems and tools to implement it. Interested? See if we can help you close the strategy execution gap with a quick discussion with one of our experts.