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:
1. 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.
2. Debate the assumptions, not the forecasts; forecasts are usually faulted with on emotional grounds, instead hitting at assumptions behind the forecasts is analytic.
3. 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.
4. Work out resource mobilization and application early in planning, involving the decision makers/ CEO.
5. Have well-defined priorities, all tactics though important, can’t be equally important.
6. Continuously monitor performance, not in bursts unevenly scheduled.
7. 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