Most Companies Are Only Moderately Successful—Or Worse—When It Comes to Executing Strategy, Executives Say

Few executives (3%) say their companies are very successful at executing corporate strategies, while the majority (62%) admit that their organizations are only moderately successful—or worse—at strategy execution. That’s according to a new global survey commissioned by American Management Association (AMA) and conducted by the Human Resource Institute (HRI).

The AMA/HRI survey “The Keys to Strategy Execution” included responses from 1,526 managers and HR experts from around the world. The survey was conducted in conjunction with AMA’s affiliates and global partners, including Canadian Management Centre in Toronto, Management Centre Europe in Brussels, AMA Latin America in Mexico City, and AMA Asia in Tokyo.

“Our survey found that executives and managers are trained to plan strategies, but believe they often fall short in execution due to a lack of skills and the existence of a process to facilitate implementation of plans,” said Edward T. Reilly, AMA’s president and CEO. “The findings show that strategy execution can improve as executives learn how to focus and align daily activities to strategic goals. To ensure this, top leaders must be committed to clear, direct, and constant communication, and committed to the change necessary to implement evolving strategies,” Reilly said.

The companies that reported relatively high success at executing strategies, however, seem to reap real dividends. That is, organizations that were good at executing strategies were also more likely to cite success in the marketplace, as measured by self-reported revenue growth, market share, profitability, and customer satisfaction.

The AMA/HRI survey gauged respondents’ ability to implement strategies in two ways: by asking them to rate their execution success and by asking them about the extent to which they use and value 57 different strategy-implementation practices. The research found that, above all else, clarity of communication is crucial to the execution of strategy.

The pivotal role of clarity was demonstrated by the fact that “creating a clear strategy” was ranked as the single most important practice. What’s more, out of 57 different approaches to strategy execution, “defining clear goals to support strategy,” “ensuring clear accountability” and “having a clear focus on implementing/executing strategy” were among the top six important practices.

The problem, however, is that organizations are not achieving clarity to the degree they should. Although clear strategies and clear goals were of top importance, they were only ranked 11th and 10th in terms of the extent to which companies use those approaches. There was a particularly large difference between the extent to which companies value a clear strategy and the extent to which they actually deliver a clear strategy.

As might be expected, companies that perform better in the marketplace are much more likely than lower performers to provide clarity. In fact, out of the top six major areas of difference between higher and lower performers, three of them (clear strategy, clear goals, and clear focus) deal with clarity.

Another major finding of the survey is that alignment practices are widely used and highly valued among responding organizations. Alignment practices account for four out of the top 10 most commonly used strategy execution methods. They are also among the top 10 most highly valued practices. Among the most highly ranked practices are “aligning strategy with the corporate vision/mission statement,” “aligning organizational goals with strategy,” “aligning business units’ goals with organizational goals,” and “aligning business units with strategy.”

Higher-performing organizations are considerably more likely than other organizations to use certain alignment strategies. Specifically, higher performers are more likely to align organizational goals with strategy and to align incentives, rewards, and recognition with strategy.

Speed and adaptability are also differentiators between higher and lower market performers. To a much greater extent than lower performers, higher performers demonstrate “the ability to quickly and effectively execute when new strategic opportunities arise.” Another differentiator is “having an adaptive organizational infrastructure.” These findings suggest that adaptive organizational infrastructures—in combination with clarity and alignment—help organizations react more quickly to new strategic opportunities.

Leadership practices also influence strategy execution, but there seems to be an overall leadership development deficit in this area. Organizations do not build “execution-focused leadership capabilities” or use “succession planning to develop leaders who are good at strategy execution” to a sufficient degree, given the importance that respondents attach to these practices. However, higher-performing organizations use these practices to a higher degree than their lower-performing counterparts.

In what could be a related finding, the survey discovered that organizations that have the same CEO for over five years say they’re better at strategy execution than organizations with less seasoned leaders. An analysis of the survey’s Strategy Execution Index shows the same trend. Therefore, it appears that stable leadership is linked to strategy execution, an important finding at a time when CEO “churn” rates are at record highs. An alternate interpretation of the data is that leaders who are good at execution are more likely to retain the top job over long periods of time.

The single greatest barrier to strategy execution, the survey found, is a lack of adequate resources. Not only does the proper allocation of resources increase a strategy’s chances of success, it’s a clear sign from leadership that the strategy is viewed as a high corporate priority.

Of course, every organization has different execution challenges. The AMA/HRI survey suggests, however, that mastering certain basics such as clarity, alignment, leadership, adaptability, and resources goes a long way toward enabling companies to turn their best strategic plans into organizational successes.

“The Keys to Strategy Execution” survey summary is available at www.amanet.org/research

About AMA
American Management Association is a world leader in professional development and performance-based learning solutions. AMA provides individuals and organizations worldwide with the knowledge, skills and tools to achieve performance excellence, adapt to changing realities and prosper in a complex and competitive world. Each year, thousands of customers learn new skills and behaviors, gain more confidence, advance their careers and contribute to the success of their organizations. AMA offers a range of unique seminars, workshops, conferences, customized corporate programs, online learning, newsletters, journals and AMA books. Visit online at www.amanet.org.

About HRI
For over 30 years, the Human Resource Institute (HRI) has remained dedicated to providing world-class research in the area of people management issues, trends and practices. Founded in 1969 at the University of Michigan’s Institute for Social Research by Dr. William Pyle in collaboration with Dr. Rensis Likert and Dr. George Odiorne, HRI is currently affiliated with the University of Tampa and is widely recognized as one of the top five institutes of its kind in the United States. HRI provides its members with accurate and timely research that helps facilitate a better understanding of all the people management issues that member organizations face today as well as the trends that are shaping the future. Currently, HRI is following approximately 150 demographic, social, economic, technological, political, legal and management trends, and there are over 100 major corporations supporting this research with annual grants.