March 25, 2011
The Perils of Poor Execution
BY Mary Mahoney
Many a chief executive officer and business have failed because a strategy – no matter how inspiring – was poorly executed.
In a study of 275 portfolio managers, managers said the ability to execute strategy was more important than the quality of the strategy. A 2010 Conference Board Survey of 2,000 senior executives said “strategic alignment and the speed of execution” are the most pressing challenges facing CEOs.
You don’t have to look too far to find a recent high-profile example of poor execution. Book lovers remember a time not so long ago when the stores of Borders Group Inc., the nation’s second-largest bookseller, were stocked with a wide selection of books, CDs and DVDs. But in the last few years, you were more apt to find that same space dominated by candy, stationary, pens, cards and novelty gifts. What had Borders become? What was the company’s strategy?
A series of CEOs took the helm of the Ann Arbor, Mich.-based company, each implementing their own strategies. The company wrestled with financial losses, a changing retail landscape and the rise of online and digital competition. CEO Ron Marshall came aboard in January 2009 with a focus on accelerating cost cuts and closing its Walden stores as well as improving the company’s execution at the store level. But then last month, Borders filed for bankruptcy. Clearly, the company failed to execute its strategy.
Only last year did Borders seriously begin to address digital competition with its partnership (and investment in) Kobo (the online e-book seller) and the establishment of its e-bookstore, but by then, it was too late.
“While Marshall’s actions did reduce the company’s losses in on year, it did nothing to slow the decline in sales, and the company still did not have a meaningful digital strategy,” said Jim Milliot, writing in Publishers Weekly.
Business Week’s top-rated management gurus, Ram Charan and David Ulrich, believe bad execution is the top reason business leaders fail. “It’s as simple as that: not getting things done, being indecisive on commitments…The results are beyond doubt,” said Charan, as quoted by David Willden in Poor Execution of Strategy – Top Leadership Challenge.
In The HR Scorecard, Ulrich and his coauthors cite a study by Ernst & Young of financial analysts, which sought to determine “measures that matter.” The study found that the most important nonfinancial variable determining a company’s success or failure it its “ability (or inability) to implement strategy.”
The road to success is in the details. Experts say successful implementation of strategy requires an understanding of the “big picture” as well as the steps that lead to it. David Norton, author and founder of the Palladium Group, told themanager.org that fewer than 10 percent of all business strategies are implemented effectively.
There are plenty of hurdles along the way. They include overcoming longstanding company traditions, conflicting interests, poor communication and unforeseen details ingrained in the corporate culture. To avoid those pitfalls, companies must rise to a level of coordination and deliberation that is often unfamiliar to the order of things.
Here are tips to avoid the perils of poor execution:
Build a strategy: Defining and designing a strategy should not be seen as distinct from creating an execution plan. Recognize what your company realistically can deliver before creating a new direction. Develop a strategy that builds on your company’s strengths.
Seek broad input: Don’t create strategy in vacuum. Include input from customers, employees, suppliers and others “who possess valuable perspectives” on the company’s direction, suggests Bill Treasurer, founder of Giant Leap Consulting in Atlanta. Encourage participation and a lively discussion on all issues.
Provide clear objectives, tasks and accountabilities: Strategies should not be grandiose. “I prefer to make them doable, well-defined, and realistic, instead of implying that we’re trying to do something as big as solving world hunger,” said Karen Silverio, vice president of market development at Pearson Education. “Clear definition of tasks, with clear milestones, is crucial.”
Move the plan forward: Sustain and build on goals achieved during the development phase.
Communicate constantly: Your employees need clear and continued direction. Most companies fail to communicate their strategy broadly or effectively. Say your goal is to improve service: What does that mean for a sales person in the store or the customer service representative at the call center? Experts argue you need to continually explain the connection between the strategic initiatives managers and employees are working on the company’s high-level goals. You need to make it clear why the new strategy is important.
Provide needed resources and tools: Your employees need the tools and resources to carry out your strategic plan. It can be as simple as offering them time away from their daily business to help implement the strategy.
Fine-tune the process: Look for opportunities to make improvements. Reflect on what went well in previous planning processes and what didn’t. Explore all suggestions to make improvements.
So, when you think about what you will do differently come Monday, ask yourself this: “How well are we executing our plan?” Then go find out!