I am often asked by clients what is the real cost of executing a strategy badly? In this short article, I will provide some highlights and lookouts on the implications of executing strategies poorly.
Good v Bad Strategy Execution Planning
Every business needs a plan or strategy whether you’re a global corporate or a £2m turnover single entity business. When we talk about strategy planning and execution, we are specifically referring to how a set of strategic objectives will be achieved. Strategy execution defines the overall approach and plans required to efficiently achieve the outcome. What then makes a good strategy execution plan versus a poor one?
A good strategy execution plan should be logically coherent, easy to understand and as simple as possible; it traceably aligns all activity to the company vision and objectives whilst providing visibility, purpose and clarity to the relevant stakeholders involved in execution of their tasks and responsibilities.
We sometimes observe business owners or leadership teams agreeing on a vision of where they want their organisation to be in the future but struggle with creating and then linking a detailed execution plan to their long-range objectives, which would otherwise enable a smooth and efficient transition to their desired end point. A further common mistake involves creating a vastly complex set of delivery activities which aren’t clearly linked to objectives or business vision and therefore fatigue the organisation and fail to deliver the outcomes efficiently.1
Commercial Impact of Poor Strategy Execution
Setting a clear strategy at leadership level is important but executing it efficiently within your organisation is critical and can often be much more challenging. It is widely documented within leading business publications, Harvard Business Review, INSEAD, Wharton and McKinsey for example, that well over 50% of strategic implementations fail in execution and here are some of the reasons why: 234
- Excessive change in strategic priorities
- Lack of knowledge and experience
- Acceptance of poor performance or failure to deliver on objectives
- High levels of bureaucracy resulting in slowing down the process
- Lack of delegation
- Under resourced
- Frequently missing deadlines and deliverables
- Poor communication across stakeholders
- Cultural resistance
- Lack of monitoring and progress
This high failure rate can come at a significant cost to an organisation such as employee morale, brand damage or ultimately the demise of the business. However, in less extreme cases the commercial and financial implications fall in to two areas.
- Failure to achieve expected top line revenue/benefit
- Increased execution costs through poor planning and inefficient use of resources
Failure to achieve expected top line revenue/benefit
Failure to achieve budgeted top line revenue could have multiple impacts on an organisation. A shortfall or reduced top line revenue could result in restricted growth, cash flow issues, poor shareholder and employee confidence, long term impact to future business plans and credibility damage with banks and lending houses. Less cash in the business may also mean abandonment of other strategy planning which could have a deepening impact on business operations and future growth. Rationalisation and divestment can also be a consequence of missed or reducing revenues which can often take some time to recover from.
Increased execution costs through poor planning and inefficient use of resources
Strategy execution plans that stall due to poor organisation comes at a cost. Trying to turn around or realigning strategies that are not being executed correctly will undoubtedly increase execution costs as businesses spend additional time and resources, either reconsidering or completely re-planning their approach. Without proper monitoring, most organisations will revert to throwing more resources at failing strategic activity plans, which often compounds the issues rather than solving them as in most cases, resources aren’t the problem, it’s the ill-conceived plans that is often at the root of the problem.
In addition to the cost of failed strategies, the commercial impact is often compounded by the non-realisation of the intended strategy benefit. This additional hit can significantly increase the total cost to the business.
There are many ways to avoid the above pitfalls such as detailed planning and alignment, strong communication methods, tracking and tooling as well as engaging with professional and experienced resources. If you would like to discuss your approach to strategy planning and execution, please contact Paul Fraine by emailing firstname.lastname@example.org or by calling 07889 600811.