7 Dysfunctions of High-Potential Companies
Strategy — the least understood aspect of a business.
Everyone talks about strategy and you would think that a company’s strategic direction is one of the most well understood aspects of the company. Actually, the opposite is often true.
Research conducted by The Palladium Group found that:
- Ninety-five percent of employees are unaware of or don't understand their company's strategy, or how the work they do impacts strategic goals.
- Eighty-five percent of executives spend less than one hour per month discussing strategy — fifty percent spend no time at all.
I often find that a company’s strategic direction is a mystery to its employees resulting in strategic chaos. Employees may have heard or read about the company’s strategy but don't know enough about it to align their day-to-day work.
The results from a recent employee pulse survey at a client company underscore this gap in strategic understanding:
- Less than sixty-five percent of employees at this market-leading, global company agreed that leadership effectively communicated their strategy or how to execute strategy.
In other words, more than a third of all employees — including managers — said they didn’t know enough about the company’s strategic direction to effectively align their work to strategic goals or continuously create customer value. This is disastrous! You have to wonder how much money this company is leaving on the table.
- Linking strategy and execution to corporate goals and overall performance is a major challenge for many companies.
Weak strategic performance is often the result of poor execution rather than a poor strategy. It's impossible to execute what you don't understand! And it's impossible to be a high-performer when your talent is pushing in different directions.
If we were to meet for a cup of coffee, could you clearly explain your company's strategic direction to me?
The disastrous impact of strategic chaos.
The first two questions I ask a client when initiating a new engagement are: 1) What are you trying to accomplish? and, 2) How does this contribute to the achievement of strategic goals? The silence that often follows is very telling. If a significant portion of a company's employees don't understand the company's strategic direction, it doesn't really have one!
Without a clear understanding of the company’s strategic focus — why it's in business and how it plans to achieve its goals including mission, vision, strategy, customer value, differentiation, and so forth — it’s not possible for employees to:
- Intentionally contribute to the continuous creation of customer value.
- Align planning, programs, and initiatives with strategic direction.
- Establish clear expectations, measures of success, and accountability.
- Ensure the effective use of resources and talent.
- Achieve sustained competitive advantage.
- MaintaIn momentum in a down economy.
The cumulative impact is that it's impossible for a company to remain viable in a global, rapidly changing marketplace. Performance and growth will always be a challenge.
The factors that determine success in good market conditions are the same that determine success in bad conditions — competent companies are able to thrive in both good and bad markets. Many companies, on the other hand, rise with the tide in a good market — in spite of their lack of clear direction — but falter as soon as the market turns sour.
'Eliminating the Chaos' Checklist — the power of focus.
One of the most important actions you can take is making sure everyone is moving in the same direction — the power of focus.
To eliminate strategic chaos, strategic direction must be clearly understood and actionable across your enterprise.
- Does your company have a current, clearly defined, actionable strategic plan with annual goals?
- Can all employees — not just senior management — clearly describe your company's strategic direction and how the work they do enables the achievement of strategic goals?
- Is strategic direction the basis of planning and assessment at all levels of the enterprise?
- Is every business unit, function, department, workgroup, team, program and initiative owner, and individual contributor able to measurably define their value proposition to the customer (differentiation) and to the organization (strategic goals)?
- Is your company's budget linked to strategy?
- Does senior management review, evaluate, and fine-tune strategy at least monthly?
- Does middle management and above have incentive compensation linked to strategic direction?
How your senior leadership team answers the items on the checklist determines your company's readiness to execute strategy. And the ability to execute is a key determiner of competitive advantage and strategic success.
Successful companies make sure strategy is everyone's job!
This is the third of the seven dysfunctions. The first three dysfunctions severely weaken a company's foundation and strategic direction. The next three dysfunctions destroy a company's ability to execute its strategic direction — the reason the organization exists.
All seven dysfunctions create an incredible drag on a company's performance, with the first six dysfunctions contributing to the seventh which is the most destructive. See 'It's Time For A Reality Check' for an introduction to the seven dysfunctions.
The issues addressed in this blog, as well as the supporting examples, are targeted to the leadership of public companies on the way to a $Billion in revenue. These issues, though, are also critical to the strategic success of all profit and non-profit organizations from early stage to mature.
David Seregow, Ed. D. is Founder and President of Attaine Performance Corporation, providing strategic guidance, collaboration, and coaching to high-potential companies. www.attaine.com Copyright 2010 David Seregow, Ed. D. All Rights Reserved. Permission granted to post, print, or email this entire posting if full attribution is included and the post is not edited.