MASTERING STRATEGY EXECUTION: STRATEGY CONTROL

MASTERING STRATEGY EXECUTION: STRATEGY CONTROL

After developing the strategy, senior management often communicates its key themes to the organization, expecting employees to act quickly upon it. However, without a strategy control system that supports the strategy, it remains a wish list or a set of goals that may or may not ever be achieved. Organizations need to build a strategy control system that measures the performance of the strategy and its execution and adapts them when needed. Controlling the strategy involves planning the execution, monitoring its progress and controlling it by adjusting the execution when needed. The strategy control system fosters, supports, measures and controls the strategy and its execution. Effective strategy control requires frequent monitoring of the progress of the strategy and its execution to assess whether the planned results are being achieved.

A strategy control system ensures action. The goal of the strategy control system is to ensure effective action throughout the organization. What gets measured, gets done is an old saying. When the strategy is to be achieved, its progress must be measured and monitored. When managers and employees know that outcomes will be reported and examined this creates a personal incentive to perform well (Lafley and Martin, 2013). Otherwise, the strategy is just a wish list that may or may not be achieved. Successful strategy and execution requires frequent and close monitoring of its progress by senior management. This clearly signals to middle managers and employees that senior management takes the strategy very serious and is determined to make it succeed.

Adapting the strategy to changed circumstances. Organizations must adapt themselves continually to their ever-changing environment to be successful. Industries are continuously changed or disrupted by the entrance of new competitors because of increased globalization, the advent of new technologies, changes in consumer demand and (de)regulation by governments. These environmental changes require that executives continuously monitor and adapt the strategy of their organization.

Plans are bound to change. As strategies and implementation plans are bound to change, due to changed circumstances or new insights, executive teams must regularly monitor and control the strategy and its execution. It is important to assess what affect the implementation is having and correct or adjust the strategy or its execution should it happen to produce negative or unsatisfactory results. Monitoring the progress of the strategy should begin early on to cut an errant strategy before losses or negative impacts become too costly or damaging.

Building a strategy control system. After the performance indicators, targets and milestones of the strategy and its execution are laid down in the execution plan, they must be organized into a strategy control system that monitors and control the execution of the strategy. Such a management control system monitors and controls the strategy and its execution. Controlling the strategy is done through regular strategy execution review meetings using periodic (often monthly or weekly) progress reports or dashboards for executives and managers.

MONITORING THE EXECUTION

During strategy execution, it is crucial to monitor progress towards achieving the goals of the implementation and to assess whether adjustments need to be made. The strategic goals translated into operational goals with performance indicators need to be monitored to assess whether the objectives are being achieved. Monitoring progress creates feedback about the performance of the strategy and its execution allowing to make adjustments accordingly.

Monitoring requires clear objectives. Without concrete objectives and milestones, it is impossible to assess the progress of the execution. Each objective also needs a target that is to be achieved. Without monitoring, an implementation effort can perform poorly without anyone noticing.

Use progress reports to monitor the execution. After translating the strategy and its execution into clear objectives, they must be monitored through progress reports. Progress reports are periodic reports written by organizational members responsible for the implementation of the strategy. In these reports, it is written down what the progress is of the execution of the strategy. It describes the objectives that are to be achieved, the degree to which they are achieved and the status of the activities that are required to achieve the goals.

Build dashboards to track progress. Dashboards can also be used for monitoring the strategy and its execution. Dashboards allow executives and managers to get a quick overview the progress and key issues of the strategy and its execution. However, building dashboards often take considerable time and resources. Furthermore, dashboards tend to rigid as metrics are often not easily and quickly changed when circumstances change. Progress reports can sometimes be a flexible and cheap alternative to dashboards.

CONTROLLING THE EXECUTION

Not only must the execution of a strategy be monitored, it must be controlled as well. Monitoring the performance of the execution, without adjusting it when needed is useless. Strategy control refers to the monitoring of the progress of the strategy and its execution and when required, the adjustment of the strategy or its execution. Adjustments need to be made when the objectives of the implementation effort are not being met.

Meet regularly in execution review sessions. Hold regular execution review meetings to discuss the progress of the implementation of the strategy and take measures when changes are needed. A best practice for strategy implementation monitoring and control is to meet regularly in well-structured and time-limited execution review sessions. Implementation teams must regularly meet to share information, reconfirm priorities and make decisions about the execution.

Adapt the execution when objectives are not achieved. During the execution review meetings, managers can adjust the execution when needed and thus control the strategy implementation effort. During these meetings, the persons who are responsible for meeting the targets can be addressed and solutions can be developed to achieve the target or change the target. Strategy execution control implies that organizational members who do not perform well with respect to the implementation effort have to be addressed about this.

Assign clear responsibilities. Controlling the execution is impossible without clear responsibilities. To make adjustments during the execution it is not only necessary to measure the degree to which a target is being met, but clear responsibilities to achieve those targets need to be assigned as well. When responsibilities are not clear, organizational members will not feel responsible to achieve the targets or take corrective action.

Hold people accountable. When the objectives of the strategy or the execution are not achieved, the person responsible for the achievement of those objectives must be held accountable. However, to hold people accountable it is crucial that people have an objective that they have accepted the target, have the required skills and resources to achieve the objective and have clear, measurable and objective targets.

Address poor execution performance. Strategy management implies that organizational members who do not perform well with respect to the implementation effort have to be addressed about this. When poor performers are not addressed their performance will not likely improve. Many executives and managers are reluctant to make adjustments during the execution because they are reluctant to offend people. This mum effect is discussed in the next chapter. Monitoring the execution may occur but no consequences are taken when the implementation performance of organizational members is lacking. Thus, such organizations lack sufficient strategy execution control often resulting in strategy execution failure.

Create a culture of accountability. Many organizations, especially in developing countries, have accountability problems that can be the result of a lack of planning, the absence of a functional management information system, or the existence of cultural values which do not encourage holding persons, especially in high positions, accountable (Kiggundu, 1996). When people do not feel responsible for poor performance they will not be inclined to do something about it. In addition, when people are not held accountable especially in high positions this tends to demotivate their direct reports as well.

CONTROLLING THE STRATEGY

Assess whether to adapt the strategy or its execution. When the goals of the strategy are not being achieved, it must be found out whether it is because of a poor strategy or poor execution. Even the best strategy will achieve poor results when its execution is flawed. However, excellent execution may mask a poor strategy. Execution teams must thoroughly investigate what the root causes are of the poor performance of the strategy.

Decide to adapt the strategy or develop a new strategy. The strategy of the organization must be changed when it is ascertained that its poor results are the result of the strategy itself and not its execution. When strategic objectives are not achieved, it is possible that the assumptions underlying the strategy are flawed or obsolete. When this happens, decided whether incremental improvements will suffice or that a fundamentally new strategy is required.

Beware of radical strategy changes. As we have seen throughout this book, executing a strategy and changing an organization is a difficult and time-consuming process. This means that organizations should be reluctant to make major changes to their strategy. Often it may be better to improve an existing strategy than to develop a completely new one. Strategies are much easier to change than organizations are to change. Research has found that incremental changes to the strategy tend to be more effective. Strategic changes should occur incrementally so that organizations are not overwhelmed by trying to execute too many changes at the same time. Incremental strategic change allows the organization the time to carefully plan and execute successful organizations or to engage employees to participate and gain their commitment. Of course, many organizations do not have the luxury to change their strategy slowly and organization when they are in crisis due to radical changes in their environment.

CONSEQUENCES OF LACKING STRATEGY CONTROL

A lack of strategy execution control can have several very negative consequences for strategy implementation performance.

Employees are not motivated to execute the strategy. When the strategy and its executing is not monitored in an effective way, or when the strategy is monitored but no actions take to improve its importance, employees will come to understand that the strategy is not that important to senior management. Consequently, they will not give best effort to execute the strategy, if they try at all.

Strategy executions grow out of control. Many strategy implementations fail, grow out of control, or are not as successful as they could be because of a lack of adjustments during the implementation effort. Many organizations fail to monitor the execution of their strategy adequately. When the execution is not monitored, is cannot be adjusted. When a flawed strategy is not adapted, or dropped early on, they tend to go on for a considerable time before it become very apparent that it is not working and something has to be done. By then, the losses can be huge and can even bring down organizations. The phenomenon that strategies continue to be executed despite poor performance can be explained by the concept of escalating commitments. This refers to the phenomenon that individuals or groups continue to rationalize their chosen course of action when confronted with poor results rather than changing course. Decision makers often feel that too much has been invested in the course of action to change it. Changing course would mean admitting failure and taking considerable losses. Furthermore, managers and executives tend to make decisions that reflect past behavior.

Employees perform poorly without consequences. When poor implementation performance has no negative consequences for an organizational member, that person will not be very stimulated to perform well during the implementation. When people perform poorly and get away with it, they are not likely to perform well. Worse, a culture of mediocre performance can arise.

Rewarding performance is impossible without performance feedback. When organizational members do not know how they perform, there can be no reward for good performance. This may reduce the motivation and performance of organizational members with implementation responsibilities. We discuss this in the next chapter.

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