|Marakon Survey of 197 Executives Reveals Common Obstacles to Successful Execution|
Companies typically deliver only 63% of their strategy's financial performance potential due to breakdowns in planning and execution, according to a new survey designed by management consulting firm Marakon Associates and conducted by the Economist Intelligence Unit (EIU). This means that if companies were to become highly skilled at execution and realize the full potential of their current strategies, the increase in performance would be nearly 60%, on average.
Three-quarters of executives surveyed (76%) indicated that strategy execution is more important than strategy development in delivering superior financial results. Yet two-thirds (65%) said they were worse at strategy execution than at strategy development. If their companies were to become "very effective" at execution, they would expect operating profits to improve by an average of 30% over two years, respondents said.
The strategy-to-performance shortfall can be attributed to a combination of factors. The most often cited reasons (in order) were: inadequate or unavailable resources, poor communication of the strategy to the organization, ill-defined action plans, ill-defined accountabilities and organizational/cultural barriers.
"The causes of this strategy-to-performance gap can be invisible to top management," noted Michael C. Mankins, a Marakon managing partner based in San Francisco. "That's why leaders often pull the wrong levers in their attempts to turn performance around - they press for better execution when what's really needed is a better strategy, or they opt to change direction when they really need to focus the organization on execution. The result: wasted energy, lost time and continued underperformance."
The survey, conducted last fall, elicited responses from 197 senior executives at companies with sales of at least $500 million. More than a third were from companies with sales over $1 billion. While the executives spanned a wide range of industries, geographies and job functions, virtually all of them said they struggle to produce the level of financial performance forecast in their long-range plans.
Few companies rated themselves as very effective at strategy execution. More than a third said they achieve less than 60% of the financial performance they aim for. Not surprisingly, larger companies (greater than $5 billion in revenues) rated themselves lower on the ability to execute than smaller companies (less than $1 billion in revenues).
To improve execution, respondents highlighted a number of possible ways. Those cited as most powerful were (in order):
-- Communications - better communication of the strategic decisions
-- Action Plans - better identification of the specific actions required to execute strategies
-- Performance Monitoring - better tracking against key milestones and implementation progress
-- Accountabilities - hold individuals more accountable for delivering results
-- Empowerment - give people more freedom and authority to execute
-- Management Buy-in - get the right people involved in strategy development from the beginning
-- Rewards - make individual success and failure more consequential
Much lower priority was given to management development (building the skills and capabilities required to execute strategy) and strategy development (making better strategic decisions in the first place).
For additional background on the survey or to arrange an interview with Michael C. Mankins, contact David Fondiller at Marakon Associates, 212 377 5016 or email@example.com.
About Marakon Associates:
Marakon Associates is an international management consulting firm that advises some of the world's best-known companies on the issues that most drive their performance and long-term value. Regarded as "top-tier" by consulting industry publisher Kennedy Information, Marakon ranked among the world's 20 largest strategy consulting practices in 2003. The Economist has called it "a consultancy that has advised some of the world's most consistently successful companies." Marakon has offices in Chicago, London, New York, San Francisco and Singapore. http://www.marakon.com
About the Economist Intelligence Unit:
The Economist Intelligence Unit, the business information arm of The Economist Group, publisher of The Economist, is the world's leading provider of country intelligence, with over 500,000 customers in corporations, banks, universities and government institutions. Our mission is to help companies do better business by providing timely, reliable and impartial analysis on market trends and business strategies. http://www.eiu.com