Formulating and implementing strategy isn’t just leadership’s responsibility. It's a team effort.
Research by strategy execution platform Cascade shows that 63 percent of organizational leaders consider their companies’ strategies at least weekly, compared to just 18 percent of their team members.
One way to close that gap is by creating a culture of strategy execution. If you want to help your organization achieve its strategic objectives, here’s a breakdown of why a culture of strategy execution is important and how to create one.
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DOWNLOAD NOWWhy Is a Culture of Strategy Execution Important?
An organizational culture focused on strategy execution is essential for your company to thrive.
Strategy execution is continually rated as one of the most significant organizational challenges. In a study by consulting firm Gartner, 83 percent of executives agreed that strategy execution’s importance has increased. Still, only 30 percent said they have confidence in closing the gap between formulation and implementation.
“Fortunately, the gap between strategy formulation and strategy execution is one that any business and any manager can overcome with the right tools and knowledge,” says Harvard Business School Professor Robert Simons, who teaches the online course Strategy Execution.
If you want to set clear organizational priorities and make difficult decisions effectively, here’s how to create a culture of strategy execution.
4 Ways to Create a Culture of Strategy Execution
1. Balance Innovation and Control
Innovation is essential to remaining competitive in today’s evolving market. However, encouraging it can be detrimental to strategy execution if you don’t balance it with control.
According to Strategy Execution, you can balance innovation and control by:
- Setting strategic boundaries: Placing limits on the types of opportunities you pursue.
- Using control systems interactively: Enabling employees to detect and adapt to change.
“Thanks to new technologies, globalization, and alliances, we’re faced with more opportunities than ever before,” Simons says in Strategy Execution. “And it's easy to feel like we can and should pursue all of them—but management time and attention is limited.”
Since you can’t pursue everything, you must make tough choices about which strategic initiatives to prioritize. Yet, setting strategic boundaries can impact employees’ desire to innovate. To overcome that, it’s crucial to use interactive control systems—information systems meant to stimulate debate rather than for diagnostic purposes.
“They’ll help your business remain innovative without sacrificing the controls necessary for executing strategy effectively,” Simons says.
In Strategy Execution, Simons describes how medical technologies company Johnson & Johnson effectively used interactive control systems to address hospitals’ increased emphasis on cost-cutting. To address the issue, the company required managers to produce five- and 10-year financial plans to create more awareness of the organization-wide changes needed to offset decreased profits.
Managers then used those forecasts to develop new ones for the current and upcoming year, which sparked dialogue and debate throughout the organization. With each new forecast, managers relied on their employees to provide critical insights about whether changes would impact the company’s longer-term goals—creating a bottom-up flow of information.
This example illustrates why Simons calls interactive control systems “attention enhancers.”
“If you want to maximize your return on management, you must be sure the system you’ve chosen to use interactively is the right one,” Simons says in Strategy Execution. “In other words, you must be careful to devote your time and attention to the most pressing strategic uncertainties for your business.”
2. Empower Employees to Execute Strategy
Employee buy-in is essential to creating a culture focused on executing and achieving strategic goals.
You can gain buy-in in several ways, including:
- Communicating clearly
- Recognizing accomplishments
- Investing in professional development
To create a culture of strategy execution, you must leverage tactics that focus on setting employees up for success. According to Strategy Execution, designing high-performing jobs is one of the most effective ways.
“Job design is a critical part of strategy execution,” Simons says. “If individuals don't have the resources they need and aren’t accountable in the right way, they won’t be able to work to their potential.”
For example, expecting an employee to focus on both creative problem-solving and strict, repetitive tasks can pull them in opposite directions, making it challenging for them to excel in either.
To avoid that, Simons recommends using the Job Design Optimization Tool (JDOT), which analyzes the balance between a job’s demands and resources.
The JDOT helps answer four questions:
- What resources will you provide to help employees accomplish their goals?
- What measures will you hold them accountable for and use to evaluate their performance?
- Who do they have to influence to achieve their goals?
- How much support can they expect when asking for help?
The answers to those questions can help determine how to best position employees for success when implementing business strategy.
“The most successful businesses identify which functions and groups are most critical to providing their unique value proposition,” Simons says. “Then they allocate the bulk of the resources to those jobs and units—the ones that create value in the eyes of customers.”
Related: A Beginner's Guide to Value-Based Strategy
3. Establish Core Values
Nearly every organization has core values that communicate its purpose and serve to inspire and guide employee behavior. By establishing your company’s values, you can ensure employees understand how to operate and behave to support its business strategy.
“I've been a great believer in values through my entire CEO career because I believe values, mission, and strategy are the most important boundaries you put into an organization,” says former Adidas CEO Kasper Rorsted in Strategy Execution. “It defines a framework on how you operate and how you behave.”
Compelling core values possess two attributes:
- They inspire people to feel proud of where they work.
- They guide behaviors when making tough decisions.
Core values’ focus on value creation can inspire people to feel proud of their work, and their guidance largely results from prioritizing certain constituents—especially when making difficult decisions.
“The best companies use their values as the foundation to communicate to everyone in their organization whose interests should come first when people are faced with tough choices,” Simons says.
For example, cloud-based software company Salesforce is known for prioritizing its employees. In its annual Stakeholder Impact Report, the company states that meeting customer needs is only possible when it takes care of employees first.
Salesforce enforces that belief through initiatives like its:
- Camp B-Well holistic well-being program
- Mental Health Matters Trailhead modules
- Health and safety management program
To ensure your company’s core values remain embedded in its culture, you need beliefs systems—sets of organizational definitions in a credo or mission statement—to communicate and reinforce its direction.
Communicating core values should also go beyond documentation.
“To ensure our values are well understood, they're very often incorporated—if not always—in almost all the town hall meetings or management conversations we have,” Rorsted says of his time at Adidas in Strategy Execution.
Taking a similar approach can ensure your core values don’t just inspire employees but consistently guide them throughout the strategy execution process.
4. Identify and Monitor Risks
In addition to the elements above, creating a strategy execution culture requires prioritizing risk management—the systematic process of identifying, assessing, and mitigating threats or uncertainties that can affect your organization.
“Competing successfully in any industry involves some level of risk,” Simons says in Strategy Execution. “But high-performing businesses with high-pressure cultures are especially vulnerable. As a manager, you need to know how and why these risks arise and how to avoid them.”
This is particularly true when implementing a new business strategy.
According to Strategy Execution, strategic risk has three main causes:
- Pressures due to growth: An accelerated rate of expansion that makes staffing or industry knowledge gaps more harmful to your business.
- Pressures due to culture: Executive resistance and internal competition from entrepreneurial risk-taking can cause problems.
- Pressures due to information management: Performance measure gaps can result in decentralized decision-making.
Those pressures can lead to strategic risks you must manage or mitigate to avoid reputational, financial, or strategic failures. Since risks aren’t always obvious, it’s crucial to identify unexpected events or conditions that could significantly impede your organization’s business strategy.
Like the balancing act you must perform with innovation and control, constant risks and threats require internal controls—policies and procedures designed to ensure reliable accounting information and safeguard company assets.
“Managers use internal controls to limit the opportunities employees have to expose the business to risk,” Simons says in Strategy Execution.
In the course, HBS Professor Eugene Soltes reflects on his visit to a large energy company with a history of poor safety measures. While the firm put several processes in place to make improvements, Soltes was taken aback by how internal controls had a noticeable impact.
“One of the things I was most intrigued with as I was walking up the stairs with their head of compliance,” Soltes says, “he told me to hold the railing.”
While this might seem like an unconventional request, the head of compliance told Soltes it was an important part of the company’s culture.
“We all hold the railing,” he told Soltes. “We want to do that in the corporate office because we need to do that when people are in the field, where it actually turns out to be really important if you're on a ship or an oil rig.”
This example illustrates that, rather than oppressive, internal controls can be powerful, symbolic gestures that empower employees.
Take the First Step Toward Executing Your Business Strategy Successfully
To avoid failure and achieve your organization’s objectives, it’s crucial to not only know how to formulate strategy but to execute it.
By taking an online strategy course, you can build the knowledge and skills to create a thriving culture of strategy execution. Through an interactive learning experience, Strategy Execution enables you to draw insights from real-world business examples to better understand how to implement business strategy.
Do you want to create a culture of strategy execution? Explore Strategy Execution—one of our online strategy courses—and download our free strategy e-book to gain insights that can help you jumpstart the strategy process.
