Planning Doesn't Equal Results - Communication and Incentives Help

Researcher/Writers Robert Kaplan and David P. Norton in their article "The Office of Strategy Management," published in the October 2005 Harvard Business Review, talk about why strategy execution has a low success rate in companies:

Over the past fifteen years, we have studied the root causes of this disconnect between strategy and performance. We have learned that most organizations do not have a strategy execution process. Many have strategic plans, but no coherent approach to manage the execution of those plans. Consequently, many key management processes remain disconnected from strategy. We have also learned that:

(a) Many organizations don't have a consistent way to even describe their strategy, other than in a large strategic planning binder. We believe strongly that organizations need to find a consistent, coherent way to translate their strategy into operational terms.

(b) Sixty percent of typical organizations do not link their strategic priorities to their budget, virtually ensuring that key strategic initiatives do not get funded and resources may not be supplied to deliver on the strategic plan.

(c) Two-thirds of HR and IT organizations develop strategic plans that are not linked to the organization's strategy. This is extraordinary.

(d) Seventy percent of middle managers and more than 90 percent of front-line employees have compensation that is not linked to the strategy.

(e) Most devastating, 95 percent of employees in most organizations do not understand their [organization's] strategy.

In short, there is often a chronic disconnect in organizations between strategy formulation and strategy execution.

So it seems that strategy could be much more cleanly executed if there was clear communication about corporate goals, checks and balances to make sure departmental goals followed, and compensation, funding, and rewards linked to execution. The authors describe the use of a Balanced Scorecard to track results in the article - http://hbswk.hbs.edu/item.jhtml?id=5269&t=strategy&wkrss=y.

PS - If you haven't already signed up make sure to receive an electronic copy of the HBS Working Knowledge Newsletter. Visit http://hbswk.hbs.edu/reg/newsletter_sub.jhtml