What is the role of CEOs in the success of an organisation’s strategy execution?
Strategy execution is a hot topic today. As the Covid-19 crisis unfolds, uncertainty is impacting business much harder than ever before. Organisations must navigate the quickly evolving landscape by adjusting their business resources and stay ahead of the game during times of change and turbulence. However, actions by senior executives need to be taken now, and may significantly determine organisations’ fate.
So far, strategy execution has been considered a doubled edged sword. Even though it is important to keep strategy execution on track during Covid-19, it is also true that, for decades, studies have also shown that brilliant strategies do not usually translate into successful performance. After the financial crisis in 2008, more sophisticated strategy execution methods emerged to resolve the gap between formulation and execution. However, there is evidence that organisations are still failing to execute strategy. The key question is: What is the most critical success factor that may guarantee an organisation’s success?
I have conducted thorough research on the reasons why organisations may continue to fail when executing strategy. The research has been fully supported by Imperial College London. It consisted of reviewing papers on strategy execution spanning the last sixty-four-years and empirical interviews with one hundred global consulting firms specialising in strategy execution.
In the research, the soft or people factors seem to be the most important aspect for guaranteeing a successful implementation of a strategy. Differentiation has been made regarding leadership styles. For example, Bourgeois & Brodwin (1984) identified different styles of leadership when implementing strategy. They combined factors from both the formulation and implementation phase, together with other factors such as culture and organisation. The main conclusion was that senior executives should guide strategy within organisations. In other words, the focus should be centralised on the CEO to direct the execution of the organisation’s strategy. The leadership role was also important to be taken into consideration. Furthermore, Schmelzer & Olsen (1994) developed a similar framework concentrated on managerial style, but also considered incentives and training capabilities as single factors. Other authors, for example Stonich (1982) incorporated other variables such as planning, resource allocations, budgeting, and rewards.
Chandler (1962) referred to the importance of a top-down approach by creating a view that strategy was formulated at the top and executed at the bottom (top-bottom approach); execution directions came from the top. Floyd & Woolridge (1996) agreed on the fact that the focus should be on top management. Inefficiency of strategic formulation or plans was also identified, and the recommendation was that senior executives should be fully involved in the end-to-end process of strategy implementation.
When analysing the Strategic Management Process Model, the research showed that the development of analytical models such as Boston Consulting Group Matrix (BCG) and the Personal Information Management System (PIMS) emphasised the fact that the strategy function was exclusive to top executives. However, further research has exhibited that this has consequently caused a misalignment between Top and Middle Management. For example: Floyd & Woolbridge (1992a) identified a gap between the strategy implementation perceived by the top executives and the lack of information and communication received at lower managerial levels (e.g. supervisors and team leaders). According to them, top, middle managerial and supervisory levels, and employees all should be involved during the strategy implementation process, and all should agree on and commit to the strategy implementation objectives. They stated that ‘This gulf between strategy conceived by top management and awareness at lower level has been called “implementation gap’ Floyd & Woolbridge (1992a: p.27).
The key objective of a good strategy execution framework is to guarantee a successful understanding and communication process. It provides top managers with the relevant guidance, based upon a detailed design of the target state for all business stakeholders to view and understand. The definition of this strategy is also crucial in order to gain agreement or consensus at the top management level, and can also guarantee consistency of communication from a top management team and full understanding and good communication across the organisation.
The empirical study was based upon in-depth interviews with leading consulting firms specialised in strategy execution. According to the empirical studies, 80% of consulting firms confirmed that the success of the strategy execution project highly depended upon clear and senior sponsorship from the top management or senior executives. Additionally, input from top managers throughout the project was also critical, 41% of these consulting firms affirmed that objectives and strategy needed to be clear and understood, and 26% of the benefits were well communicated and understood across the organisation.
My findings show that there are some important factors which organisations need to consider when executing strategy, the most critical being the full involvement of senior executives throughout the project. Unsurprisingly, given the importance of the strategy execution projects, sponsorship tends to come from a senior executive level within organisations. This has its advantages: successful delivery of consulting projects in these areas relies on active support from the top. Indeed, 80% of consulting firms say that clear and senior sponsorship is a critical success factor. But it’s not just about passive sponsorship: consultants are keen to point out that the success of these types of initiatives relies on director input being present throughout the projects.
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