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What Makes Organisations Fail to Execute Their Strategy?

I recently asked an executive where their organisation would be in 2 years’ time. After some tapping on their laptop, they proudly showed me their new corporate webpages, proclaiming their ‘strategy’, ‘vision’ and ‘mission’ statements.[1] So far so good – we’re halfway there. All we need to do now is execute that strategy! Presumably, it will just happen now that senior management have expressed the strategic direction? Maybe by some magical process of osmosis?

Of course, it won’t: the figures depend on which report we’re reading, but as a good middle figure let’s pick McKinsey, who tell us that 70% of strategic change programs fail.[2]

Strategy is not hard to understand: Where is our chosen market? How will we get there? What differentiates us in that market? What is our speed and sequence of moves? How will we make a return?[3] And choosing to perform activities differently, or performing different activities is crucial, otherwise, as Porter said, strategy is just a marketing slogan.[4]

Before we go on, let’s look at a much better indicator of where we will be in 2 years’ time. This is the current project portfolio; specifically, which projects are we doing? how are projects being prioritised? how are benefits being realised?

What should be remembered is that the portfolio ‘machine’ is always on, even if it’s so disorganised that it doesn’t actually exist as a coherent entity, just, what projects are done. What exactly are they doing in say, our SE Asian facility? Or our US one? How do they understand the centrally expressed organisational strategy and priorities? How do they prioritise? How do they respond when budgets are changed? Is it all part of a global, coherent aligned process, all pulling together, or is it a mish-mash result of perceived priorities, local constraints, cultures, and ways of doing things?

So, assuming we actually have a strategy, what is it that goes wrong in execution? Better still, let’s start by reviewing what needs to be done to ensure effective execution.

1. Executives must develop a clear strategy

Without a clear and practical strategy nothing can progress. Executives must be communicating the strategy in practical terms, avoiding ‘management speak’. They must be clear about priorities and engage with project leaders to ensure that these are understood.

2. Executives must understand that project management is the key

Success in Disrutpive Times CoverIn its 2018 Pulse of the Profession report ‘Success in Disruptive Times’,  the PMI showed that organisations classed as Champions[5] used projects to fuel  their success, with mature project portfolio management systems, an investment in project management talent and development, and a strong project management culture. Champions were successful in 92% of their projects and wasted 21 times less money than companies with a low project management culture.

3. Executives must champion the strategic role of project portfolio management

The Pulse of the Profession reports that only 49% of companies had an enterprise-wide project management office (EPMO), and only 41% of those believed that it was highly aligned with overall company strategy. The so-called ‘engagement’ domain is where strategy meets execution, controlled by strong portfolio management. A realistic strategic execution plan must be developed and embodied in integrated project portfolio management. It is portfolio management that translates strategy into work, vertically integrating from the top to the bottom, and facilitates horizontal integration across supplying functions.

4. Executives should ensure strong governance

Strong project portfolio management and strong project management are underpinned by strong governance. The right systems and performance indicators provide transparency and drive the right behaviours and are strongly supported by project leaders who understand governance processes as adding value within their projects. Strong governance provides ongoing quality assurance that we are performing the right projects and performing projects right.

5. Executives must create a project-driven culture and provide strong leadership and visible sponsorship

Individuals in champion companies have an instantly recognisable outlook. They talk about ‘we as a company’; they are confident in their leader’s vision and support and take every opportunity to communicate this to their teams, their colleagues, their customers, and their suppliers. Middle managers, the powerhouse of execution ensure that they understand strategic priorities, and question and challenge where necessary, as well as providing upwards feedback. They develop functional strategies that interpret and organisational strategy locally and turn this into project work. They accept changes of direction where these are needed and are agile in their approach. They are empowered to make decisions based on principles rather than rules. Their approach to everything they do is within a context of ‘alignment’.

6. Executives must invest in the right resources

They must invest in a project portfolio system that is able to actively prioritise scarce resources across projects, provide what-if information for different scenarios, and enable rapid responses when the environment changes. They must ensure that there is a dedicated and trained project portfolio management resource, as well as trained and experienced project leaders and teams.

7. Executives must empower teams

For a strategy to be successfully executed, everyone must be on board. But this cannot be done by simply issuing orders from above. Teams should be empowered to deliver project work in the ways they know to be right; principles work better than rules; empowered teams themselves ensure clarity, by asking questions and feeding back upwards, and communicating downwards and horizontally. Executives should drive a culture of delivery by projects.

 

Why do so many organisations fail to execute their strategy? Because one or more of the essential components detailed above are missing. But it is not just senior management who have the responsibility. We are all now executives in the context of our own roles and responsibilities, with full accountability for our contribution towards the larger strategic objectives. For the organisation, the prize is that getting this right means that will be a champion. For individuals, the prize is simpler – you will be part of an organisation that is so great to work for.

[1] All against some inspiring background graphics.

[2] McKinsey, ‘Changing change management’ 1 July 2015.

[3] After Donald Hambrick and James Fredrickson, ‘Are You Sure You Have A Strategy?’, Academy of Management Executive 2005.

[4] Michael Porter, ‘What is Strategy?’ 1996.

[5] Organizations with 80% or more of projects being completed on time, on budget, meeting business intent, and having high benefits realization maturity.

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About Rick Graham

Rick Graham
Rick Graham, an instructor with Strategy Execution, has been an active project manager for over 20 years. Areas of expertise and experience include strategic alignment, risk management, and optimisation of business value. Recent examples of projects with which Dr Graham has been involved include support in aligning project portfolio management systems with corporate strategic vision (telecommunications), development support in roll out of a global project risk management system, and support in project contracting strategy development and execution (oil & gas). He is a frequent speaker, and has been a keynote speaker at regional PMI conferences.

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