Strategic Alignment: A How-To Guide
Happy Thanksgiving Week to all! I hope you are enjoying some rest, relaxation, and time with loved ones. While I’m preparing a turkey and gathering with my family in Philadelphia, I’d like to share one more of Outthinker’s most popular posts of all time.
This post was originally published in 2015, but it’s still highly relevant almost 10 years later. One of the most common challenges in our community of chief strategy officers is creating strategic alignment in the organization. Most efforts to align strategy fail, because most organizations do not consider the effort involved in gaining buy-in from everyone in the company. With this guide, we aim to give you a set of practical steps you can apply to improve strategic alignment for the remainder of this year and beyond.
When Strategies Shift
In 2008, at the start of the economic crisis, Microsoft COO Kevin Turner was stepping off an airplane in New York City. As he approached the car that would take him into the city, the porter carrying his luggage commented that the stock market’s decline had continued that morning.
It struck Kevin that if a porter, who had no obvious reason to follow the stock market, felt the decline was the most important news of the day, the crisis must be far more severe than people thought.
If he was right, if the crisis was deeper and would last longer than many anticipated, Microsoft would need to shift its sales strategy, prioritizing value products rather than premium. Because he oversaw the company’s 30,000-person sales force, it would rest in his lap to do so.
Getting a 30,000-person organization to align to a new strategy is never easy. To do so mid-year rather than as part of the annual planning process and to do so in a couple of months, rather than the year or more most strategic-alignment efforts take, would make his challenge even tougher.
But Kevin succeeded. In a few weeks, Microsoft’s sales force was visiting IT leaders with a new message – we can save you money – and a new product focus. The organization’s ability to quickly align to a new strategy likely protected the company from losing billions of dollars in value.
Your ability to align your organization behind a new strategy, to match actions with plans, is the critical link between dreams and reality. This is true not just for businesses, but in any area of life. Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, points to the challenge of aligning actions with strategy or goals as one of the fundamental reasons organizations, teams, and people fail.
For example, the first-order consequences of exercise (pain and time-sink) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable. Similarly, food that tastes good is often bad for you and vice versa. If your goal is to get physically fit and you don’t ignore the first-order consequences of exercise and good-tasting but unhealthy food and connect your decisions with their second- and third-order consequences, you will not reach your goal.
Quite often the first-order consequences are the temptations that cost us what we really want, and sometimes they are barriers that stand in our way of getting what we want. It’s almost as though the natural selection process sorts us by throwing us trick choices that have both types of consequences and penalizing the dummies who make their decisions just based on the first-order consequences alone. By contrast, people who choose what they really want, and avoid the temptations and get over the pains that drive them away from what they really want, are much more likely to have successful lives.
The challenge of strategic alignment is pervasive and costly. A McKinsey study of 800 senior executives revealed that their number one concern with their current strategy-setting processes was their inability to achieve company alignment with the strategic plan. This is perhaps of little surprise considering that it is estimated that only 65% of companies have a strategy and that only 14% of employees know what their company’s strategy is. Even if we lower the bar and just ask managers to list one of their company’s top five priorities, a study shows that less than 55% can do so.
Even when managers understand the strategy, their companies often fail to track progress toward executing that strategy. Less than 15% of companies are estimated to actually track performance and compare it against plans.
If your organization has trouble aligning to and executing your strategy, know that you are not alone. Success is uncommon but attainable, if you can address the four areas that cause most organizations to fail: