- Executives must align on an organization's purpose before strategizing
- Sustained strategy relies on seeking employee input on decisions
- Employees feel included when leaders are transparent about objectives
Writing a strategic plan is no simple affair. Many organizations hire strategy professionals, stand up strategic planning departments or hire expert consultants to draft three- or five-year plans, create PowerPoint slides with much fanfare, roll out communication campaigns with high hopes, and then, finally, pack employees into auditoriums and Zoom meetings to learn the latest and greatest thinking on the company's future. And that's all before the real work of the strategy begins.
At which point, the strategy will probably fail. Gallup's research explains why:
- Unclear organizational purpose: Less than half of U.S. employees (41%) strongly agree that they know what their organization stands for.
- Broken decision-making: Very few managers -- just 14% -- strongly agree they are satisfied with the speed of decision-making at their organization.
- Insufficient direction: Only 22% of employees feel that leaders have a clear direction for the organization.
- Lack of communication: Just 13% of U.S. employees strongly agree that their organization's leadership communicates effectively with the rest of the organization.
Under those circumstances, strategies seldom gain alignment down the org chart. The goal posts keep shifting. The three-to-five-year plan isn't adequately fool-proofed (or future-proofed). Employees lose confidence, and after that, belief in the strategy. Black swan events like the pandemic are more disruptive than they should be. And the considerable effort the strategy design required is squandered.
Yet too often, companies press on with the strategy, even when it becomes clear that the new plan -- disruptive as it seemed in the design stage -- isn't much different from earlier strategies. In fact, McKinsey research showed that companies allocate at least 90% of their resources to the same places every year.
Clearly, organizations need a better strategy for designing strategy -- and it starts with leaders.
First, Align Purpose With Strategy and Decisions
Gallup's work with executive teams proves that any refreshed, redrawn or redesigned strategy must align leaders.
But not around the strategy. Not yet.
First, executives must align around a shared understanding of purpose. Purpose, briefly, is the reason for the business, what differentiates it and what it aspires to achieve. Microsoft CEO Satya Nadella, in a letter to his employees, said, "It is in times of great disruption and uncertainty that our ability to stay grounded in our sense of purpose and remain true to our identity is of the utmost importance."
An organization's purpose clarifies its business environment. With that clarity, leaders can see how their work environment influences their functions, plans, vision and aspirations for the future. That sharpens leaders' outlook of the future and the present.
Alignment to purpose isn't effortless -- indeed, Gallup often finds wildly different ideas of purpose on executive teams -- and cascading alignment companywide is more challenging now. Consider the shift to remote working. Functions that must work on-site have different needs and motivations than functions that can be dispersed, but all functions serve the same organizational purpose.
Hospitals are a prime example. Clinical and support workers usually stay on-site to care for patients, while administrative staff can work from home. Both groups can feel that their work is patient-centric -- legitimately so -- but they align with the purpose of their work differently. And when purpose diverges, strategies disintegrate.
So, it's not safe to assume alignment to purpose exists. Nor is it safe to think communicating purpose is sufficient: 42% of managers say they have multiple competing priorities, a Gallup survey shows. So, handled badly, even minor misalignment can give cover to competing priorities and pet projects (and sometimes, separate definitions of compliance). Most executive teams would fare better by sticking to the basics and developing a shared understanding of purpose.
When purpose diverges, strategies disintegrate.
The best way to communicate purpose and strategy is briefly. If it takes more than one page to describe strategy, communication will descend into prescription, not inspiration. Many companies use the "strategy on a page" method, but too few connect strategy to purpose. That's a miss because purpose gives one-page strategy documents greater focus and emotional heft.
The right framework helps enormously and accelerates alignment. And when that step is complete, leaders must begin conversations with lower-level employees. Their input and allegiance matter. In fact, strategy can't succeed without them.
Listen -- Intently and Deeply
Gone are the days of command-and-control leaders who can presume conformance to their strategic directions. Today's employees want to be part of their company's story. Indeed, they expect to help script the company's strategy and future direction. And there is merit in it. As Kleiner Perkins' chair and ex-Intel executive John Doerr said, "Innovation tends to dwell less at the center of an organization than at its edges."
An organization's purpose clarifies its business environment. With that clarity, leaders can see how their work environment influences their functions, plans, vision and aspirations for the future.
For good reason. The front lines develop, engineer and produce everything a customer buys. Their proximity to the market gives them a close-up view of strategic choices, potential risks and potential advantages. And as Gallup research uncovers, talented employees believe organizational success requires knowing their leaders' strategic direction -- and being involved in drafting it.
Getting employee input doesn't have to be arduous, but go about it carefully: A badly designed survey will get feedback that varies between useless and harmful. (It feels insulting to give advice your boss ignores.) A well-formulated employee engagement survey that uses validated, predictive questions is crucial. Repeat use -- or rather, informed data analysis of several surveys -- garners insights leaders need to craft a clear, credible and compelling strategy for the people who have to execute it. As the CEO of Southwest Airlines, Gary Kelly, told Gallup, "The higher you go, the more you must rely on other people, and if you're smart, you will listen to them." Indeed, many of Southwest Airlines' best strategies come from the front lines, he says, such as the "Bags Fly Free" campaign, a masterstroke in purpose-based brand marketing strategy.
Align Goals Across All Levels
With alignment around purpose and insight from the entire organization, leaders' final step is closing the well-known "strategy-execution" gap.
One simple, effective approach is the Objectives and Key Results (OKR) framework that Gallup often uses with clients. Pioneered by Intel and Google and used by high-performing organizations that have evolved from an MBO and BSC perspective, the OKR framework focuses leaders on the value of the work rather than the process of it. OKRs are usually:
- grounded in objectives that are qualitative, ambitious and directly tied to purpose -- KPIs are typically single points and quantitative
- targeted at specific goals that can be objectively scored on a 0-10 or 0-100 scale
- public and transparent -- everyone in the organization can review them and see progress
That last point is important. Employees need line of sight to leaders' objectives, strategies and future directions because they need to feel like part of the strategy. Inclusion is empowerment, and empowerment is activation. Activation is the difference between a highly effective strategy that leads a company forward -- and a piece of paper.
Talented employees believe organizational success requires knowing their leaders' strategic direction -- and being involved in drafting it.
Remember: Only 22% of employees strongly agree that leaders even have a clear direction. So, Gallup recommends that strategies incorporate leading indicators like customer and employee engagement, culture strength, and brand reputation -- and lagging indicators like EBITDA and past profitability. Strategy is woefully unrealistic if it doesn't include human metrics. And when front-line employees are part of scripting it, their leaders can expect more buy-in and better implementation.
Develop Strategic Planning Rigor
Implementation is where strategies usually fail. Like people, organizations can suffer from initiative overload. Projects pile up, and some are never completed. Employees wonder what the plan is or if there is one. The pandemic made it worse because it obliterated certainty.
But pandemics are rare -- strategy failures are not.
Aligning on purpose, listening deeply and incorporating all levels of the organization will help. And not just the next three-to-five-year plan, either. Those steps help leaders develop strategic planning rigor, which is a vital leadership competency for leaders at all levels.
Because gone are the days when one or two executives could issue a decision and expect the organization to march forth with it. Today, employees need a clear purpose, dependable decision-making, direction and communication. They don't want it -- they expect it. And leaders should expect it from their strategy function and key strategy decisions too.