A recent survey by PricewaterhouseCoopers indicated that over 50% of executives feel their company’s strategy will not lead to company success.Other surveys corroborate that strategic decision-making in corporate America is poorly performed.
Certainly no executive confronts a strategic problem intending to develop a sub-optimal solution. Often however, poor strategy stems from the process used by the leadership team. It does not adequately position the team for success.
The question is how do you know whether the strategy team is ready to develop an effective strategy? Here are six signs that indicate your company is not positioned to make effective strategic decisions.
1. Company ignores strategic issues; strategy meetings are not scheduled. The first sign is whether your company even takes strategic issues seriously. Companies intent on solving strategic issues scan their environment on a regular basis to identify trends that could impact the firm. They don’t hold off developing a new strategy until the strategic planning cycle. Strategy formation occurs throughout the year. In a recent survey of 2500 executives, those deemed effective at strategic decision-making (a VERY small percentage of the total) spent 15% of their time on strategy. Companies that don’t prioritize strategic activity are unlikely to be able to resolve the strategic issues confronting them.
2. Progress on strategic issues is full of stops and restarts. A second sign is the progress that the strategy team makes. Ineffective companies might perform a burst of activity when a problem is first recognized. But team members can focus on different approaches that they believe will resolve the issue. Or the team may identify issues immediately and begin to collect data before the issue has been fully vetted. Then when they identify new potential solutions they have to collect data again. These kinds of effort-wasting exercises frustrate the team, so they devote less time on resolving the strategic issue. An effective team knows how they are going to tackle the strategic issue from the start, which allows them to make consistent progress.
3. Political agendas hamper strategic decision-making. One of the most frustrating experiences for employees is to see decisions being made for political rather than fact-based reasons. Not to say that corporate politics do not have their place, but politics are often designed to circumvent rational decision-making, to promote a personal or departmental agenda. This means they rarely drive a result that optimizes the company outcome. If a strategy team has historically let company politics drive strategic decision-making, then it should not expect to be able to manage its future strategic challenges. Effective teams refuse to allow political manipulation to drive strategy decisions.
4. Parochial attitudes hamper strategic decision-making. Strategy formation is best performed by a multidisciplinary team because strategic issues can affect so many different aspects of the firm. Unfortunately, sometimes the different disciplines place a higher priority on protecting their personal fiefdom than the welfare of the firm. When this happens, the resulting win-lose attitude makes it extremely difficult for the strategy team to reach a consensus on an acceptable strategy. Members become entrenched in their position. They may refuse to acknowledge that their position has negative implications for other departments or the company as a whole. Often the only way they can sustain their attitude is to position their opinion as fact, take a defensive stance or argue. Sometimes this works because other team members don’t want to continue the fight. Other times, the standoff forces the team to ignore the issue altogether and hope that the business challenge will go away on its own. Only by setting the company outcome as the priority can teams ensure a positive strategic outcome for the entire company.
5. The strategy team does not identify innovative solutions to strategic problems. One attribute of ineffective strategy teams is an inability to identify innovative solutions to their strategic problems. Instead, the same solutions surface time and again. “That’s not the way we do things around here,” seems to be the team’s mantra. The primary cause of this is that the strategy team has dropped into group thinking, defined as an established way of thinking, analyzing and making company decisions because of past decision success. When this happens, it becomes very difficult for the team to identify new solutions. Decision-making becomes rote and stale. Since our world is changing so rapidly, sticking to the same tried and true solutions is like battling an Uzi-armed force with swords and pitchforks. The outcome is inevitable. Innovative solutions take time and effort. A properly designed strategic decision process will help the team find new solutions to today’s problems.
6. Strategic decisions have been poor. This is probably the most obvious indicator that a strategy team is not prepared to address the company’s strategic problems. Strategy is intended to use company competencies and resources to manage its changing environment. Has the company strategy driven company growth at an acceptable level? Has the strategy allowed the company to weather an unfavorable environmental event? A poor track record is an obvious sign that future strategic decisions will also be ineffective.
You’ve probably noticed a theme running through this post. Without a defined approach to making strategic decisions a company will take a suboptimal approach that leaves it at the mercy of environmental changes. A defined strategic decision process will provide a guide to help any company achieve positive strategic outcomes.