Corporate strategy formation is poorly performed today. Recent surveys indicate only 50% of strategies have a positive impact. Many of our leading corporations like J & J, Motorola and Kodak have selected a strategic pathway, only to find success stymied. Some companies, like Blockbuster, failed to survive their strategic blunders.
These mistaken strategies were not developed by stupid people. Rather, case after case shows that poor strategies were driven largely by ineffective social dynamics within leadership teams. They suffered from such problems as:
- Promoting parochial interests over the interests of the corporation as whole
- Failing to collect a robust fact-base
- Surfacing only information that supported conventional wisdom
- Preventing different opinions from surfacing
- Withholding information critical to the decision
A McKinsey survey1 of over 1400 executives provides the evidence that these issues are pervasive. In this survey, respondents were asked a series of business performance questions. Based upon their self-reported business performance, companies were categorized into “good quality decision” companies or “poor quality decision” companies. McKinsey also asked the executives questions about business practices their company utilized during strategy formation. Business practice responses from both groups were compared to correlate them with strategy success.
As I viewed the survey results, I concluded that many of these strategic failures could have been mitigated if business leaders simply adhered to the precepts of Robert Fulghum’s poem, “All I Really Need To Know I Learned In Kindergarten.”
Kindergarten principle, Don’t take things that aren’t yours:
McKinsey observed that individual objectives aligned with organizational objectives in 47% of good quality decision companies versus only 32% of poor quality decision companies.
In kindergarten, we learn that it is not right to take the crayon from Susie if she is using it; we need to share. Our teacher tells us that it is wrong to take away from everyone in the class, too. If a few of us talk while standing in line, the whole class can suffer by missing recess.
In the corporate environment, this principle coincides with an executive’s willingness to place the company’s welfare over parochial interests. Since some executives sacrifice the company goals for personal goals, firms work to ensure that they align. This McKinsey survey indicates that companies are more likely to develop successful strategies when the two sets of objectives are aligned; or in Fulghum’s words, when executives don’t try to take from others.
Kindergarten principle, Learn some and think some:
The McKinsey survey indicated that 60% of good quality decision companies base strategy upon a robust fact base, whereas only 30% of poor quality decision companies could make that claim.
Kindergarteners soak up learning from the facts their teacher presents. These facts invariably lead to more questions, which facilitates even greater opportunities to learn.
Most executives believe they make fact-based decisions. However, time and resource limitations often force executives to collect facts from too narrow of a perspective or in too limited detail. Some executives resist collecting more facts because of misguided perceptions that past strategies can resolve new business challenges. This McKinsey survey confirms that collecting more facts allows the executive to develop better strategies.
Kindergarten principle, Be aware of wonder:
Young children consider learning fun. Since many things are unknown, kids ask lots of questions and the answers promote wonder. A kindergartener brings a caterpillar in a jar for show and tell. Some child may ask, “What is it doing?” The teacher responds, “The caterpillar spins this cocoon and after a few weeks turns into a beautiful butterfly.” This starts the whole class down a learning path about butterflies.
55% of good quality decision companies actively sought evidence contrary to their initial plan before finalizing the company strategy versus 25% of poor quality decision companies.
Executives tend not to wonder. Instead, they develop an action plan based upon their own picture of reality. Executives fail to wonder about their environment, so they miss changes in customer needs or competitive threats that would dictate strategic plan modifications. Survey evidence demonstrates that wondering about ways the strategy may not work can make business strategy more successful.
Kindergarten principle, Look:
Fulghum observes that kids look. Don’t you find it interesting that he does not suggest they speak? Which child is more likely to learn: the observing child or the “Chatty Cathy”? What did we all learn about crossing the street? “Stop. Look. Listen.”
Only 36% of poor quality decision companies encourage dissenting opinions, but 58% of good quality decision companies do.
Executives advance in their careers by their decisiveness. Unfortunately, this means senior executives responsible for setting strategy are trained to speak and act more than listen and look. Since strategy requires input from people with different areas of expertise, the dialogue necessary to solve strategic challenges won’t occur if the team members prioritize speaking over listening. Survey evidence seems to suggest we’d create better strategies it we developed them like a child is taught to cross the street.
Kindergarten principle, The Golden Rule:
McKinsey observed only 36% of poor quality decision companies shared critical information, but 57% of good quality decision companies did. The survey also indicated that 58% of good quality decision companies ensured that criteria for decision approval were transparent versus 23% of poor quality decision companies.
In kindergarten we learn to treat others as we would like to be treated. The teacher may ask, “Why don’t you share that toy with Billy.” A child may be scolded, “How would you like it if someone called you that name?” These early socialization lessons prepare kids for adult interaction.
But some executives seem to have forgotten The Golden Rule. For instance, believing “information is power,” they withhold valuable information from the rest of the team. Sometimes an executive may try to manipulate the team by keeping the decision process secret. This McKinsey study provides evidence that sharing all known information and making the decision process transparent leads to better strategy formation.
Next time your company seeks to resolve a strategic challenge, perhaps you can start by reading “All I Really Need To Know I Learned In Kindergarten.” Committing to follow these principles will facilitate better strategy formation.
1 http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/flaws-in-strategic-decision-making-mckinsey-global-survey-results