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Strategy Is Important. But It’s Not Enough. (Part One)

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Jan G. van der Hoop, President of HiringSmart™ — our go-to partner for help on how to hire more effectively, will be contributing to this blog on Fridays.  You can reach him directly at 905-338-7961 or jan@hiringsmart.com.

If you’ve been following our posts for a while, the odds are good that you’ve heard us take the position that “Culture trumps Strategy”, day in and day out.

The point we’re making is that it doesn’t matter how brilliant your strategic plan is; it’s not worth the paper it’s printed on if you don’t have the right people aligned and equipped to deliver on it.

MBA libraries are replete with business cases that present the plight of an owner or a CEO whose organization is simply unequipped and unable to deliver on “the plan” they have sold to the Board. It’s not an enviable position to be in, but it’s also not uncommon.

It shouldn’t come as a surprise that Execution occupies two of the top three concerns consuming the minds of CEOs:


Source – The Conference Board CEO Challenge 2009
(Click on the image for an enlarged version)

Research indicates that defining a winning strategy only accounts for 15% of your financial performance against your competition; the balance, a whopping 85%, boils down to execution. That fact should not come as a surprise; a winning plan can be pretty easy to steal and adapt, but translating that plan through organizational layers and across silos and into action is an enormous challenge.

Berggren and Dalgaard are co-authoring a book they’re calling Return on Execution, in which they make a case for RoX , the ability to translate strategy into action, as the ultimate business metric that will separate the winners from the losers. The evidence they have amassed to support their position is compelling.

The stakes have never been higher. Consider the following:

  • Labour cost has never been higher. When you factor out Cost of Goods from the P&L, Payroll and Related Expenses can easily represent 70-80% of the remaining operating expenses. There’s a lot riding on securing a return on that investment, and yet it’s been estimated that 23% of payroll dollars are wasted.
  • Company valuation models have shifted significantly over the years, giving more and more weight to ‘intangibles’ such as talent. According to Success Factors’ report Comparing Price to Book Ratio for S&P 500 companies over time, ‘intangible value’ in a company’s valuation increased from 20% in 1980 to 80% in 2005. Bricks, mortar and other capital assets alone only tell a small part of the story of a company’s health.

Stay tuned for next Friday’s post for Part Two of “Culture Trumps Strategy”.

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