"Decisions about strategy are the prerogative of top management and cannot be delegated to employees. For example, deciding what customers to target or what products to sell are strategic decisions and must be made by top management. Similarly, changes to strategy are also the domain of top management. You cannot have employees changing the product offering or the customers being targeted without the direct input of their leaders.
Employees can have autonomy to act on operational issues that improve what we are already doing, but not on the strategic choices that the organization has made that define its strategic direction.
Obviously, for employees to tell the difference between operational and strategic issues, they must first know what strategic choices the organization has made. This implies that the most important parameter that will guide employees’ behaviors—and the parameter that will allow us to give autonomy without fear of losing control—is our clearly communicated strategy.
a 2013 academic study reported that even in high-performing companies with clearly articulated strategies, only 29 percent of employees knew what their company’s strategy was. This is not an isolated finding—survey after survey reports that employees seem to be in the dark when it comes to their organization’s strategy, despite claims by senior management that their strategy is clear, well communicated, and understood by their employees.
Reason #1: Failure to Make the Difficult Choices That Strategy Requires
Strategy is all about making difficult choices—what the organization will do, and more importantly, what it will not do. The question that immediately arises is: “choices about what?” There is no agreed answer to this question, but at the very least there are three choices about strategy that need to be made—the who, the what, and the how. Specifically:
- Who should we target as customers and who should we not?
- What shall we offer these customers and what shall we not?
- How should we achieve all this—what value chain activities should we undertake and what activities should we not?”
The biggest strategic mistake that organizations make is not that they miss one or two choices in their decision making; it is that they do not make choices at all.
It is amazing how many organizations fall into the trap of not making the required choices on strategy. One reason for this is the fact that these are not easy choices to make—ex ante, there are many possible answers to each one of the three questions.
There may be additional reasons, but the end result is that organizations consistently and predictably fail to make the necessary choices that strategy requires. Faced with uncertainty, they invest some of their resources going after customer X and some going after customer Y—just to be on the safe side. In the process, they do a disservice to both X and Y (by underinvesting in both), but at least they ensure that they do not make a mistake by choosing one that may turn out to be wrong five or ten years down the road. Similarly, faced with the prospect of upsetting some of their colleagues, they allocate their limited resources to projects and regions that do not fit with the organization’s goals or direction. In the process, they underinvest in the things that deserve their attention, but at least they do not upset their colleagues!
Failure to make choices leads to the first key reason why we have lack of clarity in strategy: Instead of being a clear statement of the (difficult) choices that the organization has made, strategy becomes nothing more than a vague and generic statement that lists all the wonderful things that the firm aims to achieve. It says all the right things so that nobody can really disagree with it, but fails to state the one thing that will offer guidance to employees— the choices the organization has made—exactly because no choices have been made. When you read the annual report of any company, what you get is good-sounding motherhood statements masquerading as strategy statements, a point also made by other academics. These offer no guidance or direction to employees. No wonder these people complain that they have no idea what their organization’s strategy is. They do not know it because the organization does not really have a strategy!"
Trechos retirados de “Organizing for the New Normal” de Constantinos Markides.