In honor of every company that is going through strategic plans and annual plans this Fall, I wanted to share with you some sobering news: 9 out of 10 of your strategic plans are going to fail. In the first entry of a two-part post, I’ll address the four most common reasons why Strategic Plans fail. In the second part I’ll discuss some practical methods to help companies achieve their Strategic Plans.
Why 9 of 10 Strategic Plans Fail
We have all seen the output of Corporate Strategic Planning sessions: 3 ring binders, charts, actions, metrics, etc. One company actually delivered it in a hard bound, book format. Unfortunately, the output of these sessions actually contribute to the high failure rate. In summary, Strategic Plans typically fail because:
- Employees don’t understand the strategy
- The Executive team spends less than an hour a month discussing the strategy
- The budget is not aligned to the Strategic Plan
- Employee Incentives are not aligned to the Strategic plan
Employees don’t understand the strategy
Here is a test – go ask a random group of employees what the strategic direction is of your company and see how consistent the answers are. The sheer size of many Strategic Plans is intimidating to most employees resulting in a lack of understanding. Most plans are not communicated well and I have even worked for some companies that refused to tell employees what was in the plan because it was confidential! The result is employees not knowing how they contribute on a daily basis to the plans achievement. Even when plans are communicated, it is usually in the form of some type of kick-off meeting. Worst of all, after the kick-off it’s never discussed again.
The Executive team spends less than an hour a month discussing the strategic plan
The plan is completed, 200+ tactics have been identified, it is delivered in 3 ring binders, and it’s placed in the bookshelf. There the binders sit, collecting dust until next year’s plan displaces them. Every executive team tracks financial results on an ongoing basis and they may even chart overall progress against their 5 year strategic plan. Unfortunately, the 200+ tactics (which, by the way, are excessive) identified as enablers to achieving the strategic plan are rarely discussed. Without ongoing discussions, the company has no idea if the tactics selected were the right ones, if they are delivering the intended results, and if executed flawlessly result in achievement of the plan.
The budget is not aligned to the Strategic Plan
The annual budget process is rarely aligned with the 5 year strategic plan. The reason is fundamental – the budget and the strategy are typically developed by different departments, have different timelines, and are rarely integrated. In addition, the annual budget is geared up to feed the existing machine and are based on prior year run rates. We have all seen how this turns out – departments take on a “use or lose it” spending attitude at the end of the year and their new budget looks a lot like the old budget. Hardly leading to breakthrough results.
Employee Incentives are not aligned to the Strategic plan
As I just mentioned, Strategic Plans are put in place to dramatically improve performance. Once the plan is issued, employees go back to work and are incented to do the work that they have always done. I once worked at a company that put delighting the customer at the core of the strategic plan. Unfortunately, the retail network incentives never changed. The field was still rewarded almost exclusively for current year P&L performance. Even worse – the old customer satisfaction measure was still in place and only weighted at a 20% contribution.
How do you achieve your Strategic Plan?
When you look at these four reasons, it is no surprise that only 10% of companies come close to hitting their strategic goals. In my next post, I’ll share an approach to achieving a strategic plan that I have personally used in many industries. It works so well that the process was even awarded a Global Benchmarking Award.
- How to Achieve your Strategic Plan: Part 2 of 2 (perpetualinnovationmachine.wordpress.com)