Whether strategy is more important than execution or vice versa continues to be a debate.The safe answer is that both are equally important. However, the right question here is, how can an organisation bridge the gap between strategy and execution?
When strategies did not work and executions failed, many companies’ often-used solution is restructuring the organization chart. This solution only serves to address the superficial problems but not the root cause behind them. Hence, the same problems will reoccur down the line while the gap between strategy and execution continues to grow bigger.
Whether you’re running an e-commerce business or a large corporation, it’s imperative that leaders of organisations know and understand how to execute strategies effectively.
In their work to help 250 companies improve their strategy execution, Gary L. Neilson, Karla L. Martin, and Elizabeth Powers identified four fundamental building blocks of improving strategy execution:
- Decision rights
Their findings are discussed in “The Secret to Successful Strategy Execution,” published on the Harvard Business Review.
Fundamentals of strong strategy execution
According to Neilson and his coauthors,effective strategy execution boils down to these fundamentals: “clarifying decision rights, designing information flows, aligning motivators, and making changes to structure.” They dubbed these four as decision rights, information, motivator, and structure.
While working with those 250 companies, Neilson and his colleagues found that, when leaders and team members know their decision rights and responsibilities and ensure that information flows freely across organisational boundaries, the other fundamentals follow.
Empowering people to make decisions
Under decision rights, Neilson and his coauthors emphasise that each member of an organisation, especially those in leadership roles, must clearly understand their roles and responsibilities. “Everyone has a good idea of the decisions and actions for which he or she is responsible,” Neilson and his colleagues wrote.
Managers and team members can only have a clear understanding of their decision rights when they are empowered to make decisions. Unclear decision rights lead to managers and members constantly second-guessing themselves and to convoluted and murky processes and channels. As a result, decision-making is paralysed, and business operations become increasingly inefficient.
On the other hand, clarifying every organisation member’s decision rights allows everyone to work more independently and efficiently. Roles and responsibilities are outlined clearly, so every member is clear on where their accountability stops and others’ begin.
Empowering your people to make decisions also frees up managers to fulfill their various roles to a higher degree, instead of micromanaging their team members and taking over tasks that are meant for employees. This can lead to higher engagement and effort in employees.
When decisions are made, they should rarely be second-guessed unless there is clear evidence that they are ineffective or wrong. Otherwise, it cancels the effort of empowering employees.
Employees can make decisions and translate them into actions right away, provided that they have the right information to make them, when their decision rights are clearly divided and expressed.
Ensuring information flow freely
Having adequate information is critical to make effective decisions. In their article, Neilson and his coauthors outline the importance of information from the field to the headquarters and across organisational boundaries.
To illustrate the importance of the free-flowing information in the organisation, Neilson and his colleagues discuss the case of heavy-equipment manufacturer Caterpillar, which further emphasises the importance of properly distributing decision rights.
In the case of Caterpillar, decision rights were hoarded by top management at the headquarters while information that reached the top were heavily filtered.
The lack of real and valuable field information led senior executives to focus on the “organisation’s internal workings, overanalysing issues and second-guessing decisions made at lower levels.”
Decisions, which did not always reflect the reality in the market, kept going back and forth, and executions were delayed, causing the company to lose many opportunities in fast-moving markets.
Caterpillar reorganised their business units and decentralised the control to make market decisions, which freed up the flow of information from the field to the headquarters. This enabled executives to make smart, strategic decisions guided by actual data instead of outdated sales reports.
Free flow of information also matters across different divisions, departments and teams, not just from the bottom to the top and vice versa. Departments in organisations are cogs in a machine that have their own functions and work together to keep the whole structure running.
However, unlike machine cogs that are designed to do their functions automatically, people need to communicate with one another to know what they’re supposed to do next and how they should go about doing those next steps.
For example, the research and development team figures out ways to innovate products and tests these improvements to ensure they’re foolproof. They need to communicate their research findings to the production department so that no errors find their way to the final product.
If each department hoarded vital information they gathered, they won’t be able to make sound judgment that considers the big picture and the smooth operation of the entire organisation.
- The fundamentals of effective strategy execution, according to Neilson, Martin, and Powers, are clarifying decision rights, improving information, aligning motivators, and making changes to structure.
- Decision rights involve empowering people to make decisions and ensuring every member of the organisation has a good idea of their roles and responsibilities.
- Free flow of information enables leaders and team members to make sound judgment based on actual data, which improves effectiveness and efficiency of execution.
- The four building blocks of strong strategy execution are interrelated; thus, every one of them should be addressed to obtain the goal of improving your organisation’s strategy execution.