It’s AGM season, and CEOs around the country are spruiking their strategies.
But most of what they’re saying they’ll do won’t come to pass. Their staff will try, but simply won’t be able to do it.
Cyril Peupion, a managing partner at Primary Asset Consulting and author of Work Smarter: Live Better, says Australian corporations are usually “very good” at high-level strategy.
“And in an ideal world, that would cascade down to the day-to-day work of your employees.”
But in reality, Peupion says, there is a huge gap. “Companies spend so much time, money and effort on defining their strategy… only to see two-thirds [of strategies] never executed,” he says, referring to a 2008 Ernst & Young study that found 66% of corporate strategy wasn’t ever put into practice.
It’s is a conservative estimate, Peupion says. “In my consulting business, I spend a lot of time speaking to the leaders of all sorts of businesses. Every leader I speak to can relate to this. And some of them even say, ‘Cyril, it’s probably more than two thirds that never gets done’.”
This poses a challenge for leadership. The solution, Peupion says, is simple in principle, but difficult, as it goes against most people’s instincts. He credits Peter Drucker, the management guru often called the ‘father of modern management’, with a personal credo.
“The important decision isn’t what you do; it’s what you don’t do,” Peupion says. “That’s the key to strategy.”
There are two key reasons why corporate strategy isn’t executed, Peupion says.
Part of the blame can be put down to employees not knowing how to effectively do their jobs. This can be fixed by clearer instruction and workplace training.
But even if your employees are productive, the problem often starts in the executive suite. If given complex, competing or changing instructions from their leaders, employees flounder.
“There’s often a lack of clarity,” he says. “Most people don’t know the main goal of their organisation.
“If you ask them, you either get a blank look, or 10 different answers.”
Peupion recalls a discussion he had last week the general manager of a large Australian corporation. “She had just taken over,” he says. She asked for a summary of the big corporate issues facing the business, and was handed a A4 sheet of paper divided into three columns.
“Each column had 10 or 15 bullet points,” Peupion says. “How on earth can you have a sense of urgency, of focus and priorities, when there were so many things to do?”
One of the biggest problems with strategic thinking at an executive level, Peupion says, is it’s just too complex. “Everyone spends a little time on everything. That dilutes the impact.”
Making this problem worse is the fact that businesses frequently change their strategy when it isn’t working. “Change is the only constant,” Peupion says. “How can people gain a sense of achievement and clarity in that sort of environment?”
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Myriam Robin is a media reporter at Crikey. She’s an economics graduate who previously reported on business for LeadingCompany and SmartCompany.
