CEO Perception vs. Reality
When it comes to implementing strategy, senior leaders may need HR's help to take off their 'rose-colored' glasses.
By Tom Starner
If the results of a recent survey are any indication, CEOs are woefully off base in their assessment of their companies' ability to successfully implement company strategy.
The study from BTS, a strategy implementation firm based in Stockholm, titled "Cracking the Code: The Secret to Successful Strategy Execution & Lessons for the C-Suite," shows a surprising disconnect between the perceptions of CEOs and their direct reports and other managers regarding strategy implementation.
The global survey of more than 200 executives, senior leaders and managers, conducted by The Economist Intelligence Unit for BTS, revealed that 39 percent of CEOs are "highly confident" in their strategy implementation. But only 12 percent of other C-suite executives agree, while 24 percent of managers share the same positive outlook. In addition, CEOs are also more likely (53 percent) to view their leaders as "hands-on," versus 31 percent of other C-suite members and 37 percent of managers.
Those data differences, says Stamford, Conn.-based Rommin Adl, BTS executive vice president, present a perfect chance for an organization's HR leaders to step up and narrow that perception gap, helping their CEOs take off their rose-colored glasses, so to speak.
"Our research clearly shows that CEOs may be missing opportunities to take the necessary actions to drive effective execution and skill development," Adl says. "HR executives are perfectly positioned to try and reduce or even eliminate the strategy implementation perception gap."
The BTS survey found that top-performing companies -- those yielding significantly higher revenue growth, profitability and market share -- take the necessary actions to ensure that employees are aligned to the company strategy, have the right mindset and are equipped with the skills and capabilities necessary to execute the strategy. However, the BTS research suggests that not all strategy execution drivers are equally important, as it identified "capability" as the single most critical predictor of an organization's success.
"When leaders are highly confident in their managers' ability to lead execution, the probability that their company is a performance winner is 71 percent," Adl says.
Phyllis Ezop, president of Ezop and Associates, a management consulting firm in La Grange Park, Ill., says the BTS research showcases how CEOs and management often overestimate their organization's ability to execute strategy.
"Building upon an organization's strengths, past foundations and capabilities generally characterizes a good strategy," she says. "So, it's not surprising that, according to the study, capabilities surpass mind-set and alignment as drivers of successful execution."
It's no surprise the study found that strategy execution should not be an afterthought, adds Ezop, saying that paying attention to implementation capabilities is an essential component of developing good strategy.
"Employers should heed the study's recommendation to embed implementation plans early in the strategy formulation process," she says. "They should pay attention to the organization's skills, culture and capabilities during strategy development."
As for HR, Ezop says it is in a great spot to help make it happen by assessing and understanding the company's human capital capabilities. For example, HR can help attract and retain talent with the right skills and cultural fit for the strategy. And HR can play an important role in initiating and managing training and development programs to help companies build needed capabilities.
"HR may even be able to play a devil's advocate role, by helping senior management recognize when a proposed strategy calls for talent that the organization lacks, and that market or other conditions make it extremely difficult to get," she says, adding that, in these circumstances, management may want to adjust the strategy to align with what the organization can realistically execute with its current or future capabilities.
Rick Maurer, an Arlington, Va.-based consultant who works closely with clients to develop change strategies, says the survey's results suggest that, when the leaders' belief in the capacity of their managers to execute strategy is high, the organization often benefits.
A disconnect between C-Level perceptions of reality and what others in the organization see is not uncommon, says Maurer.
"HR needs to look at the gap between the directives given by the most senior leaders and what lower-level managers hear," he says. "In other words, how well do executives communicate new strategies? How willing are they to be influenced by the people they are assigning or delegating to."
Also, Maurer conducted a study that asked people to assess their senior leaders' performance during change, and found the most effective senior leaders demonstrated their own capacity to lead major initiatives. So, before finding ways to train those down in the organization, HR should seriously consider finding out how people in the organization view their senior leaders.
"It would be easy for HR to leap to conclusions and suggest that training is the answer," Maurer says. "While skill building for middle managers might be called for, that's not where I would begin."
BTS's Adl offers some key ways HR leaders can help narrow the CEO perception gap and foster successful strategy implementation:
· Striking a better balance between strategy formulation and execution is the key. Companies that overemphasize strategy formulation had a high probability of low performance. HR leaders can help their C-suite peers by getting them to think holistically about that balance and how to execute the strategy, getting the workforce excited much earlier in the process. "If you wait too long and then say go, it may take too much time for people to adopt it," Adl says.
- Capability matters most. The BTS research shows in a powerful way that, if you look at strategy alignment mind-set and prioritization, the thing that came out on top was capability. In short, of the managers who said they were highly confident of having the right capabilities in place, 71 percent were part of a top-performing company. HR can help by understanding the skills required and delivering them. That means assessing to find the gaps and then developing capabilities though high-impact learning and development initiatives such as coaching, hands-on leadership and experiential learning strategies.
- Hands-on leadership is critical. When the research looked at some of the specific leadership skills, it found that leaders who are very hands-on in implementing strategy are more effective. HR can help leaders in setting a clear focus and expectations while defining actionable goals.
"Strategy execution demands a robust response," Adl says. "To maximize impact, HR leaders need to foster ways to embed execution plans early in the strategy formulation process, and target initiatives that directly address capability gaps, develop leaders' mind-set and commitment, and build company-wide alignment."