Most organisations today have defined vision and mission statements and strategies to achieve them, however despite having a well-defined strategy, only about 10% – 20% of companies achieve real growth in value. Based on general research, the problem lies in strategy execution, in most cases 70% of the problem lies in bad execution not bad strategy (Bossidy & Charan, 2002).
This is not to say that strategy formulation is not important. Strategy formulation, execution and organisational performance is a cog – without excellent operation and governance processes, even the most visionary strategy cannot be implemented. Conversely, without strategic vision and guidance, operational excellence is not sufficient to achieve and sustain success (Porter, 1996).
The gap between strategy formulation and organizational performance is evident in the n following statistics:
Only 63% of organizations achieve the financial performance of their strategy (Mankins and Steele, 2005).
In addition to increased technology-adoption by businesses and efforts to meet the evolving stakeholder expectations, audit function is becoming more dynamic and accommodating more advisory engagements in its strategy. When most stakeholders have stated that this is what they really want, many internal auditors use “independence” as a crutch to stay in their comfort zone and avoid providing insights and opinions which cut across advising management on the design of assurance methods, the effectiveness of controls, change initiatives, and improvements to risk management.
An auditor being independent does not exclude you from providing a control assessment of a system before deployment or working with colleagues and various business units to assist to provides insights to solving an internal control issue in an advisory capacity. Traditional auditing is no longer enough, the
When the auditor’s signature is required, it is permissible to make it apparent to everyone that your approval is predicated on the belief that the data you have been given is accurate. It is not your fault if you audit the system afterwards and discover that the controls were not applied as intended.
them to drive effective strategy implementation which in turn translates to the achievement of organizational excellence.
Strategy Implementation
It is one thing to formulate ambitious plans and bright ideas, and with a lot of management consulting firms and strategy experts, it is becoming increasingly easy to formulate ‘winning strategies’. However, successfully implementing the strategy is another thing entirely. Based on Zook & Allen (2001), 9 out of every 10 companies fail to realise their strategy, hence the execution of a winning strategy can be more valuable than the formulation of the strategy itself.
Kaplan and Norton (2001) carried out research and have identified four barriers organisations face when implementing their strategies. These barriers include vision barrier, management barrier, resource barrier and people barrier. These barriers have been considered in detail in the following sections of this article.
a) Vision Barrier
business unit objectives so that they are aligned to support the realization of the overall corporate strategy.
The alignment of the vision and strategies across business and support units will result in integrated business goals, facilitate information sharing, increase communication and collaboration which in turn will drive effective implementation.
A misalignment between the corporate vision/strategy and the individual business and support unit strategic priorities will result in ineffective implementation of the corporate strategy if at all. To mitigate this, the auditor should recommend an alignment of all the operations of the organisation.
Questions to consider include:
1.0 Does the organisation have a clearly defined vision statement?
2.0 Has the vision statement and corporate strategy been communicated to all employees and has it been understood?
3.0 Has the overall vision been cascaded down to the business units and translated to strategic priorities?
4.0 Are the support unit’s strategies and objectives in congruence with the business and overall strategy and vision?
b) Management Barrier
Management barrier exists due to poor governance structures and poor priorities. Strategies are most often for long time periods; hence it is critical that adequate structures are in place to ensure that the strategic priorities are consistently met. In addition, the strategy must also be kept in focus as time tends to create a fog and may pull the attention of employees from the strategic centre.
Three elements to consider in this area include:
I. Aligned structures: There is more to an organisational chart than boxes and linking lines, the chart defines how organisations do business, how decisions are made and who does what. Strategic priorities should be mapped to specific persons/functions to champion and information flows should be defined to ensure information flows and decisions are taken by the appropriate person in a timely manner.
ii. Aligned priorities: As stated, 85% of the executive teams spend less than 1 hour per month discussing strategy, when strategy is sidelined, execution fails. Strategy should be revisited consistently and discussed across all levels of employees to ensure that the strategic direction is kept in focus. The efficiency and effectiveness of strategy implementation will be negatively impacted without a regular focus on the strategic direction.
iii. Tracked milestones: For long term strategies, it is important to identify tangible milestones and defined indicators of the targeted results each milestone is expected to achieve. These milestones should be tracked and discussed regularly at meetings to serve as reminders of the progress made and to motivate staff to work towards future successes.
There is a risk that management and employees do what they want to do instead of activities the strategic priorities call for. To mitigate this there has to be an optimized governance and operational structure which guides performance towards the strategic centre.
Questions to consider include:
5.0 Has the organisational chart been aligned to the vision/corporate strategy?
6.0 Are there responsibility/accountability gaps in the chart (i.e. areas of the corporate strategy not managed by any business
or support function)
7.0 Has the organisational chart been developed with clearly stated roles and responsibilities?
8.0 Has the information flow in the organisation been defined to ensure fast response to issues as they arise?
9.0 Does information get to the right decision maker or does it get lost in transit?
10.0 Are strategic priorities discussed regularly across the organisation?
11.0 Are the problems faced deliberated and action items agreed and monitored?
c) Resource Barrier
Resource barrier exists due to failure to finance the set strategy. For strategy implementation to be successful, organisations must provide the resources
to carry out the planned initiatives, these could include tools, information, systems, technology, people etc.
The element to consider in this area are:
i. Aligned budgets: The organisational budget should be linked to strategy to ensure that the resources required to achieve each strategic initiative are considered and financed to drive effective implementation. Aligned budgeting can be achieved through the following ways:
u Linking strategic planning to budgeting: Strategic planning and budgeting should be performed at the same time to ensure resources required are budgeted for, and conversely, that the strategic plan is not overly ambitious and outside the resource/financing limits of the organisation.
u Collaboration during the budget setting process: Budget setting should be performed by a cross-functional team. The process should not be left to the Finance or Budgeting department alone. To create alignment, personnel from all relevant functions of the organisation must be actively involved in developing the budget.
It is almost impossible for strategy and budget to be in sync when both processes occur at varying time periods and by different teams. To achieve synergy, these barriers must be overcome.
Questions to consider include:
Vision Barrier
Only 10% of organisations execute their strategy
Barriers to strategy execution
Management Barrier Resource Barrier People Barrier
Only 5% of the workforce understands the strategy
85% of executive teams spend less than one hour per month discussing strategy
60% of organizations do not link budgets to strategy
Only 25% of managers have incentives linked to strategy
The vision barrier is the first hurdle to overcome to achieve successful strategy implementation. Organisations need to have a well-defined, articulated and inspirational vision statement which has been communicated and understood across the organisation. To achieve this, the following elements must be in place:
I. Aligned business units: Corporate level strategies should be cascaded into business unit level strategies, which should in turn be integrated across the business units to create synergy.
ii. Aligned support units: Support unit strategies and objectives should be defined alongside
Are budgets contingent on the strategic plan or vice versa?
Are the timelines for the budget setting and strategic planning process aligned?
Is budget setting and strategic planning carried out by different teams?
Does the budgeting method used in the organisation support strategy realization?
Are budget owners matched to the strategic initiatives/priorities they champion?
Does the cost containment/management structure allow for innovation necessary to drive strategic priorities?
Do employees have the requisite tools,
systems and technologies to support the implementation of planned strategies.
d) People Barrier
People barrier exists due to a lack of clear and consistent understanding of the vision and/or corporate strategy and/or misaligned incentives. It is becoming common to see a gap between the strategic plan and the daily activities of employees, this reduces the chance of effective strategy implementation because the employees are critical drivers to achieving excellent organisational performance.
The elements to consider in this area include:
i. Aligned employees: Employees are the ones who run the strategic initiatives, they must understand the strategy and should be included at strategy formulation to get their buy-in. In addition, employees should have a clear understanding of the impact of their activities on the organisation and their role in achieving its vision.
ii. Aligned incentives: Employees must understand the linkage of the strategy to their daily operations and performance indicators. Employees are more likely to pursue the realization of set performance indicators, whether or not they drive the organisations strategy as the indicators typically form the basis for incentives such as promotions, salary upward reviews, and other benefits. To drive successful strategy implementation, staff incentives should be aligned to reward assigned strategic priorities.
iii. Aligned frameworks and manuals: Documented frameworks and manuals guiding the daily operations of employees must be aligned to the strategy. An alignment will ensure that employee activities are consistently towards strategy realization (especially for long-term strategies) even when there is a change in key personnel.
The workforce is a critical driver in strategy implementation. Without an aligned workforce, even the most excellent strategy and optimized process would result to unsuccessful strategy implementation. Employees should be involved in the
strategic planning process, kept informed of progress made and the next line of actions. The reward scheme should be designed to motivate employees towards strategy realization and documented policies and manuals should drive and not impede implementation.
Questions to consider include:
19.0 Is the vision statement and corporate strategy understood by employees?
20.0 Do employees understand how their activities impact the organisation strategy?
21.0 Are employees involved during strategy formulation?
22.0 Are there clearly defined strategic priorities? Are the responsible employees aware of these priorities?
23.0 Are performance appraisal metrics aligned to set strategic priorities?
24.0 Does the employee incentive structure include rewards/recognition for the achievement of strategic initiatives?
25.0 Are there clearly documented policies, framework and operating procedure manuals?
26.0 Are the frameworks and manuals aligned to the strategy? Have they been documented in a manner that drives successful strategy implementation?
Conclusion
The strategy cog should be in a constant state of motion to realise consistent growth in organisation value. The four barriers – Vision, Management, Resources, People, should be eliminated as they serve as hinderances to strategy realisation and to the achievement of organisational purpose.
