Strategy and Performance Gap

Strategy formulation and execution always seems to have some gap, we’ve seen many perfect boardroom ideas flounder when it comes actual ground level implementation. Strategists and planners toil hard to come up with a foolproof plan but implementation continues to be a greater challenge.

HBS professor Robert S. Kaplan and colleague Andrew Pateman argue for the creation of a new corporate office. Why is there such a persistent gap between ambition and performance?" ask Robert Kaplan and David P. Norton in "The Office of Strategy Management" in the Harvard Business Review.

They studied the root causes of this disconnect between strategy and performance. They found out that most organizations do not have a strategy execution process. Many have strategic plans, but no coherent approach to manage the execution of those plans. Consequently, many key management processes remain disconnected from strategy. Some other findings are:

(a) Many organizations don't have a consistent way to even describe their strategy, other than in a large strategic planning binder. We believe strongly that organizations need to find a consistent, coherent way to translate their strategy into operational terms.

(b) Sixty percent of typical organizations do not link their strategic priorities to their budget, virtually ensuring that key strategic initiatives do not get funded and resources may not be supplied to deliver on the strategic plan.

(c) Two-thirds of HR and IT organizations develop strategic plans that are not linked to the organization's strategy. This is extraordinary.

(d) Seventy percent of middle managers and more than 90 percent of front-line employees have compensation that is not linked to the strategy.

(e) Most devastating, 95 percent of employees in most organizations do not understand their [organization's] strategy.

In short, there is often a chronic disconnect in organizations between strategy formulation and strategy execution.