May 4, 2023

TPL Insights #169 – Is Your Company as Strategically Aligned as You Think It Is?

By Rob Andrews

 

By Rob Andrews with paraphrased content from Vikas Mittal Alessandro Piazza & Ashwin Malshe’s HBR article published on May 2, 2023

A new study by professors at Rice University and The University of Texas at San Antonio suggest that many company leaders who are super energized and feeling good, having just returned from their exhaustive three-day strategy retreats may be no better aligned than they were before they left. When 500 middle managers and front-line employees were asked how aligned they thought their companies were in terms of strategy, 82% responded by saying they thought their companies were strategically aligned. Good news, right?  Not so fast. Actual alignment, as measured by the linguistic overlap in the concepts and words used, was found to be just 23%, two to three times lower than strategic alignment perceived by senior management.

This is a real problem. In organizations with large gaps between actual and perceived alignment, employees were more skeptical and less trusting regarding the effectiveness of their company’s strategy and implementation, and reported that implementation was slower, less effective, and of lower quality. At one tech company, employees rated strategic consensus to be 77%, but an analysis of written responses revealed alignment of just 26%. At a large recruiting firm, middle and senior managers believed strategic alignment in their firm to be at 90%, yet Mittal, Piazza and Malshe found the actual alignment to be only 30%, with surveyed employees listing strategic objectives and priorities that were either out of date or completely nonexistent.

These kinds of wide gaps between perceived and actual strategic alignment are not uncommon, according to empirical data. Far too often, people at different levels in organizations find themselves pursuing divergent and often conflicting objectives. This kind of well-intended dysfunction leads to distrust, unhealthy politics, firefighting, unproductive meetings, and unnecessary conflicts, all of which are distractions, value detractors and culture killers. While this study reveals real danger, it also finds there are three key steps leaders can take to get everyone on the same page.

Focus Strategy on Driving Customer Experience  

The authors found that CEOs who defeated strategic confusion, moved perceived alignment to reality, and succeeded in achieving their objectives, ultimately prioritized the customer experience. The authors’ findings in this study are entirely consistent with our own study of organizations that perform at the very top of their sectors. To date, all 41 companies we have examined in our Total Performance Leadership study over the last 11 years have had a powerful focus on delivering a highly differentiated customer experience. This is not to say the customer experience is their only strategic pillar, but in peak performing companies, it is a principle on which there is relentless focus.

A 2023 review of academic papers by the authors reveals that companies that prioritize customer experience perform better across a wide range of metrics, including revenues, EBITDA, cash flow, enterprise value appreciation, and more. When boards, CEOs, senior leaders, and middle and frontline employees are all aligned around delivering the best possible customer experience, they are less likely to become distracted, spend wastefully, and chase shiny objects that don’t add value to customers.

At Houston based ITI Manufacturing, strategic alignment was 20% in 2020. Three years later, it was 82%. The results? Sales are up 23%, profits are up, and employees report spending more than 50% of their time on customer-focused initiatives and tasks. One key change at ITI was its focus on one factor it determined was most important in driving customer experience, which is giving customers a weekly status report on their orders. CEO Joshua Robinson explained to the authors that providing weekly status reports seemed almost trivial at first but has become a powerful differentiator that causes current customers to provide testimonials that attract new ones.

Use the Power of Mindset to Weave Your Strategy into Everyone’s Daily Work

Once customer experience has become a key principle in your company, take steps to ensure the new mindset permeates everyone’s focus and daily activities. Strategy cannot be just an overlay on top of your people’s jobs. It must become their day job. Front line employees are the ones who deliver most of the value to customers and their daily activities are literally where the rubber meets the road.

Chris Jones, President of auto parts distributor Swagelok, reported that his company struggled by doing everything in the name of strategy, except improving customer value.  All that changed when Jones and his team identified rapid quoting as a critical customer need and refocused its strategy around that objective. A refocused team provided better training, technology and support to its customer facing employees to enable them to deliver flawless rapid quoting. Today, average quoting time has been reduced from 18 hours to five, and 95% of customers are happy with their quoting time. A refocused Swagelok is also experiencing internal benefits, including better employee fulfillment, better alignment, and a much better culture.

Communicate with Clarity and Implement Through Dialogue – Not Top-Down Directives

Strategy is not implemented by senior executives, rather, it is implemented by middle managers and frontline employees. For strategic implementation to stick, leaders must proactively solicit input and feedback up, down and across the organization, carefully listening to employees on the firing line and engaging in meaningful dialogue. Top-down communication from senior leaders to frontline employees will drive the perception of alignment, but it will not drive real strategic alignment and quality execution.

Margaret Seeliger, Sodexo Energy and Resources Global SVP of Strategy said “listening, not talking, to employees is the key” when describing how her team traveled to more than 50 global sites to engage with frontline teams. It was through these conversations that her team discovered that to spend more time and attention helping clients, employees needed enhanced support of certain tasks, which drove efforts to unburden and enable frontline employees to serve customers more effectively. The net result of this clarity in communication, meaningful dialogue and effective change was a 24% increase in revenue, 5% reduction in expense, and a 20% increase in EBITDA.

Seeliger reflects. “Senior executives can measure outcomes, create initiatives, and do town halls. But the real work of implementation, creating value for customers, happens on the frontlines. The essence of strategy implementation is unburdening and enabling frontline employees to do their day jobs. Senior executives shoulder the responsibility to engage their workforces around purpose, mission, vision, and values. When it comes to strategic implementation, senior leaders have only two options” support them or get out of the way.”

I spend a significant amount of time doing research to produce content that will help our clients build peak performing cultures. Given our focus on retained search, interim executive placement, workshops, tools, coaching and culture shaping, this article serves as an important reminder to all of us that the principles we have observed in our study hold true. It is one thing to be aware of the principles, and quite another to put them to work, where the rubber meets the road.  We sincerely hope this piece has been helpful. For complementary resources on ways to dramatically improve your strategic alignment, culture, and overall performance. sign up for our blog and explore our website for additional tools.

 

Warmest Regards,

Rob