For at least four decades, prestigious US consulting firms have brought strategic insight to C-Suites everywhere. Many former consultants have even taken top jobs inside corporate strategy departments. But there is still a significant gap between strategy and execution. In fact, nearly 70% of terminated CEOs have lost their jobs because of bad execution.
I can sum up the reason behind this epidemic failure in strategy execution with a simple phrase: “1, 2…10.” Or more specifically, “Step 1, step 2…skip all the middle steps…and jump to step 10.” Steps 1 and 2 are crystal clear.
These are the ‘strategy explanation steps’ that fill the slide decks often shared at senior leader off-sites. Step 10 is also usually quite clear: the description of the desired future state. However, the steps in between are often ignored by strategy creators, at their own peril, and often to the demise of their strategy. The steps in between are the steps where strategy is made personal for everyone in the organization. The steps in between include the democratization of business & financial acumen so that employees at every level can make better business decisions to support the
Unfortunately, when a new strategy is formulated at the top, most middle managers are not given a fair chance to develop the knowledge and skill to support the strategy. Subsequently, the front-line is often ‘lost’ when it comes to what they should do every day to support the strategy. I recently witnessed the CFO of a large, publicly traded technology company say the following to a group of analysts and managers:
“We are giving 3-year forward Free Cash Flow CAGR guidance, and driving cash flow is a top priority for our company and leadership team.” That’s a great example of steps 1 and 2.
“The steps in between are often ignored by strategy creators, at their own peril, and often to the demise of their strategy.”
However, a shiver of doubt would run up this CFO’s spine if he knew that 70% of corporate America, from VP to first-line manager, can’t even define cash flow. 2 Many senior directors in his own company couldn’t tell me what “3-year forward Free Cash Flow CAGR” meant, and therefore, they didn’t know what to do to support it.
In “Business Acumen for the 21 st Century”, I lay out the five pillars of business acumen.
The first pillar, “Lead Your Business,” (covered in this recent article) is about teaching people to take a broader perspective on the inter-dependencies that exist in their business. The second step, covered in this article, is about every day “Business Decision Making Capability.” If your CFO wants to focus the organization on increasing cash flow to meet analyst guidance, does the organization really know what to do to support this objective on a daily basis? Probably not.
The solution to this problem involves teaching business and financial acumen to connect people to
enterprise strategy and ‘make the strategy personal.’ Business acumen development experiences can drive tangible outcomes, such as the following:
For 120 senior directors, scores for the question “I understand cash flow and know what to do
to increase cash flow” jumped, on average, from a 4 to a 9, on a scale of 1 -10.
However, this company wanted more than just better understanding – they wanted action and results to drive the strategy. Here is a sample of actions that have caused a 7X ROI on this development experience:
One field leader increased ‘conversion’ across ten retail stores and increased cash flow by $300K over one quarter
Another field leader focused on ‘accessory attach rate’ improvement in every customer
transaction and increased cash flow by $250K in one quarter
An HR leader chose to use an internal recruitment resource instead of an outside recruitment
firm, and saved $150K and got the same quality new hire Examples like the above would be impossible to predict by even the smartest CFO. Nor could they have been mandated from above. However, extraordinary results like this are possible if people are given a chance to do the following:
Experiment with key metrics in powerful, relevant scenarios while using an interactive business
simulation to understand both ‘the what and the why?’ (this is best done in cross-functional
Experiment with decision-making cause & effect in a safe environment, including guest
facilitation by senior leaders who explain business acumen in practical language
Scaling strategy alignment and business acumen out to the front line means an organization can more quickly activate execution. If companies stop skipping the important steps between “1, 2 and 10,” then companies will start seeing managers at all levels making better decisions in support of strategy execution.