Trouble at the top by Jane Simms

Business strategy is often conceived in an ivory tower by top executives and then handed down in tablets of stone for middle management to implement. But, because the strategy is not grounded in the reality of the business and lacks "emotional edge", the rest of the organisation neither believes in it nor engages with it. So it's not surprising that only 19 per cent of corporate strategies achieve their objectives, according to new research among more than 1,600 top, senior and mid-level managers in public and private sector organisations.
The research, undertaken by management consultancy Cognosis, highlights a gulf in perception between executives and the rest of the organisation: top managers are twice as likely as either senior or middle management to believe that their strategy is exciting and inspirational, or that it challenges assumptions about the status quo.

"Business leaders appear to be sitting in an unreality bubble at the top of organisations," says Richard Brown, managing partner of Cognosis. "You have to wonder whether they understand their businesses at all."

Many business strategies appear to be over-rational and analytical, according to Brown. One of the reasons seems to be that executives fail to fully involve disciplines such as HR and marketing—the custodians, respectively, of the employees and customers. Most of the Cognosis respondents agreed that the best strategies engage both the head and the heart, and should inspire and excite, but they admitted their own strategies fail to do this. Just 25 per cent judge their strategies to be exciting, 28 per cent feel engaged by them, 21 per cent are satisfied with their organisation's approach, 47 per cent feel sufficiently involved, and 50 per cent believe their opinions are listened to and valued.

"There is a clear correlation between engagement and excitement," says Brown. He notes "only" 53 per cent of top executives believe their own strategy is exciting. "If they can't get excited about it, how can they expect anyone else to?" Business leaders are in denial about the strengths and skills of their middle managers, too. A report from Hay Group, entitled Corporate Soufflé—Is the middle giving way?, found that 40 per cent of UK directors believe their middle management is the biggest barrier to achieving their organisation's objectives. They cite a lack of commitment and leadership skills among middle managers as the biggest problems.

"This research seems to be more an indictment of top managers than middle managers," says Brown. "Middle managers are much abused: they are the glue that holds the organisation together, a crucial information conduit. If they are as bad as the Hay research suggests, you've got to ask how well they are being led. It could be that top managers are just looking for someone to blame for their own inadequacies."

Mark Jenkins, professor of business strategy at Cranfield School of Management, agrees. "Gary Hamel [visiting professor at Harvard and the London Business School] describes middle managers as the revolutionaries in the organisation," he says. "They are the ones who are closest to the action and see what needs to happen, so senior managers have to harness their frustration and energy."

Steve Welch, associate director at Hay Group, believes the prevailing ivory tower approach to strategy setting is linked with a growing trend among business leaders to do more themselves rather than delegating. "In the most successful companies, leaders see coaching and development as a critical part of their job," says Welch. "But, in the average company, leaders are increasingly trying to take control, leaving those below feeling disenfranchised and demotivated."

Top managers also seem less open to challenge, even though "report after report proves that leaders who surround themselves with people who challenge their thinking generate better results" claims Welch. "The challengers may be wrong, but the debate is important, because it involves openness, trust and dialogue, which align everyone around a common purpose," he says.

When it comes to the HR role, the Cognosis research shows that, while HR participates in the strategy-setting process, it is perceived to add little value. Another recent survey, from recruitment outsourcer Profiles Resource Management, found that 75 per cent of HR directors believe that HR's focus on service delivery, combined with the lack of skill (and will) to engage with business strategy, is the reason the strategic contribution of HR is neither recognised nor used.

Managing director Sue Brooks believes that if more HR directors were prepared to stick their necks out, strategy-setting would become more people focused. "Even those who want to cross the line, measure their contribution in qualitative and defensive terms—how successful they are in reducing headcount turnover or sickness absence—when they should be aligning those measures with the bottom-line objectives of the board, such as sales growth or cost reduction," she says.

HR also has a critical role in helping the organisation define its purpose, long-term vision and values (what beliefs will guide us on the journey?) which, says Hugh Davidson, author of The Committed Enterprise, are the bedrock of an emotionally engaging strategy.

"Get the purpose, vision and values right, and the strategy—how are we going to get there?—almost falls into place," says Davidson. He cites Tesco, Procter & Gamble and Toyota as exemplars of this approach to strategy setting, and their financial success speaks for itself.

"It's no coincidence that they are all obsessively customer driven and led by career marketers," Davidson points out. "The most difficult part of any strategy is how to achieve profitable growth and, to do that, you need to understand your marketplace and your consumers. You won't find ideas about how to generate demand in the finance department."

But in many companies, according to Cognosis, marketing is less involved and perceived as less likely to add value to the strategy-setting process than finance, operations, logistics, distribution and procurement.

Davidson, who is also the author of the best-selling Offensive Marketing, believes marketers themselves are to blame. "With their skills in building and satisfying demand at a profit, strategy setting should be a marketer's natural territory. But the proliferation of distribution and communications channels has drawn them increasingly into detail and tactics, leaving little time to step back and look at the bigger picture," he says.

It's a treadmill that the chief executive or HR director should help them step off, but the former is too busy and controlling to be of any use, while the latter is stuck in its service delivery box, believes Davidson.

The picture that emerges from research and observers is of organisations blighted by a silo mentality: self-interested, short-termist, overworked and fearful.

It's a depressing spectacle, and it requires business leaders with strong emotional intelligence to both acknowledge the problem and then start to put it right. Adopting a more involving, "whole-brain" approach to strategy setting is an obvious first step. Once they do, concludes Brown, they might find that "getting it right is not as big a deal as lots of people assume".
For more on strategy, check out our interview with Michael Raynor, author of The Strategy Paradox: Why committing to success leads to failure
Taking the customer's pulse
Simon Jenkins, group strategy director, Emap plc
Turnover £1.15bn
Employees 6,200
"Too many strategy people obsess about the journey, and forget the vision and values, which turn people on; and the 'story', which allows people to communicate it. Most strategy directors have MBAs or are ex-strategy consultants and, while they have a structured background and like solving problems, they don't like open-ended questions or dissent, their people skills are weak and their antennae for customers are poor.

"Too many strategies fail to involve customers, but customers have increasing power. It's a lesson the record industry has learned the hard way: it has traditionally been more concerned with the artists and the retailers than with consumer trends, and it has been left high and dry as those consumers moved to new platforms and technologies.

"In our strategy setting, we focus on consumers and customers. One of the good things about that is that there is lots of data, which takes some of the subjectivity out of the process, while technology allows you to put your finger on the customer pulse in real time."
Twenty per cent theory
Ade McKeon, UK & Ireland managing director, Beam Global Spirits and Wine
Turnover undisclosed
Employees 160
"Strategies are like brands: people buy them on the strength of their emotional, not their rational attributes. If you have a group of individuals who are involved in developing the strategy and commit to it with their hearts as well as their heads, that strategy will be more successful.

"We provide leadership from the top, but ideas about how to get to where you want to go can come from anywhere. We are trying to create a wider leadership committee here so that decisions are as close as possible to the point of impact; this empowers people to execute them. Our strategy-setting process involves a fifth of our workforce: if 20 per cent believe something is achievable and right, that creates an irresistible momentum."

April 2007 : Director Magazine