What are the structural barriers to strategy execution?
There are four possible in-built organizational barriers that hinder strategy execution. No matter how your strategy looks, it is advisable to focus on eliminating these barriers to increase your chances to succeed.
1. Company culture doesn’t support the new strategy
The famous saying “culture eats strategies for breakfast” is easy to agree with. In strategic planning and preparation for execution, a clear understanding of organizational culture helps in deciding on the right level of strategic ambition. One of the best practices is to properly evaluate what brings you together as an organization instead of only focusing exclusively on distinguishing yourself from the competition. This may be some core values, a vision, or a common history. Articulate this sense of unity well and the business success will follow – purpose beyond profit.
There are a few cultural elements that help in defining whether the strategic ambition level is right. Organizational flexibility is one of these. In a rigid organization, it is typical to expect decisions and accept ideas from the top. A rigid organization expects a high degree of predictability and to maintain the status quo, radical strategic shifts are often doomed. Another element is the flow of information. In an effective organization, the information flows freely horizontally and vertically. In cases where the organization does not share information freely, especially horizontally, the important matter of strategic alignment will consume a lot of energy and still produce weak results.
2. Decision rights are not clear
Too often, people in the organization don’t know which team member has the final say on some decisions. This often leads to situations where things do not progress. It sounds like it should be a basic thing: do all managers know their role and responsibilities and which decisions are theirs to make? Usually, young and small organizations have a clear understanding of what their colleagues are doing, but when the company matures and grows, this becomes more blurred. Typically, for organizations that are strong in execution, over 70% of employees know their responsibilities clearly.
3. Motivators are set wrongly
The challenge in getting motivators right lies in the delicate balance between traditional core business and new initiatives. Typically, financial and promotional motivators have the strongest impact. In the case of intended transformational strategy, the challenge lies in striking the right balance between the old activity and new activity. Furthermore, even in traditional business, it is too common, for example, to motivate sales on revenue and sales margin; this can easily lead to a dispersed product range and a mountain of hidden development and delivery costs unless the product is well defined. In the case the other part of the organization is rewarded on profitability, unnecessary internal tension will occur.
Most organizations tend to reward people based on past performance and delivered results. This easily leads to “playing it safe” behaviour, which doesn’t encourage an organization to try something new because failing at a new attempt might not be tolerated. Very few organizations are actually able to recognize and reward ambitious projects, agility or teamwork, which require a willingness to experiment. Unfortunately, many organizations reward those people who hit the numbers, which often leads to fear of failure.
4. The structure is not suitable for the selected strategy
Organization culture, decision rights and motivators are linked to organizational structure. Structural changes should be a consequence of the above three elements, not the first thing to be looked at. Structural silos are easily created if decision rights are not clear, which not only hinders decision making but also paralyzes information flow. Top-of-the-class organizations build organizational structure based on streamlined decision making, clear responsibilities and the simple customer service path.
Strategy execution needs to be driven by middle management; therefore, it is crucial that the organizational structure, reward system, culture and decision rights are clear and understandable.