Failed Strategy Execution Due to Oversight by Corporate Boards? – Forbes

Randy Ottinger (Executive Vice President at Kotter International)explores the lack of oversight by many boards of directors when it comes to corporate strategy execution, and how this may lead to the frequency of failure of most large-scale corporate change initiatives.

Here’s a board responsibility list that will look familiar to anyone who has served on a corporate board of directors:

·         Corporate strategy review

·         CEO selection, compensation and succession

·         Corporate governance

·         Budget approval

·         Accounting to stakeholders

One place that boards of directors are diligent is in corporate strategy review. Most boards require an unbiased perspective on the organizational leadership’s business strategies – but who assesses the leadership’s plans to execute a new strategy? The strategy may look great, but can the organization get behind it and implement it swiftly and effectively?

When we consider the strategy in whole, a minority of effort and resources is invested to develop a strategy (maybe 10%). The real work (maybe 90%) of the effort and resources is required to execute the strategy. Every year, billions of dollars are spent in the consulting industry on establishing a corporate strategy. Millions of hours of senior leadership time and attention will then be invested in the effort, but what investment is made in making certain that the organization is involved, aligned, and ready to make it happen? Something here is out of whack.

Implementing the strategy is where the pain and the largest costs to the organization come into play. This is where talent becomes critical, and where competitive advantages are either won or lost. The statistics on organizations’ ability to execute new strategies are very poor, whether the strategy involves an acquisition, new geographic markets, new product innovation, or supply chain issues. According to the research of Dr. Kotter, which has been validated by several other studies, approximately 5% of all organizations implement their strategies successfully, and 70% of strategic initiatives fail to meet their objectives. The remaining 25% have some middling success but do not meet the full potential of the strategy devised. 

Are boards of directors shirking one of their most important governance responsibilities? It is time to take a deeper look at this critical competitive  issue. While it is not the board’s role to get involved in the actual implementation of the strategy–that is clearly management’s function–it is the board’s responsibility to make certain that the leadership of the organization is approaching strategy implementation in a manner that will improve the organization’s chance for success. Organizations today have an awfully poor batting average.

 

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