For nearly 30 years, Wharton management professor Lawrence G. Hrebiniak has taken the art of business strategy and put it under a microscope. Over time, he has brought one critical element into irrefutable focus: Creating strategy is easy, but implementing it is very difficult.
In his new book, Making Strategy Work: Leading Effective Execution and Change (Wharton School Publishing), Hrebiniak presents a comprehensive model to help business leaders bridge the gap between strategy making and successful strategy execution. He challenges executives to recognize that making strategy work is more difficult than setting a strategic course — but also more important — and he documents the obstacles that get in the way of successful performance.
The book relies on Hrebiniak’s research as well as case studies from companies like GM, Chase-Manhattan, Disney and GE. After examining why businesses find strategy execution so difficult, Hrebiniak provides a roadmap that incorporates the critical areas of organizational structure, coordination, information sharing, incentives, controls, change management, corporate culture, and the role of power and influence in a company. The book concludes with a case study on mergers and acquisitions which Hrebiniak uses to show “how practical execution can be in confronting an important and pervasive real-work issue and how it can save management a lot of time, effort and money.”
In April and September, Hrebiniak will lead two executive Wharton School workshops on “Implementing Strategy” that will focus, in part, on why the devil is in the details when it comes to strategy execution. Below, he discusses his book with Knowledge@Wharton.
Knowledge@Wharton: The premise of your book is that “making strategy work is more difficult than strategy making.” Why do you think this is so difficult for companies to grasp?
Hrebiniak: I’ve asked myself that question for years. In the book, I talk about how managers in MBA and undergraduate business programs are well-versed in how to plan but not to execute. They first learn about it in the work place, and that’s difficult because people tend to jump into execution without thinking about why it is so important.
Knowledge@Wharton: So execution is like the strategy stepchild?
Hrebiniak: Yes. Only recently have people begun to realize that effective execution is a competitive business advantage. Companies are now seeing that if they execute better, they perform better. If they integrate long-term and short-term objectives, if they consider incentives, controls and feedback, they execute better. And if one company has that and the other doesn’t, the competitive advantage is clear.
Another reason why it’s so difficult for companies to grasp this, is that there are more people involved in executing strategy today – and execution takes longer than people expect. Political and organizational problems typically surface. So you develop a strategy, but you have to go throughout the organization and through dozens of planners to make sure it is carried out. It takes longer. Once execution starts, it could be one or two years, or even require a three-to-five year time frame.
Knowledge@Wharton: You write that managers often dream up ambitious scenarios but leave the execution of strategy to their underlings – which leads to the perception of what you call the strategy “grunt.” To achieve successful execution of a strategy – and to make sure that it gets the right emphasis – isn’t it important to change this hierarchy of planning vs. executing strategy? Don’t managers have to get rid of the idea that executing strategy is somehow inferior to making strategy?
Hrebiniak: Absolutely. There is still the perception that smart people plan and grunts execute. The short answer is that those who have power or influence have to embrace, believe in and foster execution. Some people think it is a lower-level responsibility – that’s the older perception of execution – but this simply isn’t true. I’m talking with a CEO of a global aerospace company who is starting to see that changing strategy is a high-level execution issue. If the CEO gets his VP involved and they get their managers involved, people take it more seriously through the organization.
When companies separate the planning and doing – that’s wrong. Executive strategy requires ownership at all levels, from corporate level managers on down. Strategic success really demands a simultaneous view of planning and doing. The greater the overlap of doers and planners, the greater probability of success. It’s so important for managers to be thinking about execution as they are formulating the plans.
Execution takes longer. Execution is a process, and not an action or a step. And execution involves more people than strategy formation.
Knowledge@Wharton: In Making Strategy Work, you point out that managing change, including “culture change,” is an important but often elusive concept.
Hrebiniak: Managing change has always been a problem. Look at the Wharton-Gartner Survey from the book [a joint project between Wharton and researchers at the Gartner Group that asked managers about the challenges they face]: Based on responses from 223 managers, we know that their number-one problem is the inability to manage change effectively or to overcome internal resistance to change. Why? Because change is difficult. It creates resistance. People lose power, resources, autonomy, or they perceive that they might lose autonomy. The real problem, though, is that people don’t lay out a change plan. They don’t even think about a change plan. They do everything at once. They don’t set priorities. This makes coordination difficult. And if you fail, you can’t explain it. If there is a problem, and you are doing 22 things wrong, you don’t know if it’s the interactions of the 22 or the interactions of the subsets. What accounts for the failure? People try to change, and when they can’t, they turn around and say, ‘We can’t manage change. We tried this three times and screwed up.’ Change has to be taken seriously, not ‘What’s hot this week?’ You set priorities and decide up front what it is you want to change. Every plan should have an action agenda, with steps laid out for accountability and follow-up.
Knowledge@Wharton: What about a timeframe?
Hrebiniak: It means different things in different industries. Management doesn’t like sequential change. It takes longer. It’s too boring. I often say to them, ‘Factor in some smaller, more manageable pieces in your strategy, so that you can celebrate each step and move sequentially.’ But managers love to jump in, grab the low-hanging fruit, grit their teeth and get it done. The problem is, speed kills. You jump in and do change all at once, and you can’t coordinate and you don’t understand the cause and effect, and you can’t explain mistakes. The biggest error is that we do too many things at once. I warn people about speed. Excessive speed or moving very fast when it comes to culture change sometimes sounds desirable but it’s dangerous.
Knowledge@Wharton: Who should be in charge of making strategy work? Do companies need a CSO – a chief strategy officer?
Hrebiniak: This is a difficult issue. Some companies are large enough and so complex that they need someone who literally is in charge of integration, so companies are creating these roles. In most good organizations, there is delegation. Let’s say we are entering a new market and we are going to execute a new global strategy. Who is involved with that? The CEO says, ‘Me and my executive committee,’ so the VPs get together, and now we have changed the structure worldwide. This affects IT capabilities. Then who is in charge of that? The chief information officer who reports to the CFO has to get involved, and then that person has to deal with the IT people worldwide. My point is, there has to be a logical flow of strategic information between the upper and lower levels in terms of strategy and tasks, and there has to be accountability along the way. If you come up with a good goal – but don’t identify the who, what, when and why up and down the organization — accountability varies along the way. Also — and I want to stress this point — I don’t want people to think that execution is doing something different. We do it every day.
Knowledge@Wharton: In your model of strategy execution, you stress that business strategy is important to the execution of the corporate strategy. Why isn’t this given more priority? And would this be at the heart of why more mergers and acquisitions don’t work?
Hrebiniak: Yes. The two are interdependent. In a corporate plan for diversification or, if a company is acquired, as an acquisition strategy, the business has to know where it fits in and have clear performance metrics from the corporation — such as, ‘Here’s why we bought you.’ Often there is not clear communication between corporate and the business. I do say in the book that the dog should wag the tail, but sometimes the tail wags the dog if the division is powerful and it’s not integrated into corporate-level strategies.
Knowledge@Wharton: You call your concept the “model of strategy execution.” No catchy phrase, no clever acronyms. Was this intentional?
Hrebiniak: No, not really. I’m pretty straight forward. The only time I come close to [using a catchy phrase] is when I claim that the model offers the “25,000-foot view” — an important integrative perspective to help the reader understand the logic of the entire strategy execution process. I hope it gets people to see the whole picture of making strategy work.