Are you getting a monetary return of six to one on your strategy execution interventions?
“Companies that execute strategy faster will ultimately win.” Jeff Lomey.
For years I have been captivated by how consulting interventions can be quantified in financial terms. The bang for the buck. One CEO, who paid me well for the answer, wanted to know how much he got back from his leadership development programmes. The programmes ran over four years, cost tens of millions of Rands, involved six hundred executives in over one hundred teams. When I told him his return was 2:1 he was quite satisfied. However when I told global best practice was 20:1, he became, understandably, quite grumpy.
This quote from a fascinating downloadable PDF article why strategy fails, Roland Pan, director of strategy for Skype, a voiceover-Internet telephony service provider, wonders whether “it is possible to have superior insights in a world where information is so open or to presage the process when the world is moving so fast.” Companies will not necessarily differentiate themselves by their ability to see how markets are moving; they will set themselves apart by carrying out the necessary strategic response as quickly as possible. So I would ask does your strategy live up to this requirement?
So why do companies that execute strategy faster win? Firstly they disrupt markets and quickly take market share and secondly they become much more efficient at what they do. But possibly, as important, they execute strategy and rapidly get a return on the execution investment. Typical strategy execution frameworks use some sort of alignment process where leaders clarify a compelling strategic story and cascade that down to the organisation. Plus a bunch of other stuff. This will be discussed in future articles. But C-suite execs usually pass the implementation onto the operation managers and fail to demand a return on the investment.
More recently, I researched the ROI for “change management” type interventions. The results were surprising and pleasingly spectacular. Large projects, with a change intervention, can return 6.5 times the investment. This reduces with project size. Why? The initial leadership alignment and stakeholder engagement costs and processes are generally the same regardless of number of employees engaged. It is the change management and communication costs which reflect more on employee numbers.
Other quantifiable improvement returns include a ninety six percent improvement in employee engagement, sixty six percent in customer satisfaction and thirty percent in project benefits. The message is clear. Invest in proper strategy execution process, align your leadership team and engage stakeholders on expectations.
“A colleague of mine Tertius Hickman, who works for ResolveSP, and advises clients to share the risk and returns with the consulting team. He defines gain share as reducing consultant fixed fees, and compensating consultants based on project benefits achieved. Why not ask your consultants if they are open to fees based on the financial return of the strategy execution engagement?” Tell your consultants to be bright, be bold and be gone, and to put their money where their mouth is!
Future articles will focus on how to win these large returns using the seven leadership levers, strategic leader behaviour that drives strategy execution and why top companies get better financial results from executing their strategies effectively.
By Jeff Lomey [B.Sc. Elec. Eng. (Wits); MA. Applied Behavioral Sc. (City U; USA)].
Executive Director of Jeff Lomey Associates, specialists in strategy execution.