Turning Great Strategy Into Great Performance
Every year the top management at many companies spend months for developing strategies.
Years later the performance of the company is nowhere near what the plan had projected. Often
leaders think that the execution failed, but in most cased they need a better strategy to stop their
underperformance. To close this so called “strategy-to-performance-gap” disciplined planning
and execution processes are needed. In the fall of 2004 Marakon Associates surveyed
companies translating their strategy into performance to analyze the most common causes and
actions in closing the strategy-to-performance gap. In less then 15% of the analysed companies
business results reached the performance plans, what offers the risk to embed the same
disconnect between results and forecast in their future decisions. Companies do multiyear
performance projections what creates the venetian blind phenomenon, including 3 problems.
First, financial forecasts are unreliable; second, portfolio management gets derailed and the third
problem is the communication with the investment community. Because of the poor forecast
quality most on average strategies deliver only 63% of their potential financial performance,
loosing performance by inadequate resources (7,5%), poorly strategy communication (5,2%)
or the missing of clearly defined actions to execute (4,5%). Because of the difficult process to
develop plans, allocate resources and track performance the top management doesn’t discern
whether the gap is a result of poor planning, poor execution or both. They don’t know whether
critical actions were expected, resources deployed on schedule, competitors respond as
anticipated, so it’s impossible to take appropriate corrective action. The problem of a company
creating unrealistic plans, which will not be fulfilled is a culture of underperformance, because it
becomes...
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