The real Purpose of Strategy: Inform or stimulate action?

Today, it’s clear that all companies are working with strategies. The word “strategy” is often used for many initiatives, such as those for products, marketing, M&A, and recruitment. The mothership for all strategies is the overall company strategy. This is the one that is published on the company websites and is presented to the employees in townhall meetings. This strategy is meant to be the lighthouse for the internal organization and stakeholders.

Company strategy normally contains one part about the decision parameters of top management, and another directed at the employees. The first part of this strategy is mainly informational, providing high-level direction and an explanation of decisions. This part is not dependent on the individual actions and contributions of the employees. Examples of this part could include topics like investments, footprint, or organizational structure.

The second part of the strategy is more complicated. The purpose is to motivate all employees to understand and accept the need for change. It frequently covers areas such as efficiency, customer proximity, collaboration, or other behaviors. In addition, the goal is that all employees need to act in a new way based on the strategic information. This implies that, had the strategy not been in place, the employees would not have the behaviors.

The conventional way of using the target-setting method, by breaking down numbers from top to the bottom of the hierarchy, is intended to drive certain behaviors and results. However, it has immense shortcomings. Distributing messages about two-digit targets for EBIT, ambitious growth expectations in percentages, or market share positions are valid and are important guidelines to give. However, for a vast majority of employees, these guidelines are too ambiguous and do not clearly show the change needed in their daily, individual work. The gap between the strategy targets and individual actions is often too vast to generate any meaningful actions. It is likely that most employees will continue to act as they did before, despite being aware of the company’s targets.

If this is the situation, then the whole idea of having a company strategy is lost. Many companies have realized this and are now struggling with the question: How can we run a more modern and efficient strategy process?

Our proposal is that the various units within an organization adopt a new method of working and create their own, unit-level strategy. It begins with the individual unit analyzing their current situation and identifying the gaps they need to close to reach their targets. It is crucial to the process that the entire team is involved, with the leader guiding them to build the unit’s own strategy around topics they can influence and that the team finds important. This is done by following a standard workflow, in which the team works together to analyze the situation, identify the gaps to bridge, decide on the focus areas, assign workgroups for the chosen focus areas, and set up a follow-up structure to secure execution. Simply put, it repeats the workflow any normal management team would use to come up with a strategy. All suitable teams in the company would be supported to run their own strategy workshops following a standardized workflow, using same steps and terminology. The result of the workshop is an action plan, which is well-documented and monitored transparently on a shared platform. With this method, the involvement and ownership that comes with creating the strategy will increase the acceptance of the team and, therefore, the quality of the results. This goes for all teams, management or not.

In short, we propose a different way of approaching strategy work within a company. While cascading targets certainly provide important guidelines, they lack tangible actions for many employees. To make a strategy process that truly adds value, the teams within each unit must be equipped with a method to create their own action plans build upon their collective decisions.

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