The everyday of strategy
We often associate strategy with high-paid consultants wearing tailored suits and leadership off-sites in fancy hotels, but there is a far more mundane and often overlooked aspect of strategy that deserves attention. The consultants and off-sites tend to be in service of what might be termed the ‘espoused’ strategy. An organisation’s espoused strategy is a statement of what it intends to do. It’s unavoidably theoretical (its ‘proof’ can only ever be seen in implementation) and generally idealistic. The other, less talked-about side of strategy is the ‘enacted’ strategy. Enacted strategy is what practically happens on the ground. It’s the outcome of an espoused strategy meeting the realities of internal politics, budgeting and the time and capability of people to understand, interpret and implement against it.
The parallel with values
The relationship between espoused and enacted strategy is not dissimilar to that between espoused and enacted values. In fact, the most surprising difference between the two is how little research has been done about the former and how much has been done on the latter.
Stakeholders tend to expect a high level of alignment between an organisation’s stated values and actual behaviours, and research has shown that high values alignment leads to higher workforce commitment, improved decision-making and increased profitability. Conversely, when there is low values alignment, outcomes can often be ruinous.
About 10 years after I left Rio Tinto, a lack of values alignment led to the destruction of an ancient Aboriginal site that was considered one of the most significant archaeological locations in Australia. The two caves in the Juukan Gorge (located in the Hamersley Ranges in Western Australia) had been shown to have been inhabited by the local Puutu Kunti Kurrama and Pinikura peoples for over 46,000 years.
Their significance was known to Rio Tinto, and multiple requests had been made by the traditional owners to protect them. In complete disregard of the requests and their own stated value of ‘caring for the communities and environment in which they operate’, Rio Tinto blew up the caves on 24 May 2020 as part of the expansion of its Brockman 4 iron ore mine. Technically, this was not illegal, but the lack of values alignment and stakeholder backlash led to significant ramifications for Rio Tinto’s leadership team. Following public outcry and an internal enquiry, the Chair, CEO and a number of executives lost their jobs.
Shouldn’t we be thinking about the gap between espoused and enacted strategy the same way?
Most of your people don’t know your strategy
In a previous post I recounted a recent conversation with a CEO where they lamented that they feel like they spent most of their time talking about the strategy and priorities, and yet the most common feedback on staff surveys is that no one seems to know them. This is a clear sign there is an espoused-enacted strategy gap.
But research shows this is not an isolated issue. In fact, countless studies have highlighted the magnitude of this problem.
- Less than 29% of employees can spot their organisation’s strategy when given six choices
- Only 16% of employees understand the rationale behind their organisation’s strategy*
- Less than a third of employees know what they need to do differently when their organisation’s strategy changes
* It should be noted that a random guess would be correct 17% of the time.
Perhaps the most insightful (or damning?) research comes from MIT Sloan School of Management.
Their research showed 97% of senior leaders said they had a clear understanding of the organisation’s strategic priorities and how their work contributed to objectives, but when those same leaders were asked to name the priorities, only one in four could do so.
The research demonstrates executives consistently overestimate the level of understanding and alignment across the organisation, and that there is a particularly sharp drop-off in understanding from the executive team to senior leaders and middle managers.
This raises an interesting question. If the senior leaders and middle managers don’t really understand the what and why of changing strategic priorities, how are the priorities reflected in their plans and budgets?
Strategy is often done using Ctrl+C and Ctrl+V
Although they are largely treated as administrative exercises, priority setting and budgeting are strategic activities. Priorities and budgets might be enacted over a twelve-month period, but their implications might be felt over years or even decades. Therefore, if we want the enacted strategy to reflect the espoused one, priorities and budgets need to be developed with an understanding of the strategic context and longer-term implications of their choices.
If the espoused strategy and context isn’t understood, or time isn’t carved out to translate the organisation’s priorities into meaningful and aligned actions, people will just copy and paste what they did last year.
Ctrl+C, Ctrl+V*.
*This might feel overly simplistic, but in my time at Rio Tinto the budgeting mantra I often heard was ‘take what you spent last year and add 10%’.
The implication of this is significant. Regardless of what an organisation espouses, its true strategy is what is enacted. Stakeholder value isn’t created with good intentions, it’s created through projects and actions. Regardless of the money spent on consultants in tailored suits, or the time spent at off-sites at fancy hotels*, if the actions on the ground don’t align with the direction the organisation wants to head in, then all the slide decks are for nought.
*I’ve been a little fatuous here. Under the right circumstances, both consultants and off-sites can support good strategy development, but that can’t be where strategy stops.
As I pointed out in my last post, most organisations don’t have a productivity problem, they have an alignment one. Organisations not only need a strategy that aligns with the needs of customers and stakeholders, they also require a level of internal alignment to ensure projects and priorities align with the strategy.
The shift that’s required
Over the last year, I’ve been running a strategic leadership program with a local council in Victoria. The program consists of a series of skill-based workshops aligned with key strategic events in their annual planning cycle. The approach makes capability development immediately applicable, delivering value back to the council as well as making learning relevant and memorable.
But even after being given the training, participants recently admitted they struggled to ‘find the time’ to apply the skills they’d learnt outside the workshop setting. It turns out that many felt the commitment required to think strategically conflicted with a prevailing organisational culture that prioritised firefighting and busyness.
This highlights the two issues that CEOs and executives need to address if they want to close the strategy gap. The first is to invest in the strategic capabilities of their senior leaders and middle managers; the second is to drive the cultural change required for people to carve out the time and apply those capabilities.