STRATEGY

 
 

STRATEGY

Strategy formulation is critical in today’s rapidly evolving business environment. While the development of winning strategies has never been a simple task, the successful implementation of those  strategies has been a much more daunting task indeed. Most of chief executive officer's (CEO) failures came not as result of poor strategy, but of poor execution.

The Vision Barrier

The vast majority of employees do not understand the organization’s strategy.  In the information age in which we currently exist, value is created from the intangible assets - the know-how, relationships, and cultures existing within the organization. Most companies are still organized for the industrial era, utilizing command and control orientations that are inadequate for today’s environment. If company structure is hampering employees’ ability to understand and act on the firm’s strategy, how can they be expected to make effective decisions that will lead to the achievement of your goals?

The People Barrier

Incentive compensation arrangements have been with us for quite some time, but have they been linked to the right things? Most systems provide rewards for the achievement of short-term financial targets, not long-term strategic initiatives. When the focus is on achieving short-term financial targets, clever employees will do whatever it takes to ensure those results are achieved. This often comes at the expense of creating long-term value for the firm.

The Resource Barrier

Most organizations have separate processes for budgeting and strategic planning. One group is working to force the strategy that will lead the firm into the future, while independently another group is crafting the operating and capital budgets for the coming year. The problem with this approach is that human and financial resources are once again tied to short-term financial targets and not long-term strategy.

The Management Barrier

Most executives probably spend the majority of their time analyzing the financial results and looking when actual results do not meet budget expectations. A focus only on the financial results means that executives spend their time moving above the analysis and deeper understanding of the value creating processes and destroying mechanisms in the firm.

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