4 Reasons Why Most Strategic Plans Fail

Posted by on

    

Missed target.pngAs the year draws to a close and companies are finalizing their strategic and annual plans, it pains me to be the bearer of this bit of sobering news: on average, 9 out of 10 of your strategic plans are going to fail. The good news is that there are still ways to improve their success rate, as long as you know how to spot common problem areas ahead of time. In this two-part blog series, I'll be sharing the common reasons why strategic plans fail, as well as introduce some practical methods you can use to achieving them.

The Most Common Reasons Strategic Plans Fail

From the binders full of charts, metrics, actions, etc., many of us are pretty familiar with the output of the typical corporate strategic planning session. While a lot of hard work goes into putting them together, it's unfortunately the output of these sessions that contribute to the high failure rate. This is because:

  • Employees don't understand the strategy.
  • The executive team spends less than an hour a month discussing the strategy.
  • The budget is not aligned to the strategic plan.
  • Employee incentives are not aligned to the strategic plan.

Let's explore these reasons in more detail.

Let your employees know how their day-to-day actions directly contribute to the company's strategic goal. - Tweet this!

Reason #1: Employees don't understand the strategy

If you were to ask a random group of employees what the strategic direction of your company was, do you think they'd all provide the same answer? Due to the sheer size of most strategic plans, many employees can easily get intimidated, leading to a general lack of understanding company-wide. Most strategic plans are not communicated well to the employees that will ultimately be putting it into motion. In fact, some companies even refuse to tell employees the plan because it's confidential! This leads to employees being in the dark on how their day-to-day actions are contributing to a larger goal.

In cases where the plan is communicated, it's usually done in an annual kick-off meeting and never discussed again. Sadly, this does nothing to keep everyone on task and accountable in carrying out their individual duties to accomplish set goals, causing the cycle to begin anew the following year.

Reason #2: The executive team spends less than an hour a month discussing the strategic plan

Despite all of the work that goes into creating a plan that consists of hundreds of tactics artfully arranged into a 3-ring binder, almost all of them ultimately end up on the shelf collecting dust until the next year's plan displaces them. While every executive team is eager to conduct ongoing discussions tracking financial results against their 5-year plan, this excessive list of tactics that have been identified as enablers to achieving the strategic plan are rarely discussed. 

By not keeping the strategic plan as part of an ongoing discussion, the company has no way of knowing if the tactics they selected were the right ones, whether they're delivering the intended results, or even if the plan can be achieved by following all of the tactics as prescribed.

Reason #3: The budget is not aligned to the strategic plan

The annual budget process is rarely aligned with the 5-year plan. The reason for this is because the budget and the strategy are typically developed by different departments, have different timelines, and are rarely integrated. Also, the annual budget is geared up to feed the existing machine and are based on prior year run rates. 

The end result is the all-too-familiar “use it or lose it” spending attitude at the end of the year, and their new budget looks a lot like the old budget, which can hardly lead to breakthrough results. 

Give your employees incentive to improve their performance to achieve strategic goals. - Tweet this!

Reason #4: Employee incentives are not aligned to the strategic plan

The whole purpose of strategic plans is to dramatically improve performance within a company.  However, once the plan is issued, most employees go back to work and end up doing the same work they've always done. By exclusively rewarding employees for current year P&L performance, an opportunity is missed to change the culture. For example, if delighting the customer is at the core of your company's strategic plan but employee incentives to boost CSAT are negligible or missing altogether, the frontline staff has little or no incentive to change what they do on a daily basis.

This approach reminds me of a quote often attributed to Albert Einstein, “The definition of insanity is doing the same thing over and over and expecting different results.” 

How Do You Achieve Your Strategic Plan?

When you look at these four reasons strategic plans fail, it is no surprise that only 10% of companies come close to hitting their goals. In my next post in this two-part series, I'll be sharing an approach to achieving a strategic plan that I think you'll find incredibly useful. I will also share how TSIA benchmarking, research, and pacesetter practices can improve your chances of success and accelerate your implementation.

Until then, don't lose heart. Half the battle of achieving your strategic plan is being conscious of things that can derail your efforts and knowing the signs of problem areas as they arise.

Read the other post in the "How to Achieve Your Strategic Plan" series:

About the Author

vele-galovski

Vele Galovski is vice president of research, Field Services, for TSIA. Using his nearly 30 years of industry experience, he has consistently helped companies both large and small drive double-digit top-line growth with a proven retain, gain, and grow strategy. Vele has also written a book, The Perpetual Innovation Machine, which describes a holistic approach to management based on ambitious goal setting, data driven analysis, skillful prioritization, inspiring leadership, and the lost art of employee engagement. He may be contacted at vele.galovski@tsia.com

Read more from Vele on these topics:
Field Services | Intro to IoT | Spare Parts Logistics | Benchmarking

 Hardware Manufacturer's Strategic Growth Plan
Save 10% on conference registration

Topics: field services, strategic plan, How to Achieve Your Strategic Plan

Comments

Subscribe to the Blog

Posts by Topic

see all

Follow TSIA