How Do You Weigh Strategy, Execution, and Culture in an Organization’s Success?
Summing up: Respondents who ventured to place weights on the determinants of success gave the nod to culture by a wide margin, says HBS professor Jim Heskett. (Online forum now closed. Next forum opens July 2.)
Strategy, execution, and culture: Do we have our priorities right? First, my thanks to all of you who weighed in on the issues of the month regarding ways of thinking and asking questions about the relative importance of strategy, execution, and culture in an organization's success. I hope the comments were as helpful and thought-provoking to you as they were to me.
Those of you willing to venture to place weights on the determinants of success gave the nod to culture by a wide margin. As Mouaz AlZayyat put it, "Growth plans and articulated business tactics cannot be sustainable without a framework of cultural values and rules." Drew Williamson pictured the relationship as "a virtuous circle that can break at any of the three points. It starts with a happy, innovative culture that generates a strategy for success." In Phil Clark's words, "Just thinking about D-Day in the context of your question… . Even as many failures and unplanned events unfolded, the culture and training sustained the men to the ultimate execution of victory on that day." Jobe Mabaso added, "A sound organizational culture is a basis for solid planning and flawless execution."
The importance of execution was advanced, for example, by Mercedes Fernandez, who reminded us that "execution … makes things happen." Bob Legge said: "An outstanding strategy weakly executed will always be trumped by a weak strategy with outstanding execution." Those placing the greatest weight on strategy were characterized by Pete DeLisi's observation that "it's hard to perform if you don't have the right solutions, addressing a real need, provided to the right customers when they are needed, and in a way that differentiates you from competition."
Several noted that "it all depends" on other factors. For example, Basel Kakah commented that "[responses to] those questions could … [depend on] the nature and size of the organization as well as the nature of the industry and business environment…." Fidel Arcenas cited "prevailing conditions" and Ahmed Issa mentioned "external and internal factors" as influences on possible responses.
Perhaps the most interesting responses were to the questions themselves. Gopal Padinjaruveetil commented that "there are no obvious answers to these questions and the answers lie somewhere else … [for example] … good leadership." Yan Song said, "To ask which of these components is more important is equivalent to asking which part of our body—head, torso or heart—is more dispensable." Gerald Nanninga suggested that "it may be as relevant to ask how much is the level of my execution diminishing my level of profits…."
Eddie Jiang provided an alternative way of thinking about the relationship of these three factors by suggesting that they are multiplicative rather than additive. "Organization success = Culture x Strategy x Execution." This argues for a different way of formulating the questions.
Several commented on the importance of the thought behind the questions, leading to yet another question: Are their important differences between these responses and the relative emphasis placed on strategy, execution, and culture in today's business school curricula? If so, why? And can they best be addressed? What do you think?
During the course of research for a book I'm writing, I have had the opportunity to talk with a number of managers about the degree to which strategy, execution, and culture contribute to the success of their organizations. After several such conversations, I at first reluctantly—because I feared that respondents would regard the questions as too complex or even irrelevant—began asking each of them three questions intended to attach numbers to an otherwise abstract conversation. The questions are:
- If your organization's performance (operating income) = 100%, roughly what percentage is accounted for by the quality of the organization's strategy (clients we target; products, services and results we offer; the way we organize and compensate people, etc.) vs. the quality of the organization's execution of its strategy (the quality of our people, work, processes, decisions, etc.)?
- If your organization's strategy = 100%, roughly what proportion of its effectiveness is dependent upon and accounted for by the organization's culture (widely-shared values, beliefs, behaviors, rites and rituals, etc.)?
- If the execution of your organization's strategy = 100%, roughly what proportion of its effectiveness is dependent upon and accounted for by the organization's culture?
To my surprise, my respondents neither found the questions too complex nor irrelevant. One even made it the subject of a management meeting at which he had forty of the most senior members of his organization tackle the questions.
Now I ask you, as a change of pace from our previous columns, to address the questions based on your experience. Can you respond, or are the complexities of each question—possibly requiring more complete or different definitions of strategy, execution, and culture—too great? Are the three dimensions of the questions the right ones? Do they cover all or nearly all aspects of competitive success? How would people in various regions of the world—or in for-profit vs. not-for-profit endeavors—approach this set of questions differently? How would you respond to the questions? Why did you respond that way? What do you think?