New research shows executives doubt the effectiveness of strategy planning, which is conducted by an overwhelming majority of large companies in the United States. That attitude may doom such plans’ successful implementation, the researchers argue.
Executives at 88% of large companies engage in strategy planning, according to the research featured in a chapter of "Focus: How to Plan Strategy and Improve Execution to Achieve Growth," a new book co-authored by Vikas Mittal, professor of marketing at Rice's Jones Graduate School of Business, and Shrihari Sridhar, professor of marketing at Texas A&M University's Mays Business School.
In 1973, when Louis Gerstner, former CEO of IBM, sought fellow chief executives’ reactions on this topic for an article for McKinsey Quarterly, they responded that strategic planning is “basically just a plaything of staff” and “a staggering waste of time.”
Today, executives’ attitudes toward strategy planning are just as skeptical, according to three recent studies reported in the book.
The first study captured a national sample of 5,433 full-time employees with 668 senior executives including CEOs/presidents, senior/executive vice presidents or vice presidents. Among senior executives, 43% agreed or completely agreed they were doubted the effectiveness of their company’s strategy plans.
In the second survey, of 57 executive MBAs, 25% agreed or strongly agreed they were “quite skeptical of their company’s strategic plan.” The third study of 23 executives in the energy industry, found 39% were “quite skeptical of their company’s strategic plan.”
“The skepticism about strategy planning appears to be a widely known but carefully guarded secret among corporate executives,” Mittal said. “With 2 out of 5 executives doubtful about strategy planning, the amount of time and effort being spent on strategy planning activities by companies such as Shell and ExxonMobil is puzzling. It could be that executives wildly overestimate the financial benefits of strategy planning but underestimate the level of skepticism everyone around them has in the strategy plan.
“If senior executives, middle managers and front-line employees doubt a company’s strategic plan, how can its implementation be successful? When people are doubtful about a strategy’s effectiveness, they lower their commitment to implementing it,” Mittal continued. “In many cases, senior executives think of strategy planning like an amateur stock picker thinks of stock-market investing. Both will selectively remember the few times when actions based on their hunches or gut feel succeeded, ignoring failures."
Increasing confidence in a company’s strategic plan is not a simple matter of communicating it, Mittal said. “It requires executives to have humility and acknowledge that their hunches, gut feelings and judgment are more fallible than a strategy plan based on analytics using statistical analysis, machine learning algorithms and randomized experiments to establish true causality,” he said. “These techniques are used in basic corporate functions such as product development and testing, and strategy planning should have to stand the same test of rigor.”