Top Five Reasons Why Strategic Initiatives Fail

Feb. 8, 2010
One reason for failure is that decision makers do not understand the relevance or are unable to measure progress.

When looking to improve your organization, many business leaders will advise you to study the best practices and strategic initiatives (such as Lean and Six Sigma) of successful companies. Yet, it is just as critical to study the elements which can contribute to less than optimal results. For that reason, next time you consider embarking on a strategic initiative, be aware of the following five factors that are common elements of failed initiatives.

Strategy is Not Clearly Communicated to the Stakeholders

Often when a small group embarks on a program, its goals are not communicated throughout the organization at both operational and governance (boardroom) levels. This scenario results in a disconnect between both groups. Managers responsible for implementing a program at an operational level must be aware of the program's goals so that resources can be appropriated. Likewise, board members must be aware of the specifics so they can provide necessary oversight and ensure that the program aligns with the larger strategic vision of the organization.

Lack of Support by Key Leaders in the Organization

Even if a program is small in scope, key decision-makers in the organization should understand its importance. The managers and/or the board have the ability to set the right tone regarding communication about the initiatives. A positive and encouraging tone can make a great deal of difference when it comes to change management. Senior leadership involvement in any strategic initiative is imperative. Whether it is to allocate resources or adjust compensation, board members must take responsibility alongside senior management. Too often, the C-suite takes the blame when strategic initiatives fail -- but it should not bear sole responsibility for any failures (or, on the other hand, successes).

Decision-Makers Do Not Understand the Relevance or are Unable to Measure Progress

If the strategy is not communicated within the company and has no support from leaders, it will be difficult to establish quantifiable metrics to test the program's progress. If there is no way to measure whether the initiative benefited the company, the time and effort put in is wasted. Preliminary data must be assembled before embarking on a project to establish a reference point to continuously measure progress throughout the program. Concrete goals should also be established so that results can tie directly back to the objectives communicated throughout the organization. Many companies claim to use metrics, but few use them strategically and to their advantage.

Lack of Impact on Employee Compensation

Companies may not see the link between the success of an initiative and employees' compensation, but this is a key component in motivating employees and is a sign of support from leaders in the organization. Aligning pay with performance is not a new idea, but it has become a key component of the debate around excessive executive compensation. Initiatives such as Lean or Six Sigma, no matter what the scope, are important strategic programs and those responsible for them should benefit (or not) depending on the outcomes.

Technology Needed for Implementation is Not Available

Companies often create sub-systems within their existing technological infrastructures when embarking on a new initiative. These sub-systems are often not integrated with the existing enterprise systems or infrastructures, creating (often unnecessary) integration complications at a later time. For example, in a customer relations management initiative, the technology used might not integrate with the core enterprise solution, creating data redundancy. While this technology may provide useful feedback to one area, such as the marketing team, another area, such as the accounting department, may be unaware of any progress. In this case, other decision-makers within the organization might not understand its relevance to what might be working (or not working).

Let these factors serve as warning signs if you identified any of them with current practices at your company. To compound the challenge, these factors are often interrelated. If just one faulty step appears now, the others may not be far behind. For example -- without support from the key leaders in your organization, it may be difficult to justify the necessary expenditures for necessary technological infrastructures -- thereby possibly increasing the irrelevance of the strategy in the eyes of the decision-makers.

Don't create a domino effect -- watch for these five elements now and take the necessary steps to prevent mass failure later.

Sandra B. Richtermeyer, Ph.D., CMA, CPA is Chair of the Department of Accountancy at Xavier University's Williams College of Business in Cincinnati, Ohio. She is also 2009-2010 Chair-Elect of the Institute of Management Accountants ( IMA is the world's leading organization dedicated to empowering management accounting and finance professionals to drive business performance.

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