All In: Why the Best Leaders Involve Key Stakeholders in Strategy Development
Strategic plans are as common as office printers and just as likely to malfunction. In fact, 70% of the strategic initiatives that companies pursue to increase revenue, decrease costs, improve efficiency and innovate fall short of their goals.
Why? A lack of stakeholder engagement, especially among employees—the most influential stakeholders in any organization.
The importance of engaging employees and other critical groups in strategy development cannot be overstated. Many companies find out the hard way that neglecting to pave the way with key stakeholders creates major potholes along the road of implementation, some of which can put an organization’s future in jeopardy.
Today’s U.S. companies have a one-in-three chance of being delisted in the next five years because of financial distress.2 And the pace of failure has quickened. The same analysis showed that companies are being delisted at six times the rate they were 40 years ago.
What is going wrong with their strategies? It’s a scenario we’ve seen play out for years: Companies do not engage critical stakeholders in strategy development soon enough,
if at all. For example, the board of directors at a hospital implements a new process for uploading patient records into an EMR system without consulting its doctors, who then resist the new system because it takes too much time away from caring for patients. Or, university administrators decide to launch massive online open courses (MOOCs) to reach more students only to find that when they present the plan to the faculty, professors reject the program as an inferior, depersonalized learning experience.
In both these cases, company leaders followed a top-down process of developing their organization’s strategic direction and then presenting it to those who are expected to implement or comply with it. In our experience, this rarely works. Important stakeholders who aren’t involved in a plan’s creation are likely to actively oppose or quietly resist it.
This may help explain why the failure rate of strategic initiatives is so high, especially in sectors and organizations where classes of stakeholders possess outsized influence. Businesses need to be thoughtful about how and when they approach these critical groups, including:
Boards of public companies, associations, universities, hospital systems and medical groups with fiduciary responsibilities
Department heads of functions such as marketing, sales, operations and human resources at consumer companies
Members of tourism agencies who represent hotels, restaurants, attractions and retail outlets
Practitioners in service-oriented organizations such as doctors, engineers, accountants, consultants, lawyers, architects and university faculty
When key stakeholders are not aligned on strategy, initiatives can quickly fizzle. In one instance, board members of a destination marketing organization (DMO) wanted to mount an international marketing program to promote tourism to the city but rejected recommendations from the organization’s CEO to increase visitor taxes. Without the additional income, the DMO couldn’t fund the program and was forced to change direction. The result has been relatively flat growth in visitor market share, while surrounding destinations with larger budgets are experiencing growth.
Challenges may also arise when a new strategy requires changes across functions. Business unit heads will generally view the initiative through the lens of their own priorities. A director of marketing, for example, might believe increasing company revenues would require a bump to her budget while the company’s director of “When key stakeholders are not aligned on strategy, initiatives can quickly fizzle.”
Often, company leaders don’t intentionally avoid seeking stakeholder input. Sometimes, they neglect to engage stakeholders in the early strategy planning stages because they think they must first develop something stakeholders can respond to. Other times, they fear their board, employees or other stakeholders will resist their planning efforts before taking the time to understand the benefits.
Whatever the rationale, to effect real change leaders must engage these groups at the beginning of their process, even if they believe their stakeholders are likely to challenge the new strategic direction. These interactions are crucial to identifying and cultivating champions within stakeholder groups that will stand behind the strategy once it is ready for implementation. This is even more important for organizations that must make rapid changes or revise their strategies midstream to respond to unexpected disruption and other market shifts.
operations might believe that adding features to the company’s product would justify a price increase and provide the desired revenue. If the business’s strategy doesn’t account for these conflicting views, or if one leader believes their function won’t directly benefit from it, the initiative is unlikely to gain traction.
These issues are often compounded by the fact that many organizations don’t take the time they need to prepare their leaders to oversee the execution of the strategy. Proper preparation may require accounting for gaps in the leadership team’s capabilities by bringing in additional resources or helping the team develop the skills it lacks. Without a collaborative vision, many organizations will find their strategic planning headed toward failure before they even try to implement.
Some things you just can’t fix
When a strategic initiative begins to go sideways, company leaders tend to fall back on the same methods to resuscitate them, often with underwhelming results. They:
Double down on the current strategy by appointing a project manager to oversee
a course correction. However, making someone responsible for gluing together something developed through a broken process will result in a jerry-rigged execution that will still likely face stakeholder resistance.Overcorrect for neglecting to get stakeholder input by seeking it after the fact. Unfortunately, this doesn’t allow leaders the time to consider the possible biases of the stakeholders, leading to poorly informed course corrections.
Add reporting mechanisms to measure and manage progress on key initiatives. Although tracking progress is important, the best metrics can’t measure the lack of buy-in from board members, employees and other groups.
Sell the strategy harder, thinking they can rally the troops by providing more communication about the plan. But, if the stakeholders fundamentally disagree with the strategic direction, and don’t like it, more information won’t change their minds. In fact, increasing the cadence of communication might cause those who oppose the plan to grow even more resentful.
Give up and start over by bringing in a consulting firm to interview senior leaders and devise a new plan. This approach can succumb to the same problems that sabotaged the original one if stakeholders are not involved early and often. We’ve seen many strategies deemed failures that, upon further inspection, appear to have been exactly what the organization needed. Leadership just gave up too soon.
Shoot the messenger by firing the strategy head, CEO or COO for failing to execute the plan. However, their replacements may find themselves fighting the same battles that have grown harder to win, because they’re saddled with organization-wide cynicism due to previous misfires.
Quietly abandon the strategy and hope no one notices, chalking up the failure to bad timing or a lack of resources to execute the plan properly. This is the path of least resistance for failed strategies developed behind closed doors by a few C-suite executives, but it certainly doesn’t address the company’s needs or prepare it for the future.
None of these responses will increase the chance that a strategy—even a good one—will be implemented successfully.
