McKinsey Advises Senior Leadership Teams to Work in a Fundamentally Different Way
Norman Marks, CRMA, CPA, is a vice president for SAP and has been a chief audit executive and chief risk officer at major global corporations for more than 20 years.
In the latest McKinsey Quarterly is an interesting discussion entitled Managing the Strategy Journey. I was struck by the early reference to “pervasive, ongoing uncertainty” and the statement that “companies needed to get their senior-leadership teams working together in a fundamentally different way.” Their basic point is that rather than strategy being set in annual or semi-annual meetings, there should be a more continuous process, a journey, in which strategies and related actions are monitored and adjusted at least weekly.
The authors don’t hold back with their language, noting that they found “strong evidence that a great many companies are generating strategies that, by their own admission, are sub-standard.” Only 35% of strategies they evaluated were considered likely to beat the competition.
McKinsey’s first recommendation is that companies’ executive leadership teams should increase the time they spend together on strategy to 2-4 hours every week or two. Why? Because (although the authors don’t say it this way) risks to strategies and objectives are changing all the time, requiring response and, sometimes, adjustment to strategic directions. The authors do talk about companies’ inabilities to manage uncertainty — i.e., risk. — and the need to develop “uncertainty-management skills.”
They also recommend moving to rolling forecasts and budgets — which recognize that trying to look 12 months or more out is gazing into the mists of uncertainty (my metaphor). McKinsey has some detailed ideas and suggestions for moving to that more frequent process.
The board is advised to recognize the need for flexibility and that the company’s strategy is not “set in stone” but rather there is a “continual evolution and refreshment of the enterprise’s strategic direction.” I would add that this emphasizes the need to integrate risk management into both strategy-setting and performance management.
Do you agree that executive leadership teams should spend as much time monitoring and adjusting strategy as on operational issues?
I would appreciate hearing your views.
Posted on Jul 30, 2012 by Norman Marks
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