In one of the strategy planning sessions I facilitated, I started with the question: “How do you define the word strategy?” I can’t begin to tell you how broad (and sometimes weird) the answers were. However, one answer, given my a marketing manager (now a vice president), stuck with me. That person said: “Whenever I am told by my boss to work on something ‘strategic’, it means that there will be no revenue from it.”
That statement made me wonder why someone would feel that way. In fact, so much so that during a course I took in Organizational Development towards my PhD, I wrote a paper about that concept.
As someone who had the word “strategy” on his business cards for 15 years, I can tell you that serving in a strategic role is hard. Strategy is not very well understood or appreciated. Why is it so hard for you to spend time developing strategy? I counted three reasons.
1. Management By Objectives (MBO) Systems
MBO is pervasive as the mechanism by which promotions, bonuses and pay increases are measured. The idea behind MBO is to define the objectives and outcomes, and measure employee performance by the degree to which those objectives are met. It can be used for any level employee, from the CEO to the last line employee.
However, for the most part, pay increases and bonuses are typically calculated once a year, during budget planning time. In order to use meeting objectives as a measure for this, those objectives are set with a one-year horizon. Achieving longer-term objectives will not be used to determine compensation. As a result, objectives such as “grow revenue by 20% every year” are common, whereas objectives such as “double the revenue in four years” are not.
2. Shorter Employment Tenure
Average employee turnover almost reached its peak in 20018, when it was 18.7% total, and 12.5% voluntary. The lowest was in 2011 (14.4% total and 9.1% voluntary), but last year the total turnover climbed to 17.8% total, and 12.8% voluntary. This means that on average an employee would stay with the company for 6 years.
This statistic is not telling enough, since employees change jobs within the company, although those changes are typically not considered turnover by statisticians. I worked for Texas Instruments for just under 7 years, but during that time I filled 4 different positions, and worked for 4 different bosses. My objectives from one job at the company didn’t carry to the next one, and my next boss didn’t care about meeting my objectives assigned by my previous boss.
If it’s a reasonable expectation is that you would stay in one job for not much more than 1.5 years, why would you want to spend time preparing for events that would take place after you already left your job? As a CEO–why would you want to take the hit for expenses (R&D, for example), which would only yield benefits after you left the company? As Gary Hamel said in an Executive Briefing at Stanford in 1998:
“… find a 60-year old chief executive, … set a mandatory retirement age of 62, … give that CEO a boatload of share options, and get out of the way, and guess what? Share prices will go high… …but is it going to create any new wealth?”
What he meant was that the CEO, given the short tenure expected, would cut costs to increase profitability, and not make strategic investments in the future of the company.
3. Net Present Value of the Upside
That leads to the next question: What’s more important, the current project that takes all your time, or the overall future success of the company? I’m sure you would answer that the future of the company is more important. However, like any return on investment calculation, the future benefits are discounted to their net present value (NPV) today. And that value is lower than the value you have for the project that takes 100% of your time today. You don’t have enough intrinsic motivation to invest in the future.
What Can You Do?
The investment of effort, funding, and other resources in strategic, long-term initiatives is intrinsically motivated, but for the three reasons detailed above–the intrinsic motivator is not enough to overcome the day-to-day “busyness.” You focus on the urgent things, whether important or not, over the important, yet not urgent activities.
The way to overcome this is to deploy extrinsic motivators (bonuses, promotions, pay raises) instead of intrinsic ones. Reward strategic actions that are taken within the year (even if it will be years before you can measure the outcomes) and not only annual outcomes that are easier to measure. Of course, you will have to know what activities would, in fact, contribute to long-term success.
You should reward employees for achieving 20% revenue growth next year, but also for implementing the first quarter of the 4-year plan to double the revenue in 4 years. Both are important.
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