May23
In a study highlighted in the MIT Sloan Management Review, the CEO of a major technology company was initially delighted to see high marks for strategic alignment in the company’s annual employee engagement survey. An impressive 97% of senior leaders clearly understood the company’s priorities and how their work contributed to corporate objectives. Given these results, the CEO believed the company’s five strategic priorities—unchanged for the past two years and regularly communicated—were well understood by those responsible for executing them.
However, a deeper investigation using a machine-learning algorithm and human coders to analyze responses revealed a shocking reality: only a quarter of managers could correctly list three of the five priorities, and a third couldn’t name even one. This disconnect between perceived and actual strategic alignment is not unique to this company but is prevalent across various industries. An analysis of 124 organizations showed that executives and middle managers responsible for strategy execution could list three of their company’s strategic priorities.
When faced with such results, executives often resort to more town hall meetings or additional email communications to reinforce corporate strategy. However, as the MIT Sloan Management Review article suggests, these efforts are unlikely to address the core issues. The research identifies three non-intuitive causes of strategic misalignment and provides actionable steps for improvement.
The first step is acknowledging the existence of a problem. C-suite executives often overestimate the alignment within their organization. The MIT Sloan Management Review's strategy execution survey measures the extent to which a company shares and understands strategic priorities and whether these influence resource allocation and goal setting. Typically, top executives rate their company’s alignment much higher than lower-level managers. For instance, if mid-level managers rate their company’s alignment at the 50th percentile, top executives might rate it at the 67th percentile, demonstrating a significant perception gap.
Strategic misalignment often begins at the top. For effective alignment, the top team must agree on a unified set of objectives for the business. Unfortunately, in many organizations, there is a lack of consensus among senior executives. The technology company featured in the MIT Sloan article found that only half of the top team could list all or all but one of the company’s five priorities. At the same time, the rest were largely unaware or mistaken about these objectives. This lack of agreement underscores the need for the top team to align before the strategy can be effectively communicated throughout the organization.
Strategic alignment issues do not end at the top but extend throughout the organization. Our data shows that the steepest decline in alignment occurs between the top team and their direct reports rather than further down the hierarchy. For instance, while over half of top team members can list the company’s priorities, only 22% of their direct reports can do the same.
To bridge this gap, top executives must ensure that their direct reports understand the overall strategy and how their roles contribute to it. One practical approach is for each top executive to consistently explain the relevance of their unit’s objectives to the company’s broader goals. In the MIT Sloan study, half of the direct reports indicated that their bosses consistently provided this context, while the others did not, highlighting an area for significant improvement.
Building on the insights from the MIT Sloan Management Review, consider the example of Tesco, one of the UK’s leading retailers. Tesco has made significant strides in strategic alignment by ensuring that all levels of management understand the company’s strategic priorities. The company holds regular strategy sessions where senior leaders communicate key objectives and how each department’s goals align with these priorities. This has helped create a cohesive understanding across the organization, from the executive to store managers.
Similarly, Unilever UK has implemented a robust internal communications strategy to maintain strategic alignment. Unilever’s senior leaders regularly engage with their teams through interactive platforms, clearly explaining how departmental goals contribute to the company’s overall strategy. This practice has fostered a strong sense of alignment and purpose across the company.
Leaders must clearly explain how their team’s goals align with the company’s strategic priorities. The survey revealed that the best predictor of strategic alignment was how consistently managers articulated the importance of their team’s objectives about the overall company strategy. For example, if a company scores average on all survey items except for this one, a high score in this area alone could elevate the company to the top quartile regarding strategic alignment.
While a shared understanding of strategic priorities among key leaders does not guarantee successful execution, it is a crucial first step. Misunderstandings and disagreements about what matters most can severely undermine team coordination and prioritisation. Managers who do not understand the company’s overarching goals cannot align their actions accordingly.
To enhance strategic alignment, top executives should:
Acknowledge potential misalignment.
Achieve consensus on strategic priorities within the top team.
Ensure that direct reports comprehend these priorities.
Promote clear communication of strategic objectives at all organisational levels.
Addressing these areas can significantly improve organisations' strategic alignment, leading to better execution and overall success.
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By Andrew Constable MBA, LSSBB
Keywords: Business Strategy, Innovation, Leadership
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