Picture this: You’re the CEO of a midsize company, and you just returned from an expensive, multi-day strategy retreat with your entire management team. You spent hours discussing the ins and outs of your strategy, and it left you and your employees feeling more aligned than ever. But are you actually on the same page?
Our new study suggests that you might not be — and that this sort of strategic misalignment is both more common and more harmful than you might think.
Specifically, as part of our ongoing research, we asked more than 500 frontline employees, middle managers, and senior executives across 12 different organizations to indicate how aligned they thought their companies were with respect to corporate strategy. And we found that the participants were largely optimistic, on average reporting that they felt strategic agreement within their companies was 82%. But when we analyzed detailed written explanations from those same employees around what their company’s strategies were, we found that actual alignment (as measured by the linguistic overlap in the concepts and words they listed) was, on average, just 23% — two to three times lower than perceived alignment.
Unsurprisingly, this disconnect creates real problems. We found that in organizations with larger gaps between actual and perceived strategic alignment, employees were more skeptical about the effectiveness of their company’s strategy and its implementation, and they reported that their company’s attempts to implement its strategy were both slower and lower quality.
For example, employees at an ed tech company in our study rated strategic consensus within their organization at 77%, but an analysis of their written responses showed that their actual alignment was only 26%. Upon reviewing the results, the CEO — a 25-year industry veteran — was surprised: “I’ve had a feeling that we were not completely focused, but the level of discrepancy and disagreement surprised me,” he shared. “Everybody seems to be interpreting strategy based on their functional silos, even members of our strategy team.”
Similarly, middle managers and senior executives at a recruiting firm reported that they believed strategic alignment across their organization was 90%. Yet we found that actual alignment was just 30%, with employees listing priorities as unrelated as product diversification, adding value to the community, and building a powerful platform as the company’s primary strategic objective. In some cases, different employees’ understandings of their strategy were in direct conflict: One respondent described a strategy of focusing on complex, more-expensive services, while another described a strategy of investing in higher-volume, simpler projects that would be easier to deliver quickly.
Too often, executives and employees alike find themselves in an echo chamber, assuming that everyone shares the same understanding of the company’s strategy while actually pursuing divergent or even clashing goals. This inevitably leads to politics, firefighting, unproductive meetings, and interpersonal challenges, all of which distracts everyone from their jobs and hinders actual value creation.
That said, true strategic alignment is in fact possible. Our research highlighted three key steps leaders can take to foster alignment and get everyone (actually) marching to the same tune:
Focus your strategy on driving customer value
First, we found that the CEOs in our study who defeated strategic confusion, transformed perceived consensus into actual strategic alignment, and succeeded at achieving their goals focused almost exclusively on prioritizing their customers.
This trend is consistent with prior studies. A 2023 review of 245 academic papers found that firms that prioritize customer satisfaction perform better across a wide variety of metrics, including sales, profits, cash flows, stock price, and more. Another recent study showed that companies that build strategic consensus around supporting their customers’ needs have lower costs and higher revenues, profits, and valuations. When senior executives, middle managers, and front-line employees are all aligned around a customer-focused strategy, they are less likely to end up spending wastefully or investing in disparate initiatives that consume resources without driving customer value.
For example, in 2020, actual strategic alignment at the Houston-based supply chain services firm ITI Manufacturing was less than 20%. Three years later, we found that alignment was up to 82%. Sales were also up 23%, and employees reported spending more than 50% of their time on customer-focused tasks.
What happened? ITI shifted its strategy to explicitly focus on the one factor it determined was most important for driving customer satisfaction: giving customers weekly status updates on their orders. This new approach enabled ITI to forge strategic consensus across the organization and reduce the amount of time people spent on internally focused activities. As CEO Joshua Robinson explained, “Starting from customer value helped focus me and my team on the one thing that mattered most to our customers: providing weekly updates. It seemed so simple, even trivial at first. But today, the results speak for themselves. We can differentiate our pitch to new customers and prospects, and current clients love to provide testimonials on our behalf.”
Weave your strategy into frontline employees’ daily work
Next, once you’ve reoriented your strategy to focus as exclusively as possible on customer value, take steps to ensure that this new mindset permeates everyone’s daily activities. A strategy cannot simply be overlaid on top of employees’ day jobs — it must become their day job. After all, it is on-the-ground employees and managers who create value for customers, and so it is their daily work that is most critical to implementing a customer-focused strategy.
Another business in our study, auto parts distributor Swagelok Southeast Texas, attempted time and again to address its strategic alignment issue. President Chris Jones described the many internally-focused initiatives his team had undertaken: “We were doing everything in the name of strategy — except for improving customer value,” he reflected.
In 2021, the organization identified rapid quoting as a critical customer need, and fully refocused its strategy around this goal. “We paused or deferred most of our internal initiatives, focusing our attention, effort, and energy on rapid quoting. [We] provided our customer service reps with an updated and streamlined computer interface, more training, and everything else possible to support their work. It was a series of difficult conversations with my senior executives to stop or defer unrelated initiatives,” mused Jones. “But we really made rapid quoting the centerpiece of our strategy implementation. Today, we have decreased average quoting time from 18 hours down to five hours, and more than 95% of our customers are satisfied with quoting time.”
Deborah Carpenter, Director of Strategy and Development at Swagelok Southeast Texas, added that this improvement to the customer experience also had internal benefits: “Previously, sales team members spent more than 30% of their time following up on quotes — instead of doing their day job,” she explained. “It created a vicious cycle: Customers went elsewhere if they did not get a quote on time, and sales could not sell because they were chasing quotes instead of sales.” Weaving a customer-focused strategy into the day-to-day operations of the business enabled workers, managers, and executives to stay aligned, ultimately creating value for both customers and the company.
Implement strategy through dialogue — not top-down directives
Finally, executives must remember that strategy is not implemented by senior executives, but by middle management and frontline employees. Leaders cannot simply announce a strategy and assume it has permeated the rest of the organization. Instead, they must proactively solicit input and feedback from across the org chart, truly listening to lower-level employees and engaging in meaningful dialogue. After all, top-down communication from leaders to frontline workers may drive perceptions of strategic alignment, but it won’t improve real consensus.
“Listening — not talking — to employees was the key,” explained Margaret Seeliger, Global SVP of Strategy at Sodexo’s Energy & Resources division, when describing how her team visited more than 50 sites all over the world to connect directly with frontline teams. Through these conversations, her team discovered that to spend more time helping clients, employees needed more support on certain tasks, and so the organization implemented a strategy that was directly informed by this input to unburden frontline employees. These initiatives led to a 24% increase in revenues, a 5% reduction in expenses, and a two-point boost to customer satisfaction.
Reflecting on how impactful this dialogue-driven approach to strategy had been for Sodexo, Seeliger commented, “Senior executives can measure outcomes, create initiatives, and do town halls. But the real work of implementation — creating value for customers — happens at the front lines.” She continued, “How can we unburden frontline employees to focus their day jobs, on creating customer value? This is the essence of strategy implementation — and it all happens at the front lines. Senior executives have only two options: support them or get out of the way.”
Building strategic alignment across an organization is always challenging, but a large gap between actual and perceived alignment makes it that much harder to get on the same page and implement a strategy effectively. To foster true strategic alignment, leaders must focus the entire company on driving customer value; weave that strategy into everyone’s daily work; and develop strategic priorities not in a vacuum, but through collaborative dialogue with senior executives, middle managers, and frontline employees.
This content was originally published here.