The passion, the concentration of efforts and the commitment of executives to achieve the long-term objectives – the fulfilment of the company’s mission and social responsibilities towards shareholders, workers and other interested parties- are key elements in the success of any business.
Without a strong team involvement in carrying out the common mission, the long-term success of any company becomes very difficult, if not impossible. Managers committed to their strategy and objectives are personally bound to them, which maximizes the chances of success.
This close link between manager and strategy, while essential, presents an inconvenience not always well recognized and very infrequently addressed by companies: executives observe the strategy -the company business, in general- from the inside and rarely have the opportunity to stand and place themselves in the position of an experienced external observer. What’s more, if they did, they risk losing intensity and focus, both necessary for the successful execution of the strategy.
Without this “putting into perspective” it is easy for some management shortcomings to appear, such as:
- Lack of regular benchmarking: comparing with ourselves along the time is not enough
- Vision exclusively intrasectoral or intra-business: “in this industry it is like this” or “this is how things are done here” impoverishes or eliminates innovation
- Searching for new answers to the same old questions (lack of “out-the-box” thinking): the possibility of creating a disruption that gives us a competitive advantage is reduced
- Emotional bonding with strategy and products: how many companies “fall in love” with their products?
- Emotional bonding with the team and colleagues: trust and teamwork lead to the point of not challenging any decision taken by the peers.
- Personal and group previous experiences: good and bad experiences lead to repeat or avoid decisions, instead of reviewing and learning from them.
- Action limited to known ground by managers: one does not usually aspire to the unknown.
Decision making biases
- Confirmation bias: we select data seeking confirmation of our intuitive thinking
- Sunk costs: persisting with bad decisions due to irrational attachment to costs (monetary, emotional or reputational) that we cannot recover
- Group thinking: avoidance of discrepancy
- Authority bias: lack of constructive challenge to management
- Bandwagon bias: accommodation to others’ decisions without necessarily agreeing
- Strategic misrepresentation: unjustified excess of optimism
Nobody questions nowadays the need and usefulness of performing external evaluation exercises, such as financial audits (whether required by the law or by internal regulations), compliance or human resources audits, validations of industrial, IT and logistics processes or even commercial audits. All these processes, naturally integrated in the management practice of the companies, provide an external and expert vision that, properly used, facilitates the continuous improvement of the organizations.
However, it is rather surprising that the formulation and execution of the strategy -probably the activity with the most impact on the mid and long-term results of the companies- does not undergo an external periodic assessment to confirm the adequacy of the decisions taken and / or allow the introduction of adjustments and improvements at the highest level.
Someone may argue that the external validation of the strategy could undermine the leadership of the management team or its first executive, but that is – in sales language – a false objection. In fact, considering the top management of companies as infallible at all times and circumstances is an obvious anachronism.
Quite the contrary, the manager who challenges and tests the quality of his decision-making shows great maturity and solidity as a leader and, without a doubt, will be able to obtain better results in the mid and long term. No one is in possession of the absolute and immutable truth, all human processes are susceptible to improvement, even more those – like the strategic formulation – containing a strong component of subjectivity and that have to do with trust in people, in their capabilities and perceptions.
Therefore, it is highly recommended to include the Strategic Validation* among the periodic practices of the Senior Management and the Board of Directors. An external view, constructive yet unbiased, certainly carried out by professionals with an extensive and wide and comprehensive practical executive background, will improve to some extent – in the vast majority of cases – the strategy formulated or the quality of its implementation. The management team, at the head of the initiative, will be strengthen and the confidence – of the manager himself, of the shareholder and of the board of directors – in the direction taken will be reinforced.
* It should not be confused with the use – in most cases well justified – of external consultants for the organization and implementation of new projects or for the management of organizational change or transformation. The aim of the Strategic Validation is to assess the formulation and implementation of the general strategy, which is part of the responsibilities of the board of directors and / or the senior management.