In my 25 years as a business psychologist, I’ve worked with a lot of businesses, particularly mid-sized companies, and it’s surprising just how few of them have a decent strategy. By ‘a decent strategy’ I mean that the business knows where it’s going and how it’s going to get there. “We want to double in size in the next five years” – a surprisingly common aspiration – is not a strategy. Double what? Turnover? Profit? Market share? Even if the overall goal is clear, the route to get there is often sketchy.
This is unlikely to surprise you if you work across a range of organisations. It crops up all the time in my work with Private Equity-backed businesses and it’s a often a contributing factor in turnaround situations, where the specialists I work with at the Institute for Turnaround get called in. But what’s this got to do with business psychology? Shouldn’t I leave this to the strategy consultants? Well yes and no. I wouldn’t advise a company on the content of their strategy. But I am interested in exploring how this situation arises in the first place and that is most definitely about people. Specifically the senior leadership team who have neglected one of their core leadership tasks, namely working out where they are going and how they’re going to get there.
Why? It’s too easy to say they were too busy with the day-to-day operations. Yes, that’s where they focused their attention but it’s not a reason in itself. I’ve identified four people-related factors which get in the way of a senior team devising a decent strategy. They’re not mutually exclusive but it is useful to look at them independently.
1. They can’t handle complexity
Good strategic thinking requires an ability to handle complexity and to do so without having structure to guide your thinking. I call it ‘top down’ thinking – the ability to start at point A and work out from a blank sheet how to get to point B or F or even Z, even if you haven’t done it before. Not everyone can do this. In fact, the majority of people are what I’d describe as ‘bottom up’ thinkers, who work outwards from their existing knowledge and experience and generally need some sort of route map to follow. Many very smart people think in this way (I’ve met PhD-educated geophysicists in the mining industry in this category, for example). They can handle technical (depth) complexity but are less capable with strategic (breadth) complexity.
There is an important role for these people in setting strategic direction as they often have a very good grasp of what will work in practice. But if there is no one in the business who can handle strategic complexity, it’s time to get some support, maybe from a non-exec or a strategy consultant.
2. They need certainty
Some people who, in theory, have the intellectual bandwidth to engage effectively with strategic complexity, still don’t actually do it. They’re cautious, detail-conscious perfectionists on the hunt for the right answer. Often found in finance or tech roles, they are used to being able to prove they’ve got it right. They can show their workings and no one can disagree or criticise them. When it comes to messy, ambiguous strategic questions, there is no right answer. They have to defend their ideas. They may not know whether they’ve made the right decision for years, so it’s easier not to engage with this stuff. Incidentally, this can also apply to people who aren’t strong strategic thinkers, I just wanted to highlight that being able to think strategically isn’t enough.
To develop as strategists, and, indeed, as leaders, these people need to move away from seeing themselves as experts who can work out the answer and develop confidence in their judgement. This is something that often responds well to coaching.
3. They can’t rule things out
Some people are so good at strategic thinking that they come up with endless ideas to grow the business or to innovate. Others are fantastic at spotting and capitalising on opportunities. In organisations full of people like this, there is often a lot of discussion of strategy. They don’t fall into the trap of getting stuck in the day-to-day detail, but they lack focus or a clear sense of direction. They probably have a goal but are trying to achieve it by pursuing too many avenues at the same time.
Often these leadership teams describe themselves as ‘agile’. Of course, it’s important to be flexible to changes in the market and responsive to opportunities. But not every opportunity. When you’ve got to the stage where you’re expanding into South America, developing a new product, trialling a premium service and acquiring a sub-contractor all at the same time and someone says “Hey there’s this great opportunity in Vietnam”, it’s probably time to pause and take stock. An agile organisation can easily become a chaotic or overstretched one.
This is just a hunch, but I’ve noticed that this seems to happen more often in companies with a very strong brand identity. When building the brand becomes more important than building the business, it can be tempting to jump on any opportunity that builds the brand regardless of what it does to the business. The developmental challenge for leaders like this is to sharpen their evaluation and decision-making skills and learn to rule things out, even when those things, in themselves, may be good ideas.
4. They can’t handle conflict constructively
Another reason that a leadership team may not rule options out is that they don’t want to have difficult conversations. Should Andy’s new tech innovation take priority over the fantastic opportunity Sally has carefully nurtured to open up a whole new market? There’s no right answer to that question. Many leadership teams leave things vague because gaining clarity would bring disagreements to the surface and they don’t know how to handle them.
‘Teams’ like this rarely function as a team. Each person looks after their own little bit and reports back on what they are doing. There is little joint decision making until resources are scarce and then things can get messy. In an attempt to look for compromise and keep everyone happy, they may end up pursuing two or three ideas half-heartedly, rather than going all out together to pursue the best option for the business. For these teams the developmental task is to learn to work through issues together, which takes trust and commitment. Group coaching is generally the best way to approach this.
Of course, some businesses can trundle along quite happily without a grand strategic plan. If you’re in a stable business with loyal, repeat customers (e.g. a vet’s practice) or a guaranteed stream of new business (e.g. a funeral director) and you are content to stay the same size or grow slowly and steadily, then you’ll probably be fine focusing on delivering a great service.
But if you want to grow the business, or you face rapid change (new technology, supply chain disruption, different competitor landscape) or the business is in trouble, then you need a strategy. If your business, or one you’re advising, doesn’t have one and you’d like to explore what’s in the way, do get in touch: email@example.com.