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Don’t Mistake Execution for Strategy

by Graham Kenny

A business involved in conducting clinical trials for medical and pharmaceutical companies recently sent me a copy of their strategic plan for review in preparation for a forthcoming strategic planning workshop. I studied the nine pages carefully. But despite its promise to outline the company’s “Mission, Vision, Strategies, and Actions,” the document contained no real strategy.

This is not an unfamiliar experience for me.  I come across it all the time because a company’s managers often confuse a strategy’s design with its execution. Recognizing the difference between these two will have a major and positive impact on your organization’s performance.

Strategy design involves detailing positions to take on what I call strategic factors. These are the decision criteria used by key stakeholders, i.e., the criteria used by customers in deciding to buy from a business, or by employees in deciding to work for an organization, or by suppliers in deciding to supply to a company. Strategy design concerns the position that, for instance, Ford or Toyota as a company takes to woo customers on factors such as product range, price, retail locations, product quality and image.

Positioning can be quite subtle and can equate to the different brands of a business. Take, for example, the Accor hotels group. Accor carries a range of brands each catering for a different set of target customers with varying positions on customer service, price, and quality. It has a luxury end (Raffles, Fairmont, Sofitel), a premium space (MGallery, Pullman, Swissôtel), midscale (Novotel, Mercure, Adagio) and economy (ibis, hotelF1).

Strategy design must take place at the organization level because each business faces its competitors in the marketplace. They compete, company against company.

The reason executive teams struggle with strategy design is that they don’t adopt organization-level thinking at the start. They rush to execution at a strategy retreat, because they invariably arrive ready to address what they need to do. Unless the doing impulse is switched off, until design is ready, the cart gets put before the horse. This has clients leaving their retreat with a hodgepodge of actions but still no clear idea of where their organization is heading or how it differs from competitors in the marketplace.

I could see this in the clinical trial company’s strategic plan. It had pages of actions and they were fine – up to a point. The problem, as my pre-workshop interviews with members of the executive team exposed, was that the organization is “drowning in things to do” – the words of the CEO. Another executive suggested that the company needed “clarity about where we’re heading.” Yet another proposed that “we need a bigger picture around the strategic stuff” adding that “we get sucked into micro measurement.” Another executive described this abundance of activity as “leaving staff feeling quite lost.”

What the planned workshop had to achieve was clarity on the company’s positioning on the strategic factors for its key stakeholders and a stripping away of non-essential actions leaving only those which clearly drove these positions. To do that I needed to shift the executive team’s thinking away from individual action and up to organizational positioning.

What we concluded at the workshop was that there were two fundamentals that would drive the business’s success over its rivals – lower prices and superior client service. The CEO described the company’s larger competitors as “very expensive.” As work was won from clients on a tender basis, price would be positioned case by case. Where the company stood on service could be stated overall.

To lift the executive team’s thinking to the strategy design level I employed a technique which I’d used in the past to yield dividends. I asked, “As an organization what is your position on client service?” The wording and emphasis are deliberately chosen to shift thinking away from individual action.

The team crafted the following response: “A service tailored to each client’s specific needs involving a unique combination of pre-clinical planning with the avoidance of regulatory hurdles to streamline the product approval process.” Reduced lead times through the approval process allowed clients to commercialize their products sooner, giving them a first-mover advantage in their markets and delivering income flows from their products much earlier.

Lower prices and better service can be a killer combination, and this has proven to be the case. It has given the company a significant competitive edge over its rivals. From a base relatively small compared to its larger competitors, the CEO reports a “28 per cent year-on-year sales growth for the last three years.”

In preparation for your next strategy retreat recognize that underpinning the essential difference between strategy design and execution is level of analysis. While most participants may be unaware of it, it is one of the most important and useful concepts in social science. Strategy design operates at the organization level. Strategy execution operates at the individual level. If you don’t make this distinction, you’ll be committing the error I’ve seen in many clients. You’ll mistake individual action for strategy. And that can be disastrous.

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How SMEs and Scale-Ups Can Afford the Very Best Executive Directors on a Budget

Key Takeaways

For an SME or scale-up to succeed, its board and executive team needs to be at the top of their game. They’re responsible for business strategy. They have to find the plans and processes which will allow the firm to grow. Adding more experience, knowhow and skill to the pool of decision makers is a great way for any firm to progress.

Unfortunately, the very best executives don’t come cheap. They’re often out of reach of smaller businesses with more limited budgets. That is, if those businesses want to hire them full-time. Taking on executive directors on a part-time or interim basis is a far more viable option. It allows SMEs to enjoy the knowhow and abilities of the very best executive directors. All on a budget.   

 

Running a scale-up or an SME is a continuous balancing act. The long-term aim of any such company is always to grow and progress. Growth and progress can often only be achieved with significant investment. For a business to survive in the here and now, however, it must also live within its means. The budget of most SMEs is limited at best.

Decision makers at smaller companies have to find innovative ways to move forward. They can’t endlessly invest more money in an effort to grow. That would be a mistake that could prove terminal. When frugality is a must, there are a surprising number of creative solutions which SMEs can turn to. 

Read on and you’ll learn about a creative way in which SMEs can still get the very best executive directors. The kind of high-level decision makers that can be key to a firm’s progress. Hiring such individuals in the traditional sense is often beyond smaller businesses. They can be brought on board on a part-time basis, however. 

Part-time directors can provide invaluable assistance when needed. Below, you’ll learn all you need to know about outsourcing to bring part-time directors on board.     

What Are Executive Directors?

Executive directors are members of a company’s board. They also have management responsibilities within the firm. They are company employees at the senior executive level, as well as being board members. On top of their day-to-day duties within a firm, they also contribute to the decision-making of the board. They are tasked with helping to determine the business’s overall strategy. As well as performing the other functions of their role.

Executive directors are joined on most boards by non-executive directors. They’re board members who do not have responsibility for daily management or operations. They’re employed by businesses purely to help with the big picture. To contribute to overall strategy and aid the board’s decision-making. What exactly, though, do different executive and non-executive directors do for a firm? 

What Do They Do?

Executive director is a catch-all phrase. It describes a range of different roles within a company. All executive directors sit on the business’s board and play a role in high-level decision making. Exactly what they do for their organisation, however, depends on their specific role:

  • Chief Executive Officer (CEO) – A firm’s CEO is the man or woman in charge. They’re responsible for the business’s overall operations and performance. They must maintain corporate policy and help shape a firm’s long-term strategy. Sometimes, a business’s CEO will also be the chairperson of the board. 
  • Managing Director (MD)The MD of a company plays a similar role to the CEO. In fact, the two roles are often confused. An MD is one of the most senior positions at any business. Unlike a CEO, though, they’re often more focussed on managing the day-to-day operations of a company. They will generally report to the chairperson of the board. They still also play a key role in high-level strategy decisions.
  • Chief Operating Officer (COO)A COO is another high-ranking member of any business’s board. Their duties are typically threefold. They’re responsible for day-to-day running of key departments. Such as manufacturing, sales and distribution. They also work to implement processes which improve the efficiency of those departments. Finally, they report back operational information to the CEO.
  • Strategy DirectorThese directors focus on a firm’s position in the wider industry. They collect and evaluate information about the industry and wider market trends. They then use that information to inform discussions and decisions regarding business strategy. Their overall aim is to define a path toward success and keep a business on that path.
  • Chairman and other Non-Executive DirectorsIt’s obvious that non-executive directors are different to executive directors. It’s worth mentioning them, though, as they also play a key role on company boards. They’re board members who aren’t a part of your executive team. Instead, they’re focussed on planning, policy making and monitoring performance.  

How Much Are They Paid?

It should now be clear that executive directors are high-level employees. They’re skilled and experienced individuals who take on lots of responsibility. The way they’re paid reflects that responsibility and the high-level skill set they have.

Take the position of CEO as an example. According to recent statistics, the average salary for a CEO in the UK in 2019 is £89,020. On top of that, they’re also typical rewarded with an average annual bonus of £19,918. Alongside around £35,000 in other remuneration. That represents an average outlay of close to £145,000 per year for a firm to their CEO alone.

Plenty of CEOs earn more, of course. Other executives also typically command a lower average salary. Those stats do reveal something important, though. That is that taking on new full-time executive directors isn’t viable for many SMEs. There is a way, however, that those firms can still afford the very best executive directors.  

How Can SMEs and Scale-ups Afford the Best?

You may think that the high remuneration commanded by executive directors puts the best people beyond the reach of SMEs or scale-ups. Fortunately, that isn’t the case. Due to an innovative and increasingly popular practice. The practice of outsourcing senior company positions to part-time operatives.

A smaller enterprise is able to bring on board a CEO, COO or strategy director for a fraction of their usual cost. They can choose how often and how much the director’s services are available to them. For instance, an early stage business with a low budget might bring the part-time Director on board for say only one day per month. More established companies might prefer 2 or 3 days a week. They can still benefit from their expertise and perspective without breaking the bank.

It’s not all about salary, either. There are other ways in which hiring part-time directors is kinder on an SME’s budget. Outsourcing a senior position does not incur a recruitment fee, which employing full time often can. Unlike hiring a full-time board member. An SME also doesn’t have to worry about negotiating an annual bonus or benefits package. 

The executive directors SMEs and scale-ups can afford on a part-time basis can be of a higher grade. Their operating budget is no longer an obstacle. They can benefit from the skills and knowhow of the best executives. Cost-efficiency isn’t the only benefit of the part-time director route, either.     

Other Benefits of Part-Time or Interim Executives

Hiring part-time executive directors allows SMEs access to a higher level of executive. That’s not the only benefit of choosing to outsource a senior board position, though. The following are other reasons why interim executives may be a better option for SMEs:

  • Flexibility – A firm’s relationship with a part-time director can be tailored to their exact requirements. The business can scale up or down the level of advice provided as needed. Ending such a relationship is also far more straightforward. Part-time Directors can be hired on a fixed term or monthly review basis. If things aren’t working out, an SME has an easy exit available.
  • Specific Expertise – Taking on a full-time director often takes months. Hiring an interim executive can be done in a matter of days. Outsourcing in this way, then, is a great way for a business to respond to a particular problem or challenge. For example, a board might be facing an issue that falls outside their field of expertise. They may have a problem with their digital marketing, infrastructure or technology. To nip the issue in the bud, they could quickly hire an interim director with digital expertise     
  • Focus – Experienced and skilled executives brought onto a board on a part-time basis can give an SME’s issues their full attention. A full-time executive may have other duties. A part-time or interim director can focus on strategy and planning to meet a firm’s challenges. Often, such high-level executives can get three or four days’ worth of work done in two days or less.
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