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Key Takeaways
- Failure to execute a strategy is often referred to as an “execution problem,” but the real problem is authority.
- Companies pay millions in consulting fees to develop a strategic plan, but those plans often stall because consultants lack institutional power.
- Embedded operators drive results. They have authority to approve capital expenditures, hire executives and allocate resources — work that consultants aren’t designed or incentivized to do.
The 143-slide strategy deck looked perfect. Months of work by a top-tier consulting firm had mapped out a three-year transformation plan. The market analysis, competitive positioning, operational roadmap and financial projections were all there.
Six months later, the CEO calls me. Not one single slide has been implemented and is still sitting in a shared drive. The management team has gone back to doing things as always. And the company has spent $2 million on consulting fees for nothing.
“I know we had a good strategy, he tells me. “But we could never get enough people to implement it.”
According to Harvard Business Review, 67% of well-formulated strategies fail because of poor execution.
The problem isn’t execution. It’s authority.
While the failure of strategy implementation can often be referred to as an “execution problem,” the real problem is authority. Consulting firms assume that providing smart advice and capable management will lead to successful outcomes. But, in reality, it does not create solutions.
Why? Because consultants lack institutional power.
When a consultant states, “You should reorganize your sales unit,” this is an advisory statement. When someone who has control of your budget, sits on your board and influences how much you are compensated, says the same thing, it is a directive. Both statements may contain similar language, but the influence behind each is very different.
Most strategies fail at the “messy middle.” Middle managers kill strategies silently because they either never fully prioritize the strategy, or when the consultants leave, the middle manager reverts back to their normal routine (the old playbook) as opposed to continuing the new strategy.
There is a significant “execution gap” between the brilliance of a strategic recommendation and the ability of the organization to successfully execute on that strategy, due to the fact that no one has the authority to push the new strategy through the organization’s natural resistance to change.
Embedded leadership recognizes this dynamic. A consultant may be able to identify the problem, but they cannot override the VP of Finance, who is slow rolling the budget approvals; or the COO, who claims he is too busy to staff the initiative; or the Division President, who agrees to the new strategy in meetings, but later tells his team to ignore the new plan.
About a decade ago, the private equity industry made a major shift away from using consultants to develop strategies and instead began to embed operators with actual line authority who showed up, took responsibility, and were accountable for the results. They are the internal leaders with visibility and voice within the organization, not external advisors who check in every quarter.
Having budget control and hiring authority
I have seen operating partners have direct authority to approve capital expenditures, hire senior executives and reallocate resources. When embedded operators say “We’re going to consolidate these three functions,” they have the authority to pull the budget lever to make it happen.
Consulting’s “success” isn’t tied to operating success. Typically, operating partners will have a large portion of their equity or carry as a function of the company’s performance; therefore, their incentive for the company’s strategy to be successful is higher than consultants, who get paid regardless of the outcome.
Also, embedded operators have a longer time horizon than consultants. Typically, embedded operators sign agreements for at least 2-4 years (which can include renewal options). This allows them to take a company’s strategy from concept to completion, through the “messy middle” and into reality, which may not align with the original strategy.
The real work of execution is messy, repetitive, political and often draining. Consultants are not designed to operate in this environment. While consultants are excellent at diagnosing and developing solutions to these problems, they do not attend the numerous follow-up meetings necessary to implement the solution and, ultimately, to determine if the solution is viable.
I worked with one company that engaged an embedded CFO for two years. The embedded CFO’s task was not to develop a financial strategy; the strategy was clear. His task was to participate in each budget meeting to question every assumption, require each division to utilize the new planning process and personally review the monthly close until the new process was fully adopted.
Was this type of work intellectually stimulating? No. Could a consultant have accomplished the same task? Yes. However, at what cost? The embedded CFO received a modest salary and ownership of the company. A consultant would have cost the company more than they could have justified. Moreover, the embedded CFO had the authority to enforce compliance with the new processes.
Why executives are hesitant
Embedded leadership provides significant benefits, but many executives are hesitant to bring in embedded operators. Why?
Embedded operators are often perceived as a threat; they can challenge the status quo, and by doing so, they may also challenge your authority structure.
While bringing in a consultant is generally viewed as low risk, as it does not challenge your current authority structure, once the consulting engagement ends, the consultant leaves. Bringing in an embedded operator, on the other hand, acknowledges that you cannot execute the strategy that was developed; it gives someone the power to make decisions, and they also have the ability to question your decisions and influence the direction of the organization.
Many CEOs state that they want execution; however, what they really want is validation for the strategic plan that they have already developed, and consultants are very effective at providing that type of validation. But if you are serious about bridging the execution gap (i.e., making the strategy work rather than simply making the strategy appear to be working), you will need to have someone with authority in the room, not just advising, but leading.
Because ultimately, strategies do not fail because the strategy was incorrect — they fail because no one did anything to make it happen.
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Key Takeaways
- Failure to execute a strategy is often referred to as an “execution problem,” but the real problem is authority.
- Companies pay millions in consulting fees to develop a strategic plan, but those plans often stall because consultants lack institutional power.
- Embedded operators drive results. They have authority to approve capital expenditures, hire executives and allocate resources — work that consultants aren’t designed or incentivized to do.
The 143-slide strategy deck looked perfect. Months of work by a top-tier consulting firm had mapped out a three-year transformation plan. The market analysis, competitive positioning, operational roadmap and financial projections were all there.
Six months later, the CEO calls me. Not one single slide has been implemented and is still sitting in a shared drive. The management team has gone back to doing things as always. And the company has spent $2 million on consulting fees for nothing.
