Strategy works best when senior management tells it straight: Study

Business leaders naturally want their company’s strategy to be understood and accepted by employees – or, as we call it, “embedded”. This helps ensure that workers’ daily decisions and behaviours support the firm’s competitive intentions.

Embeddedness is especially important when employees cannot simply be told what to do, as is increasingly the case in modern economies. It’s the reason companies hold “town hall meetings” and executives write company-wide emails: they want to make sure employees “get it”. Yet we know very little about why some employees get it and others don’t.

To better understand what facilitates embeddedness, we analysed more than 60,000 confidential responses to an employee-satisfaction survey conducted by a global corporation that owns more than 300 operating companies. We correctly anticipated some of the results: higher-level employees, employees who are happy with their compensation and work-life balance, and employees whose overall view of their company is positive are more likely than others to understand and agree with the company’s strategy. (Together these results explained 39% of the variation we found in degrees of embeddedness.)

But we also encountered some surprises. For instance, we expected that long-tenured employees would be much more conversant than others with company strategy, but the effect was inconsistent, perhaps because long stints at a company mean more encounters with strategic changes, requiring shifts in mindset and renewed acceptance.

We focused our analysis on three variables we thought would affect embeddedness: an employee’s job conditions, his view of the quality and engagement of his supervisor, and his perception of and trust in top management (in particular, the strength of two-way engagement). We found that job conditions are indeed a significant factor, with training opportunities and a clear development path being far and away the most important elements in this respect.

By contrast, we learned that supervisors don’t play a direct role (though they do have an indirect effect, in that they shape an employee’s tasks, teamwork and development opportunities). Most significant, we found that top management has a profound impact on how well employees grasp and support strategy – far greater than any other variable we examined, and far greater than we’d expected.

These results have important implications for companies that are working to increase embeddedness. For example, many firms rely on a “cascade” mechanism, according to which senior leaders communicate strategy only to their direct reports and depend on them to disseminate it to front-line workers. Our results suggest that this faith in cascades may be misplaced. Employees need to hear from senior managers themselves – through straight talk, and ideally in reciprocal exchanges, so that workers feel their own views are heard.

What accounts for the overwhelming importance of top managers to embeddedness? We believe the explanation is twofold. Senior leaders should have a unique understanding of their company’s strategy; there may be no equal substitutes when it comes to communicating and discussing it. And their position at the top is powerfully symbolic, giving them more credibility and authority than others have. With these considerations in mind, companies need to find ways to bring senior management closer to the workforce.

The trouble with ‘cascades’

Many executives share information only with their direct reports, hoping it will trickle down the organisational chart. This doesn’t work well, for three reasons:

  • Only top leaders can give strategic communications the appropriate weight.
  • Strategy involves trade-offs, which are more easily accepted when put in a broad perspective, without parochial filters.
  • As in the game of Telephone, messages passed from person to person seldom arrive intact.

Charles Galunic is the Aviva Chaired Professor of Leadership and Responsibility at Insead. Immanuel Hermreck is the global head of human resources at Bertelsmann. This article has been sourced from the Harvard Business Review and first appeared on LeadingCompany.


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