CEOs Likely to Overestimate Strategy

By Bill Leonard May 9, 2014
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Implementing strategies and applying them to business operations may not be as easy as some cor​porate leaders believe. Research released by BTS, a consulting group based in Stockholm, Sweden, found that CEOs are much more likely than lower-level executives and managers to overestimate their organization’s ability to translate strategies into successful business plans.

The Economist Intelligence Unit (the research arm of The Economist magazine) surveyed more than 200 executives and managers for the study, and the researchers discovered that expectations of performance varied widely among different management levels. The study is titled Cracking the Code: The Secret to Successful Strategy Execution & Lessons for the C-Suite.

The survey results revealed that CEOs are likely to significantly overestimate their organization’s ability to execute strategy, which has caused some business leaders to miss opportunities and fail to take the steps needed for skills development and effective strategy implementation.

When asked to rate their managers’ ability to lead a successful implementation of a strategic plan, nearly 40 percent of the CEOs surveyed said they were highly confident. In contrast, only 12 percent of other C-suite executives agreed with the CEOs’ assessments, while 24 percent of managers or supervisors had the same positive outlook. In addition, more than half the CEOs (53 percent) were likely to view their leaders as hands-on—compared to 31 percent of other C-suite executives and 37 percent of managers.

Yet the study suggests that zealous CEOs can have a positive effect on an organization. The researchers identified leadership capabilities as the single most critical predictor of an organization’s success. When an organization’s leaders are highly confident in their managers’ ability to lead and put plans into action, the probability that the business succeeds or surpasses its performance goals is 71 percent, the study concluded.

Still, these varying opinions of leadership engagement and abilities can create disconnects and negatively affect business performance, the study revealed. Top performing companies that have higher profits, stronger growth and greater market share take the steps needed to ensure that managers and employees understand and support corporate strategies. The most successful organizations also ensure that their staffs have the skills and capabilities to implement strategic business plans.

“Strategy execution is comprehensive and demands a robust response,” Rommin Adl, an executive vice president at BTS, stated in a release. “To maximize impact, organizations should embed their implementation plans early in the strategic development process and make sure to target ways for directly addressing capability gaps and developing leadership skills.”

Bill Leonard is a senior writer for SHRM.

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