90% of employees don’t understand their company’s strategy

“You have to communicate the plans to employees seven times in seven ways” for them to understand those plans, he says. “At the end, they need to understand the organization’s strategy and understand what they can do to contribute to the success of the strategy.”

Dr. Kaplan points to Volkswagen Brazil, a half-century-old subsidiary of the carmaker, as a successful example of effective employee engagement, motivation, and communication when implementing a turnaround strategy. Volkswagen Brazil had suffered eight straight years of losses, falling from number one to number three in market share in the country.

“Their only strategy was cutting and downsizing,” Dr. Kaplan says. “The unionized employees were alienated.” To turn that around, “they needed to capture the hearts and minds of the people. They wanted a strategy of growth and innovation, and that starts with culture.”

Most companies are paying more attention to identifying and managing risks, according to a November 2010 survey by Bloomberg Businessweek Research Services. Better tools to monitor and assess risks ranked as the second highest operational priority for the 300+ companies that responded to the survey. Note that the percentage citing these types of tools as a top priority increased by four percentage points in one year.

Although most companies develop key performance indicators (KPIs), Dr. Kaplan says they should be linked with an emerging metric called key risk indicators (KRIs). British Petroleum (BP), for example, “followed a risky strategy, drilling in deep water more than a mile below the surface. That’s OK,” he says, “because-as they say-no risk, no reward. Where I second-guess them is if you are going to take a risky strategy, you need to beef up the risk [management] function.”

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