Why Great Strategies Fail

Mike: There are a couple of different things about this episode than, most of better leadership team show episodes, number one. I try never to make an episode that is time-based. We don’t have Christmas episodes or New Year’s episodes, or I don’t know, summer episodes because obviously I never know when you are.

Listening to this, are you listening right when it comes out? Are you listening two years later? So you don’t nor normally do that? but I’m making an exception. I am super excited that my new book, my third book, called The Strength of Talent, how to Grow Your People To Grow Your Profit is launching on October 14th.

2025. So if you are someone from the future and you’re listening in 2027, it’s my old book, but for those of you listening, more,closer to when this comes out or the week it comes out. [00:01:00] the book is coming out October 14th, 2025. Super excited. So number one, this is kind of time based on my new book coming out.

and secondly, this is gonna be the first of what I think is gonna be three episodes. I say, I think I’ll, we’ll see how this comes out, but this at least is planned as the first of three episodes,on three weeks leading up to the book launch. So real excited about it and this first episode based on the strength of talent is really focused on.

Why great strategies fail, and then the next two episodes will be my answer to that. And a,the details of a framework that I call the talent density system. 

But let’s start with why great strategies fail. And this is important to me because the first, the better part of the first 17 [00:02:00] years of my career was as a management consultant and as a management consultant, it’s very different than the coaching I do today. As a management consultant, my job was to go in with my team to multi-billion dollar companies like Disney or Verizon or Chanel, or Polo Ralph Lauren, go in there. Assess the situation, be smarter than our clients, and then give them recommendations normally in the form of these, you know, beautiful binders.

and I remember one particular client called Mercantile Stores way back in 1988, so a long time ago, and. There was this project, that was called the Mercantile Store’s Inventory Optimization Strategy. And I just knew this project was gonna make me partner early. I was gonna make history, the work we were gonna do to improve the inventories of this [00:03:00] retailer.

they were a department store. the work we were gonna do was phenomenal. And the. You know, the, a new system to automatically replenish their inventory. A beautiful binder with graphics and in color, and back then color, cost, extra money. This is it. This is my career. tons of value.

I’m making partner early, and the thing added, no value. In fact, I think it may have been in some cases, negative value. But here’s what I learned since, in case you look at that goal, my God, I’m never hiring this guy. Here’s what I’ve learned since that, those debacle from back in my consulting days, and I am embarrassed to say how many clients, we went into and they spent many months and millions of dollars only to get a little value because, you know, I, we thought it was all about the analysis and the strategy, but here’s what I’ve learned since then.

Is strategy doesn’t fix a [00:04:00] people problem. And most businesses, most business problems are people problems in disguise. It’s all about your people actually. It’s not really all about your people. It’s all about, as a leader, how you grow your people. The main lesson I learned, and it’s the heart and soul of everything I do now, is that the number one driver of profit growth is people growth.

It’s not a great strategy. a great process, a great technology, a great strategy with the wrong people, fails every single time, but a mediocre strategy with the right people. Will eventually succeed as those great people grind it out and figure out how a way to make that [00:05:00] mediocre strategy work. Or better yet, they learn and grow and come up with a better strategy.

So the number one driver of profit growth is not a great strategy, a great process, a great technology, a great new market. The number one driver of profit growth is people growth. Now let’s talk a little bit. About the business case for people growth. Why is it such a driver? So much of a driver that I’m saying it’s the number one driver of profit growth?

Well, first, let’s look at something I call the talent profit cycle. The talent profit cycle could either be a virtuous cycle going up, leading to more and more growth and a better and better company. Or it could be a vicious cycle going down. And let’s start with the vicious cycle. Let’s say as an organization, you are [00:06:00] not investing the right amount of time and skill and dollars in attracting, keeping and developing great people. Well, if you are not prioritizing that, you’re not doing a good job of that. You’re not investing enough time in attracting and keeping great people, what happens to your productivity? Does it go up or down? Well, Your productivity’s gonna go down.

If your productivity goes down, what happens to your profitability? Your profitability goes down. If your profitability goes down, what happens to your ability to invest? Time and money and skill in attracting and retaining great people? It goes down and even if you try, if you are not growing, you are not gonna be able to attract great people who are looking for opportunity and growth in their career.

You’re not gonna be able to [00:07:00] keep the great people who are looking for promotions and more money and more opportunity. And if that lower profitability leads to a lower ability to attract and keep great talent, what happens to your productivity? It goes down. What happens to your profitability? It goes down further.

What happens to your ability to attract and keep great talent? It goes down and on. The vicious cycle goes. But what about the virtuous cycle? What if you make talent development, talent acquisition, your number one priority? Well, what happens there is if you, you’re gonna have a greater ability if you’re investing the time, the money, the skill, the right techniques and attracting and retaining great people, your productivity goes up.

If your productivity goes up, your profitability goes up. If your profitability goes up, your ability to attract and retain great people goes up. If that goes up, your productivity goes up and so [00:08:00] on. And you. Just keep getting better and better. You’ve got this virtuous cycle. Now notice I didn’t talk about any companies in the middle.

You know what? If you are, you know, you know growing slowly, you are barely growing, barely profitable. Well, two things happen from there. I don’t think you stay there either that slow growth and low profitability. Turns into an inability to attract and retain great people. ’cause again, if you’re low profitability, you don’t have the time or the money to invest in those things.

So if you are low growth versus no growth or low profitability versus no profitability, you’re gonna wind up going down into that vicious cycle anyway, unless you make the decision that you’re gonna find a way to invest. Doing the right things, invest with the right people. Then you enter [00:09:00] that virtuous cycle.

So, so we’ve got the talent profit cycle. 

The other thing I learned many years ago from Kip Tyndall, who’s the founder of the Container Store, wrote a great book called Uncontainable, is this philosophy called one equals three. One equals three says one superstar performer equals the productivity of three mediocre performers.

Now we’ve all seen examples of that, right? In fact, I’ve seen examples of one equals five or one equals 10. I think anyone on your senior leadership team has such an impact cascading down and out through the organization that one superstar equals five or 10 mediocre performers. I’ve seen great salespeople.

Be five x mediocre salespeople. I’ve seen great programmers and software engineers be 10 x mediocre software engineers. The point is we could pay our superstars double [00:10:00] and still see a greater return on investment than a whole bunch of mediocre performers. Lastly in quantifying this, there is a great Boston Consulting Group study that showed that companies that are characterized as being talent magnets, and that means they scored high in these 20 different categories of leadership and talent development, those companies.

Grew their top line, their revenue 2.2 times faster, and their profits 1.5 times faster than the talent laggards. You show me a new marketing strategy, a new technology that’s gonna get you that kind of return on investment. So what’s your business case for putting a higher priority on.

People growth as business leaders, [00:11:00] we do things because we believe we’re gonna get some return on investment. You need to understand and communicate that return on investment for you, because when push comes to shove and things aren’t going well, it’s typically our investment in people that goes out the window when that’s the first and most important thing we ought to be thinking about.

Talking about taking action on. Now When we develop our people, there’s certain techniques you are probably already executing on, certain techniques that come to mind. Things like annual performance reviews. joint goal setting, 360 degree reviews, performance improvement plans, training, of course, all those things come to mind when we think of growing our people.

And the umbrella we put over all of those types of activities is performance management. [00:12:00] So if we already have this thing called performance management, what am I talking about? This is something that already exists. why did I write this new book? Well, here’s the problem. Mercer Group did a study of over 1200 leaders and found that only 2% of leaders believed their performance management was adding great value.

2%

If the number one driver of profit growth is people growth and our people growth activities. Or only having great impact 2% of the time. That’s a problem we need to fix. 

Now , Why doesn’t performance management work? Now, one thing I’ll say is a lot of it is based on this idea of annual performance reviews.

I believe, and I may have [00:13:00] said this on other podcasts, I believe annual performance reviews are the worst invention ever created in business. And if you’re thinking, Mike, I agree. That’s why we do them quarterly. You do a crappy process four times a year. It is, it’s unbelievable to me. and I did annual and quarterly performance reviews for many years, for decades, but think about the logic behind waiting until the end of the quarter or the end of the year to have this formal conversation.

And sometimes that formal conversation comes with a rating. You are exceeds expectations. Your meets expectations. You’re a two, you’re a three, you’re a four. Who cares? All that does a combination of these rating systems and the fact that we tend to tie raises, salary adjustments to these things means that they’re not [00:14:00] productive conversations.

They’re conversations where our team members, our direct reports push back. What do you mean I’m a meets expectation? I should be and exceeds expectations. That’s not a productive conversation. Think about the timing. It’s not just about ratings and salary adjustments. Think about the timing. Imagine in, in a sport.

Imagine you’re, you manage a baseball team and one of your best players is just in a slump all year, not hitting, and at the end of the season. You sit down with them and say, you know, I’ve been watching you all season and I see exactly what you’re doing wrong. Let’s talk about how you fix it before next season starts.

Like that wouldn’t be acceptable in little league baseball, and yet we do that in our businesses. We need something better. Why else doesn’t performance management work well in most [00:15:00] performance management systems? Companies have a lack of alignment around measures of individual and team performance. You might call them key performance indicators or KPIs.

Companies do a crappy job of measuring performance. Now, there are certain functions like sales that are easier than others. You may measure new revenue, gross margin on that revenue closing ratio of a sale. But what about marketing? How are we measuring success in marketing? Is it that the new website looks great, that it went live on time and on budget, that the logo looks really good, that a whole bunch of people are clicking on our,you know, on our social media?

Or is it 10 marketing qualified leads per week? There’s very little alignment for functions like [00:16:00] marketing and HR and technology and even finance. Most people think well finance well. We’re gonna measure net profit. Really, it’s finance accountable for net profit. Or do they think, just report on it. So there’s a lack of alignment around measures of both individual performance and team performance, which means we’re flying blind most of the time.

There’s a lack of a, that’s kind of the first thing that, well, first thing was annual performance reviews, quarterly performance reviews. Second reason performance management doesn’t work is this lack of alignment I just mentioned. Third thing is. There is a lack of adequate coaching and development on the part of leaders, partially because they’re not investing enough time in coaching and development.

But let’s be honest, most leaders don’t know the difference between coaching, development, accountability, feedback. Those are all different things, but they never learn what the difference is or when and how to use each. [00:17:00] The next thing is that there’s very little leadership accountability for growing our people.

Notice I kind of accented the leadership accountability. We are all fans of holding our direct reports accountable for managing themselves and growing and managing their career, and that’s all great. But we as leaders need to be accountable for growing our people. It’s not just, did we hire right or wrong?

If someone is low or medium performing, we must have hired wrong. That’s crap. There are a lot of folks who are low and medium performing because we are not holding ourselves accountable for leading them in the right way for helping them grow. So it’s not about hiring wrong, although sometimes that’s a problem.

Way more often it’s about coaching, development, developing accountability, feedback, so who is holding leaders [00:18:00] accountable for coaching, developing, challenging, all those things. It’s a missing piece in most organizations. There’s also no clear measure of success. For people growth. Now I mentioned earlier is a lack of alignment for KPIs, but I’m talking about something much more specific here.

Remember I said earlier the number one driver of profit growth is people growth. There’s a big problem with that statement and It comes from the cliche, and it’s a cliche because it’s mostly true that you can’t manage what you don’t measure. Well, let’s think about that. The number one driver of profit growth is people growth.

Do we measure profit growth? Course? We do. I’m about to be, this next week out in San Antonio with a group [00:19:00] of leaders. A group of CEOs in a workshop, and I do dozens of those throughout the year. And when I do, every time, if I go around the table and ask them about their profit growth, they could all tell me right away or maybe after, you know, looking at their phones pretty quickly, they could all tell me down to the 10th of a percent how they’re doing on profit growth compared to last year and compared to budget.

No doubt. But when I say, how are you doing on people growth, I get answers like, uh, pretty good. Pretty good is not a measure. And without a measure, we can’t hold people accountable. I will share with you in the next video or the one after a specific measure that I use called the Talent Density Indicator.

So. We have all those inadequacies of performance [00:20:00] management, but maybe the one that I see most often, and the one that I was a victim to is that as leaders we tend to overinvest in our lowest performers and underinvest in our highest performers. We overinvest in those people that we could only probably drag up to average.

But we underinvest in the people that have the ability to make us great.

So we talked about a lot here. We talked about. Why great strategies fail? We talked about,the,you know, the idea that the number one driver of profit growth is people growth. We talked about the business case for growing your people. We talked about the inadequacies of performance management.

Which performance management, inadequacies do you see in your company? Do you see [00:21:00] in yourself that you could start working on? The next episode, next week,or in the next minute, depending on how you’re listening to this. But in the next episode, as we get closer to the launch of my new book, the Strength of Talent, how to Grow Your People To Grow Your Profit on October 15th, 2025 is the next episode.

I’m going to begin to describe my five step talent and density system to tackle these challenges and maximize your ability to grow your people, to grow your profit. I look forward to seeing you there. 

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