Strategy Mistakes - part 1 of.....

Just gave a talk this morning at a breakfast for strategy-makers, on "7 Costly Strategy Mistakes."  So for a while, I'll be doing "highlights of..." or "best ideas from..." in this blog on Strategy.

The first costly mistake is "the Secret Strategy" - where the owner / founder / president is the ONLY one who knows what the strategy is.

Is that crazy, or have you seen it, too?

In the case that led to naming this, a business owner actually told me "No, I don't tell my people what my strategy is.  We have high turnover in this industry, and if I tell them what it is, my competition will know it within a few months."

I had to bite my tongue to resist asking the "Dr Phil" question: "How's that workin' for ya?"

What I did instead was to ask more specific questions about the impact on several areas that are predictable problems with the "secret strategy" approach:

• The owner has to make all the decisions, because he/she's the only one who knows the strategy and real priorities.
• Because of that, the owner is always "fighting fires" and handling crises caused by the players not knowing the playbook.
• Because of that, employees who are bright, have initiative, and prefer some autonomy start to feel stifled and "second-guessed."
• Because of that, the best ones leave, creating a self-fulfilling prophecy about turnover, leaving the owner having to replace good talent and scramble to cover in the meantime.
• Because of that, the customer experience suffers from mistakes, churning, and a succession of new customer-facing reps - not the way to inspire confidence or loyalty!

What does this cost?

Attrition costs at least 25% of annual salary - even for low-skill, minimum-wage folks.  For skilled customer-facing people, for those with high technical or good sales skills, the cost is a higher percentage of a higher salary.  For great salespeople or senior customer managers who have "a following" - the real cost of replacement can be more than their annual salary!

Even at the 25% level, if you replace 4 per year, you're paying the equivalent of a year's salary for a ghost - the "dearly departed" takes on a different meaning!  It's hard to get profitable when you're paying salaries for empty cubicles.

And what's the cost in customer confidence and loyalty, when they get a new person every time they call?

Customer loyalty is a predictable casualty of high turnover and the sort of mistakes caused by customer-facing staff clueless about the strategy.

That could be so costly it drives a company out of business.

In the best case, it creates a tough hole to dig out of -- and an unnecessary one.

Please comment!  Have you known companies with a "secret strategy?"  How do the consequences and costs reflect what you've seen?

Next week, the next costly strategy mistake - "Strategy without Contingencies"