Introduction

The challenges of strategy execution are well realized for long-term sustainability and success of the firm (Hrebiniak and Joyce 1984; Wooldridge and Floyd 1990; Miller 1990; Beer and Eisenstat 2000; Bossidy and Charan 2002; Higgins 2005; Kaplan and Norton 2008; Srivastava and Sushil 2014). Disillusionment with the search of new paradigm of strategy (Prahalad and Hamel 1990), lack of study on strategy execution (Noble 1999), and failure of several leading companies call for research on strategy execution for the long-term success of the firm (Hrebiniak 2006). Since last decade, a significant number of research studies started coming up with emphasis on developing framework of strategy execution (Okumus 2001; Higgins 2005; Sull 2007; Kaplan and Norton 2008). There have been diverse perspectives pointing out different issues affecting successful strategy execution.

These perspectives of existing literature clearly touch upon four major managerial issues. First, aligning strategy with the organization design which is the most classical approach; second, automate to streamline and standardize the processes, performance management systems, etc.; third, act to channelize the operations into the actions; and fourth, adapt to tune with the changing internal and external realities (Sushil 2009; Srivastava and Sushil 2013, 2014). These four major constructs are rooted in the theoretical proposition of the literature as well as reflected, in some or other sense, in different frameworks of strategy execution. The ‘act’ construct is found as one of the most critical barriers/facilitators of strategy execution. On the other hand, the ‘adapt’ construct is more of a contemporary thought process highlighting the need for change management for successful strategy execution. However, it is found that many of the organizations struggle and fail to succeed in managing act and adapt in the context of strategy execution. One of the plausible reasons for such a scenario is weak understanding of ‘act’ and ‘adapt’ linkage that affects execution outcomes. This study proposes that the variables of the construct ‘adapt’ has mediating function influencing effect of ‘act’ variables on strategy execution outcome.

Literature Review

The high-success firms face significantly less execution problems than do low-success firms (Alexander 1985). Successful execution involves preventing various execution problems from occurring in the first place and taking quick action of resolve and address problems that do occur. The ‘Act’ channelizes the operations and suggests action for execution through execution leadership (Martin 2010), communication and coordination (Raperta et al. 2002; Miller et al. 2004; Peng and Litteljohn 2001), etc. Less attention to the act aspects hinders effective execution. For example, in the case of reengineering challenges related to technological competence, project time frame, and management support are important to manage; however, addressing such problems does not necessarily improve the performance outcomes (Giles 1991). A tendency to neglect Act aspect, such as reward and motivation to generate appropriate performance orientation among employees, damage the strategy success (Grover et al. 1995). This study identifies key ‘Act’ variables as-execution leadership (AC1); performance orientation (AC2); communication and coordination (AC3); innovation (AC4); rewards/motivation (AC5); reviews and reflections (AC6); and corporate culture (AC7).

Managing adapt is one of the biggest threat and found to be critical for successful strategy execution (Hrebiniak 2006). Successful strategy execution requires adapting execution process, incentives, people, objectives, responsibilities, etc. A failure of managing adapt such as reducing resistance to new decisions, lack of incorporation of learning, lack of adaptive culture, etc., results poor record of achieving strategic performance of the firm (Aspesi and Vardhan 1999; Hrebiniak 2006; Chiva et al. 2010). In the context of strategy execution, scholars debated adapt from various perspectives such as marketing, human resources, performance management, organization design and corporate governance, etc., (Schneier et al. 1991; Ulrich 1998; Neilson et al. 2008). Different scholars highlighted different issues involved in strategy execution. The key ‘Adapt’ variables are identified as: Modify strategies (AD1); Reformulate strategic and operational plans (AD2); Reassess capabilities (AD3); Adaptive culture (AD4); and Incorporating reflection (AD5).

The literature on performance measurement and management highlights that identifying right combination of strategic performance factors (SPFs) is the beginning point for successful strategy execution. Since the evolution of research on ‘Critical Success Factors’ (Rockart 1979), researchers have been proposing frameworks suggesting different shifts in identifying SPF such as industry focus (Freund 1988); company focus (Rockart 1979); and environmental factors. The SPFs are also identified considering the specific strategic direction of the firm such as new product development (Cooper and Kleinschmidt 1995); supply chain management (Power et al. 2001), etc., There is a clear agreement on the characteristics of SPFs that they should be linked with company’s overall goal; measurable and controllable; limited in numbers; critical to achieve, etc., (Freund 1988). The SPFs determine and communicate performance targets for effective strategy execution. Therefore, identification of right set of SPFs helps management focusing on right issues, acquiring appropriate data and resources, develop required measures and monitor the execution (Rockart 1979).

There have been debates on identifying right combination of SPFs. The most prominent debate has been on adaptation of a balanced performance measurement focusing on both financial as well as non-financial measures (Kaplan and Norton 1996; Neely 2005; Burgess et al. 2007). There has also been debate on balancing short versus long-term objectives; lag versus lead indicators; and external versus internal factors to be monitoring and managed for smooth strategy execution (Kaplan and Norton 1996, 2008; McAdam and O’Neill 1999; Sushil 2008; Srivastava and Sushil 2013). For example, Miller (1990) demonstrated that the extreme approach may bring initial success but in long-run the extreme attractors bring organizations to failure. The successful organizations are characterized by paradox showing fit approach and also the differentiation considering the situational dynamics (Pascale 1990). There are mainly two categories of SPFs-‘strategic enterprise performance factor’ and ‘strategic customer performance factor’ (Volberda 1997; Sushil 2008, 2014; Nasim and Sushil 2010; Srivastava and Sushil 2013; Yadav 2014).

Research Methodology

As organizational behavior theorists have sought to move beyond descriptions and predictions of phenomena to explanations for how situational and personal factors influence organizational outcomes, statistical tests of mediation processes have become increasingly important to the scientific status of the field. There have been different terminologies in use for mediation such as indirect effects, intervening variables, and mediation. There have also been discussions on multiple methods for testing mediation and the criteria for claims of mediation. However, there is agreement that mediation occurs when the effects of one variable on another can be explained by a third, intervening variable. This study adopts causal steps approach suggested by Baron and Kenny (1986) to investigate mediating effect of ‘adapt’ variables. It is suggested that all four conditions should be examined and inferences of full, partial, and no mediation should be grounded in sound statistical testing and theoretical roots.

As presented in the literature review, a total five variables and Adapt while seven variables of Act are indentified to be observed in this study. The first variable of Adapt, i.e., ‘Modify Strategy’ (AD1), suggests that the fundamental business and strategic assumptions should change with the changes in the environment. Modifying strategy is necessarily about changes in intent, direction and component of strategies of the organization. The ‘Reformulate Strategic and Operational Plans’ (AD2), deals with changes in long-term and short-term strategic plans in congruence with the changes in grand strategic direction. It is reflected in Balanced Scorecard metrics. It exemplifies a balanced trade-offs as per the need of the time, clearly defined outcomes, and continuously following through. It also analyzes the changing situation and instills flexibility in case new opportunities arise or the plan fails. The ‘Reassess Capabilities’ (AD3) is the process of configuration of personnel and their competencies to match with the requirements of the strategy. This process can be reactive or proactive as per the need of the time. The ‘Adaptive Culture’ (AD4) facilitates an organization to respond quickly to the environmental changes for strategic advantage. It is characterized by robust dialogue among the people of the organization, acceptance of changes and continuous incorporation of learning to update strategies, plans and processes. Finally, ‘Incorporating Reflection’ (AD5) goes beyond measuring and monitoring performance and is based on interaction and incorporation of inputs from different stakeholders. It clarifies what is changing, how the changes are influencing the strategies and how to refine strategic and operational plans.

A total seven variables of Act are identified. The variable ‘Execution Leadership' (AC1) reflects top management’s support and involvement in execution; clarifying execution initiatives at different levels; providing compelling vision and measurable objectives to the employees. All the efforts of strategy execution boils down to ‘Performance Orientation’ (AC2) demonstrated in terms of a sense of urgency, giving more importance to work than relationship and proper follow-up of policies and procedures. The ‘Communication and Coordination’ (AC3) is defined in terms of shared understanding about strategy and execution efforts that is the key for effective execution and superior performance. Innovation (AC4) efforts connect execution decision and actions with the market and customer. Rewards and Motivation (AC5) are to be designed to shape up employees’ behaviour that suits to execution. It should be based on strategic focus so that it employees efforts can be linked to firm growth. The ‘Reviews and Reflections’ (AC6) makes execution a continuous process and accustoms employees to act strategically. It helps in identifying key managerial actions to avoid and correct problems of execution. Finally, the ‘Corporate Culture’ (AC7) reflects the balance of short and long-term goals, ethical work practices, and learning and sharing culture.

The research proposition of this study is depicted in Fig. 1. A total 182 responses were collected through self-administered questionnaire. The convenience sampling technique is used while ensuring respondents from varied background and experience (Table 1). The average year of experience of the participants is 9.3. Additionally, the respondents represent 12 industries in India. The depth of experience of participants and breath of industry covered helped in making the exercise comprehensive and reliable.

Fig. 1
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Conceptual framework of mediating role of adapt

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Table 1 Profile of respondent for questionnaire survey (N = 182)
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Results of Mediation Analysis

The results of the mediation analysis clearly point out that adapt mediates the effect of act on strategic performance of the firm. While in the case of strategic customer performance factors the mediation effect is observed to be partial, complete mediation is observed in the case of strategic enterprise performance factors. Table 2 summarizes the results of mediation analysis at the macro level. The table indicates of four essential steps suggested by Baron and Kenny (1986) to conduct mediation analysis. The complete mediation in the case of strategic enterprise performance is observed when the effect of act is found completely insignificant. The indirect effect in this case is found to be 0.539.

Table 2 Regression analysis summary for testing macro level mediating impact of managing adapt on strategic performance factors
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The indirect effect in the case strategic customer performance is 0.218. The results indicate that the adaptive exercise such reassessing capabilities facilitates influence of act on strategic performance such as improving processes that can support customer orientation. For example, innovation is often recombination of existing ideas, technologies, etc., in new and exciting ways. The incorporation of reflections through a regular process for collecting input from important stakeholders helps develop innovative business and management solutions resulting in profit and growth (Hanley 2007). However, it could be more interesting to analyze the micro level mediation effect. Table 3 summaries the results of micro level mediation analysis.

Table 3 Regression analysis summary for testing micro level mediating impact of managing adapt on strategic performance factors
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It is clear from the above table that neither all the mediation effect in the case of strategic enterprise performance, nor all the mediation effect is partial in the case of strategic customer performance. The ‘reassessing capabilities’ has emerged as one of the most powerful mediating variable facilitating effect on performance orientation on strategic enterprise performance. In this case, the value of R-square changes from 0.232 to 0.532, which shows that performance orientation becomes a strong predictor of enterprise performance when organization continuously reassessing the capabilities (Figs. 2 and 3). The ‘reassessing capabilities’ functions as mediating variable in most of the cases. Another adapt variable, adaptive culture also emerged as key mediating variable influencing effect of performance orientation and reviews & reflection on strategic enterprise performance. While in the case of strategic customer performance, adaptive culture influences effect of execution leadership, performance orientation and reviews & reflections.

Fig. 2
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Comparison of direct and mediation effect of independent micro variables (“(C)” indicates complete mediation)

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Fig. 3
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Changes in R-square reflecting micro level mediation effect (“(C)” indicates complete mediation)

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Discussion and Managerial Implications

The execution leadership is characterized by many capabilities such as top management’s support and involvement in strategy execution; empowering people to contribute in strategy execution; clarifying strategy execution initiatives at different levels; providing compelling vision and directions to the employees; and providing measurable objectives (Guth and MacMillan 1986; Beer and Eisenstat 2000). The middle managers expect top management's direction, but often feel that they are in a better position to initiate and assess alternative courses of action. The results of this study provide a plausible reason that a strong adaptive culture facilitates influences of execution leadership to achieve superior execution outcome.

Developing the performance orientation among the employees and managers is the basic aim of management interventions. It is the performance orientation that converts the strategy, operation, and process into the action for execution. However, the execution efforts may fail if do not enjoy support in terms of capabilities and commitment of the employees and managers. The mediation analysis rightly points out that the reassessing capabilities and adaptive culture help developing capability and commitment base to nurture performance orientation for execution efforts. Therefore, execution leadership should take charge of developing adaptive culture to make employees more result oriented. The adaptive culture also facilitates employees’ involvement and consensus building that help in developing performance orientation (Wooldridge and Floyd 1990).

The communication and coordination is cited as most frequent barrier as well as facilitator of strategy execution (Alexander 1985). Its effect on strategy execution manifests in many ways. For example, effective communication and coordination bridges the gap between strategy formulators and executors in general and line and staff personnel in particular. In the context of role of communication and coordination in strategy execution, existing literature focuses mainly on developing shared understanding (Wooldridge and Floyd 1990; Raperta et al. 2002). Additionally, this study suggests that communication and coordination has to be supplemented by continuous capability reassessment to fine tune the execution efforts.

Innovation is also important for effective execution because it orients execution activities towards strategic direction and link performance with market and customer. The capability reassessment and adaptive culture shape up effect of innovation on strategic performance. For incremental innovation through continuous capability assessment and developing adaptive culture, an organization may apply cross-functional coordination and communication; reward and motivation; and employees’ involvement. A gap between strategy and reward system is also one of the most common reason of poor execution of strategy (Wooldridge and Floyd 1992a; Aaltonen and Ikavalko 2002). An organization that ties rewards to the success of the strategy is rewarded with higher levels of organizational performance. The top managers should also develop reward systems that encourage middle managers to think strategically and follow firm’s growth plan (Wooldridge and Floyd 1990). For example, the low-cost strategy can be achieved when managers receive compensation based on their efficient control of business operations. However, if reward scheme is based on today’s performance, it is challenging to achieve active participation for the future plan.

A continuous review and reflection is critical to make employees think and act strategically even though daily routines and lack of time prevent to do same. For example, strong consensus may be good when the business environment is relatively stable but during divergent period strong consensus may stop the flow of new ideas. The reviews and reflections identify key managerial actions to effectively control execution activities (Reeda and Buckley 1988). It also helps in developing performance orientation by involving people and therefore, providing ownership and commitment to strategic outcomes. Organization culture has been found a key predictor of execution success (Delisi 2001). The important aspects of corporate culture for effective strategy execution are - balance of short and long-term orientation; use of ethical means by company and its staff for organization’s long-term success (Jones 1995); and learning and sharing culture (Senge 1990; Qi 2005). The learning and sharing culture helps in reading changing realities and contextualization requirements which is important for strategy execution effectiveness (Sheehan 2006; Schaap 2006).

Conclusion

There is a need of robust dialogue among the people of the organization and leaders to develop the adaptive culture in the organization. Organizations need to design the incentive plans so as to encourage staff to incorporate the learning and make required changes to innovate. For this, developing the adaptive culture is crucial, especially for the organizations operating in high-speed and rapidly changing environment. For example, a profit oriented manager may resist a new strategy because it will create a short-term performance fall, even though it would lead to longer term profit enhancement (Piercy 1998; Hanley 2007). At the same time, consistent reassessment of capabilities is necessary to effectively execute the strategy. Therefore, many scholars and practitioners emphasize that it is important to develop leadership pipelines through continuous improvement succession depth, talent review and reducing retention risk. For example, Ulrich (1998) pointed out that HR activities are usually disconnected from the real work of the organization. The HR professionals should become partner in strategy execution by helping organization to develop adaptive culture and continuously incorporate reviews and reflections.