What is the strategy-to-performance gap?
The strategy-to-performance gap is the shortfall between the results a strategy promises and the results a company delivers. Michael Mankins and Richard Steele described it in a 2005 Harvard Business Review article. They estimated that a typical strategy delivers about 63 percent of the financial value it promises, and they traced the loss to weak plans as well as weak follow-through.
Why it matters to a revenue leader
The revenue plan is where the gap becomes visible, because bookings are reported against plan every month. A CRO who treats every miss as an execution problem may be pushing harder on a plan that was never achievable. Separating a flawed plan from flawed follow-through gives a PE sponsor a more honest commercial update and points the fix in the right direction.
Example
Fictitious numbersA PE-backed testing company's plan calls for $12 million in new agreements, assuming 10 sellers at full productivity by March. Hiring slips, and only 7 sellers are fully ramped by midyear. Bookings land at $8 million, and the review shows the plan assumed a hiring pace the company had never achieved.
"How much of last year's miss came from the plan's assumptions, and how much from execution?"