By Melissa J. Anderson

Based on analysis of its organizational-health database (which includes more than ten years of surveys of over 765,000 employees at some 600 companies), McKinsey has determined that many companies are not succeeding when it comes to one of the key drivers of employee engagement: making sure employees voices are included and valued in creating corporate strategy.

In most companies, employees are often uncertain about the path the business plans to take. Arne Gast and Michele Zanini, authors of McKinsey’s recent report “The Social Side of Strategy,” explain, “…many organizations struggle with strategic alignment: even at the healthiest companies, about 25 percent of employees are unclear about their company’s direction. That figure rises to nearly 60 percent for companies with poor organizational-health scores.”

But this is a problem that can be solved. The research suggests that “making more employees part of the strategy process should be a powerful means of aligning them more closely with the company’s overall direction.”

Companies can improve their organizational health, better engage employees, and potentially build better plans by “crowdsourcing” strategic design, suggest Gast and Zanini.

They add, “The payoff for such cohesion is significant: companies with a top-quartile score in directional alignment are twice as likely as others to have above-median financial performance.”

Crowdsourcing Strategy

By including a wide range of front-line employees as well as managers, companies draw from a more diverse set of viewpoints, which enables them to develop stronger plans, Gast and Zanini explain.

“If you’ve ever wondered how to inject more diversity and expertise into your strategy process, to get leaders closer to the operational implications of their decisions, or to avoid the experience-based biases and orthodoxies that inevitably creep into small groups at the top, it may be time to try shaking things up.”

The report indicates that there are two key benefits to opening up strategic direction design to a broad audience of employees.

“One is improving the quality of strategy by pulling in diverse and detailed frontline perspectives that are typically overlooked but can make the resulting plans more insightful and actionable.” They explain that by including more voices to the strategic process, leaders hear from those individuals who will actually be carrying out the plan in the day-to-day.

Next, they say, is a boost in employee engagement that comes from being part of an inclusive organization. They write:

“The second is building enthusiasm and alignment behind a company’s strategic direction—a critical component of long-term organizational health, effective execution, and strong financial performance that is all too rare, according to research we and our colleagues in McKinsey’s organization practice have conducted.”

Encouraging employees to take part in designing a firm’s strategic direction can go a long way in helping them feel motivated and valued. “Those employees not only understand the strategy better but are also more motivated to help execute it effectively and more likely to spot emerging opportunities or threats that require quick adjustments,” explain Gast and Zanini.

Making It Work

Crowdsourcing organizational strategy does not mean opening the floor to everyone all the time. Most of the case studies presented by McKinsey in the report have to do with specific initiatives or product launches – pieces of the whole. Nevertheless, the case studies show that inspiration, analysis, and expertise can be found in people seemingly unrelated to the project.

For example, in 2009, HCT Technologies, an Indian software company, launched a new process called “My Blueprint,” through which 300 managers posted their business plans and invited 8,000 employees to review them, and add their own critiques.

Not only were the initial plans of better quality because their authors knew they were up for the review, but the employee reviewers provided honest feedback on the realities they were facing day to day. “At the conclusion of the inaugural My Blueprint process, there was broad consensus that participatory business planning had been far more valuable than the traditional top-down review process,” explain Gast and Zanini.

McKinsey also emphasizes that when preparing to undertake this level of transparency and egalitarianism, particularly in company that has historically had a more hierarchical structure, leadership must be brave – and this can mean a challenging shift in responsibility and transparency. “It takes courage to bring more people and ideas into strategic direction setting. Senior executives who launch such initiatives are essentially using their positional authority to distribute power,” Gast and Zanini write.

They add, “While these are still early days for social strategy, its potential to enhance the quality of dialogue, improve decision making, and boost organizational alignment is alluring. Realizing that potential will require strategic leaders to flex new muscles and display real courage.”