When a company formulates strategies for its business units, it reaps what it sows, executives say. Those who work at companies that frequently apply best practices—such as assessing trends, risks, and competitor reactions—and take on the challenge of fostering collaboration between executives at the corporate and business unit levels are more positive about the outcomes.

The latest McKinsey online survey¹ of executives around the world reveals tension throughout the process. Corporate-level managers tend to perceive their companies’ processes for developing business unit strategy as collaborative, while their colleagues at the business unit level more often see the strategies as mandated by the corporate center.

Most respondents do agree, however, that their companies have some way to go before the formulation of business unit strategy meets the rigorous standards associated with best practice. For instance, while eight executives out of ten surveyed say it is relevant to identify the top business, social, and environmental trends that would affect a business unit’s strategy, only half report that their companies frequently do so.

What’s more, executives have mixed feelings about the results. While a large majority of respondents say the process aligns business unit leaders with the strategy and makes managers committed...