3 REASONS WHY GOOD STRATEGIES FAIL: EXECUTION, EXECUTION ...
(Part 2 out of 2)
(Part 2 out of 2)
People versus Process.
What should be done? Mankins says that there are two schools of thought about the best way to improve execution.
One school emphasizes people: Just put the right people in place and the right things will get done. However, within the people school, there are also divisions. Some experts insist that the right people are hired, not made. “The idea is you get A players, you pay them a lot of money, and you pay them for the performance they generate — irrespective of what may be happening in some other business or region,” Mankins says. Others within the people camp think that the key is to improve executive performance through training, and improve the average employee’s performance through the creation of a culture of accountability. For example, W. James McNerney, Jr., the chairman and CEO of 3M, argues that by improving the average performance of every individual by 15%, irrespective of what his or her role is, a company can achieve and sustain consistently superior performance.
A second school emphasizes process rather than people, Mankins says. Larry Bossidy, the CEO of Honeywell and co-author of Execution: The Discipline of Getting Things Done, is one of the leading proponents of this school. Hrebiniak is also a firm advocate of better processes. “If you have bad people, sure, you’re not going to do anything well. But how many organizations go out and hire bad people? They all hire good people. So something else must get in the way,” he argues. Mankins, however, believes both propositions have merit. “I don’t believe those two schools of thought are competing. I think they’re just two sides of the same coin,” he says.
Marakon’s research suggests that companies that have delivered the best results to shareholders combine both approaches. Looking at stock performance going back to 1990, Mankins says, they found that the majority of companies in the top quartile of performance combine attention to process with attention to executive development. Cisco, 3M, and GE are all companies that have emphasized both. Bossidy’s Honeywell, on the other hand, has focused principally on process – and has achieved only average performance.
Five Keys to Getting the Job Done.
Whatever perspective is ultimately seen as the most helpful, there seem to be some tangible things companies can do to improve the chances of success. Experts at Wharton and Marakon agree that, like everything else in business management, improving execution is an ongoing process. However, they say there are steps any company can take that should provide some incremental gains. For example:
Develop a model for execution.
Strategic yardsticks are plentiful. Michael Porter’s theory of comparative advantage, for instance, gives strategists a way to conceptualize market leadership goals. In the evaluation of narrower plans, William Sharpe’s capital asset pricing model, or more recent schema such as real options theory, can play a similar role. But when it comes to managing change, there are few such guidelines.
Hrebiniak, who offers such guidelines in his book, notes that it’s important for managers to “have a model [identifying] the critical variables that define — at least for the manager — the things they have to worry about when they put together an implementation plan. Without that, managers will say something like, ‘We just hand the ball off to someone and let them run with it,’ and that’s the execution plan. That isn’t going to go anywhere.”
Choose the right metrics.
While sales and market share are always going to be the dominant metrics of business, Mankins says that more and more of the best companies are choosing metrics that help them evaluate not only their financial performance, but whether a plan is succeeding. For example, when a large cable company realized that the speed at which it penetrated a new market correlated directly with the number of service representatives it had in the field, executives began tracking the progress of how quickly representatives were being added in particular territories.
But Hrebiniak warns that it’s important to choose metrics in a package so that they can change if market conditions change. For example, sales of cars might be a good metric for a car manufacturer, but if interest rates rise, sales will likely suffer. A good set of metrics takes that into account.
What should business units that don’t touch customers use as a metric? Hrebiniak says he is often told by lawyers, human resource officers or information officers that the success of what they do can’t be measured in numbers. His advice: Ask internal clients what would change for them if your department were good or bad — or didn’t exist? Sometimes questions like that can lead to good ideas for performance metrics.
Don’t forget the plan.
As noted above, plans are often simply agreed to and then forgotten. One way advocated by Mankins to keep the plan on center stage is to separate executive meetings about operations from those focused on strategy. While Hrebiniak holds that strategy only succeeds when it is integrated into operations, Mankins and his colleagues argue that day-to-day concerns often so overwhelm the executive team that such an agenda management process is the only way to keep executive attention focused on the organization’s progress.
Assess performance frequently.
Performance monitoring is still an annual affair at most companies. However, according to Mankins, plan assessments at many of the leading companies happen at much more frequent intervals than they did in the past. “The reason why Wal-Mart is so good at execution is it knows daily if what it is doing in each of its stores gets results or not,” Mankins says. For example, when Wal-Mart learned this year that its Christmas sales strategy hadn’t worked just eight days after the close of the season, it was able to mitigate the damage in a way it wouldn’t have if results had been slower in coming. By shortening the performance monitoring cycle — from quarter-by-quarter to month-by-month or week-by-week — top management can get more “real-time” feedback on the quality of execution down the line.
Hrebiniak says that companies often go wrong by creating a cultural distinction between the executives who design a strategy and people lower down in the corporate hierarchy who carry it out. Asking ongoing questions about the status of a plan is a good way to ensure that it will continue to be a priority.
Meetings between the executive team and unit managers should be regular and ongoing, advises Perigo. It’s that kind of “direct, demonstrated leadership,” he says, that convinces an organization that commitment to a plan is real and that there will be consequences if the plan is not followed through. “It’s a signal of commitment from the top that there’s an expectation of commitment from below”.
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