Translating strategy into results: part two

If you want to drive successful execution, where do you begin? What levers do you have at your disposal? It seems a question too easy, yet many stumble in execution because they do not know how to start!  When it comes to execution, one of the biggest challenges senior leaders face is that we lack a model or a guiding framework for how to think about it, especially when executing in uncertain markets.

Over the past few years, my research colleague and I have worked to develop a model which provides a holistic understanding of the key drivers of execution, and how these fit together.

Below I lay out some key elements of this framework, and in doing so explore a few other common perceptions versus the realities of executing strategy.

1. We need a guiding framework for execution which takes a holistic view

What are the critical pieces for execution?  Let’s start with the fundamentals.  All organisations have a top executive team and also a group of leaders and managers distributed throughout the firm.  Most organisations are also pursuing some kind of strategy, even if it’s not explicit.  As Henry Mintzberg has pointed out, there are patterns to an organisation’s actions even if they don’t deliberately plan them.  The challenge is that these three elements – the top team, the distributed, mid-level leaders or managers, and the strategy - usually don’t seem to work together.

What is missing is something called shared context.  Shared context is a common understanding of what matters, why it matters, how the pieces fit together, and what’s working and not working.  This common understanding is the foundation of effective execution.  We would never build a house without solid foundations, yet many organisations attempt to implement new processes and initiatives and are surprised when they collapse, or just crumble away.  They do so because the foundations that solid shared context brings are not in place.

Once the shared context is in place, the roles of the top team and the distributed leaders become more clear, and we can add the last two elements of our framework: the hardware and the software.

The hardware consists of two sets of processes.  

The first are processes for managing performance commitments up and down the organization, across units, and outside the firm, and processes for  renegotiating these commitments when circumstances change.  The second are processes to ensure the most critical resources an organisation has – cash, people, and senior managerial time – are allocated and assigned to the areas where they matter the most.

Finally, there is the software, or cultural elements, of execution.  These are often overlooked in execution frameworks and toolkits, yet the softer elements are often the hardest, and indeed most critical, to get right.  For effective execution, the challenge is to establish what I call a ‘culture of execution’, or the bundle of values and behaviours that supports execution over the long run.

Thus, when moving from strategy to results, we need to consider four key factors: shared context (shared understanding amongst key leaders of what matters, why it matters, how the pieces fit together, and how you’re doing); leaders to drive execution (the top team and distributed leaders); the hardware (processes, explicitly the allocation of resources); and the software (a culture that supports execution).  Together, these drivers present a view of how to take a holistic view of the organisation, and the key levers you can pull to better lead execution.

2. Most people don’t know what your strategy is, and this really matters for execution

That many managers do not know what the company’s strategy will come as no surprise to most operational managers. What surprises me, though, is how surprised executives are when the results of their execution surveys show how little their own strategy is understood!  Our online survey asks a killer question: “What are the top priorities for your company over the next three to five years.”  Even with some fairly generous coding, on average less than 60% of distributed leaders converge on even one top priority for their company.

Why the disconnect between what executives think is being communicated and what is actually understood? We forget that communication is a loop.  What matters is not what is said but what the people that are being spoken to have understood.  It is not about output, but effect.  Countless executives I work with proudly tell me how many town halls they’ve held to roll out their strategy.  After glancing at the 100+ deck PowerPoint presentation they’re using to communicate this, and that their agenda is 90% them talking through them, I know how well this will land with their leaders.  Simply put, communication does not equal understanding, and the necessary shared context for effective execution is built through conversations held between leaders across the organisation.  No amount of power point slides can substitute for this.

Part of the issue also lies with these so-called strategies themselves.  Strategy is about making choices.  It should end with a simple story that tells us where we as an organisation or going to play, or compete, and how we are going to win, or succeed, while being clear on the top challenges that we’ll face along the way.  The most critical element is then saying what are we going to do?  What are the top priorities for the company or business unit over the next few years, the few aspects that we are going to be focusing the majority of our effort on?  Many strategies leave the distributed leaders wanting.  They may see some main themes, but this is not strategy.  They leave after these town halls without knowing the answer to the most critical, and perhaps the only, question they want their senior leaders to answer for them: ‘so what do you want me to do?’  The way to answer that is to answer a subtly different question, or what my colleague Stephen Bungay and I call the Spice Girls’ question: ‘Tell me what you want, what you really, really want”.  Answering it is difficult, but necessary.  Then they can go away, have a think, and come back and tell you what they think they should do as a result.

The solution is not to increase effort: more town halls won’t solve the problem.  What we need is a set of discussions that build an understanding of what we are going to do, and what we are not going to do, and provide distributed leaders with the criteria they need to make the critical choices they face in executing in their markets.  Building shared context takes time.  As a senior leader, you are never done.  You cannot check ‘shared context’ off the list, as it is built by talking (not telling) over time and across the organisation.

3.  It’s not about doing everything right; it’s about doing the right things

Many managers equate execution with flawless delivery on a company’s operational processes through tools such as lean, six sigma, total quality management, etc. Operational excellence clearly influences a company’s ability to execute its strategy. When a plant cannot achieve required quality levels in its production, for example, it directly impedes the company’s ability to ship products and creates massive amounts of additional work. Operational excellence is necessary, but not sufficient for effective execution. Many of the companies we have studied have well-functioning operational processes, but still struggle to execute their strategy.

For these companies the major obstacle to execution is not doing things right, but doing the right things.

The companies we have studied consistently struggle to allocate resources—cash, people, and managerial attention—to activities that matter most. Execution is about focusing time, energy, and resources on the few things which will do the most to create value and take your organisation to a different, better place.  Resource allocation is the flip side of performance commitments. Managers can promise results, but will not be able to deliver on their promises unless they have the required resources.

Resource allocation is critical, but the term itself can be misleading. In existing businesses, all allocation is re-allocation across projects, priorities, and initiatives.  We have found that this re-allocation challenge is especially pronounced when it comes to exiting declining projects or initiatives.  Getting into new, promising opportunities is less of a struggle.

4. The focus should not be on building a culture of performance, but a culture for execution

When talking to senior executives or leaders, they often express a desire to build a stronger culture of performance, believing this is holding them back from execution.

Yet, while performance matters, it’s not the silver bullet for more effective execution.  For one, our research shows that most companies are doing fairly well on this already.  Most do better than okay on holding individuals accountable for results, reward performance, and hire and promote based on performance-related factors.

More critically, there are real risks for organisations that try too hard to turbocharge this focus on performance. One of the biggest is that too much focus on performance - on hitting your numbers - can hamper the needed coordination across teams or units that is so vital in complex organizations, especially those look to offer integrated solutions or serve global customers.

Execution in uncertainty also requires an element of agility and adaptation.  And when making quick calls in the face of volatile markets, some things will inevitably go wrong.  When they do, there needs to be an environment of candid conversations, where tough issues can be flagged and discussed.  Shockingly few of the companies we’ve studied said they could discuss these issues openly and honestly.

Adaptation also involves an element of innovation and experimentation.  Most of the companies I work with on execution have innovation as a core element of the success of their strategies, and when we ask companies what their top values are, innovation falls in the list of the top more times than not.  What is actually happening in these organisations does not match the values listed on their breakroom walls: more than 2/3 of senior managers say that if they experimented and failed they feared career risk.

The point of experimenting is to learn.  Most experiments, by definition, fail.  I also work with dozens of technology start-ups in Silicon Valley who embrace this learning culture as part of their DNA; their future success depends on it, and they act accordingly.  These young companies embrace a learning culture, which has to tolerate mistakes or failures and allow people to innovate.  Unfortunately, these credos are translated far less to the larger, complex organisations that have taken our execution survey.

5. You need good data to execute

The amount of data on hand to inform decision-making has exploded in recent years, and most managers gather a wealth of information about customers, competition, technology and macroeconomic trends when formulating company strategy. While most managers also acknowledge that they may need help in analysing this information, many consider themselves experts when it comes to execution. This is, after all, what they spend most of their time doing. As a result, they believe they can trust their gut instincts when it comes to assessing what is and is not working as they execute their strategy, or at least rely on their intuitive sense of how things are going.  If the past is a good guide to the future, intuition can be very valuable.  But in a complex, ambiguous, fast changing environment, it can be a trap.

Unfortunately managerial confidence in their knowledge of how well things are working is also usually misplaced. For one, we find that managers consistently overestimate how well their organization is executing.   A degree of over-confidence is not surprising: people routinely over-estimate their abilities at anything from driving to cooking to athletic prowess. The more critical issue is that managers lack clarity on what specific aspects of execution are working and not working.

We often track a variety of metrics to gauge performance, ranging from budgets to employee engagement surveys. While important, this type of information is a lagging indicator of how well the unit or company is executing.  To better execute their strategy, the same disciplined data collection, review and feedback needs to occur with metrics that measure and track leading indicators of how well the organization is executing.

Having a framework or something like a set of survey results can help executives say, ‘Here are the aspects I should be focusing on, and here are the things that I’m setting aside for now’. It’s not about doing everything right, it’s about focusing on the few right things that you need to do to really take your organisation to a different place.

For the leaders who have taken the survey and used it to drive better execution, one of their key learning was that with execution, the key is to focus on a few key drivers that really make a difference, rather than trying to maximise across everything.

Effective execution is an enduring challenge.  It is hard because it means facing and resolving the tension between apparently conflicting needs.  It requires focus and agility.  It requires alignment and autonomy.  It requires accountability and coordination, individual performance and teamwork.  The trade-offs are live, real, and tough to make.  Mastering it is rare.  But the rewards are great.