Barriers to strategy execution.

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Recent studies have shown that organizations that have gone through the effort of developing a written strategy fail miserable at execution. According to Paul Niven in his book “The balanced Scorecard:

• Only 10% of organizations execute their strategy
• Only 25% of managers and executives have incentives linked to strategy
• 85% of executive teams spend less than 1 hour per month on strategy
• 60% of organizations don’t link budgets to strategy

Those are pretty dismal facts about commitment and results as they pertain to strategy execution. Why are companies so poor in doing what they say they want to do?

According to an article in the Sloan Management Review in the summer of 2000 most of it has to do with leadership. The Sloan report listed Six Strategy Killers”.

1. Ineffective senior management teams
2. Top down management style
3. Unclear strategy and conflicting priorities
4. Poor vertical communication
5. Poor coordination across boundaries
6. Inadequate leadership skills down the line

These are all related to leadership and vision of senior management. In over 35 years experience as a CEO and business coach if I had to pick one of the strategy killers it would be unclear strategy and conflicting priorities.

I’ve worked with numerous companies developing a vision and a strategic plan to achieve that vision. In most every case the executive team knows that change is needed and indeed inevitable. They develop a strategy to put their organization in the best possible position to be proactive to the anticipated change, and then they freeze. Day-to-day priorities set in and they lose focus on why the plan was developed.

Developing a strategic plan is a worthwhile effort but the work doesn’t end there it’s just beginning. If all internal processes and management incentives are not aligned with plan achievement the real message is business as usual.

Senior management must take the lead in driving change and that lead needs to be in visible as well as compensatory forms. If we look at the statistics above they simply isn’t happening.

The real question is why isn’t it happening 90% of the time. I believe it has to do with short term incentives linked to quarterly and annual financial performance. It all sounds great when a company plans to invest in technology or human resources to strengthen their market presence in the next five years, but when it comes to spending money that impacts now, for something that may or may not happen later, it just doesn’t compute.

They often rationalize the problem hasn’t happened yet; we’ll have time to deal with it later. Of course by the time later comes they are scrambling trying to make a five year plan happen in one year.

Long term strategy implementation takes strong leadership, a clear vision, and absolute accountability for results. If you accept these as fact, you have to accept that these attributed are in short supply in all but 10% of organizations in the United States. 

Article first published as <a href='http://technorati.com/business/article/barriers-to-strategy-execution/'>Barriers to strategy execution.</a> on Technorati.

What is effective leadership?

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What constitutes effective leadership? If you ask ten people you’ll probably get a variety of answers. During my leadership development programs we spend a great deal of time defining what leadership means to the individuals in the session.

The simple fact is you can define it in many ways, it almost becomes an individual preference of what each calls a great leader. That’s understandable because different people respond to different things.

We begin by establishing the attributes of  effective leadership. We ask each participant to think if a person that they consider to be a great leader. We then ask them to list the main characteristics of that person that makes them a leader. We always get a variety of the same answers:

Integrity

Great communicator

Innovative

Intelligent

Decisive

And many more.

We then discuss each of these traits and decide if their choice of leaders was born with that skill or acquired it. The answer to everyone except possibly native intelligence is they are acquired skills. So the inference is made, ‘leaders are made not born”.

But a lot of people are smart and not great leaders, or honest and not considered leaders, what makes one person with those attributes a leader and another not?

If I look back at my career I can honestly say I met hundreds if not thousands of managers, but a handful of people I would consider leaders. If I were to try and define the difference from my experience I would have to say leadership is certainly defined by getting positive results, but that’s too narrow. I’ve known many managers and executives that got positive results but were hated by their employees. I think it has to go further than that.

To me great leadership is getting the best possible results from all the resources  available to him or her, human and capital, by developing focused commitment by all stakeholders on attainment of the primary vision.

Put plainly it means getting the best from everyone and everything through commitment, communications and buy -in.

Now ask yourself the question how many managers or executives have you known or worked with in your careers that fit this profile?

If you are like me it’s down to just a few.

The bigger question is why can’t you name more than a few? If nearly all leadership traits are learned, and well known to most of us, why aren’t there more great leaders?

I can think of several ways to answer that question based on my own experience.

One is ego. People get put into a position of authority and ego takes over. They no longer listen to advice, facts, metrics or much of anything. They are the supreme leader, nobody can tell them anything.

Another is fear. If I commit to a vision it might not work so I’ll allow the direction of the business to be decided for me.

Still another is commitment to results. Many executives confuse being busy with being productive. They over schedule themselves in meetings and micromanage every task. They are “too busy” doing what they feel comfortable doing to do what needs doing.

All of the patterns above lead to poor results. Those poor results are too often the only thing that they delegate well, leading to morale issues, turnover, poor customer satisfaction and more poor results.

My management career spans over thirty-five years and I learned many things good and bad from many people. One gentleman told me something early in my management career that has always stuck. “If you want to be a great leader give everyone else credit for the good things and take the blame for all the bad things that happen”.

I don’t know if it’s that simple but it’s a good start.

Is there any leadership left in large companies?

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Everyone is familiar with the horrible public image projected by BP’s CEO during public talks on the gulf oil disaster. For an educated, experienced executive I don’t see how he could have come off any worse than he did. And that was his public image. I wonder what he’s like inside the walls of BP?

I was thinking about that this weekend while discussing management and job related issues with several friends and family members. It appears last weekend was the time for all job related concerns to surface.

What surprised me about the conversations I had with two of the people was I really wasn’t surprised. I have experienced so many similar occurrences in my history I almost expect it.

Both people were to say the least de-motivated. I’m not sure de-motivated is a word, but I can’t think of another that’s better suited. I say that because both people are self-driven, hard working, and results driven individuals that I’ve known for many years. What their management has succeeded in doing is converting a highly motivated employee into a disengaged employee.

I spent some time thinking about how that happens, and I have to admit it wasn’t that hard to understand. They both report to mid-level managers and middle management in a large company is not a great place to be. They are for the most part afraid. They make a decent to great salary and have a nice benefit package, they are usually middle aged or later, and they know if they get shown the door, the chance of them duplicating their current situation is slim. So they develop the “hunker down” mentality. Don’t make waves, don’t take risks, don’t do anything that might result in making a mistake. They become caretakers of their own organization filtering information up the chain of command. Innovation, creativity, leadership are all things that are best left to someone else, what if I make a mistake? Worse yet what will happen to me if I have a top performing employee that is visible to my bosses, they see that as a risk to themselves not as an asset to the corporation.

Leadership defiantly starts at the top, but effective leadership makes sure it’s carried through the entire organization. Top management is all too often fed sanitized data, and is unaware of employee issues, customer issues or anything other than earnings and stock prices. If the numbers are good all must be well. That’s how a guy can get so out of touch with reality like our friend from BP, but he isn’t alone.

I wrote an article a few years ago saying that I believe the large corporation is outdated and cannot survive in it’s present form. I have seen nothing that makes me believe otherwise. Large corporations are afraid of lawsuits. They deal with this fear by not delegating anything below a certain level of management. They try to offset this lack of delegation by volumes of processes and procedures to limit the exposure of middle management, wrongly thinking that level will escalate any exceptions.

Middle management is “hunkered down” and isn’t about to take the risk of telling anyone anything. So the system is flawed from the start.

Effective leadership doesn’t foster fear, and it allows innovation, open communication and even failure. Fear of failure results in no risks, no risk taking results in no innovation and no change. On change results in a slow certain demise of the organization.

WIIFM for better leadership results

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In order to get the most from your employees, and from your staff you need to learn and communicate WIIFM. (What’s In It For Me). In order for employees to embrace organizational goals they must view them as their own. To do that they must clearly understand how meeting the goals of the organization is tied to achieving their personal goals.

It is much more difficult to separate personal and professional lives than it was even twenty years ago. Money alone is not the primary motivator but a short-term benefit quickly absorbed and forgotten. With the commonality of the two job household, work is a huge part of personal conversation and thought.

Leaders who take the time and make the effort to understand employee wants and needs, and helps the employee set personal goals that complement organizational goals will find better leadership results very achievable.

Goal setting is not a common practice among most of us. It starts by defining what you want in clear and crisp terms. Most of us have great difficulty in understanding or accepting what we want. Needs are easier to define, I need $500 more per month, I need a new car. Once the need is met the problem goes away and along with it the motivation.

Wants are very difficult to define. If you haven’t tried it you may be surprised. One of the exercises in our Leadership Development program is to develop a “dream inventory”. It’s a list of anything and everything you want to achieve or own or whatever your dreams are. We tell the participants to stop at fifty.

I have seen very few got even ten.

We are programmed to take care of needs and forget about most wants. If you can understand your employees wants and tie the achievement into attainment of organizational goals, you have a long term recipe for leadership results.

WIIFM starts with your personal goals and ties into your professional goals why should it be different with your employees?

Leaders need to encourage goal setting on a personal and well as professional level. Most people don’t have a plan for their lives, they just allow life to happen. They give more thought and planning to a two-week vacation than they do for the most important journey of all the journey through life.  If you can help your direct reports understand this and set goals, then have them take it down throughout the organization, how effective do you think that might be?

Explaining your organizational goals so al understand and giving everyone the opportunity to buy-in and develop personal goals that they can achieve through attainment of your goals is a win-win for everyone.

Improved leadership results start with changing culture

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I recently wrote an article on achieving better strategic planning results. It was a look at how Toyota became number one in the auto industry through effective long term strategic thinking and execution. It touched on the subject of culture but didn’t go into any real detail.

Just this week I asked a group of people why they thought Toyota had enjoyed so much success and growth. The answer was of course their Toyota Production System (TPS), lean manufacturing and attention to detail. That is exactly what General Motors came away from the Toyota / GM joint venture at NUMMI. Learn the TPS and we’ve solved our problems. And it’s exactly what most U.S. companies feel, that lean manufacturing, or Six Sigma or some other program will make them world class.

They are all missing the point.

Toyota recognizes that the TPS is an excellent tool but is not a silver bullet. Real excellence comes from developing a culture that engages and empowers employees.

This was further emphasized by conversations with a friend that works for a large Fortune 1000 company. He told me about the repercussions he got from escalating a problem with a major account. The company actually put him on a communications improvement plan to work better with his peers, even after the major account told his VP that the performance of one of his peers was preventing them from doing more business together. The old “shoot the messenger” adage is alive and well.

Toyota has a carefully cultivated culture of employees being expected to report problems. Development of that culture begins with the hiring process and continues through training and constant reinforcement. In Japan it is actually considered shameful not to report a problem when it’s noticed.  However saying you want to have employees report problems and actually being receptive and following up on problem resolution is where most managers and executives fall short.

Toyota’s culture employs a term called “Genchi Genbutsu”, translated as go and see for yourself. Employees are expected and required to report problems and managers and executives are expected to go to the source and see for themselves. They are taught not to rely on hearsay.

That’s as far from “shoot the messenger” as you can get.

If you truly want high quality products, excellent customer service, engaged and empowered employees, leadership has to “walk the talk” every day.

The overall culture of the organization has to clearly and visibly support open communications, and a blameless approach to problem solving.

In my book, “Bottom Line Focus” I talk about my own experience with continuous improvement training and implementation. I worked for a then Fortune 500 computer manufacture and was sent to an expensive training session on Total Quality Improvement. The very first time I tried to implement it back at the plant I was told “ship it, it’s month end and we need the sales”. That attitude prevails in the majority of companies I’ve been associated with.

If you really want to see improved leadership results, be a better leader. Don’t just say something live it. 

Can Small Business concepts work in big corporations?

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I read an article in Forbes on-line today by Matt Symonds asking “Can Entrepreneurship be Taught to Big Business”?  It seems that several business schools are trying to find a way to develop a term called “intrapreneurship”, or corporate entrepreneurship.

They see the need to drive small business innovation and flexibility to large corporations. While I certainly see the need to do so I will never believe that most large corporations will ever embrace those qualities with anything other than “lip service”.

Large companies have basically insulated themselves from their customers through cost cutting, and outsourcing. When was the last time you called a large company with an issue and got a live person on the phone without going through a series of maddening prompts? I had an issue with a credit card charge a few months back and was actually given the option of paying a fee for the opportunity to talk to a customer service representative. I have to admit I opted out.

The issues with large corporations go much deeper than the obvious however; the issues are fed by fear of liability, seemingly lack of trust of employees and turf management.

I’ve had experiences with numerous large companies over the years and am constantly amazed that many remain viable.  

One in particular that I’m familiar with is an excellent example of what I’m talking about. It’s a large Fortune 100 company in a highly regulated market. Product sales were historically driven by high quality and name recognition. As is common in most industries new competitors are entering the market putting cost pressures on the market leader.

They have responded by:

·     Increasing sales goals on field reps, while:

o   Cutting costs in inventory for sale

o   Cutting levels of service personnel and spare parts

o   Cutting billing and support personnel

o   Eliminating training and customer education

o   Centralizing all quotes and pricing delegations to headquarters functions, while maintaining almost no customer contact from that level.

In short there are conflicting goals and little or no customer contact beyond the sales reps in the field. To me this is a recipe for failure.

Large corporations whether through fear of litigation or lack of trust have layers of management and hundreds if not thousands of policies and procedures aimed at standardizing everything, where is the room for innovation in this environment?

Many years ago I worked at a senior level of a then Fortune 500 company. The saying there was “nails that stick out get hammered down”. I fear that’s as true today as it was then, maybe just more eloquently put.

I agree that lack of innovation, flexibility, poor communications are issues that are making large companies less competitive and vulnerable to smaller faster businesses. I also think that every company runs the risk of growing to a point that it loses the things that made it successful in the first place.

Only the most effective leadership can address these issues and prevent them or turn them around. That leadership ability must permeate through all levels of the organization. In a small business there are less layers to filter and interpret the message. Large corporations have many more opportunities to block out even the most effective focus and direction.

Until business schools can understand and resolve these issues which are based in human nature I do not see small business concepts being embraced by most corporations.

Biggest problems facing small business may be small business

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Ask any businessperson what the biggest problems are that they face in this or actually any economy, and they will invariably list three or four external issues that have a negative impact on their business. While the issues they list may be real, they are probably impacting every business to some degree; they all deal with them differently.

When I was doing research for my book, “Bottom Line Focus”, I ran across some interesting data that validated the theme I was using.

In the United States only about 3% of all companies provide the majority of revenue and job growth. They were referred to as high impact companies.  They went further to say it took an average of 17 years to become a high impact company.

What was disturbing was that after 4 four years 75% are no longer high impact!

My experience tells me that there are several reasons for this, but most all come back to leadership issues. A small business finds a profitable niche and the founder is hands- on. It grows quickly and adds people without clear vision and adequate processes. The business grows beyond it’s ability to execute. For the record in m coaching business small business is any organization with less that 500 employees.

In my research I found from numerous sources that the following is fact:

·     Over 50% of small businesses do not have a documented strategy or business plan.

 ·     Only 10% of businesses execute their strategy.

 ·     75% of business improvement initiatives fail due to lack of sustainability.

 ·     85% of leadership teams spend less than one hour per month on strategy.

 ·     On average 95% of employees are unaware if or don’t understand the company’s strategy.

 All of these factors can be traced directly to leadership. While external factors certainly impact business my advice to clients is to take care of the things they have direct control over and they will be in a much stronger position and have more options in dealing with the external issues that they have limited control over.

One of the most common things I run into on a regular basis is management so busy with fighting fires and hand holding poor processes that they tell me they simply don’t have time to develop a strategy. It is hard to convince them that having a solid foundation with a thorough S.L.O.T. analysis would go a long way in identifying root causes of current problems and inadequate processes. It is also a great forum to develop a team approach to strategy, vision, and problem solving.

The planning process is also useful in developing leadership qualities within the management team, as well as identifying potential weaknesses within the management structure.

Successful businesses develop management teams that function together to empower employees to innovate and solve problems. Unsuccessful companies often don’t progress beyond the point of a top down management style that becomes less and less effective with growth. 

Effective change management is proactive

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Change is a constant. It's always been with us, it always will be, and it's never easy. That's something that doesn't change. 

But the challenge of dealing with it is greater today because the pace of that change is accelerating. Only fifty years ago, we had decades to adjust to significant changes. Today we often have only a year or two. Science, technology, transportation, and communications are advancing so rapidly that all of life seems to be in constant transition.  

That means that at times you may have to be ready and willing to make major changes to your business and your life. You must be willing to abandon everything you’ve built, if necessary, in order to survive and prosper.

Most people can't do that. People naturally don't like change because it creates uncertainty. They instinctively resist it because they fear the unknown. 

Effective change management is learning to anticipate the need and deal with it on our own terms. We must anticipate change so we're not surprised by it. And we must anticipate where their market or industry  is headed so we can get out in front of it.  

Wayne Gretzky, one of the greatest hockey players of all time, captured the essence of this principle when he said, "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be."

Prospects frequently ask me "What if we try something different and it doesn't work I respond the same way each time, "Do you think sticking with the status quo is a viable option? How’s that working for you?”

Obviously it isn’t or I wouldn’t be there.

We change only when the pain to change is less than the pain to remain as we are.

Nothing wrong with that. But too often we don't recognize how much pain we're in until it's too late.

Many of today's business owners and managers are in denial. They are refusing to face the seriousness of the changes that are occurring in the workplace from such things as –

·     Global competition.

·     Advances in technology.

·     Automation.

·     Increased governmental intervention.

·     Immigration.

·     Changing values and motivations of workers (Gen X, Gen Y).

What are you doing as a leader to anticipate change? 

What are you doing to stay current with new market and employment trends?

What are you doing to encourage and help your employees upgrade their skills and knowledge?

If you're like most business executives, I'm afraid your honest answer would have to be, "Not nearly enough."

You are your company's change agent.

That means that you must intentionally develop your company's workforce and processes to stay in front of change. Personally dealing with change is one thing. Helping others deal with it is another.

You can help people more effectively manage change by –

·      Helping them understand the reasons for it by taking time to communicate clearly about the issues and the options. Make sure everyone involved understands the rewards of change and the consequences of not changing.

·      Considering the impact of changes on the people involved and taking steps to minimize adverse effects.

·      Giving people opportunities to share in the positive benefits of change. People want to know WIIFM? (What’s in it for me?)

·      Implementing new policies, procedures, and approaches as organized components to well-conceived plans rather than as knee-jerk reactions to circumstances. 

Biggest problems facing small business in 2010

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A while back I wrote an article on the biggest problems facing small business in general. It generated a lot of interest and is by far my most read article. That tells me that business leaders are not only searching for answers but are also searching for the right questions.

To clarify that point, many business leaders know their organizations aren’t doing as well as they want they just don’t know why.Things such as declining revenue, shrinking profit margins, and losses ofcustomers are obvious, but they are the result of problems not the real issue.This is further confused by a poor economy, is my company doing poorly because the economy is slow, or are the causes internal?

Poor economic times allow weak organizations to fail. That may sound harsh but think about it, dollars are still in circulation, there arejust fewer of them. Consumers still need goods and services, they are just more cautious about buying them. I used the example if there are five auto repair shops in an area, people still need their cars repaired, they just won’t do it as quickly or as often. The top service providers with the loyal following will survive, the marginal ones will not.

The top problems for business in 2010 aren’t new, they are simply being magnified, and they will continue to become more and more critical. We need to accept that “business as usual” will never mean the same thing. Technology is making the world smaller. There are new competitors entering nearly every market every day. The Internet has created an environment where small companies can level the playing field with large corporations by reaching millions of people with their message with little or no cost. Good news as well as bad news on a product or service travels far and fast.

So the biggest problems for business in 2010?

1.    Lack of a clear vision and plan – Most companies don’t have one. Throwing something at the market and hoping it will stick will become tougher and tougher. Find a niche and excel at it.

2.    Lack of execution– When you decide on a strategy execute.

a.    Over 90% of strategies that are developed are never executed.

b.    75% of improvement projects fail.

c.     85% of leaders spend less that 1-hour per month on strategy.

d.    Over 90% of employees don’t know the company’s strategy. (This is a direct result of top management not documenting and communicating it)

e.    Well over 90% of organizations don’t have meaningful performance measurements in place.

3.    Ineffective leadership – Things are moving faster and are more complex, and an effective leader must develop an environment that fosters innovation and open communications to take advantage of all human and capital resources.

4.    Sales and marketing effectiveness - this leads back to planning and leadership. Many companies have not taken the time to decide what their USP is. They try to compete in conflicting areas, such as lowest price and highest service. One takes away dollars and the other adds cost. Part of the planning process should include a very clear answer to one simple question, “with all of the products and services available to my customers why should they buy from me?”

In my book I had a chapter that stated flatly that all businesses have problems.While this may seem obvious my experience has taught me that not all leaders deal with problems in the same way. Many unfortunately try to deal with them by ignoring them, others by treating a symptom, still others by trying to blame someone. A few actually use meaningful data to get to the root cause and fix the issue.

The economy seems to be rebounding in 2010. The questions iswhat have you done as a business leader to position your organization to take advantage of it?

How do you improve leadership results?

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In our book Bottom Line Focus,  we talk about effective leadership being scarce. There are literally hundreds of books written on the subject, with no shortage of ideas and programs. Why then is effective leadership so hard to find?

I think first you have to clarify exactly what does effective leadership mean to you and your organization? In order to improve anything you have to have a clear understanding of three things.

• What does it look like when it’s better?
• Where is it now?
•  How do you measure progress?

So what constitutes and effective leader? 

First and foremost a leader gets results. If he or she doesn’t they may be popular but they won’t be a leader long. The difference between a leader and an effective leader is how those results are attained.

In todays highly complex, highly technical, and global environment effective leaders must learn to make use of all resources around them. This is a change from the days when the top person was expected to know everything and touch everything.

To do that you need to attract and retain excellent people, you need to create an environment that is open to communication and innovation, and you must allow them to fail. Innovation with penalties for failure creates a “don’t rock the boat” mentality.

So an effective leader gets results, develops great people and is an active listener and communicator. They are open minded, non –threatening and just as important non-threatened.

So the next step is where is your organization now? One way to tell other than simply results is to look for warning signs:

Take an honest look inside your organization. How many of these issues are present?

·     Excessive meetings with no agenda and no results

·     Consensus-driven decision making (CYA for all us older folks)

·     Lack of personal accountability

·     Poor communication between entities

·     Reluctance to terminate poor performers

·     Misaligned and uncoordinated efforts (silo effect)

·     Personality conflicts and power struggles

·     Apathetic and unmotivated employees

·     Inconsistent results

·     Poor time management

·     Reactive rather than proactive effort

·     Micro-management

·     Declining sales and / or market share

·     Lack of teamwork

·     Duplication of effort

·     High employee turnover

·     Substandard quality

·     Numerous unresolved issues and postponed decisions

All of these are symptoms of leadership issues.

Effective leadership creates an environment where things get accomplished, employees feel valued and part of an overall team.

If you want to be successful, you must be supported by an energized and competent management team. If you're not, your flow of communications is hindered in two directions. Your instructions don't go down the chain of command the way they should, so things aren't done the way you want. And communications from below don't come up to you in an accurate and timely manner, so you find out about important matters too late or not at all.

In order to be an effective leader of others you must first learn to lead yourself.