93323 09 209-228 r2 am 11/18/10 9:07 PM Page 209 Turning Great Strategy into Great Performance by Michael C. Mankins and Richard Steele Copyright © 2011. Harvard Business Review Press. All rights reserved. T THREE YEARS AGO, THE LEADERSHIP team at a major manufacturer spent months developing a new strategy for its European business. Over the prior half-decade, six new competitors had entered the market, each deploying the latest in low-cost manufacturing technology and slashing prices to gain market share. The performance of the European unit—once the crown jewel of the company’s portfolio—had deteriorated to the point that top management was seriously considering divesting it. To turn around the operation, the unit’s leadership team had recommended a bold new “solutions strategy”—one that would leverage the business’s installed base to fuel growth in after-market services and equipment financing. The financial forecasts were exciting—the strategy promised to restore the business’s industryleading returns and growth. Impressed, top management quickly approved the plan, agreeing to provide the unit with all the resources it needed to make the turnaround a reality. Today, however, the unit’s performance is nowhere near what its management team had projected. Returns, while better than before, remain well below the company’s cost of capital. The revenues and profits that managers had expected from services and financing 209 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 210 Copyright © 2011. Harvard Business Review Press. All rights reserved. MANKINS AND STEELE have not materialized, and the business’s cost position still lags behind that of its major competitors. At the conclusion of a recent half-day review of the business’s strategy and performance, the unit’s general manager remained steadfast and vowed to press on. “It’s all about execution,” she declared. “The strategy we’re pursuing is the right one. We’re just not delivering the numbers. All we need to do is work harder, work smarter.” The parent company’s CEO was not so sure. He wondered: Could the unit’s lackluster performance have more to do with a mistaken strategy than poor execution? More important, what should he do to get better performance out of the unit? Should he do as the general manager insisted and stay the course—focusing the organization more intensely on execution—or should he encourage the leadership team to investigate new strategy options? If execution was the issue, what should he do to help the business improve its game? Or should he just cut his losses and sell the business? He left the operating review frustrated and confused—not at all confident that the business would ever deliver the performance its managers had forecast in its strategic plan. Talk to almost any CEO, and you’re likely to hear similar frustrations. For despite the enormous time and energy that goes into strategy development at most companies, many have little to show for the effort. Our research suggests that companies on average deliver only 63% of the financial performance their strategies promise. Even worse, the causes of this strategy-to-performance gap are all but invisible to top management. Leaders then pull the wrong levers in their attempts to turn around performance—pressing for better execution when they actually need a better strategy, or opting to change direction when they really should focus the organization on execution. The result: wasted energy, lost time, and continued underperformance. But, as our research also shows, a select group of high-performing companies have managed to close the strategy-to-performance gap through better planning and execution. These companies—Barclays, Cisco Systems, Dow Chemical, 3M, and Roche, to name a few—develop 210 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 211 TURNING GREAT STRATEGY INTO GREAT PERFORMANCE Idea in Brief Most companies’ strategies deliver only 63% of their promised financial value. Why? Leaders press for better execution when they really need a sounder strategy. Or they craft a new strategy when execution is the true weak spot. Copyright © 2011. Harvard Business Review Press. All rights reserved. How to avoid these errors? View strategic planning and execution as inextricably linked—then raise the bar for both simultaneously. Start by applying seven deceptively straightforward rules, including: keeping your strategy simple and concrete, making resourceallocation decisions early in the planning process, and continuously monitoring performance as you roll out your strategic plan. By following these rules, you reduce the likelihood of performance shortfalls. And even if your strategy still stumbles, you quickly determine whether the fault lies with the strategy itself, your plan for pursuing it, or the execution process. The payoff? You make the right midcourse corrections— promptly. And as high-performing companies like Cisco Systems, Dow Chemical, and 3M have discovered, you boost your company’s financial performance 60% to 100%. realistic plans that are solidly grounded in the underlying economics of their markets and then use the plans to drive execution. Their disciplined planning and execution processes make it far less likely that they will face a shortfall in actual performance. And, if they do fall short, their processes enable them to discern the cause quickly and take corrective action. While these companies’ practices are broad in scope—ranging from unique forms of planning to integrated processes for deploying and tracking resources—our experience suggests that they can be applied by any business to help craft great plans and turn them into great performance. The Strategy-to-Performance Gap In the fall of 2004, our firm, Marakon Associates, in collaboration with the Economist Intelligence Unit, surveyed senior executives from 197 companies worldwide with sales exceeding $500 million. We wanted to see how successful companies are at translating their strategies into performance. Specifically, how effective are they at 211 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 212 MANKINS AND STEELE Idea in Practice Seven rules for successful strategy execution: • Keep it simple. Avoid drawn- out descriptions of lofty goals. Instead, clearly describe what your company will and won’t do. Example: Executives at Euro- pean investment-banking giant Barclays Capital stated they wouldn’t compete with large U.S. investment banks or in unprofitable equity-market segments. Instead, they’d position Barclays for investors’ burgeoning need for fixed income. Copyright © 2011. Harvard Business Review Press. All rights reserved. • Challenge assumptions. Ensure that the assumptions underlying your long-term strategic plans reflect real market economics and your organization’s actual performance relative to rivals’. Example: Struggling conglomerate Tyco commissioned crossfunctional teams in each business unit to continuously analyze their markets’ profitability and their offerings, costs, and price positioning relative to competitors’. Teams met with corporate executives biweekly to discuss their findings. The revamped process generated more realistic plans and contributed to Tyco’s dramatic turnaround. • Speak the same language. Unit leaders and corporate strategy, marketing, and finance teams must agree on a common framework for assessing performance. For example, some high-performing companies use benchmarking to estimate the size of the profit pool available in each market their company serves, the pool’s meeting the financial projections set forth in their strategic plans? And when they fall short, what are the most common causes, and what actions are most effective in closing the strategy-to-performance gap? Our findings were revealing—and troubling. While the executives we surveyed compete in very different product markets and geographies, they share many concerns about planning and execution. Virtually all of them struggle to produce the financial performance forecasts in their long-range plans. Furthermore, the processes they use to develop plans and monitor 212 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 213 TURNING GREAT STRATEGY INTO GREAT PERFORMANCE potential growth, and the company’s likely portion of that pool, given its market share and profitability. By using the shared approach, executives easily agree on financial projections. • Discuss resource deployments early. Challenge business units about when they’ll need new resources to execute their strategy. By asking questions such as, “How fast can you deploy the new sales force?” and “How quickly will competitors respond?” you create more feasible forecasts and plans. Copyright © 2011. Harvard Business Review Press. All rights reserved. • Identify priorities. Delivering planned performance requires a few key actions taken at the right time, in the right way. Make strategic priorities explicit, so everyone knows what to focus on. • Continuously monitor performance. Track real-time results against your plan, resetting planning assumptions and reallocating resources as needed. You’ll remedy flaws in your plan and its execution— and avoid confusing the two. • Develop execution ability. No strategy can be better than the people who must implement it. Make selection and development of managers a priority. Example: Barclays’ top execu- tive team takes responsibility for all hiring. Members vet each others’ potential hires and reward talented newcomers for superior execution. And stars aren’t penalized if their business enters new markets with lower initial returns. performance make it difficult to discern whether the strategy-toperformance gap stems from poor planning, poor execution, both, or neither. Specifically, we discovered: Companies rarely track performance against long-term plans In our experience, less than 15% of companies make it a regular practice to go back and compare the business’s results with the performance forecast for each unit in its prior years’ strategic plans. As a result, top managers can’t easily know whether the projections that underlie their 213 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 214 MANKINS AND STEELE Where the performance goes This chart shows the average performance loss implied by the importance ratings that managers in our survey gave to specific breakdowns in the planning and execution process. 37% Average performance loss Copyright © 2011. Harvard Business Review Press. All rights reserved. 63% Average realized performance 7.5% Inadequate or unavailable resources 5.2% Poorly communicated strategy 4.5% Actions required to execute not clearly defined 4.1% Unclear accountabilities for execution 3.7% Organizational silos and culture blocking execution 3.0% Inadequate performance monitoring 3.0% Inadequate consequences or rewards for failure or success 2.6% Poor senior leadership 1.9% Uncommitted leadership 0.7% Unapproved strategy 0.7% Other obstacles (including inadequate skills and capabilities) capital-investment and portfolio-strategy decisions are in any way predictive of actual performance. More important, they risk embedding the same disconnect between results and forecasts in their future investment decisions. Indeed, the fact that so few companies routinely monitor actual versus planned performance may help explain why so many companies seem to pour good money after bad—continuing to fund losing strategies rather than searching for new and better options. Multiyear results rarely meet projections When companies do track performance relative to projections over a number of years, what commonly emerges is a picture one of our 214 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 215 Copyright © 2011. Harvard Business Review Press. All rights reserved. TURNING GREAT STRATEGY INTO GREAT PERFORMANCE clients recently described as a series of “diagonal venetian blinds,” where each year’s performance projections, when viewed side by side, resemble venetian blinds hung diagonally. (See “The venetian blinds of business.”) If things are going reasonably well, the starting point for each year’s new “blind” may be a bit higher than the prior year’s starting point, but rarely does performance match the prior year’s projection. The obvious implication: year after year of underperformance relative to plan. The venetian blinds phenomenon creates a number of related problems. First, because the plan’s financial forecasts are unreliable, senior management cannot confidently tie capital approval to strategic planning. Consequently, strategy development and resource allocation become decoupled, and the annual operating plan (or budget) ends up driving the company’s long-term investments and strategy. Second, portfolio management gets derailed. Without credible financial forecasts, top management cannot know whether a particular business is worth more to the company and its shareholders than to potential buyers. As a result, businesses that destroy shareholder value stay in the portfolio too long (in the hope that their performance will eventually turn around), and value-creating businesses are starved for capital and other resources. Third, poor financial forecasts complicate communications with the investment community. Indeed, to avoid coming up short at the end of the quarter, the CFO and head of investor relations frequently impose a “contingency” or “safety margin” on top of the forecast produced by consolidating the business-unit plans. Because this top-down contingency is wrong just as often as it is right, poor financial forecasts run the risk of damaging a company’s reputation with analysts and investors. A lot of value is lost in translation Given the poor quality of financial forecasts in most strategic plans, it is probably not surprising that most companies fail to realize their strategies’ potential value. As we’ve mentioned, our survey indicates that, on average, most strategies deliver only 63% of their potential financial performance. And more than one-third of the 215 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 216 MANKINS AND STEELE The venetian blinds of business This figure illustrates a dynamic common to many companies. In January 2001, management approves a strategic plan (Plan 2001) that projects modest performance for the first year and a high rate of performance thereafter, as shown in the first solid line. For beating the first year’s projection, the unit management is both commended and handsomely rewarded. A new plan is then prepared, projecting uninspiring results for the first year and once again promising a fast rate of performance improvement thereafter, as shown by the second solid line (Plan 2002). This, too, succeeds only partially, so another plan is drawn up, and so on. The actual rate of performance improvement can be seen by joining the start points of each plan (the dotted line). Performance (return on capital) Plan Plan Plan Plan 2001 2002 2003 2004 30% Copyright © 2011. Harvard Business Review Press. All rights reserved. 25% 20% 15% 10% actual performance 5% 0% 2000 2001 2002 2003 2004 2005 2006 executives surveyed placed the figure at less than 50%. Put differently, if management were to realize the full potential of its current strategy, the increase in value could be as much as 60% to 100%! As illustrated in “Where the performance goes,” the strategy-toperformance gap can be attributed to a combination of factors, such 216 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 217 Copyright © 2011. Harvard Business Review Press. All rights reserved. TURNING GREAT STRATEGY INTO GREAT PERFORMANCE as poorly formulated plans, misapplied resources, breakdowns in communication, and limited accountability for results. To elaborate, management starts with a strategy it believes will generate a certain level of financial performance and value over time (100%, as noted in the exhibit). But, according to the executives we surveyed, the failure to have the right resources in the right place at the right time strips away some 7.5% of the strategy’s potential value. Some 5.2% is lost to poor communications, 4.5% to poor action planning, 4.1% to blurred accountabilities, and so on. Of course, these estimates reflect the average experience of the executives we surveyed and may not be representative of every company or every strategy. Nonetheless, they do highlight the issues managers need to focus on as they review their companies’ processes for planning and executing strategies. What emerges from our survey results is a sequence of events that goes something like this: Strategies are approved but poorly communicated. This, in turn, makes the translation of strategy into specific actions and resource plans all but impossible. Lower levels in the organization don’t know what they need to do, when they need to do it, or what resources will be required to deliver the performance senior management expects. Consequently, the expected results never materialize. And because no one is held responsible for the shortfall, the cycle of underperformance gets repeated, often for many years. Performance bottlenecks are frequently invisible to top management The processes most companies use to develop plans, allocate resources, and track performance make it difficult for top management to discern whether the strategy-to-performance gap stems from poor planning, poor execution, both, or neither. Because so many plans incorporate overly ambitious projections, companies frequently write off performance shortfalls as “just another hockey-stick forecast.” And when plans are realistic and performance falls short, executives have few early-warning signals. They often have no way of knowing whether critical actions were carried out as expected, resources were deployed on schedule, competitors responded as anticipated, and so on. Unfortunately, without clear information on how and why 217 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 218 MANKINS AND STEELE performance is falling short, it is virtually impossible for top management to take appropriate corrective action. Copyright © 2011. Harvard Business Review Press. All rights reserved. The strategy-to-performance gap fosters a culture of underperformance In many companies, planning and execution breakdowns are reinforced—even magnified—by an insidious shift in culture. In our experience, this change occurs subtly but quickly, and once it has taken root it is very hard to reverse. First, unrealistic plans create the expectation throughout the organization that plans simply will not be fulfilled. Then, as the expectation becomes experience, it becomes the norm that performance commitments won’t be kept. So commitments cease to be binding promises with real consequences. Rather than stretching to ensure that commitments are kept, managers, expecting failure, seek to protect themselves from the eventual fallout. They spend time covering their tracks rather than identifying actions to enhance performance. The organization becomes less self-critical and less intellectually honest about its shortcomings. Consequently, it loses its capacity to perform. Closing the Strategy-to-Performance Gap As significant as the strategy-to-performance gap is at most companies, management can close it. A number of high-performing companies have found ways to realize more of their strategies’ potential. Rather than focus on improving their planning and execution processes separately to close the gap, these companies work both sides of the equation, raising standards for both planning and execution simultaneously and creating clear links between them. Our research and experience in working with many of these companies suggests they follow seven rules that apply to planning and execution. Living by these rules enables them to objectively assess any performance shortfall and determine whether it stems from the strategy, the plan, the execution, or employees’ capabilities. And the same rules that allow them to spot problems early also help them prevent performance shortfalls in the first place. These rules may 218 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 219 TURNING GREAT STRATEGY INTO GREAT PERFORMANCE seem simple—even obvious—but when strictly and collectively observed, they can transform both the quality of a company’s strategy and its ability to deliver results. Copyright © 2011. Harvard Business Review Press. All rights reserved. Rule 1: Keep it simple, make it concrete At most companies, strategy is a highly abstract concept—often confused with vision or aspiration—and is not something that can be easily communicated or translated into action. But without a clear sense of where the company is headed and why, lower levels in the organization cannot put in place executable plans. In short, the link between strategy and performance can’t be drawn because the strategy itself is not sufficiently concrete. To start off the planning and execution process on the right track, high-performing companies avoid long, drawn-out descriptions of lofty goals and instead stick to clear language describing their course of action. Bob Diamond, CEO of Barclays Capital, one of the fastestgrowing and best-performing investment banking operations in Europe, puts it this way: “We’ve been very clear about what we will and will not do. We knew we weren’t going to go head-to-head with U.S. bulge bracket firms. We communicated that we wouldn’t compete in this way and that we wouldn’t play in unprofitable segments within the equity markets but instead would invest to position ourselves for the euro, the burgeoning need for fixed income, and the end of Glass-Steigel. By ensuring everyone knew the strategy and how it was different, we’ve been able to spend more time on tasks that are key to executing this strategy.” By being clear about what the strategy is and isn’t, companies like Barclays keep everyone headed in the same direction. More important, they safeguard the performance their counterparts lose to ineffective communications; their resource and action planning becomes more effective; and accountabilities are easier to specify. Rule 2: Debate assumptions, not forecasts At many companies, a business unit’s strategic plan is little more than a negotiated settlement—the result of careful bargaining with the corporate center over performance targets and financial forecasts. 219 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 220 Copyright © 2011. Harvard Business Review Press. All rights reserved. MANKINS AND STEELE Planning, therefore, is largely a political process—with unit management arguing for lower near-term profit projections (to secure higher annual bonuses) and top management pressing for more long-term stretch (to satisfy the board of directors and other external constituents). Not surprisingly, the forecasts that emerge from these negotiations almost always understate what each business unit can deliver in the near term and overstate what can realistically be expected in the long-term—the hockey-stick charts with which CEOs are all too familiar. Even at companies where the planning process is isolated from the political concerns of performance evaluation and compensation, the approach used to generate financial projections often has builtin biases. Indeed, financial forecasting frequently takes place in complete isolation from the marketing or strategy functions. A business unit’s finance function prepares a highly detailed line-item forecast whose short-term assumptions may be realistic, if conservative, but whose long-term assumptions are largely uninformed. For example, revenue forecasts are typically based on crude estimates about average pricing, market growth, and market share. Projections of long-term costs and working capital requirements are based on an assumption about annual productivity gains—expediently tied, perhaps, to some companywide efficiency program. These forecasts are difficult for top management to pick apart. Each line item may be completely defensible, but the overall plan and projections embed a clear upward bias—rendering them useless for driving strategy execution. High-performing companies view planning altogether differently. They want their forecasts to drive the work they actually do. To make this possible, they have to ensure that the assumptions underlying their long-term plans reflect both the real economics of their markets and the performance experience of the company relative to competitors. Tyco CEO Ed Breen, brought in to turn the company around in July 2002, credits a revamped plan-building process for contributing to Tyco’s dramatic recovery. When Breen joined the company, Tyco was a labyrinth of 42 business units and several hundred profit centers, built up over many years through countless 220 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 221 Copyright © 2011. Harvard Business Review Press. All rights reserved. TURNING GREAT STRATEGY INTO GREAT PERFORMANCE acquisitions. Few of Tyco’s businesses had complete plans, and virtually none had reliable financial forecasts. To get a grip on the conglomerate’s complex operations, Breen assigned cross-functional teams at each unit, drawn from strategy, marketing, and finance, to develop detailed information on the profitability of Tyco’s primary markets as well as the product or service offerings, costs, and price positioning relative to the competition. The teams met with corporate executives biweekly during Breen’s first six months to review and discuss the findings. These discussions focused on the assumptions that would drive each unit’s longterm financial performance, not on the financial forecasts themselves. In fact, once assumptions about market trends were agreed on, it was relatively easy for Tyco’s central finance function to prepare externally oriented and internally consistent forecasts for each unit. Separating the process of building assumptions from that of preparing financial projections helps to ground the business unit–corporate center dialogue in economic reality. Units can’t hide behind specious details, and corporate center executives can’t push for unrealistic goals. What’s more, the fact-based discussion resulting from this kind of approach builds trust between the top team and each unit and removes barriers to fast and effective execution. “When you understand the fundamentals and performance drivers in a detailed way,” says Bob Diamond, “you can then step back, and you don’t have to manage the details. The team knows which issues it can get on with, which it needs to flag to me, and which issues we really need to work out together.” Rule 3: Use a rigorous framework, speak a common language To be productive, the dialogue between the corporate center and the business units about market trends and assumptions must be conducted within a rigorous framework. Many of the companies we advise use the concept of profit pools, which draws on the competition theories of Michael Porter and others. In this framework, a business’s long-term financial performance is tied to the total profit pool available in each of the markets it serves and its share of each profit 221 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 222 Copyright © 2011. Harvard Business Review Press. All rights reserved. MANKINS AND STEELE pool—which, in turn, is tied to the business’s market share and relative profitability versus competitors in each market. In this approach, the first step is for the corporate center and the unit team to agree on the size and growth of each profit pool. Fiercely competitive markets, such as pulp and paper or commercial airlines, have small (or negative) total profit pools. Less competitive markets, like soft drinks or pharmaceuticals, have large total profit pools. We find it helpful to estimate the size of each profit pool directly—through detailed benchmarking—and then forecast changes in the pool’s size and growth. Each business unit then assesses what share of the total profit pool it can realistically capture over time, given its business model and positioning. Competitively advantaged businesses can capture a large share of the profit pool—by gaining or sustaining a high market share, generating above-average profitability, or both. Competitively disadvantaged businesses, by contrast, typically capture a negligible share of the profit pool. Once the unit and the corporate center agree on the likely share of the pool the business will capture over time, the corporate center can easily create the financial projections that will serve as the unit’s road map. In our view, the specific framework a company uses to ground its strategic plans isn’t all that important. What is critical is that the framework establish a common language for the dialogue between the corporate center and the units—one that the strategy, marketing, and finance teams all understand and use. Without a rigorous framework to link a business’s performance in the product markets with its financial performance over time, it is very difficult for top management to ascertain whether the financial projections that accompany a business unit’s strategic plan are reasonable and realistically achievable. As a result, management can’t know with confidence whether a performance shortfall stems from poor execution or an unrealistic and ungrounded plan. Rule 4: Discuss resource deployments early Companies can create more realistic forecasts and more executable plans if they discuss up front the level and timing of critical resource deployments. At Cisco Systems, for example, a cross-functional 222 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 223 Copyright © 2011. Harvard Business Review Press. All rights reserved. TURNING GREAT STRATEGY INTO GREAT PERFORMANCE team reviews the level and timing of resource deployments early in the planning stage. These teams regularly meet with John Chambers (CEO), Dennis Powell (CFO), Randy Pond (VP of operations), and the other members of Cisco’s executive team to discuss their findings and make recommendations. Once agreement is reached on resource allocation and timing at the unit level, those elements are factored into the company’s two-year plan. Cisco then monitors each unit’s actual resource deployments on a monthly basis (as well as its performance) to make sure things are going according to plan and that the plan is generating the expected results. Challenging business units about when new resources need to be in place focuses the planning dialogue on what actually needs to happen across the company in order to execute each unit’s strategy. Critical questions invariably surface, such as: How long will it take us to change customers’ purchase patterns? How fast can we deploy our new sales force? How quickly will competitors respond? These are tough questions. But answering them makes the forecasts and the plans they accompany more feasible. What’s more, an early assessment of resource needs also informs discussions about market trends and drivers, improving the quality of the strategic plan and making it far more executable. In the course of talking about the resources needed to expand in the rapidly growing cable market, for example, Cisco came to realize that additional growth would require more trained engineers to improve existing products and develop new features. So, rather than relying on the functions to provide these resources from the bottom up, corporate management earmarked a specific number of trained engineers to support growth in cable. Cisco’s financial-planning organization carefully monitors the engineering head count, the pace of feature development, and revenues generated by the business to make sure the strategy stays on track. Rule 5: Clearly identify priorities To deliver any strategy successfully, managers must make thousands of tactical decisions and put them into action. But not all tactics are equally important. In most instances, a few key steps must be 223 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 224 Copyright © 2011. Harvard Business Review Press. All rights reserved. MANKINS AND STEELE taken—at the right time and in the right way—to meet planned performance. Leading companies make these priorities explicit so that each executive has a clear sense of where to direct his or her efforts. At Textron, a $10 billion multi-industrial conglomerate, each business unit identifies “improvement priorities” that it must act upon to realize the performance outlined in its strategic plan. Each improvement priority is translated into action items with clearly defined accountabilities, timetables, and key performance indicators (KPIs) that allow executives to tell how a unit is delivering on a priority. Improvement priorities and action items cascade to every level at the company—from the management committee (consisting of Textron’s top five executives) down to the lowest levels in each of the company’s ten business units. Lewis Campbell, Textron’s CEO, summarizes the company’s approach this way: “Everyone needs to know: ‘If I have only one hour to work, here’s what I’m going to focus on.’ Our goal deployment process makes each individual’s accountabilities and priorities clear.” The Swiss pharmaceutical giant Roche goes as far as to turn its business plans into detailed performance contracts that clearly specify the steps needed and the risks that must be managed to achieve the plans. These contracts all include a “delivery agenda” that lists the five to ten critical priorities with the greatest impact on performance. By maintaining a delivery agenda at each level of the company, Chairman and CEO Franz Humer and his leadership team make sure “everyone at Roche understands exactly what we have agreed to do at a strategic level and that our strategy gets translated into clear execution priorities. Our delivery agenda helps us stay the course with the strategy decisions we have made so that execution is actually allowed to happen. We cannot control implementation from HQ, but we can agree on the priorities, communicate relentlessly, and hold managers accountable for executing against their commitments.” Rule 6: Continuously monitor performance Seasoned executives know almost instinctively whether a business has asked for too much, too little, or just enough resources to deliver the goods. They develop this capability over time—essentially 224 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 225 Copyright © 2011. Harvard Business Review Press. All rights reserved. TURNING GREAT STRATEGY INTO GREAT PERFORMANCE through trial and error. High-performing companies use real-time performance tracking to help accelerate this trial-and-error process. They continuously monitor their resource deployment patterns and their results against plan, using continuous feedback to reset planning assumptions and reallocate resources. This real-time information allows management to spot and remedy flaws in the plan and shortfalls in execution—and to avoid confusing one with the other. At Textron, for example, each KPI is carefully monitored, and regular operating reviews percolate performance shortfalls—or “red light” events—up through the management ranks. This provides CEO Lewis Campbell, CFO Ted French, and the other members of Textron’s management committee with the information they need to spot and fix breakdowns in execution. A similar approach has played an important role in the dramatic revival of Dow Chemical’s fortunes. In December 2001, with performance in a free fall, Dow’s board of directors asked Bill Stavropoulos (Dow’s CEO from 1993 to 1999) to return to the helm. Stavropoulos and Andrew Liveris (the current CEO, then COO) immediately focused Dow’s entire top leadership team on execution through a project they called the Performance Improvement Drive. They began by defining clear performance metrics for each of Dow’s 79 business units. Performance on these key metrics was tracked against plans on a weekly basis, and the entire leadership team discussed any serious discrepancies first thing every Monday morning. As Liveris told us, the weekly monitoring sessions “forced everyone to live the details of execution” and let “the entire organization know how we were performing.” Continuous monitoring of performance is particularly important in highly volatile industries, where events outside anyone’s control can render a plan irrelevant. Under CEO Alan Mulally, Boeing Commercial Airplanes’ leadership team holds weekly business performance reviews to track the division’s results against its multiyear plan. By tracking the deployment of resources as a leading indicator of whether a plan is being executed effectively, BCA’s leadership team can make course corrections each week rather than waiting for quarterly results to roll in. 225 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 226 MANKINS AND STEELE Furthermore, by proactively monitoring the primary drivers of performance (such as passenger traffic patterns, airline yields and load factors, and new aircraft orders), BCA is better able to develop and deploy effective countermeasures when events throw its plans off course. During the SARS epidemic in late 2002, for example, BCA’s leadership team took action to mitigate the adverse consequences of the illness on the business’s operating plan within a week of the initial outbreak. The abrupt decline in air traffic to Hong Kong, Singapore, and other Asian business centers signaled that the number of future aircraft deliveries to the region would fall—perhaps precipitously. Accordingly, BCA scaled back its medium-term production plans (delaying the scheduled ramp-up of some programs and accelerating the shutdown of others) and adjusted its multiyear operating plan to reflect the anticipated financial impact. Copyright © 2011. Harvard Business Review Press. All rights reserved. Rule 7: Reward and develop execution capabilities No list of rules on this topic would be complete without a reminder that companies have to motivate and develop their staffs; at the end of the day, no process can be better than the people who have to make it work. Unsurprisingly, therefore, nearly all of the companies we studied insisted that the selection and development of management was an essential ingredient in their success. And while improving the capabilities of a company’s workforce is no easy task—often taking many years—these capabilities, once built, can drive superior planning and execution for decades. For Barclays’ Bob Diamond, nothing is more important than “ensuring that [the company] hires only A players.” In his view, “the hidden costs of bad hiring decisions are enormous, so despite the fact that we are doubling in size, we insist that as a top team we take responsibility for all hiring. The jury of your peers is the toughest judgment, so we vet each others’ potential hires and challenge each other to keep raising the bar.” It’s equally important to make sure that talented hires are rewarded for superior execution. To reinforce its core values of “client,” “meritocracy,” “team,” and “integrity,” Barclays Capital has innovative pay schemes that “ring fence” rewards. Stars don’t lose out just because the business is entering new 226 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 227 TURNING GREAT STRATEGY INTO GREAT PERFORMANCE Copyright © 2011. Harvard Business Review Press. All rights reserved. markets with lower returns during the growth phase. Says Diamond: “It’s so bad for the culture if you don’t deliver what you promised to people who have delivered. . . . You’ve got to make sure you are consistent and fair, unless you want to lose your most productive people.” Companies that are strong on execution also emphasize development. Soon after he became CEO of 3M, Jim McNerney and his top team spent 18 months hashing out a new leadership model for the company. Challenging debates among members of the top team led to agreement on six “leadership attributes”—namely, the ability to “chart the course,” “energize and inspire others,” “demonstrate ethics, integrity, and compliance,” “deliver results,” “raise the bar,” and “innovate resourcefully.” 3M’s leadership agreed that these six attributes were essential for the company to become skilled at execution and known for accountability. Today, the leaders credit this model with helping 3M to sustain and even improve its consistently strong performance. The prize for closing the strategy-to-performance gap is huge—an increase in performance of anywhere from 60% to 100% for most companies. But this almost certainly understates the true benefits. Companies that create tight links between their strategies, their plans, and, ultimately, their performance often experience a cultural multiplier effect. Over time, as they turn their strategies into great performance, leaders in these organizations become much more confident in their own capabilities and much more willing to make the stretch commitments that inspire and transform large companies. In turn, individual managers who keep their commitments are rewarded—with faster progression and fatter paychecks— reinforcing the behaviors needed to drive any company forward. Eventually, a culture of overperformance emerges. Investors start giving management the benefit of the doubt when it comes to bold moves and performance delivery. The result is a performance premium on the company’s stock—one that further rewards stretch commitments and performance delivery. Before long, the company’s 227 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 09 209-228 r2 am 11/18/10 9:07 PM Page 228 MANKINS AND STEELE reputation among potential recruits rises, and a virtuous circle is created in which talent begets performance, performance begets rewards, and rewards beget even more talent. In short, closing the strategy-to-performance gap is not only a source of immediate performance improvement but also an important driver of cultural change with a large and lasting impact on the organization’s capabilities, strategies, and competitiveness. Copyright © 2011. Harvard Business Review Press. All rights reserved. Originally published in July 2005. Reprint R0507E. 228 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:07. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 229 Who Has the D? How Clear Decision Roles Enhance Organizational Performance. by Paul Rogers and Marcia Blenko Copyright © 2011. Harvard Business Review Press. All rights reserved. D DECISIONS ARE THE COIN of the realm in business. Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make. At many companies, decisions routinely get stuck inside the organization like loose change. But it’s more than loose change that’s at stake, of course; it’s the performance of the entire organization. Never mind what industry you’re in, how big and well known your company may be, or how clever your strategy is. If you can’t make the right decisions quickly and effectively, and execute those decisions consistently, your business will lose ground. Indeed, making good decisions and making them happen quickly are the hallmarks of high-performing organizations. When we surveyed executives at 350 global companies about their organizational effectiveness, only 15% said that they have an organization that helps the business outperform competitors. What sets those top performers apart is the quality, speed, and execution of their decision making. The most effective organizations score well on the major strategic decisions—which markets to enter or exit, which businesses to buy or sell, where to allocate capital and talent. But they truly shine when it comes to the critical operating decisions requiring consistency and speed—how to drive product innovation, the best way to position brands, how to manage channel partners. Even in companies respected for their decisiveness, however, there can be ambiguity over who is accountable for which decisions. 229 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 230 Copyright © 2011. Harvard Business Review Press. All rights reserved. ROGERS AND BLENKO As a result, the entire decision-making process can stall, usually at one of four bottlenecks: global versus local, center versus business unit, function versus function, and inside versus outside partners. The first of these bottlenecks, global versus local decision making, can occur in nearly every major business process and function. Decisions about brand building and product development frequently get snared here, when companies wrestle over how much authority local businesses should have to tailor products for their markets. Marketing is another classic global versus local issue— should local markets have the power to determine pricing and advertising? The second bottleneck, center versus business unit decision making, tends to afflict parent companies and their subsidiaries. Business units are on the front line, close to the customer; the center sees the big picture, sets broad goals, and keeps the organization focused on winning. Where should the decision-making power lie? Should a major capital investment, for example, depend on the approval of the business unit that will own it, or should headquarters make the final call? Function versus function decision making is perhaps the most common bottleneck. Every manufacturer, for instance, faces a balancing act between product development and marketing during the design of a new product. Who should decide what? Cross-functional decisions too often result in ineffective compromise solutions, which frequently need to be revisited because the right people were not involved at the outset. The fourth decision-making bottleneck, inside versus outside partners, has become familiar with the rise of outsourcing, joint ventures, strategic alliances, and franchising. In such arrangements, companies need to be absolutely clear about which decisions can be owned by the external partner (usually those about the execution of strategy) and which must continue to be made internally (decisions about the strategy itself). In the case of outsourcing, for instance, brand-name apparel and foot-wear marketers once assumed that overseas suppliers could be responsible for decisions about plant employees’ wages and working conditions. Big mistake. 230 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 231 WHO HAS THE D? Idea in Brief Copyright © 2011. Harvard Business Review Press. All rights reserved. Decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed stems from a decision someone made—or failed to make. Yet in many firms, decisions routinely stall inside the organization—hurting the entire company’s performance. The culprit? Ambiguity over who’s accountable for which decisions. In one auto manufacturer that was missing milestones for rolling out new models, marketers and product developers each thought they were responsible for deciding new models’ standard features and colors. Result? Conflict over who had final say, endless revisiting of decisions—and missed deadlines that led to lost sales. How to clarify decision accountability? Assign clear roles for the decisions that most affect your firm’s performance—such as which markets to enter, where to allocate capital, and how to drive product innovation. Think “RAPID”: Who should recommend a course of action on a key decision? Who must agree to a recommendation before it can move forward? Who will perform the actions needed to implement the decision? Whose input is needed to determine the proposal’s feasibility? Who decides—brings the decision to closure and commits the organization to implement it? When you clarify decision roles, you make the right choices— swiftly and effectively. Clearing the Bottlenecks The most important step in unclogging decision-making bottlenecks is assigning clear roles and responsibilities. Good decision makers recognize which decisions really matter to performance. They think through who should recommend a particular path, who needs to agree, who should have input, who has ultimate responsibility for making the decision, and who is accountable for follow-through. They make the process routine. The result: better coordination and quicker response times. Companies have devised a number of methods to clarify decision roles and assign responsibilities. We have used an approach called RAPID, which has evolved over the years, to help hundreds of companies develop clear decision-making guidelines. It is, for sure, not a 231 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 232 ROGERS AND BLENKO Idea in Practice The RAPID Decision Model For every strategic decision, assign the following roles and responsibilities: Copyright © 2011. Harvard Business Review Press. All rights reserved. People Who . . . Are Responsible For . . . Recommend • Making a proposal on a key decision, gathering input, and providing data and analysis to make a sensible choice in a timely fashion • Consulting with input providers—hearing and incorporating their views, and winning their buy-in Agree • Negotiating a modified proposal with the recommender if they have concerns about the original proposal • Escalating unresolved issues to the decider if the “A” and “R” can’t resolve differences • If necessary, exercising veto power over the recommendation Perform • Executing a decision once it’s made • Seeing that the decision is implemented promptly and effectively Input • Providing relevant facts to the recommender that shed light on the proposal’s feasibility and practical implications Decide • Serving as the single point of accountability • Bringing the decision to closure by resolving any impasse in the decision-making process • Committing the organization to implementing the decision panacea (an indecisive decision maker, for example, can ruin any good system), but it’s an important start. The letters in RAPID stand for the primary roles in any decision-making process, although these roles are not performed exactly in this order: recommend, agree, perform, input, and decide—the “D.” (See the sidebar “A Decision-Making Primer.”) 232 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 233 WHO HAS THE D? Decision-Role Pitfalls In assigning decision roles: • Ensure that only one person “has the D.” If two or more people think they’re in charge of a particular decision, a tug-ofwar results. • Watch for a proliferation of “A’s.” Too many people with veto power can paralyze recommenders. If many people must agree, you probably haven’t pushed decisions down far enough in your organization. The RAPID Model in Action To fix the problem, the company “gave buyers the D” on how much space product categories would have. Sales staff “had the A”: If space allocations didn’t make sense to them, they could force additional negotiations. They also “had the P,” implementing product layouts in stores. Example: At British departmentstore chain John Lewis, company buyers wanted to increase sales Once decision roles were clarified, sales of salt and pepper mills exceeded original levels. • Avoid assigning too many “I’s.” When many people give input, at least some of them aren’t making meaningful contributions. Copyright © 2011. Harvard Business Review Press. All rights reserved. and reduce complexity by offering fewer salt and pepper mill models. The company launched the streamlined product set without involving the sales staff. And sales fell. Upon visiting the stores, buyers saw that salespeople (not understanding the strategy behind the recommendation) had halved shelf space to match the reduction in product range, rather than maintaining the same space but stocking more of the products. The people who recommend a course of action are responsible for making a proposal or offering alternatives. They need data and analysis to support their recommendations, as well as common sense about what’s reasonable, practical, and effective. The people who agree to a recommendation are those who need to sign off on it before it can move forward. If they veto a proposal, 233 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 234 Copyright © 2011. Harvard Business Review Press. All rights reserved. ROGERS AND BLENKO they must either work with the recommender to come up with an alternative or elevate the issue to the person with the D. For decision making to function smoothly, only a few people should have such veto power. They may be executives responsible for legal or regulatory compliance or the heads of units whose operations will be significantly affected by the decision. People with input responsibilities are consulted about the recommendation. Their role is to provide the relevant facts that are the basis of any good decision: How practical is the proposal? Can manufacturing accommodate the design change? Where there’s dissent or contrasting views, it’s important to get these people to the table at the right time. The recommender has no obligation to act on the input he or she receives but is expected to take it into account—particularly since the people who provide input are generally among those who must implement a decision. Consensus is a worthy goal, but as a decision-making standard, it can be an obstacle to action or a recipe for lowest-common-denominator compromise. A more practical objective is to get everyone involved to buy in to the decision. Eventually, one person will decide. The decision maker is the single point of accountability who must bring the decision to closure and commit the organization to act on it. To be strong and effective, the person with the D needs good business judgment, a grasp of the relevant trade-offs, a bias for action, and a keen awareness of the organization that will execute the decision. The final role in the process involves the people who will perform the decision. They see to it that the decision is implemented promptly and effectively. It’s a crucial role. Very often, a good decision executed quickly beats a brilliant decision implemented slowly or poorly. RAPID can be used to help redesign the way an organization works or to target a single bottleneck. Some companies use the approach for the top ten to 20 decisions, or just for the CEO and his or her direct reports. Other companies use it throughout the organization—to improve customer service by clarifying decision roles on the front line, for instance. When people see an effective process for making decisions, they spread the word. For example, 234 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 235 WHO HAS THE D? after senior managers at a major U.S. retailer used RAPID to sort out a particularly thorny set of corporate decisions, they promptly built the process into their own functional organizations. To see the process in action, let’s look at the way four companies have worked through their decision-making bottlenecks. Copyright © 2011. Harvard Business Review Press. All rights reserved. Global Versus Local Every major company today operates in global markets, buying raw materials in one place, shipping them somewhere else, and selling finished products all over the world. Most are trying simultaneously to build local presence and expertise, and to achieve economies of scale. Decision making in this environment is far from straightforward. Frequently, decisions cut across the boundaries between global and local managers, and sometimes across a regional layer in between: What investments will streamline our supply chain? How far should we go in standardizing products or tailoring them for local markets? The trick in decision making is to avoid becoming either mindlessly global or hopelessly local. If decision-making authority tilts too far toward global executives, local customers’ preferences can easily be overlooked, undermining the efficiency and agility of local operations. But with too much local authority, a company is likely to miss out on crucial economies of scale or opportunities with global clients. To strike the right balance, a company must recognize its most important sources of value and make sure that decision roles line up with them. This was the challenge facing Martin Broughton, the former CEO and chairman of British American Tobacco, the secondlargest tobacco company in the world. In 1993, when Broughton was appointed chief executive, BAT was losing ground to its nearest competitor. Broughton knew that the company needed to take better advantage of its global scale, but decision roles and responsibilities were at odds with this goal. Four geographic operating units ran themselves autonomously, rarely collaborating and sometimes even competing. Achieving consistency across global brands proved difficult, and cost 235 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 236 ROGERS AND BLENKO A Decision-Making Primer GOOD DECISION MAKING DEPENDS on assigning clear and specific roles. This sounds simple enough, but many companies struggle to make decisions because lots of people feel accountable—or no one does. RAPID and other tools used to analyze decision making give senior management teams a method for assigning roles and involving the relevant people. The key is to be clear who has input, who gets to decide, and who gets it done. The five letters in RAPID correspond to the five critical decision-making roles: recommend, agree, perform, input, and decide. As you’ll see, the roles are not carried out lockstep in this order—we took some liberties for the sake of creating a useful acronym. Copyright © 2011. Harvard Business Review Press. All rights reserved. Recommend People in this role are responsible for making a proposal, gathering input, and providing the right data and analysis to make a sensible decision in a timely fashion. In the course of developing a proposal, recommenders consult with the people who provide input, not just hearing and incorporating their views but also building buy in along the way. Recommenders must have analytical skills, common sense, and organizational smarts. Agree Individuals in this role have veto power—yes or no—over the recommendation. Exercising the veto triggers a debate between themselves and the recommenders, which should lead to a modified proposal. If that takes too long, or if the two parties simply can’t agree, they can escalate the issue to the person who has the D. Input These people are consulted on the decision. Because the people who provide input are typically involved in implementation, recommenders have a strong interest in taking their advice seriously. No input is binding, but this synergies across the operating units were elusive. Industry insiders joked that “there are seven major tobacco companies in the world— and four of them are British American Tobacco.” Broughton vowed to change the punch line. The chief executive envisioned an organization that could take advantage of the opportunities a global business offers—global brands that could compete with established winners such as Altria Group’s Marlboro; global purchasing of important raw materials, 236 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 237 WHO HAS THE D? shouldn’t undermine its importance. If the right people are not involved and motivated, the decision is far more likely to falter during execution. Decide The person with the D is the formal decision maker. He or she is ultimately accountable for the decision, for better or worse, and has the authority to resolve any impasse in the decision-making process and to commit the organization to action. Perform Once a decision is made, a person or group of people will be responsible for executing it. In some instances, the people responsible for implementing a decision are the same people who recommended it. Copyright © 2011. Harvard Business Review Press. All rights reserved. Writing down the roles and assigning accountability are essential steps, but good decision making also requires the right process. Too many rules can cause the process to collapse under its own weight. The most effective process is grounded in specifics but simple enough to adapt if necessary. When the process gets slowed down, the problem can often be traced back to one of three trouble spots. First is a lack of clarity about who has the D. If more than one person think they have it for a particular decision, that decision will get caught up in a tug-of-war. The flip side can be equally damaging: No one is accountable for crucial decisions, and the business suffers. Second, a proliferation of people who have veto power can make life tough for recommenders. If a company has too many people in the “agree” role, it usually means that decisions are not pushed down far enough in the organization. Third, if there are a lot of people giving input, it’s a signal that at least some of them aren’t making a meaningful contribution. including tobacco; and more consistency in innovation and customer management. But Broughton didn’t want the company to lose its nimbleness and competitive hunger in local markets by shifting too much decision-making power to global executives. The first step was to clarify roles for the most important decisions. Procurement became a proving ground. Previously, each operating unit had identified its own suppliers and negotiated contracts for all materials. Under Broughton, a global procurement 237 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 238 Copyright © 2011. Harvard Business Review Press. All rights reserved. ROGERS AND BLENKO team was set up in headquarters and given authority to choose suppliers and negotiate pricing and quality for global materials, including bulk tobacco and certain types of packaging. Regional procurement teams were now given input into global materials strategies but ultimately had to implement the team’s decision. As soon as the global team signed contracts with suppliers, responsibility shifted to the regional teams, who worked out the details of delivery and service with the suppliers in their regions. For materials that did not offer global economies of scale (mentholated filters for the North American market, for example), the regional teams retained their decision-making authority. As the effort to revamp decision making in procurement gained momentum, the company set out to clarify roles in all its major decisions. The process wasn’t easy. A company the size of British American Tobacco has a huge number of moving parts, and developing a practical system for making decisions requires sweating lots of details. What’s more, decision-making authority is power, and people are often reluctant to give it up. It’s crucial for the people who will live with the new system to help design it. At BAT, Broughton created working groups led by people earmarked, implicitly or explicitly, for leadership roles in the future. For example, Paul Adams, who ultimately succeeded Broughton as chief executive, was asked to lead the group charged with redesigning decision making for brand and customer management. At the time, Adams was a regional head within one of the operating units. With other senior executives, including some of his own direct reports, Broughton specified that their role was to provide input, not to veto recommendations. Broughton didn’t make the common mistake of seeking consensus, which is often an obstacle to action. Instead, he made it clear that the objective was not deciding whether to change the decision-making process but achieving buy in about how to do so as effectively as possible. The new decision roles provided the foundation the company needed to operate successfully on a global basis while retaining flexibility at the local level. The focus and efficiency of its decision making were reflected in the company’s results: After the decision-making 238 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 239 WHO HAS THE D? overhaul, British American Tobacco experienced nearly ten years of growth well above the levels of its competitors in sales, profits, and market value. The company has gone on to have one of the bestperforming stocks on the UK market and has reemerged as a major global player in the tobacco industry. Copyright © 2011. Harvard Business Review Press. All rights reserved. Center Versus Business Unit The first rule for making good decisions is to involve the right people at the right level of the organization. For BAT, capturing economies of scale required its global team to appropriate some decisionmaking powers from regional divisions. For many companies, a similar balancing act takes place between executives at the center and managers in the business units. If too many decisions flow to the center, decision making can grind to a halt. The problem is different but no less critical if the decisions that are elevated to senior executives are the wrong ones. Companies often grow into this type of problem. In small and midsize organizations, a single management team—sometimes a single leader—effectively handles every major decision. As a company grows and its operations become more complex, however, senior executives can no longer master the details required to make decisions in every business. A change in management style, often triggered by the arrival of a new CEO, can create similar tensions. At a large British retailer, for example, the senior team was accustomed to the founder making all critical decisions. When his successor began seeking consensus on important issues, the team was suddenly unsure of its role, and many decisions stalled. It’s a common scenario, yet most management teams and boards of directors don’t specify how decisionmaking authority should change as the company does. A growth opportunity highlighted that issue for Wyeth (then known as American Home Products) in late 2000. Through organic growth, acquisitions, and partnerships, Wyeth’s pharmaceutical division had developed three sizable businesses: biotech, vaccines, and traditional pharmaceutical products. Even though each business 239 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 240 Copyright © 2011. Harvard Business Review Press. All rights reserved. ROGERS AND BLENKO had its own market dynamics, operating requirements, and research focus, most important decisions were pushed up to one group of senior executives. “We were using generalists across all issues,” said Joseph M. Mahady, president of North American and global businesses for Wyeth Pharmaceuticals. “It was a signal that we weren’t getting our best decision making.” The problem crystallized for Wyeth when managers in the biotech business saw a vital—but perishable—opportunity to establish a leading position with Enbrel, a promising rheumatoid arthritis drug. Competitors were working on the same class of drug, so Wyeth needed to move quickly. This meant expanding production capacity by building a new plant, which would be located at the Grange Castle Business Park in Dublin, Ireland. The decision, by any standard, was a complex one. Once approved by regulators, the facility would be the biggest biotech plant in the world—and the largest capital investment Wyeth had ever undertaken. Yet peak demand for the drug was not easy to determine. What’s more, Wyeth planned to market Enbrel in partnership with Immunex (now a part of Amgen). In its deliberations about the plant, therefore, Wyeth needed to factor in the requirements of building up its technical expertise, technology transfer issues, and an uncertain competitive environment. Input on the decision filtered up slowly through a gauze of overlapping committees, leaving senior executives hungry for a more detailed grasp of the issues. Given the narrow window of opportunity, Wyeth acted quickly, moving from a first look at the Grange Castle project to implementation in six months. But in the midst of this process, Wyeth Pharmaceuticals’ executives saw the larger issue: The company needed a system that would push more decisions down to the business units, where operational knowledge was greatest, and elevate the decisions that required the senior team’s input, such as marketing strategy and manufacturing capacity. In short order, Wyeth gave authority for many decisions to business unit managers, leaving senior executives with veto power over some of the more sensitive issues related to Grange Castle. But after that investment decision was made, the D for many subsequent 240 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 241 Copyright © 2011. Harvard Business Review Press. All rights reserved. WHO HAS THE D? decisions about the Enbrel business lay with Cavan Redmond, the executive vice president and general manager of Wyeth’s biotech division, and his new management team. Redmond gathered input from managers in biotech manufacturing, marketing, forecasting, finance, and R&D, and quickly set up the complex schedules needed to collaborate with Immunex. Responsibility for execution rested firmly with the business unit, as always. But now Redmond, supported by his team, also had authority to make important decisions. Grange Castle is paying off so far. Enbrel is among the leading brands for rheumatoid arthritis, with sales of $1.7 billion through the first half of 2005. And Wyeth’s metabolism for making decisions has increased. Recently, when the U.S. Food and Drug Administration granted priority review status to another new drug, Tygacil, because of the antibiotic’s efficacy against drug-resistant infections, Wyeth displayed its new reflexes. To keep Tygacil on a fast track, the company had to orchestrate a host of critical steps—refining the process technology, lining up supplies, ensuring quality control, allocating manufacturing capacity. The vital decisions were made one or two levels down in the biotech organization, where the expertise resided. “Instead of debating whether you can move your product into my shop, we had the decision systems in place to run it up and down the business units and move ahead rapidly with Tygacil,” said Mahady. The drug was approved by the FDA in June 2005 and moved into volume production a mere three days later. Function Versus Function Decisions that cut across functions are some of the most important a company faces. Indeed, cross-functional collaboration has become an axiom of business, essential for arriving at the best answers for the company and its customers. But fluid decision making across functional teams remains a constant challenge, even for companies known for doing it well, like Toyota and Dell. For instance, a team that thinks it’s more efficient to make a decision without consulting other functions may wind up missing out on relevant input or being overruled by another team that believes—rightly or wrongly—it 241 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 242 ROGERS AND BLENKO A Recipe for a Decision-Making Bottleneck AT ONE AUTOMAKER WE STUDIED, marketers and product developers were confused about who was responsible for making decisions about new models. When we asked, “Who has the right to decide which features will be standard?” 64% of product developers said, “We do.” 83% of marketers said, “We do.” When we asked, “Who has the right to decide which colors will be offered?” 77% of product developers said, “We do.” 61% of marketers said, “We do.” Copyright © 2011. Harvard Business Review Press. All rights reserved. Not surprisingly, the new models were delayed. should have been included in the process. Many of the most important cross-functional decisions are, by their very nature, the most difficult to orchestrate, and that can string out the process and lead to sparring between fiefdoms and costly indecision. The theme here is a lack of clarity about who has the D. For example, at a global auto manufacturer that was missing its milestones for rolling out new models—and was paying the price in falling sales—it turned out that marketers and product developers were confused about which function was responsible for making decisions about standard features and color ranges for new models. When we asked the marketing team who had the D about which features should be standard, 83% said the marketers did. When we posed the same question to product developers, 64% said the responsibility rested with them. (See “A Recipe for a Decision-Making Bottleneck.”) The practical difficulty of connecting functions through smooth decision making crops up frequently at retailers. John Lewis, the leading department store chain in the United Kingdom, might reasonably expect to overcome this sort of challenge more readily than other retailers. Spedan Lewis, who built the business in the early twentieth century, was a pioneer in employee ownership. A strong connection between managers and employees permeated every 242 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 243 Copyright © 2011. Harvard Business Review Press. All rights reserved. WHO HAS THE D? aspect of the store’s operations and remained vital to the company as it grew into the largest employee-owned business in the United Kingdom, with 59,600 employees and more than £5 billion in revenues in 2004. Even at John Lewis, however, with its heritage of cooperation and teamwork, cross-functional decision making can be hard to sustain. Take salt and pepper mills, for instance. John Lewis, which prides itself on having great selection, stocked nearly 50 SKUs of salt and pepper mills, while most competitors stocked around 20. The company’s buyers saw an opportunity to increase sales and reduce complexity by offering a smaller number of popular and well-chosen products in each price point and style. When John Lewis launched the new range, sales fell. This made no sense to the buyers until they visited the stores and saw how the merchandise was displayed. The buyers had made their decision without fully involving the sales staff, who therefore did not understand the strategy behind the new selection. As a result, the sellers had cut shelf space in half to match the reduction in range, rather than devoting the same amount of shelf space to stocking more of each product. To fix the communication problem, John Lewis needed to clarify decision roles. The buyers were given the D on how much space to allocate to each product category. If the space allocation didn’t make sense to the sales staff, however, they had the authority to raise their concerns and force a new round of negotiations. They also had responsibility for implementing product layouts in the stores. When the communication was sorted out and shelf space was restored, sales of the salt and pepper mills climbed well above original levels. Crafting a decision-making process that connected the buying and selling functions for salt and pepper mills was relatively easy; rolling it out across the entire business was more challenging. Salt and pepper mills are just one of several hundred product categories for John Lewis. This element of scale is one reason why cross-functional bottlenecks are not easy to unclog. Different functions have different incentives and goals, which are often in conflict. When it comes down to a struggle between two functions, there may be good 243 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 244 ROGERS AND BLENKO reasons to locate the D in either place—buying or selling, marketing or product development. Here, as elsewhere, someone needs to think objectively about where value is created and assign decision roles accordingly. Eliminating cross-functional bottlenecks actually has less to do with shifting decision-making responsibilities between departments and more to do with ensuring that the people with relevant information are allowed to share it. The decision maker is important, of course, but more important is designing a system that aligns decision making and makes it routine. Copyright © 2011. Harvard Business Review Press. All rights reserved. Inside Versus Outside Partners Decision making within an organization is hard enough. Trying to make decisions between separate organizations on different continents adds layers of complexity that can scuttle the best strategy. Companies that outsource capabilities in pursuit of cost and quality advantages face this very challenge. Which decisions should be made internally? Which can be delegated to outsourcing partners? These questions are also relevant for strategic partners—a global bank working with an IT contractor on a systems development project, for example, or a media company that acquires content from a studio—and for companies conducting part of their business through franchisees. There is no right answer to who should have the power to decide what. But the wrong approach is to assume that contractual arrangements can provide the answer. An outdoor-equipment company based in the United States discovered this recently when it decided to scale up production of gas patio heaters for the lower end of the market. The company had some success manufacturing high-end products in China. But with the advent of superdiscounters like Wal-Mart, Target, and Home Depot, the company realized it needed to move more of its production overseas to feed these retailers with lower-cost offerings. The timetable left little margin for error: The company started tooling up factories in April and June of 2004, hoping to be ready for the Christmas season. 244 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 245 WHO HAS THE D? The Decision-Driven Organization THE DEFINING CHARACTERISTIC of high-performing organizations is their ability to make good decisions and to make them happen quickly. The companies that succeed tend to follow a few clear principles. Some decisions matter more than others The decisions that are crucial to building value in the business are the ones that matter most. Some of them will be the big strategic decisions, but just as important are the critical operating decisions that drive the business day to day and are vital to effective execution. Action is the goal Good decision making doesn’t end with a decision; it ends with implementation. The objective shouldn’t be consensus, which often becomes an obstacle to action, but buy in. Copyright © 2011. Harvard Business Review Press. All rights reserved. Ambiguity is the enemy Clear accountability is essential: Who contributes input, who makes the decision, and who carries it out? Without clarity, gridlock and delay are the most likely outcomes. Clarity doesn’t necessarily mean concentrating authority in a few people; it means defining who has responsibility to make decisions, who has input, and who is charged with putting them into action. Speed and adaptability are crucial A company that makes good decisions quickly has a higher metabolism, which allows it to act on opportunities and overcome obstacles. The best decision makers create an environment where people can come together quickly and efficiently to make the most important decisions. Decision roles trump the organizational chart No decision-making structure will be perfect for every decision. The key is to involve the right people at the right level in the right part of the organization at the right time. A well-aligned organization reinforces roles Clear decision roles are critical, but they are not enough. If an organization does not reinforce the right approach to decision making through its measures and incentives, information flows, and culture, the behavior won’t become routine. Practicing beats preaching Involve the people who will live with the new decision roles in designing them. The very process of thinking about new decision behaviors motivates people to adopt them. 245 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 246 ROGERS AND BLENKO A Decision Diagnostic CONSIDER THE LAST THREE MEANINGFUL decisions you’ve been involved in and ask yourself the following questions. 1. Were the decisions right? 2. Were they made with appropriate speed? 3. Were they executed well? 4. Were the right people involved, in the right way? 5. Was it clear for each decision • who would recommend a solution? • who would provide input? • who had the final say? • who would be responsible for following through? 6. Were the decision roles, process, and time frame respected? 7. Were the decisions based on appropriate facts? Copyright © 2011. Harvard Business Review Press. All rights reserved. 8. To the extent that there were divergent facts or opinions, was it clear who had the D? 9. Were the decision makers at the appropriate level in the company? 10. Did the organization’s measures and incentives encourage the people involved to make the right decisions? Right away, there were problems. Although the Chinese manufacturing partners understood costs, they had little idea what American consumers wanted. When expensive designs arrived from the head office in the United States, Chinese plant managers made compromises to meet contracted cost targets. They used a lower grade material, which discolored. They placed the power switch in a spot that was inconvenient for the user but easier to build. Instead of making certain parts from a single casting, they welded materials together, which looked terrible. To fix these problems, the U.S. executives had to draw clear lines around which decisions should be made on which side of the ocean. The company broke down the design and manufacturing process 246 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 247 Copyright © 2011. Harvard Business Review Press. All rights reserved. WHO HAS THE D? into five steps and analyzed how decisions were made at each step. The company was also much more explicit about what the manufacturing specs would include and what the manufacturer was expected to do with them. The objective was not simply to clarify decision roles but to make sure those roles corresponded directly to the sources of value in the business. If a decision would affect the look and feel of the finished product, headquarters would have to sign off on it. But if a decision would not affect the customer’s experience, it could be made in China. If, for example, Chinese engineers found a less expensive material that didn’t compromise the product’s look, feel, and functionality, they could make that change on their own. To help with the transition to this system, the company put a team of engineers on-site in China to ensure a smooth handoff of the specs and to make decisions on issues that would become complex and time-consuming if elevated to the home office. Marketing executives in the home office insisted that it should take a customer ten minutes and no more than six steps to assemble the product at home. The company’s engineers in China, along with the Chinese manufacturing team, had input into this assembly requirement and were responsible for execution. But the D resided with headquarters, and the requirement became a major design factor. Decisions about logistics, however, became the province of the engineering team in China: It would figure out how to package the heaters so that one-third more boxes would fit into a container, which reduced shipping costs substantially. If managers suddenly realize that they’re spending less time sitting through meetings wondering why they are there, that’s an early signal that companies have become better at making decisions. When meetings start with a common understanding about who is responsible for providing valuable input and who has the D, an organization’s decision-making metabolism will get a boost. No single lever turns a decision-challenged organization into a decision-driven one, of course, and no blueprint can provide for all 247 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 93323 10 229-248 r2 mu 11/19/10 12:40 PM Page 248 ROGERS AND BLENKO the contingencies and business shifts a company is bound to encounter. The most successful companies use simple tools that help them recognize potential bottlenecks and think through decision roles and responsibilities with each change in the business environment. That’s difficult to do—and even more difficult for competitors to copy. But by taking some very practical steps, any company can become more effective, beginning with its next decision. Copyright © 2011. Harvard Business Review Press. All rights reserved. Originally published in January 2006. Reprint R0601D. 248 Review, Harvard Business, et al. HBR's 10 Must Reads on Strategy (including featured article "What Is Strategy?" by Michael E. Porter), Harvard Business Review Press, 2011. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pensu/detail.action?d Created from pensu on 2019-07-15 06:29:21. 7/15/2019 HRER825: Strategic Business Tools for HRER Professionals HRER825: S HRER P B T Lesson 11: Implementing Business Strategy Commentary To this point in our discussion of strategy, we have focused on the dimensions of the concept, and in the last lesson, how to create a strategy designed to create a sustainable competitive advantage. This lesson continues to pursue strategy, but from the point of view of implementation. In other words, there is no strategy that is self-executing. Once identified, the destination that it describes requires coordinated efforts among many stakeholders to make the plan operational. The lesson’s readings focus on that perspective. There is no implementation "bible" containing a blueprint that everyone follows when moving from strategy to strategy implementation. A quick search of Youtube.com results in a variety of presentations identifying focusing on this issue. For example, one person identifies these four keys: Develop an Action Plan; Write the strategy in a clear, concise manner that will motivate stakeholders to action; Use leadership resources to clearly articulate the strategy; and, Align the organization’s structure, policies and processes with the strategy to maintain focus. What is Strategy Implementation? A Quick Overview Video 11.1, Length: 00:04:29, Strategy Implementation Transcript https://psu.instructure.com/courses/1984843/modules/items/26501950 1/2 7/15/2019 HRER825: Strategic Business Tools for HRER Professionals Transcript No transcript available. The Secret to Strategic Implementation 13 Video 11.2, Length: 00:03:20, The Secret to Strategic Implementation Transcript Transcript No transcript available. Unlike instructions on the calculation of the circumference of a circle, therefore, there is no accepted template that everyone will follow. Given this circumstance, it appears more instructive that students create their own, which is the subject of this lesson's assignment. https://psu.instructure.com/courses/1984843/modules/items/26501950 2/2 93323 06 143-166 r3...
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