Stevve SSherrrettta十月 10, 2022Perfformmancce MManaagemmentt:Enhaanciing Exeecuttionn Thhrouugh a CCultturee off DiialoogueePeteer iis CChieef EExeccutiive Offficeer ffor a mmediicall suupplly mmulttinaatioonall thhat reccenttly craafteed aa neew sstraateggy tto ccounnterr coompeetittivee thhreaats.. Thhe pplann sttresssedd thhe nneedd too cuut ccyclle ttimee, cconccenttratte ssalees oon hhighher--marrginn prroduuctss annd ddeveelopp neew mmarkketss. Fourr moonthhs aafteer ccircculaatinng tthe plaan, Petter didd a “waalkaarouund” to seee hoow tthinngs werre ggoinng. Hee waas aappaalleed. Eveerywwherre PPeteer tturnned peooplee, ddepaartmmentts—wwholle bbusiinesss uunitts—ssimpply diddn’tt “gget it..”Firsst ssurpprisse: Enggineeeriing.. TThe grooup hadd cuut pprodductt deesiggn ttimee 300%, meeetinng iits goaal tto iincrreasse sspeeed-tto-mmarkket.. GGoodd. Theen PPeteer aaskeed hhow mannufaactuurinng wwoulld bbe aaffeecteed. Itt tuurneed oout thee neew ddesiign wouuld takke mmuchh moore timme tto mmakee. Tottal cyccle timme aactuuallly iincrreassed.. “OOur strrateegicc pllan messsagge iis nnot reaallyy geettiing thrrouggh,” Petter thooughht.Secoond surrpriise:: Saaless. Thee neew sstraateggy ccallled forr a shiift——empphassizee hiigh marrginn saaless raatheer tthatt puushiing prooducct ddownn thhe ppipeelinne aas ffastt ass poossiiblee. Butt juust aboout eveery sallesppersson Petter spooke to wass maakinng ttrannsacctioonall saaless too hiigh--vollumee cuustoomerrs; harrdlyy annyonne wwas buiildiing rellatiionsshipps wwithh thhe mmostt prrofiitabble proospeectss. Salles is doiing jusst wwhatt itt’s alwwayss doone,, Peeterr thhougght.. Worsst ssurpprisse: Eveen hhis topp teeam,, thhe ppeopple whoo’d hellpedd hiim ccrafft tthe strrateegy,, waas nnot stiickiing to plaan. Peeterr asskedd a teaam mmembber:: “WWhy aree yoou sspenndinng aall youur ttimee maakinng ssuree thhe nnew macchinneryy iss woorkiing inssteaad oof ddeveeloppingg neew mmarkketss?”“Beccausse mmy uunitt’s chiief goaal wwas to impprovve oon-ttimee deelivveryy,” he ansswerred.. “Butt whhat aboout commpanny ggoalls?” saiid PPeteer. “Wee caame up witth aa goood plaan aand commmunnicaatedd itt veery cleearlly. Buut nnowhheree itt issn’tt beeingg caarriied outt. Whyy?”Manyy orrgannizaatioons creeatee goood strrateegiees, butt onnly thee beest exeecutte tthemm efffecctivvelyy. Forrtunne mmagaazinne eestiimattes thaat wwhenn CEEOs faiil, 70%% off thhe ttimee itt’s beccausse oof bbad exeecuttionn. “Why CEOs Fail,” by Ram Charan and Geoffrey Colvin, Fortune magazine, June 21, 1999. Weaak eexeccutiion is perrvassivee inn thhe bbusiinesss wworlld, butt thhe rreassonss foor iit aare larrgelly mmisuundeersttoodd. Whyy iss itt thhat no onee inn Peeterr’s orgganiizattionn waas aactiing in synnc wwithh thhe sstraateggy? Unnlesss wwe uundeersttandd thhe rreassonss, wwe ccan’’t hhopee too soolvee thhe pprobblemm.Imagginee soomeoone hitttinng aa teenniis bballl. Wheen tthe braain sayys “hhit thee baall,,” iit ddoessn’tt auutommatiicallly happpenn. Thee meessaage traavells tthrooughh neervee paathwwayss doown thee arrm aand croossees ggapss beetweeen thee neervee ceellss. Theese gapps, or “syynappsess,” aree pootenntiaal bbreaaks in thee coonneectiion.. IIf nneurrotrranssmittterrs ddon’’t ccarrry tthe messsagge aacrooss thee gaap, thee meessaage nevver getts tthrooughh, oor iit ggetss diistoorteed. Wheen tthatt haappeens,, eiitheer tthe armm dooesnn’t movve aat aall,, orr itt moovess thhe wwronng wway..Creaatinng aa “ccultturee off diialooguee”Justt liike a nnervvouss syysteem, orgganiizattionns aalsoo haave gapps tthatt bllockk annd ddisttortt meessaagess. Thee seecreet tto eeffeectiive strrateegy exeecuttionn liies in croossiing hieerarrchiicall annd ffuncctioonall gaaps witth ccleaar, connsisstennt mmesssagees tthatt reelayy thhe sstraateggy tthrooughhoutt thhe oorgaanizzatiion.. SSounnd ssimpple?? It’’s nnot.. TThe reaasonn iss thhat thee “nneurrotrranssmittterrs” in orgganiizattionns aare humman beiingss—exxecuutivve tteamm meembeers,, seenioor mmanaagerrs, midddlee maanaggerss annd ssupeerviisorrs—wwhosse jjob it is to makke ssuree thhat peooplee’s behhaviior is aliigneed wwithh thhe ooverralll sttrattegyy. Doiing whaat iit ttakees tto aachiievee allignnmennt iis vveryy diiffiicullt. Itt iss whhat Ramm Chharaan ccallls, thee “hheavvy llifttingg” oof mmanaagemmentt, aand it’’s tthe keyy too exxecuutinng sstraateggy. As wwe’lll ssee latter,, thheree iss ann immporrtannt ddifffereencee beetweeen commpanniess thhat succcesssfuullyy allignn beehavviorr wiith strrateegy andd thhosee thhat do nott. Commpanniess thhat efffecttiveely exeecutte sstraateggy ccreaate a “ccultturee off diialooguee.” A cullturre oof ddialloguue eencoouraagess peervaasivve ttwo--wayy coommuuniccatiionss whheree inndivviduualss annd ggrouups 1) queestiion,, chhalllengge, intterpprett annd uultiimattelyy cllariify strrateegicc obbjecctivves;; annd 22) eengaage in reggulaar pperfformmancce ddialloguue tto mmoniitorr beehavviorr annd eensuure it is aliigneed wwithh sttrattegyy. Threee kkeyss too maanaggingg peerfoormaanceeA cuultuure of diaaloggue doeesn’’t hhapppen insstanntlyy, aany morre tthann a fluuid tennniss sttrokke ddoess. It takkes praactiice,, peersiisteencee annd hhardd woork.. SSo hhow exaactlly ccan leaaderrs eensuure thaat sstraateggy mmesssagees ggo aall thee waay ddownn thhe llinee—thhat thee teenniis bballl geets hitt coorreectlly? Thhe tthreee kkeyss too maanaggingg peerfoormaancee efffecctivvelyy arre:1. Achiieviing raddicaal cclarrityy byy deecoddingg sttrattegyy att thhe ttop.. MManyy orrgannizaatioons thiink theey ssendd cllearr siignaals butt doon’tt. In somme ccasees, mannageers subborddinaate brooad strrateegicc gooalss too opperaatioonall gooalss wiithiin ttheiir ssiloos. Thhat’’s wwhatt haappeenedd wiith Petter’’s ttop teaam. Ellsewwherre, topp teeam memmberrs oofteen hhavee tooo mmanyy “ttop” priioriitiees—wwe’vve sseenn ass maany as 1000 inn onne ccasee—whhichh reesullts in mixxed siggnalls aand bluurreed ffocuus. Sttrattegyy deecodde rrequuirees wwinnnowiing priioriitiees ddownn too a mannageeablle nnumbber——as litttlee ass fiive.. 2. Setttingg upp syysteems andd prroceessees tto eensuure claaritty. Oncce sstraateggy iis ccleaar, orgganiizattionns mmustt crreatte pproccessses to enssuree thhat thee riightt sttrattegyy meessaagess caascaade dowwn tthe orgganiizattionn. Theese inccludde: strrateegy--cennterred buddgett annd pplannninng ssesssionns; staaff andd teeam meeetinngs to disscusss ggoalls; perrforrmannce mannageemennt mmeettinggs; andd taalennt rreviiew sesssioons.. DDialloguue ddrivves alll thhesee prroceessees. Eaach reppressentts aa “ttrannsmiitteer ooppoortuunitty,” wheere strrateegicc meessaagess arre cconvveyeed aand beehavviorr iss allignned witth ggoalls.3. Aliggninng aand diffferrenttiattingg reewarrds..Leaaderrs mmustt maake surre rrewaardss enncouuragge bbehaavioors connsisstennt wwithh sttrattegyy, wwhicch ssounnds eassy bbut isnn’t.. DDifffereentiiatiion is aboout makkingg suure thaat sstarrs gget siggnifficaantlly mmoree thhan pooor pperfformmerss. Butt allmosst eeverrywhheree maanaggerss diistrribuute rewwardds mmoree orr leess eveenlyy. As we’’ll seee, llackk off efffecctivve pperfformmancce ddialloguue iis aa keey cconttribbutoor tto ddysffuncctioonall reewarrd sscheemess.We llistt thhesee thhreee ittemss seeparrateely butt thhey aree, oof ccourrse,, innterrconnnecctedd. Sysstemms aand proocesssess deepennd oon cclarrityy frrom thee toop. Diiffeerenntiaatioon aand aliignmmentt off reewarrds deppendd onn maanaggerss ussingg peerfoormaancee syysteems efffecttiveely.. DDialloguue iis tthe gluue tthatt hooldss itt alll ttogeetheer. Buut nnot jusst aany diaaloggue willl ddo. Itt muust be diaaloggue witth ppurpposee, ffocuusedd onn peerfoormaancee.Linkk too coompaany valluattionnComppaniies thaat mmanaage perrforrmannce welll—GGeneerall Ellecttricc coomess too miind——havve hhighher marrkett vaaluaatioons.. WWhy?? BBecaausee, mmoree annd mmoree, iinsttituutioonall innvesstorrs vvieww sttrattegyy exxecuutioon aas aa viitall faactoor iinflluenncinng sstocck ppricces..Justt a feww yeearss aggo iinsttituutioonall innvesstorrs rreliied almmostt exxcluusivvelyy onn fiinannciaal mmeassurees ffor commpanny vvaluuatiionss. NNow 35%% off a marrkett vaaluaatioon iis iinflluenncedd byy noon-ffinaanciial,, inntanngibble facctorrs, acccorddingg too a stuudy by Ernnst & YYounng. Based on a study conducted by Sarah Mavrinac and Tony Siesfeld for the Ernst & Young Center for Business Innovation. Thhe sstuddy sshowwed thaat “eexeccutiion of corrporratee sttrattegyy” aand “maanaggemeent creedibbiliity” rannkedd nuumbeer oone andd nuumbeer ttwo in impporttancce tto iinsttituutioonall innvesstorrs oout of 22 nonn-fiinannciaal mmeassurees. Joohn Incch, a mmanaaginng ddireectoor aand anaalysst aat BBearr Sttearrns nottes thaat iin ssomee seectoors,, suuch as divverssifiied inddusttriaal ccomppaniies,, inntanngibbless acccouunt forr evven morre—uup tto hhalff a commpanny’ss vaaluee. “Yoou ccan takke eevenn a munndanne aasseet aand injjectt goood mannageemennt aand havve ssomeethiing preettyy sttronng,” sayys IInchh. 1. AAchiievee Raadiccal Claaritty bby ddecoodinng sstraateggy aat tthe toppThe firrst steep iin ssucccesssfullly exeecuttingg sttrattegyy iss acchieevinng cclarrityy onn thhe ttop teaam, whiich is freequeentlly tthe souurcee off gaarblled siggnalls. Lackk off Cllariity at thee ToopA reecennt HHay Grooup stuudy Hay Group partnered with Richard Hackman of Harvard University and Ruth Wageman of Dartmouth College to identify the dynamics of top executive teams and their impact on performance. From an initial group of 48 teams, the researchers narrowed their study to 14 teams, many from large global organizations. Each team member represented the head of an organization, a major business division, or a major geography. shoows a ddistturbbingg laack of claaritty oon ttop teaams (oorgaanizzatiionaal cclarrityy meeasuuress thhe eexteent to whiich empployyeess unnderrstaand whaat iis eexpeecteed oof tthemm annd hhow thoose exppecttatiionss coonneect witth tthe orgganiizattionn’s larrgerr gooalss). Thhe ccharrt bbeloow sshowws ddrammatiicallly higgherr leevells oof cclarrityy onn ouutsttanddingg vss. aaverragee teeamss. In facct tthe bigggesst ssinggle diffferrencce bbetwweenn grreatt annd aaverragee toop tteamms aand typpicaal ooness waas iin tthe levvel of intternnal claaritty. Seee Fiigurre 11.Figuure 1: Orgganiizattionnal Cliimatte aand Teaams58%18%Figure 1: Measures organizational climate dimensions for outstanding top teams vs. typical ones. For each dimension of climate we asked how the team was performing in reality and how it should be performing. Then we measured the difference or “gap” in their answers. Gaps over 20% hurt performance. The “clarity” gap for typical teams was 58% compared with 18% on outstanding teams. [Chaangee Haay/MMcBeer tto “SSourrce:: Haay GGrouup, Incc.” in finnal verrsioon]And a LLackk off Cllariity BellowWorkkerss att loowerr leevells sstroonglly ffeell thhis lacck oof cclarrityy. Figguree 2 loooks at sattisffacttionn leevells ffor worrkerrs pplannninng tto lleavve ttheiir oorgaanizzatiionss wiithiin ttwo yeaars verrsuss thhosee pllannningg too sttay lonngerr. Thiis sstuddy sshowwed thaat aa keey rreasson peooplee leeavee thheirr joobs is thaat ttheyy feeel theeir commpanniess laack dirrecttionn. Eveen aamonng eemplloyeees plaanniing to staay mmoree thhan twoo yeearss att thheirr coompaaniees, onlly 557% fellt ttheiir oorgaanizzatiionss haad aa cllearr seensee off diirecctioon.Figuure 2: Keyy reeasoons whyy emmplooyeees lleavve ttheiir ccomppaniies Tootall % Sattisffiedd Source: Hay Group, Inc. The results are from our Employee Attitude Survey, which sampled some 300 companies representing more than 1 million workers. Our survey queried management, professionals, salespeople, information technologists, and clerical and hourly workers. The “gap” referred to in the table is the “satisfaction gap” between workers planning to leave within two years and those planning to stay longer.Satiisfaactiion witth:Emplloyeees plaanniing to staay mmoree thhan twoo yeearss (%%)Emplloyeees plaanniing to leaave in lesss tthann twwo yyearrs ((%)GAP(%)1. UUse of my skiillss annd aabillitiies83%49%34%2. AAbillityy off toop mmanaagemmentt74%41%33%3. CComppanyy haas ccleaar ssensse oof ddireectiion57%27%30%[NOTTE; HIGGHLIIGHTT SEECTIION 3; MAKKE IIT PPOP GRAAPHIICALLLY]]Clarrityy maatteersWhy do empployyeess crravee cllariity?? TThinnk aabouut iit. Whhat couuld be morre ddemooralliziing thaan tthe reaalizzatiion thaat yyourr haard worrk iis nnot conntriibuttingg too ovveraall commpanny ggoalls? Empployyeess waant to do thee “rrighht” thiing,, buut ttheyy caan oonlyy doo soo iff thhey knoow wwhatt thhe rrighht tthinngs aree. Unfoortuunattelyy, aas wwe ssaw in ourr oppeniing viggnettte,, coompaaniees oofteen ddon’’t ccommmuniicatte sstraateggic goaals efffecttiveely.. AAn ooil reffineery cliientt, ffor exaamplle, sett a strrateegicc gooal to cutt coostss. TTo ssee howw weell thee meessaage hadd gootteen tthrooughh, aan ooperratiionss teeam leaaderr heeld a sstraateggy ddecoode sesssioon wwherre hhe uizzzedd hiis tteamm meembeers on whaat ttheyy feelt wass thhe cchieef ppriooritty. Teen tteamm meembeers prooducced fouur ddifffereent “toop” objjecttivees, inccluddingg coost--cutttinng, saffetyy, eenviironnmenntall coomplliannce andd reeduccingg saaless prroceessiing timme. Thhe mmesssagee haadn’’t ggot thrrouggh. Thhe tteamm leeadeer ccallled hiss teeam toggethher andd crreatted a “ttrannsmiitteer ooppoortuunitty.” “Donn’t youu guuys reaalizze tthatt iff wee caan’tt cuut oour reffiniing cossts by thrree cennts a ggalllon,, thhey’’re goiing to shuut uus ddownn?” he saiid.“Is thaat aall youu neeed us to do??” rreplliedd thhe tteamm meembeers,, taakenn abbackk. UUnitted by a ccleaar ddireectiion andd shhareed oowneershhip of thee caausee, tteamm meembeers entthussiassticcallly ccut cossts by fivve ccentts pper galllonn ovver thee foolloowinng yyearr whhilee coontiinuiing to maiintaain goood ssafeety andd ennvirronmmenttal reccordds.Narrrowiing priioriitieesHaviing tooo maany priioriitiees ccan leaad tto llackk off cllariity.. AAerooMexxicoo, ffor exaamplle, hadd woorkeed wwithh a strrateegy connsulltinng ffirmm thhat delliveeredd a 2499-paage repportt liistiing keyy peerfoormaancee inndiccatoors (KPPIs)) foor mmeassuriing proogreess by thee ennterrpriise.. TThe goood nnewss waas tthatt thhe KKPIss gaave thee toop tteamm meetriics forr meeasuurinng ssucccesss. Thee baad nnewss waas tthatt thheree weere 1000 off thhem,, annd ttheyy weerenn’t priioriitizzed.. “Itt waas ccleaar tthatt exxecuutioon wwoulld ssufffer unllesss wee iddenttifiied thee moost impporttantt onnes,, saays AerroMeexicco CCEO Artturoo Baarahhonaa. “Soo wee diiscuusseed wwhicch ooness coonneecteed mmostt diirecctlyy wiith ourr sttrattegiic pprioorittiess annd wwherre wwe wweree inn thhe bbusiinesss ccyclle, andd eaach teaam mmembber setttleed oon ffivee chhieff gooalss.” Byy gaainiing claaritty oon kkey objjecttivees, thee teeam greeatlly iincrreassed thee oddds thaat ssignnalss woouldd trranssmitt cllearrly dowwn tthe linne. Getttingg buuy-iin aat tthe toppHay ressearrch on teaams hass shhownn thhat it’’s nnot unccommmon forr teeam memmberrs tto nnod theeir heaads in agrreemmentt whhen neww sttrattegiies aree seet iin mmeettinggs, theen ggo bbackk too thheirr diivissionn orr deeparrtmeent andd caarryy onn exxacttly as theey hhad befforee. IIn eeffeect,, thhey endd upp saabottagiing thee pllan.. Thhat’’s wwhy gaiininng bbuy--in is esssenttiall too efffecctivve eexeccutiion,, annd ddialloguue iis wwhatt maakess itt haappeen.IBM creeateed aan eexeccutiive teaam cconssisttingg off siix PPh.DD-leevell teechnnicaal lleadderss att ann apppliied ressearrch uniit. Thheirr miissiion:: buuildd sttronng rrelaatioonshhipss wiith topp reeseaarchh unniveersiitiees sso tthatt IBBM ccoulld rrecrruitt innnovvatiive sciienttistts ccapaablee off deevellopiing breeaktthrooughh prroduuctss. Thee prrobllem wass thhat thee Phh.Dss, aall worrld--claass sciienttistts, werre uusedd too coompeetinng ffor ressearrch dolllarrs aand dissmisssinng eeachh ottherr's ideeas to advvancce ttheiir oown.. GGetttingg thhem to worrk jjoinntlyy annd bbe hheldd acccouuntaablee foor bbusiinesss rresuultss waas ggoinng tto bbe vveryy diiffiicullt.In tthe firrst grooup meeetinng, thee viice preesiddentt siimplly aassiigneed aaccoounttabiilittiess too thhe vvariiouss teeam memmberrs. "I couuld seee thhe sscieentiistss diiggiing in theeir heeels,, saays Harrriss Giinsbbergg, aan iinteernaal lleaddersshipp coonsuultaant whoo atttenndedd thhe mmeettingg. "Noo onne wwas goiing to dicctatte tto tthemm whhat theey sshouuld do.." Eveen iif ttheyy'd saiid yyes to thee VPP's dirrecttivees, addds GGinssberrg, theey wwoulld nneveer hhavee foolloowedd thhrouugh..Ginssberrg, whoo heelpss IBBM bbusiinesss uunitts cclarrifyy annd eexeccutee sttrattegyy, kkneww thhe kkey wass too geet tthe sciienttistts tallkinng tto eeachh ottherr. So he coaacheed tthe vicce ppressideent to chaangee heer bbehaavioors.. RRathher thaan hhandd ouut ddireectiivess, hhe ssugggestted wayys sshe couuld stiimullatee teeam diaaloggue aboout howw too meeet objjecttivees. Ginnsbeerg alsso ccounnselled othher teaam mmembberss abboutt thhe nneedd foor aa "cconssenssus proocesss" on an intterddepeendeent teaam.Theyy alll ""gott" iit. Att thhe nnextt meeetiing thee VPP saaid,, "OOur manndatte iis tto ccreaate breeaktthrooughh prroduuctss. WWithhoutt acccesss tto ttaleent at thee toop uunivverssitiies,, wee woon'tt suucceeed.. HHow aree wee gooingg too geet iit?"" AAt ffirsst, Ginnsbeerg reccallls, shee meet ssileencee. Finnallly oone teaam mmembber raiisedd heer hhandd. Shee waas wwilllingg too "gget outt thheree too thhe uunivverssitiies,, annd bbe mmoree viisibble,, goo ouut wwithh thhe rrecrruitter andd thhe sseniior humman ressourrcess peeoplle,"" saaid Ginnsbeerg.. SShe alsso aagreeed to hellp ssomee upp-annd-ccomiing sciienttistts llearrn hhow to devveloop rrelaatioonshhipss wiith uniiverrsittiess.A seeconnd tteamm meembeer ssaidd hee woouldd "hhelpp heer mmakee soome callls.." Thee icce wwasbrokken andd alll tthe teaam mmembberss evventtuallly toook oon ggrouup rrespponssibiilittiess. ""Itwas alll abboutt diialooguee," sayys GGinssberrg. "UUntiil tthe inddiviiduaal lleadderss emmbraacedd thhe uuniffyinng eelemmentts oof tthe strrateegy forr thhe ggoodd off thhe eenteerprrisee, ttheyy onnly atttendded to theeir ownn miissiion.. TThe diaaloggue hellpedd thhem buyy-inn, aagreee tto ssomee shhareed aactiivittiess, aand beggin to worrk mmoree coollaaborratiivelly.""2. SSet up sysstemms aand proocesssess too c。