A group of 13 CEOs, each of whom heads a company within a family-owned conglomerate, recently gathered around a table in New Delhi to trade thoughts on the importance of speed for strategy execution. The ostensible reason for the meeting was to hear my co-author discuss a book we recently authored on the topic, but the CEOs quickly took over the conversation, speaking of their respective challenges in executing their strategies with a degree of speed.
Although they operate in India’s fast-growing economy, their top concerns were remarkably similar to those of CEOs in the U.S. and European economies, where growth is sluggish to non-existent.
From East to West, it appears, CEOs share a universal concern with what my co-authors and I call “strategic speed.” CEOs are calling upon their organizations to execute new strategies more quickly in order to cope effectively with an increasingly challenging economic and competitive environment. Yet their abilities to execute these strategies quickly and well depend to a great extent on the most variable of factors — their people. As one of the 13 CEOs in New Delhi put it, “I have a winning strategy, and I’ve put all the right technical and financial resources in place, but we’re still struggling to execute. I think I’ve got a challenge with my managers and my staff.”
He isn’t alone in feeling frustrated. On average, organizations abandon 50 percent to 70 percent of strategies because they fail to take hold in the organization or fail to achieve the desired results in the time expected. In other words, only 30 percent of strategic initiatives fully succeed, on time. Yet the stakes are extremely high. Faster companies have an average of 40 percent higher sales growth and 52 percent higher growth in operating profit than slower companies.
People are paramount
So what’s the secret in the sauce? What do faster companies know that slower companies don’t?
The answer: You achieve strategic speed by focusing on people. If you can mobilize people, you can accelerate execution.
This is a little-researched and poorly understood area of management. And yet, at some level, the notion that people are critical to speed is intuitive. It’s no coincidence, for example, that as organizations emerge from the recession, they are showing renewed interest in leadership development for managers and other leaders. Many organizations are realizing that they simply don’t have enough talent to execute their strategies, partly the result of staff cuts and curtailed developmental opportunities brought on by the recession.
Employers cut spending on training by 11 percent in both 2008 and 2009, according to human resources consulting firm Bersin & Associates LLC. Those cuts, in conjunction with deep job cuts, have left organizations hurting for talent. The Forum Corp.’s Leadership Challenges Index found that leadership bench strength tops the list of concerns, with many organizations looking to recruit and/or develop new leaders at all ranks in the hopes of stimulating growth. It’s no surprise, then, that about half of companies plan to increase their leadership-development budgets in 2010, according to a Bersin survey.
What many of these companies might not know is that the skills needed to lead and manage strategic execution and to achieve strategic speed are specific. That is, if you want your leaders and managers to achieve strategic speed, you have to teach them exactly how.
But of the many “people factors” on which leaders can focus, which ones provide the most return in the form of strategic speed? Our research showed that there are three conditions that effective leaders in fast organizations seek to increase, and that in turn increase strategic speed.
Three conditions for increasing strategic speed
The first is clarity, the shared, clear understanding of your situation and direction. This is the primary lever Kirk Kimler pulled when he developed a new strategy for selling Fisher HealthCare’s 600,000 clinical products, ranging from disposable rubber gloves and syringes to state-of-the-art pieces of lab equipment valued at several hundred thousand dollars. Kimler, who was the organization’s head of marketing at the time and who later became president, recognized that implementation of the strategy would be impeded by a lack of clarity about priorities and by cumbersome work processes. So he streamlined the number of reports his managers were consulting regularly from 73 to 20, and continually insisted on a top priority list that could not exceed 10 items. With newfound agreement on a clear set of priorities and minimal distractions, the organization successfully implemented the new strategy and enjoyed increased sales.
Unity is the second condition on which “fast” leaders focus. They get their organizations to achieve wholehearted agreement on the merits of the organization’s direction and the need to work together to move ahead. It’s what John Cooper, executive vice president of North American sales of SunGard Availability Services, focused on when he oversaw the integration of a newly-acquired company into his organization. The acquisition doubled the size of the company and the sales force, and created a confusing patchwork of sales approaches. In response, he created a uninform approach that encouraged greater collaboration across functions. Everyone in the organization – whether in sales, engineering, marketing or operations – was now held accountable for sales, service and client retention. Engineers went on sales calls. Salespeople made smoother post-sale hand-offs to service, freeing themselves to make more sales. And service issues were addressed more quickly and flexibly. The changes resulted in a multi-million-dollar increase in revenue in the first year and 50 percent increase in retention of salespeople over three years.
The third condition on which leaders focus when achieving strategic speed is agility. Some confuse agility with pace. Interestingly, in a global survey we conducted of leaders, those at slower companies were the ones who focused on efficiency, pace, and sticking with the known, and showed a distinct lack of concern with alignment. The faster companies, by contrast, emphasized alignment, flexibility, openness, innovative thinking, and – in a seeming paradox — taking time to reflect and learn.
Those characteristics are the true reflection of agility – the willingness to turn and adapt quickly while keeping strategic goals in mind. Consider Starbucks CEO Howard Schultz’s recent announcement that the organization will pursue domestic growth by looking beyond its iconic retail locations to smaller cafes. He also plans to expand the availability of Starbucks products via other retailers, while continuing to grow internationally. The organization remains focused on its strategic growth goals but has shown a willingness to consider new and different ways to achieve them.
Each of these three conditions – clarity, unity and agility – are people-focused, and because people must be led, the ability to achieve these conditions is dependent on the “people” skills of each organization’s leaders. Our research found that four leadership practices in particular contribute to the attainment of these three conditions.
A leader who wants his or her organization to be strategically fast must:
- Affirm strategies. It’s not enough to formulate a great strategy and issue it in a compelling statement. Leaders need to communicate that strategy clearly and frequently to ensure all people in the organization – not just those at the top — know where they’re going and are motivated to go there.
- Drive initiatives. Leaders need to realize that they must lead the execution of their strategy or it will slow and eventually die. They don’t have to become project managers, but they do have to direct the initiative in a more detailed way than many are used to.
- Manage the climate. The way it feels to work in a place – what we call the organizational climate – has a direct impact on employee motivation, performance and speed. By focusing on six dimensions of climate – clarity, standards, commitment, responsibility, recognition, and teamwork – a leader can improve an organization’s climate significantly.
- Cultivate experience. Individuals and teams with experience move more quickly than those without. Strategically fast leaders learn how to cultivate their staff’s insights and lessons learned, and to distribute those learnings in a continuous cycle of improvement.
When faced with a need to become strategically faster, a leader’s intuition is often to focus, naturally, on pace and/or process. In fact, however, companies that do so to the exclusion of people often become strategically slower. That is, their focus on pace and process is disconnected from people’s beliefs and behaviors and, as a result, fails to achieve the desired results in the desired time. Their strategy joins the upwards of 70 percent that fail.
Pace and process are important, make no mistake. But they cannot be divorced from people. Vittorio Colao, CEO of Vodafone Group, put it this way when we asked for his take on strategic speed: “The three key words for us are speed, simplicity and trust – which in a way correspond to pace, process and people. Pace is the pure speed element. Process is something you have to pay attention to in a large company, but it’s something you need to simplify as much as possible. Then there’s people, which we’d put under the “trust” category, because if you want people to move fast and simplify processes, the key is to inject a high degree of trust. People must know that risk taking and judgment calls are fine; they must have trust in one another. Trust is also the glue that holds different functions and processes together.”
People are the overlooked or underappreciated ingredient in the recipe for strategic speed. When neglected, their inability to perform well will undermine the execution of the best-conceived strategies. But when attended to, they will greatly increase the likelihood of successful implementation, enhance the speed with which strategies are executed, and deliver the results we seek.