Improving Your Strategy ExecutionThe lead article in the June 2008 issue of the Harvard Business Review details the results of research Booz & Company has conducted over a period of several years to elucidate what makes a difference in the effectiveness with which an organization executes its strategy.
Gary L. Neilson, Karla L. Martin, and Elizabeth Powers, all Booz employees, provide evidence that the most important factors in strategy execution generally relate to clarifying decision rights (who is responsible for what decisions) and designing appropriate information flows within an organization. Relatively less important are factors relating to aligning motivators and adjusting organizational structure.
As part of its research program, Booz created a survey for assessing organizational effectiveness in implementing strategy (available online here). The survey lists seventeen traits that Booz found have a significant impact of varying intensity on implementation effectiveness. There are also two items relating to implementation outcomes: Important strategic and operational decisions are quickly translated into action and Overall, this firm deals successfully with discontinuous change in the competitive environment.
Five of seventeen implementation effectiveness traits relate to decision rights, and another five to information flows. Four relate to aligning motivators, and three to organization structure. In the lists below, the number associated with an item is its place in the overall list of the seventeen traits, once those traits have been arranged in descending order of impact on implementation effectiveness.
The five traits relating to decision rights are:
#1 Everyone has a good idea of the decisions and actions for which he or she is responsible.
#3 Once made, decisions are rarely second-guessed.
#7 Managers up the line get involved in operating decisions.
#11 It is more accurate to describe the culture of this organization as "persuade and cajole" than "command and control."
#12 The primary role of corporate staff here is to support the business units rather than to audit them.
The five traits relating to information flows are:
#2 Important information about the compettiive environment gets to headquarters quickly.
#4 Information flows freely across organizational boundaries.
#5 Field and line employees usually have the information they need to understand the bottom-line impact of their day-to-day choices.
#6 Line managers have access to the metrics they need to measure the key drivers of their business.
#8 Conflicting messages are rarely sent to the market.
It is not until midway through the list of traits that the first item relating aligning motivators appears. The four traits relating to motivators are:
#9 The individual performance-appraisal process differentiates among high, adequate, and low performers.
#10 The ability to deliver on performance commitments strongly influences career advancement and compensation.
#16 If the firm has a bad year, but a particular division has a good year, the division head would still get a bonus.
#17 Besides pay, many other things motivate individuals to do a good job.
Even though many organizations rush to introduce structural changes when they find themselves having difficulty with strategy implementation, the Booz research indicates that such restructuring moves are best reserved for late in the process of improving implementation effectiveness as can be seen in the low rankings of the three restructuring traits on the survey:
#13 Promotions can be lateral moves (from one position to another on the same level in the hierarchy).
#14 Fast-track employees here can expect promotions more frequently than every three years.
#15 On average, middle managers have five or more direct reports.
Neilson, Martin, and Powers conclude their article with a concise summary:
As long as companies continue to attack their execution problems primarily or solely with structural or motivational initiatives, they will continue to fail. ... they may enjoy short-term results, but they will inevitably slip back into old habits because they won't have addressed the root causes of failure. Such failures can almost always be fixed by ensuring that people truly understand what they are responsible for and who makes which decisions and then giving them the information they need to fulfill their responsibilities. With these two building blocks in place, structural and motivational elements will follow.Booz has provided an online simulator that enables you to test a batch of five improvement actions in each of two years. (You select from a preset list of 28 actions related to the seventeen implementation effectiveness traits.) Note that you first have to diagnose which of seven types of organization passive-aggressive, overmanaged, etc. your organization is.
The simulator tells you how much your effectiveness score, measured on a scale of 100, would rise each year as a result of your chosen actions. Note, however, that the scoring is based on the assumption that your organization matches the "average" organization embodied in Booz's regression analysis of the impact of the seventeen traits on implementation effectiveness. In effect, you end up trying to guess what actions the regression analysis indicated would be best. Whether what's optimal for the "average" organization is optimal for your organization is a question that requires its own analysis.