“Vision without execution is hallucination”
Figure 4.1 Getting things done — Execution
What sets one orchestra apart from another is its collective ability to beautifully play a symphony. What differentiates a successful company from others in the same industry is its ability to execute. The ability to execute is no doubt much more important than access to technology, access to capital markets (as mentioned before, accessing financial markets in difficult times requires quick and precise execution) or even strategic planning. The level of execution needs to be faster, better and more sustainable than that of the competitors. And it is our people who ultimately execute, reinforcing the importance of the previous chapter in making sure everyone is on board if we want to be successful in the execution phase.
In this phase, the plan needs to be detailed and supported with plenty of quantitative data. There should be targets around several dimensions: the markets in which the company will compete; the main products and services that will be delivered; the main market share targets; and the main cost or expense lines that will be addressed.
The basics of the operating model of the company need to be clearly articulated: clarify the main decision-making processes and decide which key elements will remain exclusively within the local operations and therefore close to the market, and on the other hand, which processes will be common for the whole group regardless of the geography or business unit.
Lack of clarity here may cause endless debates about who does what and once again create a finger-pointing and excuses culture instead of a performance culture. When this task is given to the different operating units to solve, it does not work: in the same way that sibling rivalry, if it is not managed at some level, runs amok — you would not give just one piece of candy to your kids and let them sort out who will have it.
The plan needs to be reviewed regularly to guarantee that it becomes the driving force behind the company’s transformation. Each revision must take into account new contextual and internal information, and make the necessary adjustments to keep it on track.
Ruthless focus is needed to produce a turnaround! You will not be able to affect a successful turnaround by trying to tackle too many things at the same time. Select a few key projects around which to focus the whole of the company.
Figure 4.2 Focus on a few projects and STOP others
Focusing on a few key issues requires STOPPING some things. Stop any existing projects that are distracting the impact of resources and energy from the crucial points. Are you able to share your key strategic elements and projects in two minutes? Which are the three to five most important projects you will be focusing on personally for the next six months?
Of course it is very difficult to stop doing things! We all prefer to start projects and not to stop them. It is difficult to tell a team that has been working on an initiative from scratch, placing lots of energy and enthusiasm on it, and perhaps spending many hours and nights trying to make it happen, to discontinue all related efforts. But, as we said before, it is better to treat people like adults.
A common pitfall is to not stop a project because we don’t want anyone to feel bad, but if you are not convinced or will not support it, you will end up contributing to its demise anyway. Instead of stopping projects early on, I have often seen that teams are asked to come up with many different scenario analyses and the project never gets formally launched but remains in a permanent debate phase. Don’t insist on 10 different sensitivity analyses and versions of a project if you are not willing to go ahead with it. It will waste energy, resources and create great dissatisfaction in the teams working behind the project. If you are not going to move forward with a particular project it is much better to speak boldly and clearly to the team behind it, explain the reason why at that particular moment in time the project will be stopped and quickly redirect those resources to some other relevant project that will flourish.
All projects being pushed forward made sense at one particular time, were approved with the best intentions to make them successful and are probably good projects. We just have to make choices to be able to focus. So the question is not whether the project is good or bad, but whether it is a priority for the company at this time. Only when the project is formally stopped will you be able to free up resources and redeploy them where they are desperately needed.
A favorite analogy of mine is the focus doctors have in an emergency room. I am sure that many incoming patients may need cures for many small problems such as athlete’s foot, but the doctors know very well to focus on what is really critical to save the patient’s life at that particular moment and leave less urgent matters for later.
In many companies, stopping a project can be construed as a massive failure for its leader and the teams behind it, as well as for all parties that were somehow involved in its approval. But keep in mind that you are facing a crisis situation that requires a large and urgent turnaround. Leadership is tough and it requires making decisions and choosing the right battles. Encourage and reward the stopping of projects and give this process the right visibility within the company.
Several years ago I was working for a startup and we were focused on defining the right value proposition for our product as we tried to close the first deals. It was a B2B initiative in the middle of the dotcom bubble. A team had been set up to deploy the support information system that would be used once we had reached our first billion in revenue. I still remember the frustration of being distracted by that team who were trying their best to help but were not conscious that we had no revenues at all yet, so who cared how we would manage our invoices and link them to the general ledger of the company? We were in survival mode.
There is usually not one single answer regarding what key business decisions must be made, but once this hard process of selecting the key elements behind the strategy and execution plan is finished, make sure all elements are aligned behind that plan. A quick checklist that I find very useful is the McKinsey 7-S Alignment Model.
Figure 4.3 McKinsey’s 7 S framework
I find this a useful checklist to make sure that everything is aligned. The model reminds us to make sure that shared values, strategy, structure, systems, staffing, skills and style are all in line to guarantee successful execution. If there is an inconsistency among these elements the probability of success will be much lower and a lot of tension will show up within the organization when trying to execute.
Even though this framework was developed in the late 1970s, it is still very useful and relevant. All 7 S’s are interrelated and there is no direct hierarchical link between them. They are all equally important and to be successful you cannot expect to change any single one without having to adapt the rest. They are easy to remember and can be used to quickly diagnose how a company is developing and working, or which elements are working fine and which ones are not.
These refer to what the organization is trying to achieve. Shared values should not change that much over time. They should also represent why people would want to work with your organization. All shared values must be relevant and support what the organization is trying to achieve.
Style could also be called culture. It is the set of informal rules of behavior within a community or the way things are usually done in the organization. It is a very important factor but very difficult to diagnose. A company may want to reject people with behaviors that are not in line with its culture.
Skills refers to both the individual and institutional skills required to perform as a business. Globalization of the economy and of corporations, and the level of specialization that many companies have today have increased the level of importance of this element. Companies need to define how to either develop or acquire these skills or decide to outsource them completely. A great question to understand this topic is “What should the company do for itself and what should it have customers or providers do?”
Systems are more than IT systems. This refers to all processes in the company from traditional HR processes to the way risks are assessed. It includes the decision-making processes that allow the company to react quickly to the new market and context demands. Having the right processes in place is a must to survive successfully.
Structure represents the classic organization of the company and how authority relationships work inside it. With geographical expansion and globalization of companies, where more complex organizational forms appear (such as matrix organizations), this element has become more relevant than in the past.
Staff refers to the people who work in the company and how talent is acquired and developed. It includes the basic understanding of the numbers behind people, such as headcount and turnover, and also includes the type of people required to successfully operate the company in the short and long term. A new dimension to consider here is making sure that the diversity of the workforce represents the diversity of the customer base.
Strategy is what the company is trying to do in order to gain a competitive advantage. As market dynamics evolve, the strategy must also be adapted to make sure it remains relevant to the new context that the company is facing.
Change programs need to have a combination of structural, long-term processes and projects, and some quick iconic moves to show that we are making decisions, getting the right results and moving in the right direction.
Quick wins are very important to build credibility within the organization. Include their achievement as fast as possible in the communication plan and start making them part of the Story!
If you consider that the company’s culture needs to be shaken up in order to move forward with the transformation, try to identify a few culture-specific iconic moves and openly embrace the new behaviors you want to embed in this new phase. If you really want to build credibility there can be no sacred cows! No exceptions may be allowed when implementing these new measures.
Figure 4.4 Quick wins and structural projects
The quick wins in restructuring processes are usually centered around big decisions that impact the cash situation of the company, given that in most cases it is the cash position or financial situation that has brought the company to a crisis situation. Therefore, a typical quick win could be the sale of some non-strategic assets, divestiture from some non-core investments, a change in dividend policy, refinancing of current debt or closure of some unprofitable divisions. Despite the fact that these quick wins require difficult decisions, these decisions are concentrated around a limited group of people and are usually not so hard to implement. I do not intend to minimize the effort and courage required to make the decision, I am merely stressing that even though they may seem tremendously difficult, executing them is not very complex. On the other hand, the structural projects required to change the fundamentals of the business are usually much more onerous to execute because they require changing processes that touch many different parts of the business and change the way business is conducted. If you have already taken some of these drastic first measures to improve the financial situation, the work has just begun. The real challenge still lies in front of you and during the next several months or years will require you to transform the highly operational parts of your business.
As an example of how to work on these two elements at the same time (structural projects and quick wins or iconic moves), I will briefly explain how we addressed an effort to improve customer satisfaction in our operations. We knew customer satisfaction was not at the highest levels and we recognized that there was a lot of work to be done in order to improve this key indicator. The most relevant project to improve customer satisfaction required a profound revision of all customer-facing activities. We knew that embarking on this journey to improve all “moments of truth” where customers interacted with our company and the processes behind them would take several years because it required changing legacy systems and revisiting processes that would affect several divisions within the company.
Knowing that we had to start the deep transformation of our processes at some point, we were concerned that the time to see tangible results would be too long and would therefore discourage the teams from working on and with those processes. We needed to keep everyone committed and motivated around the project and at the same time start showing some cultural changes to those who still believed that this was just another attempt to address quality problems that would be discontinued shortly. Some of the iconic moves we took were the following: we decided to present the main causes and reasons why our customers were filing complaints to the executive committee; we added customer satisfaction indicators at the front, not on the last page, of our monthly business reports; and we launched a program where all senior executives visited customers, call centers or stores, or attended focus groups with customers from different market segments. We also set up a special room in our training center at our headquarters where groups of employees would be invited to listen to our customers when they contacted our call centers. We also openly shared the impact on the company’s profitability (in € millions) of each percentage point increase or decrease in customer satisfaction. We gave a lot of visibility to all of these activities in order to show the whole company that we were taking this issue seriously.
Probably the best way to check the consistency of an urgent plan is to make sure that you are spending the right quality time working on the transformation and the key projects you have identified. If you have said, for example, that the three most important issues in the short term are refinancing debt, visiting large customers and sharing the Story with all employees, the key question is how much time are you personally devoting to these three activities? Is your agenda still tied up with other operational topics that should have been delegated by now? Are these three topics the first three topics on your agenda at every Executive or Board meeting, or are you still sticking to the old agendas starting with other operational items from the business?
Figure 4.5 Are you spending your time working on the key issues?
What are the KPIs that you should select in order to make sure that the transformation is moving at the right speed? It is very important to define and set the right KPIs to measure real progress. If you do not identify the key variables to monitor, you will run the risk of not knowing what is happening.
Most businesses have several measures in place to track business performance on a regular basis. Several of these measures will probably remain as KPIs during and after the transformation process. However, it is very important to assess these KPIs to make sure we are measuring the right things during this phase in which we are trying to overcome a crisis situation. We may consider highlighting a few financial indicators that perhaps were not on the front page of our reports during business-as-usual periods (for example, evolution of working capital) because under these new circumstances they require special attention. If we need to dramatically simplify our product portfolio, we may want to monitor the number of products or services that we have eliminated every 15 days. As well as identifying a new set of KPIs for this stage, there will be a few KPIs that we may have been following in the past that we should set aside for some time. We could decide not to track employee satisfaction during the next year or so, understanding that the process we are going through may distort the results. Once the business is stable again, it may be appropriate to return to the original KPIs.
When selecting the new set of KPIs, we have to be sure that we establish a mechanism to measure them. Determination of the KPIs has to be easy. This may sound trivial, but I have faced several situations where we had a very clear idea of a great KPI that would allow us to know what was going on, but the information behind the KPI was almost impossible to gather in a timely manner. If changing processes to get the right information is not something we can achieve quickly and easily, I would chose a different KPI that could probably still give a great sense of how things are going.
Figure 4.6 Find the right KPIs to measure progress
Incentives and rewards are a good way to align people and send a clear message to reinforce the important objectives or behaviors that need to be met. Incentive systems in large companies are usually defined and set in a very rigorous process that takes weeks or months from start to finish. In publicly traded companies, the reward and bonus mechanisms for senior executives may require formal approval from the Board of Directors. I mention this because I recognize that changing the reward structures may be a difficult task, but they still need to be addressed.
Incentives and rewards should align with the KPIs that have been identified as part of the success of the transformation of the business. If you have a set of business indicators with targets as part of your annual bonus structure, make sure those business indicators are the most meaningful for the transformation. If your company is publicly traded, stock plans (restricted share plans, common stock awards or stock option plans) represent an easy tool to align management with shareholders. They are very easy to measure and every single person can track them on a daily basis.
But remember that the best way to motivate people is not always just through monetary incentives. There are many other and much cheaper ways to send the right messages to all staff. Many companies have formal reward or recognition programs, in which any employee can be recognized publicly for an outstanding performance in his or her daily job. If you have one of these programs in place, make sure that you align the rewards with those behaviors that you desperately need to model at this stage. For example, if you need to adjust your cost base in a very dramatic way, you may want to recognize and praise the person who brought up and implemented an idea where the cost was slashed by a significant percentage of the existing base.
Social media tools within organizations offer easy and far-reaching electronic praise functionalities that give visibility to those who are contributing greatly and often.
Figure 4.7 Align incentives and rewards to KPIs
What differentiates one company from another is its ability to execute faster than its competitors. And it is the people within a company that actually execute, and will or will not go that extra mile to make a difference.
Reaching out to engage all employees is very important during a transformational effort. Consistency between what is said and what is done is a key element for building credibility throughout the company. People will be looking up to you, the leader, to see exactly what you are doing after listening to what you have said. That is why consistency between the words that have been expressed and the actual behaviors from the leadership team is so important. Building trust and credibility requires a lot of effort and a lot of time. Unfortunately, it only takes one single action that shows inconsistency to damage the reputation that has been built in the past.
Ensure that you will be able to act in line with the messages that you have been sharing. If in doubt, I would recommend not committing to a particular rule or behavior that you might find difficult to model.
A friend of mine, who works as a consultant, told me the following situation that I think shows the value of consistency. Several years ago she was presenting a few suggestions to a group of senior executives around some required cultural changes. The team included a suggestion to avoid having any meetings after 6 pm. Among other things, they were trying to reduce the number of meetings while enhancing the work–life balance. At that company’s headquarters, meetings would extend all day long, starting first thing in the morning until late in the evening. The senior executives group approved several measures suggested but rejected this recommendation of not having meetings later than 6 pm. At first she was disappointed with the decision, but all members were very open and honest, and said they knew that meetings would still go on later than 6 pm and they preferred not to commit to something publicly to later have to retract it and explain why they were the first ones not to comply with the rule. In the end she was glad that the suggestion was taken off the list.
People will easily identify inconsistencies and talk loudly about them instead of mentioning all the cases in which the new helpful rules are being applied. Since this human phenomenon is unavoidable, I suggest you eliminate the root cause from the beginning and commit only to those things that you will really do.
Figure 4.8 Walk the talk
Consistency and patience during the execution phase are key factors. I have seen many projects fail after initiatives are launched and then discontinued after a few months. A typical example would be programs in which the senior management commits to listening to the “voice of the customer”. Public commitments to weekly, monthly or quarterly visits to customers, retail stores or call centers to listen to customer complaints are made only to be forgotten a few months afterwards because day-to-day commitments fill up the leaders’ agendas. When we wake up and realize that no one is following up with the initial commitments, credibility once again goes down the drain.
You need to guarantee that the new sources of revenue receive the necessary resources to be successful. Usually, all budgets are set based on the previous year’s allocation criteria. In that sense, the big or traditional units keep getting the biggest chunks of resources (whether it is capital expenditure, general level of expenses or talent, etc) and the new areas get little or nothing because by definition there was no budget allocated to them the previous year.
If the company has launched new projects to create future growth opportunities, the budgets to support the initial phases should be ring-fenced or protected from the normal budgeting process and cycle. Otherwise they may be the first items to be eliminated when pressure increases on the numbers.
A zero-based budget will also allow you to really revisit and decide on all expense items, making sure the rationale behind each project is revisited, therefore avoiding the continuation of certain projects or initiatives just because they were budgeted for at some point in the past. This mechanism is actually one of the most powerful tools to identify projects that can be stopped (and we have previously recognized that stopping projects is a very hard task). A zero-base budget process will allow this to happen in a much easier and more natural way.
Find an external enemy that everyone can identify and focus all efforts on beating that external enemy. It has to be clear and easily identifiable by all employees. Who is stealing our customers and gaining those extra points in market share? Who is launching competitive products that are directly affecting our revenues? Who are we bumping into in the corridors when visiting our corporate customers? Who is better able to make deals with our vendors and suppliers? Who is poaching our talent?
Make sure it is the right enemy and not someone in a totally new industry. If we pick someone in a completely different or lateral part of the industry segment, only a few employees will identify that player as a real competitor. It will also be very difficult to compare ourselves with them because our businesses are not similar enough.
Once the enemy is identified, regularly bring to meetings all of the information you can about that competitor and what they are currently doing in the marketplace. Identify key indicators to compare with your same indicators and set targets around them. Like the Samurai, respect your enemy, get to know them and engage people in the quest and art form of staging their demise.
Finding and defining this common enemy will bring back the competitive spirit all companies need to compete in the marketplace. This external and common competitor will help focus all internal energy on that external enemy instead of wasting large amounts of effort on infighting.