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The Strategy of Execution
THE FIVE-STEP GUIDE FOR TURNING VISION INTO ACTION
By LIZ MELLON, SIMON CARTER McGraw-Hill Education
Copyright © 2014 Liz Mellon and Simon Carter
All rights reserved.
ISBN: 978-0-07-181531-4
CHAPTER 1
Mobilize the Village
Outstanding leaders go out of their way to boost the self-esteem of their personnel. If people believe in themselves, it's amazing what they can accomplish.
–Sam Walton
Cisco Gets It
Cisco was incorporated in December 1984 and headquartered in San Jose, California. Husband and wife Len Bosack and Sandy Lerner, both working for Stanford University, wanted to e-mail each other from their respective offices located in different buildings but couldn't. There was no technology that could deal with disparate local area protocols. They and other computer scientists designed a software system, the Internet Operating System (IOS), which could send streams of data from one computer to another. As a result of solving their challenge, the multiprotocol router was born. The software was loaded into a box containing microprocessors specially designed for routing and was then sold as a package to businesses.
Cisco is the plumber of the technology world, making routers, switches, IP telephony, data centers, mobile devices, and advanced network technologies that keep data moving "7/24" in Cisco vernacular. Customer demand led to an online customer support system by 1992 and by the mid-1990s, the company was providing consultancy services and customer-driven solutions.
In 2007, Cisco CEO John Chambers went to the World Economic Forum in Davos, Switzerland. He was impressed with the quality of answers produced in a group exercise on a vision for life in 2015 and became convinced that top-down, command-and-control leadership and decision making had to stop. In April 2007 he repeated the exercise in Cisco and found that three different groups of employees came up with the same answer to a question about the company's mobile strategy. Chambers said, "You can take your top 40 or 50 people and then your top 300 and then your top 3,000 and still arrive at the same decisions."
By 2009, Chambers had restructured Cisco into a series of 43 boards reporting to 12 councils, each with about 14 members, including 1 or 2 senior vice presidents or vice presidents. The 12 councils of 14 people (the top 168) reported into the operating committee, which was made up of the 15 top executives of the company, including Chambers. All board or council members had delegated authority for decision making from their function or business unit. What are the advantages to this approach? The leaders of business units formerly competing for power and resources now shared responsibility for one another's success. And their intimate role in reaching decisions meant that they felt that they owned execution of them.
Cowboys
In the company's old "cowboy culture," strong personalities were rewarded for jostling one another out of the way to get Chambers' approval. The internal economy of the old Cisco was very much market based. After the company was reorganized into boards and councils, executive compensation became based on how well the collective of businesses performed, not the executive's own individual product unit. Cisco vice president Ron Ricci said at the time, "One of the traditional ways you define power in a big corporation is by the resources you control. It's one of the evil characteristics of corporations. If you control resources for your unilateral use, you can move away from the greater whole, even if you make good decisions." CEO Chambers said, "I now compensate our leadership team based on how well they do on collaboration and the longer-term picture. If we take the focus off of how they did today, this week, this quarter, it will work."
What John Chambers wanted was to create a company with less reliance on the CEO, less deference to hierarchy, and more widespread involvement in decision making. In addition to these features, what he also got was faster decisions, speedier resource allocation, and a more nimble company. His leaders, the top 168 sitting on councils, followed by the next 500 on boards, felt ownership of the decisions they had a hand in reaching and therefore acted on them faster. They adopted an enterprise-wide mindset, looking out for Cisco as a whole, not just their own part of the business.
We aren't seeing this in many organizations. Cisco is truly unusual. And it's what we are advocating here, as the first step in effective strategy execution.
It doesn't need to be done in the same way, of course. There is more than one organizational form that can garner ownership from the top 100 or so executives. But the objective is right.
Three Core Ideas
Moving from strategy to execution has always been tough. In other words, execution was never easy, and people who say otherwise are kidding you or themselves (and possibly both).
This book is not about how to get sign off on the strategy. That process involves the CEO, the executive team, the board, and a whole bunch of external stakeholders. It's important. Setting off without stakeholder buy-in is a risky business. Dominique Fournier offers us one example. He was CEO of Infineum, a research joint venture between Exxon and Shell, until 2012. Getting sign-off on the strategy takes a lot of hard work behind the scenes including lobbying in order to gain agreement so that you can move forward. You can't force decisions or implement ideas before they are fully accepted. Fournier did this once and found out the hard way that it was inadvisable. He moved to implement a strategic initiative that was right for Infineum, but he didn't have clear buy-in from the board. The initiative ended after 12 months, representing wasted effort, frustration, and loss of credibility in his leadership. "I think it was right for Infineum, but I was wrong to implement it without agreement. I had to undo everything—it was painful."
This book is about how to execute strategy. Once you have sign-off on the strategy itself, how do you make it happen for real?
In this chapter, we focus on three core ideas. The first idea is that the root of the struggle to execute strategy has shifted over time. We used to think that incalcitrant workers at the bottom of the organization acted as a block. But today there is a growing awareness that the problem has shifted. Our work over many years in this field has convinced us that the strategy execution bottleneck has moved up several levels in the modern organization. It's not the CEO and it's usually not his or her immediate executive team either; they get it. Nor is it the people lower down the organization; they will execute the strategy if given proper leadership. The block to strategy execution today lies with the top 100 most senior executives. Why do we call it the top 100? It's an approximation. Sometimes more, or sometimes it's fewer, depending upon the size, nature, and geographic spread of the organization. For example, at CISCO it's about 160; at Rio Tinto, 120; at Whitbread, 40; and at Jaguar Land Rover, it's 160. Think in terms of the top 0.1–0.2 percent of the total population.
The second idea relates to this group of 100 top executives. We see them as a community, like a small village. And unless they embrace the strategy and actively engage with it, the strategy (any strategy) is doomed to failure. The third idea covers how to tackle the challenge and mobilize the top 100 to action.
So there you have it: three simple ideas. First, the biggest block on execution is the top 100 in the organization. Second, if they as a community don't actively support a strategy, it is dead in the water. Third, a few crisp ideas on how to undo the blockage and get these top 100 executives owning and moving the strategy to execution. First, let's look at the evolution of the problem from the bottom to the top over the last 150 years.
The Shifting Problem
If we think about the first 70 or so years of the last century, any barrier to getting business done was firmly placed at the door of the workers. In fact, this bias stems from the industrial revolution. The most famous consultant of the late nineteenth and early twentieth centuries was Frederick Winslow Taylor, who used engineering principles to increase productivity dramatically in factories. His underlying belief was that people were lazy and would take any opportunity they could to slack. He believed that they needed to be controlled by managers or experts (in the organizational principles he advocated) in order to get a good day's work out of them.
Middle Managers—Glue, Concrete, or Cooked Geese?
Who would volunteer to be a middle manager when these are the kind of labels used to describe you? By the 1980s, the blame had shifted up to middle managers, formerly considered to be the glue holding the organization together but now seen as the roadblock to success. This "layer of concrete" was blamed for failing to translate a perfectly good strategy from the top into actions and deliverables for the workers. Roger Smith, chairman and CEO at General Motors from 1981, referred to middle managers as "the frozen middle."
Leaders tried to eliminate middle managers by creating leaner, more empowered organizations with fewer layers that were focused on delivering service to customers. Tom Peters, who was the first management writer to have a management book reach the best-seller list and the first management expert to be called a guru, wrote, "Middle Management as we have known it since the railroads invented it after the Civil War is dead. Therefore middle managers as we have known them are cooked geese."
The "cooked geese" ranks of middle managers were decimated during the 1980s and 1990s—and it's not over yet. The Economist had a recent article featuring Unilever, the food and healthcare giant, in a story about consistently reducing layers of management from a startling 36 tiers at the start of this century to 6 levels today. As The Economist put it, "Rising through the grades at such places was often a reward for longevity, not competence. Many big firms simply accumulated managers over time. It is little surprise, therefore, that recent cost-cutting efforts have focused on the middle manager." But middle management and bureaucracy are not synonymous; it depends what they are expected to do. For example, we know that an individual's relationship with his or her line manager is critical to motivation and productivity. A good manager can get extraordinary performance out of a team, while a bad manager makes people quit. Good people managers, with enough initiative to balance the needs of the company's day-to-day operations against the need to implement the wider strategy, can still play a valuable role in organizations today.
It may save money in the short run to cut middle managers, especially if you have let recruitment or promotion at this level get out of control, although many believe that the savings are illusory. But there is no evidence that the organization gets any better at strategy execution with fewer middle managers. In fact, the opposite may happen. According to Wharton School faculty member Joe Ryan, "In cost-cutting times, knee-jerk reactions happen. There is a paradox where middle managers are essential, but end up sacked when restructuring occurs. It's a rough situation because the people needed to run the most important projects are in the middle."
We believe that the problem with strategy execution today lies at the top—not with the workers or with middle managers. We call them the Village. Let's meet the inhabitants.
The Village
How do you become a member of the top 100 Village? You have to run a large part of the business. It may be a geographic area, a function, or a business unit. For example, you could be the global head of marketing, the general manager for India, or the CEO of gas compressors. You are a leader in your own right. You have responsibility for your financial results, and you lead strategy development in your part of the business. You may also contribute to the overall strategy for the organization. At a minimum you can expect to participate in the annual conference where the CEO presents and updates the strategy for the whole organization.
Why a Village?
If you look at how we human beings have historically structured our society, the basic building block is a village. Anthropologists, such as Roger Dunbar, tell us that the optimum number of relationships we can deal with is about 150—the size of a small village. This is now known as "Dunbar's number," and his work is fascinating. According to him, the current mean size of the human neocortex was developed about 250,000 years ago. It's the size of our brain that limits the number of meaningful relationships we can manage, or monitor, simultaneously. When a group's size exceeds this limit, it becomes unstable and begins to fragment. His surveys of village and tribe sizes back this up. The estimated population of a Neolithic farming village was 150; similarly, 150 represented the splitting point of Hutterite settlements, and 150 was the basic unit size of professional armies in Rome and in modern times since the sixteenth century.
So if we want to create a close-knit community for action at the top of our organizations, 150 is about the maximum size that will work.
Some organizations choose structures that make good use of Dunbar's insight. Sir Richard Branson, founder of the Virgin Group of businesses, was famous for popularizing the idea in his early business empire in the 1970s, when he tried to keep business units to a size of about 150. He still believes in this today. Branson says, "The challenge as you get bigger is not to become so big that you become just like another one of the big carriers. Trying to stay small while getting bigger is very important. Any company that has more than 250 people in a building is in danger of starting to become impersonal. In an ideal world, 150 people are the most that should be working in one building and in one organization, so that everyone knows each other and knows their Christian names."
The number of 150 also includes past relationships where you still want to keep in contact. Dunbar tells us that 150 would be the average group size only for communities with a very high incentive to remain together. For a group of 150 to remain cohesive, he speculates that as much as 42 percent of the group's time would have to be devoted to social grooming. And that's where the problem starts.
The Blockage in the Village
The difference between a real village and the top 100 Village in companies is that, in the real village, you live close to your neighbors and you know them—sometimes too well. You can look across the street and the village green and watch them as they go about their daily business. Your paths intertwine and cross, and conversations and pleasantries keep everyone in touch. Some stay and some depart, but newcomers are visible and are assimilated into the community.
In contrast, the top 100 Village is spread all over the organization and, in a global firm, all over the world. It's hard for the 100 executives to identify that they are part of a community with a special responsibility in strategy execution for the organization as a whole. They are separated, if not by geography, then by function or specialty, in their various roles as country heads or leaders of functions, services, or product lines. As one executive complained ruefully, "You tell us that we are the top 150, but we don't even see each other. We are not even a group. We hardly ever meet." He wanted to be part of a leading community for his organization, but he just couldn't see how it could be done. The Villagers may not even be the 100 most senior, as generally a few high-potential, but more junior executives, will be included. They mostly meet as a collective only once a year at a formal conference organized just for them. The objective of the conference is for the CEO to explain the strategy and present progress to date and to urge this group of executives on to greater effort. If the CEO and the executive team construct the strategy, this group makes it come alive. Without these people, nothing happens. But they don't see that.
Management in Retreat
Let's think about the norm in most organizations. The argument is that the top 100 Village knows who its members are only because they may meet once a year for a few days. This would be an annual two- to three-day gathering in a large hotel or conference center. Communicating information—about new ideas, products, strategies, opportunities, and challenges—would be a core objective. Generally, this takes the form of presentations from the stage. Between presentations there would be opportunities to mingle, either through formally designed sessions or informal events like lunch. All attendees wear a badge with their name on it, so everyone is able to address their colleagues by name, even though they may not know which part of the business the other is from or what she or he actually does. It's very unlikely that any one individual will manage to talk to all of the other 99 during this short period. They literally don't all meet each other during the event, let alone see themselves as a collective. There may be some social events, probably limited to dinner, or perhaps with the addition of a special event or outing. Whatever happens will definitely not meet Dunbar's definition of social grooming. Often, for security reasons the company will not list the members or their contact details, so unless you exchanged business cards during the meeting, you won't be able to get in touch again afterwards. They have a very long way to go in creating a real community for action.
(Continues...)
Excerpted from The Strategy of Execution by LIZ MELLON, SIMON CARTER. Copyright © 2014 Liz Mellon and Simon Carter. Excerpted by permission of McGraw-Hill Education.
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