WHY COMPANIES NEED TO TRANSLATE STRATERGY TO EXECUTION?

Posted by: Aditya Batra, Head of Supply Chain

Companies today struggle to implement strategies because of over reliance on structural changes in their organizations. Structural change is important and has its place, but most powerful executors of strategy focus on two different aspects from structural change:

1. Decision rights – Who makes decisions and how?
2. Information flows– Does the right information reach decision makers quickly and across organizational silos?

Tackle these two first, and the third and fourth aspects of driving implementation – ‘structural change’ and aligning ‘motivating factors’ can follow later to support these moves. Our findings are surprisingly consistent across countries. Indian companies are no different from the global average and face a similar set of execution challenges.

The Path to Effective Execution

Most companies, by their own admission, cannot sustain superior results. Their vision and strategy are clear, but they are unable to get past the barriers that stand between them and enduring exceptional performance. Sustainable success is therefore a matter of execution.

There are four fundamental, interdependent building blocks of great execution, which are captured in what we call as an ‘Organization’s DNA’. These factors determine the speed and consistency of implementation of the strategy. The first two elements are the most important, and most often ignored.

1. Decision rights: Everyone has a good idea of the decisions/actions for which he or she is responsible; and
2. Information flows: Important information about the competitive environment, customer feedback, and internal events gets to headquarters and across silos quickly.

The last two play a supporting role:
3. Motivators: What objectives, incentives and career alternatives do people have?
4. Structure: What is the organization model, including ‘lines and boxes’?

Example of Dysfunctional Decision Rights

In a consumer goods company, decisions made by regional and divisional leaders were overridden by corporate functional leaders. Decisions were slow. Overheads increased as divisions hired people to put together robust cases for challenging corporate decisions. Management solved this by firmly delegating decisions to the divisions and held them accountable for profitability.

Example of Information Flow Issues

At a financial services firm, sales people often crafted one-off deals with clients that cost more than revenues. The sales people did not understand the cost and complexity of their decisions. The problem was rectified when the sales people were armed with information pertaining to the cost of their decisions, using a smart customization approach.

The Seven Different Organization Personalities

Based on our research, there are seven types of organizations – three of which are effective and four that are in-effective Recognizing the type of organization is the first step, which enables development of targeted interventions to move towards a better execution profile.

Our research shows that the majority of organizations have unhealthy profiles, India being broadly similar to the rest of the world.

More than 50 per cent of organizations in India state that their execution is weak. The largest number of respondents, around 25 per cent characterizes their organization as suffering from a cluster of pathologies we place under the label ‘Passive-Aggressive’. The category takes its name from the organization’s quiet but tenacious resistance, in every way but openly to corporate directives. In Passive-Aggressive organizations, people pay those directives lip service, making only enough effort to appear compliant.

In contrast to responses from the healthiest resilient organizations, people working in Passive-Aggressive organizations feel strongly that they do not know which decisions they are responsible for, that no decision is ever final, that good information is hard to obtain, and that their performance is not accurately appraised.

In contrast, the resilient organization gets these most important elements right – clarity of decision rights, no second guessing of decisions, free availability of the right information and accurate performance appraisals.

Conclusion

Organizational success is the result of superior execution ability and agility. To achieve success, managers must assemble the right program of high-leverage actions integrated across four key organizational levers: decision rights, information, motivators and structure.

A full transformation of an organization is impossible without the engagement of senior management. But even those in the middle of the organization can make a difference within their own scope of influence. Large organizations are made up of many small overlapping units. Even if they are not entirely independent, most of us can make changes in ours. If you are a brand manager in a Passive-Aggressive company, for instance, you can make it clear to your team that delivering on promises matters. Then find an opportunity to prove it. Slowly, your division can become a source of initiative in a sea of lassitude. You may not change the whole company overnight, but you just might begin to set a new tone