Is Your Roof Leaking?

So which is it? It's raining and therefore you can't fix the roof? Or since it's not raining, the roof is not leaking and therefore there is no need to fix the roof? In either case, the roof doesn't get fixed and as soon as the rain goes away so will the leak until the next time it rains. Translating this old story to the world of organizations roughly means that organizations are either so busy doing things that they have no time to work on their corporate culture or that their business results are such that there is no apparent need to work on corporate culture. The problem with this of course is that the hole in the roof or the absence of high performance accountability culture lies as a latent problem under good times and is a bit like doing in-flight kite repair under stressful times. There's never an ideal time to work on it. Therefore any time is as good as any other.

Consider this hypothetical situation. Company X gets formed around a new piece of technology that is spectacularly effective and becomes wildly popular with a large audience. Because of the strength of the technology and the ability to transform the technology into products, the company enjoys spectacular revenue growth and profitability. The company goes public. Huge sums of money are generated that provide for continued expansion of the product line, global distribution, and market development. Everything is going just fine. The original founders are able to scale their expertise and their core idea to formulate a rapidly growing and expanding enterprise. Everyone in the organization has a shared sense of what's important, what the priority set is, and intuitively knows what to do.

What is hard to see these circumstances is that as the organization grows, there is a very gradual loss of the founding message in the company that begins to erode some of the original effectiveness. Originally the company understood its customers, its customer’s customer, all of the distribution channel, and all the other moving parts of their business model. Because of the speed of expansion this business model was not codified nor systematized because it was carried on the mutual understanding of “how we do things”. Mutual understanding of how things are done and who does them is also known as organizational culture. It is the invisible element of an organization that can only be seen in the reflection of how things are done. As an organization grows, the culture is stabilized by reinforcing cultural norms by way of hiring practices, orientation processes, coaching and mentoring, and overall leadership. When this doesn't happen effectively, there's a loss of the original message. What can easily happen is that the technology and products that originally made the company so popular, begin to suffer an almost invisible breakdown.

Here's an example: let's say maker of cellular communications equipment originally sold in two basic ways. The first way that they sold was to corporate accounts where the deployment of their cellular devices was done on a corporate wide contract. The second way that they sold was to single users. In one case they're selling in units of hundreds in the other case they're selling in units of one. Sooner or later, the growth of the company begins to flatten. More aggressive sales targets are placed on both the corporate sales organization as well as the single user sales channel. The corporate sales organization realizes that there are a number of small business people who technically are a corporate client but they are a sole practitioner. This leads them to sell to the sole practitioner who originally had a cell phone that was attached to the network as an individual, not as a corporate account. Not knowing this, the sole practitioner purchases a new device from the company only to find out that their connection to the network is blocked because of the classification of their account. This leaves the person without cell phone capability, a bill to pay for the new device, and an opportunity to spend hours on the phone trying to unscramble the connection between the two types of accounts. An argument can be made that this is just simply a systems design error or an oversight but actually runs deeper than that. What this amounts to is a reflection of a loss of the original founding idea of outstanding performance in customer service. It is a loss of integrative thinking and a lack of collaboration. Certainly there are some systems and procedures issues at play here but one of the more fundamental aspects of this type of situation is the aspect of organizational culture. In a strong organizational culture based on customer service, customer outcome focus, collaboration, integrative thinking, and value chain analysis, this would not happen.

Leaders need to understand that there are culturally embedded signals as to what to do and how to do it that communicate the rules of “how to decide”. This is very different than “tell them what to do”. When organizations are small there can be a great deal of “tell them what to do” . As the business grows, at some point that will stop working and the transition must be made to “teach them how to decide”. This is the juncture at which culture becomes central to the execution of strategy and the performance of the company.

The impact of culture is very pronounced in the case of mergers and acquisitions. It's well documented that the extracted value of most mergers and acquisitions does not equal their cost. The debate is about why that is true. Our contention is that when two cultures meet, what gets lost is a shared sense of the obvious that is carried by culture. No matter which culture was the acquired and which was the acquirer, the mixture often creates a breakdown. People are accustomed to doing things in certain ways and it's not always obvious to them why it is that they do the thing they do the way they do. Sort of like the old story about the person being asked by their child as to why they prepare food the way they do. Not knowing the answer the person goes and asks their parent who in turn doesn't know so goes and asks the grandparent. Three generations later, the answer is that the great grandparent did it that way because of the equipment that they had available to them. And even though that equipment restriction no longer exists, the practice of three generations ago is still in effect. The way we do work is culturally embedded. When two cultures who do work differently are merged, a conflict results. The conflict then has an opportunity to be resolved one of three ways. It can be resolved passively by having someone simply withdraw and become silent. It can be resolved aggressively by someone imposing their will. Or it can be resolved constructively through idea sharing, alternative generation and mutual commitment to moving forward. These three aspects of passive, aggressive, and constructive behavior are the reflection of the underpinning characteristics of the organization’s culture.

So although there may never be a perfect time nor an ideal set of circumstances to engage in cultural transformation, there's also never a bad time. So that means that the time to get going on understanding corporate culture, formulating the approach to improving it, and executing on that approach is as good right now as it's ever going to be.

What is your ROC?

The financial world is filled with three letter acronyms that all talk about different kinds of return on assets, return on controllable assets, return on shareholder equity, return on sales etc. and I was thinking why not a new one called "return on consulting". The reason I think this might be of some value is in watching presentations from a large consulting firm (to remain nameless) to a mutual customer in the last two years has left me wondering what the client really got for their money spent. In one case the company presenting their 50 plus slide deck had a chart that compared current spending on research and development to current sources of revenue. Now maybe these consultants got their degree in business from a different school than I did but it seems to me that if we are going to compare data it should be temporally matched. This would mean that the money spent in each category applies to the same time period. But on this particular chart, what the presenter was actually saying was that past revenue had a different pattern than spending on future products. Even though the graphics were nice, a chart that essentially says that the past does not equal the future is not terribly valuable. Nevertheless, the client has spent many thousands of dollars on that one chart alone. It doesn't take much of a calculator to figure out that the return on consulting for such a chart is extremely low.
In another case with the same client but a different consulting company, I witnessed a presentation that demonstrated the lack of correlation between how a salesperson spent the day and the sales results that they generate. Again this is a multi-thousand dollar chart. Again the return on consulting is extremely low.

What's needed here is for organizations that purchase consulting do so on the basis of the consultant understanding the real issue that they are working on and not the deployment of some standardized methodology that comes out of a consultancy's run block. Before spending huge sums of money to end up with a PowerPoint deck that contains primarily the obvious, the mundane, and the simply inane, they should sharpen up their consumer skills and simply ask people who are doing consulting work for them how they approach the subject delivering a significant return on consulting.

Oh... and in case you are wondering, I dont mind being asked for my R.O.C.

The Myth of Best Practices

I constantly hear representations of things that are trumpeted as "best practice". The theory behind most of the trumpeting is that if you implement best practices that worked well for someone else in their context, you too too derive spectacular benefits. I almost expect the pitch to include a set of free steak knives for the next 10 callers.

Save your money.

Save your money that is until you perform a small sanity check. Here is the sanity check. Ask yourself what the critical success factors were that enabled the supposed best practice to work. For instance; How did the best practice resonate with the purpose of the company? How did the best practice fit, support and enhance the brand image of the company? How about the long term... how did the best practice create a substantial benefit for the long range intention of the company? Further, what goal did the best practice help achieve? To what leading indicator of success did the best practice contribute improved performance? Now for the bonus questions. How did the best practice fit and support the company culture? How well did the best practice aid the organizational structure in a way that made work easier to accomplish?

Now if you have all these answers and you are satisfied that what you have going on in your organization is a match for all that context, then fire away. Simply pick up the latest whiz bang book of Jack Welch success stories and go for it.

On the other hand, maybe you should think that over. Perhaps this helps: Before a best practice becomes a best practice, it is a leading practice. A leading practice is something that works quite well in some contexts but has not reached a fad stage. It is innovative. Very few organizations do it. These organizations benefit greatly. Portfolio management with full resource reconciliation and strategic alignment is a leading practice right now. Not many organizations do it, few do it well and those that do reap a huge benefit. Before something is a leading practice, it was an experiment. Before that it was a theory, before that it was an idea. Before that it was an observation. The person that observed that pieces of paper that relate to each other had no way of being temporarily fastened, had an idea about how to fix the problem, generated a theory of making a device to accomplish such a thing, then began to experiment with various means that ended up in the first paper clip did not start with best practices. They started with observations and the generation of theory and immediate action to try things on a small scale. Innovation is not well suited to the adoption of best practices. Efficiency is well suited to the adoption of best practices. Real value in an organization cannot be created through efficiency alone. Innovation is the only thing that can do that.

The constant hammering of best practices in an organization can put you on the cover of Business Week just like it did for 3M. 3M implemented 6 Sigma to the point of almost killing the most precious asset it owned... its innovation culture.

So if you have a bunch of consultants running around your organization implementing best practices, perhaps you should check out if they are curing you or killing you. Perhaps what you need is a better set of observations, ideas, theories, experiments and leading practices

Just a thought.

Hey... cut me some slack

One of the most influential books I have read recently (other than my own of course) is Slack by Tom DeMarco. The case Tom makes in this short and powerful book is that organizations have a nasty habit of overloading the system with so many projects and becoming so efficient that they create a situation that is so rigid that change cannot take place. The analogy Tom uses is the puzzle many of us have had at one time or other that has one less piece than a full matrix. The object of the puzzle is to use the slack in the puzzle to order the other pieces in numeric sequence. Fill in that "wasted space" and what you have is gridlock. No change is possible.

I have worked with many organizations that fundamentally suffer from lack of slack. In writing our book "Executing Your Strategy", we attempted to show the critical nature of portfolio management in the execution of strategy. The right projects done right is the theme we are looking to advance. The right projects that cannot be done right because there are too many to do any of them well is probably the most pressing problem of our time.

Small wonder however. Overload has become part of the culture. It has gotten to the point that a conversation cannot be executed for more than 60 seconds before someones instant message or cell phone or text message beeps in with an urgent interruption. Probably something critical like "did you see the YouTube on ...." Maybe another stunning development in the Brittany Spears drama.

We have to get a grip on this, folks. We cannot change our selves or our organizations if we dont create some space to do something creative and transformational. Being booked 24/7/365 is going to be the end of our ability to adapt.

Practically speaking, the only way to break the addiction to being overloaded is to examine the concept of ideation which is the combination of purpose, identity and long range intention. As we wrote in our book, from the examination of why we are here, where we are going and a deeper sense of who we are, we can generate a basis for what to do and what to not do. If we include some slack in our list of things to do, then we might just be able to accomplish something transformational.

So the thought for today is to include some slack in your time planning. Dont worry, it wont be wasted because when you create some slack, you can choose from a broad array of value added things that will come your way. Dont take my word for it... just give it a shot. This technique comes with a "past back" guarantee. If it does not work... you can have your "past back". Guaranteed.

What to Do About Free Radicals

What happens when a company is acquired by another company and the key intellectual assets just don't seem to mesh with the combined enterprise? What do I mean by intellectual assets you might ask? They are the least accounted for and most precious asset of the company. They are the people who know how the company really works. They are the people that were the reason that the company was worth buying in the first place. You will not find them on the balance sheet. There will be no mention of them on the asset inventory. No dollar value is associated with them directly even though all the dollar value of the organization is a result of the actions they have taken and the decisions they have made. If these people leave or disengage their creative energy, the company stands to lose a great deal of future value. If they remain in the post merger enterprise, I call them "Free Radicals". They are still "free" to do their jobs but are somewhat "radical" to the combined enterprise

Based on my direct observation, this is a critical issue post merger. Most mergers take this into account by way of financial instruments and golden parachutes. Often, people have some financial reason to stay with the enterprise. The problem is that their loyalty and their best creative energy are not for sale. Consider that these people were successful in the old enterprise. That is why they were acquired. But the new enterprise does not see the need to listen to them. After all, they are the acquiring company. They know what is best. Except where they don't.

A significant problem arises when the acquiring company is of a different ideation including a different purpose, a different identity and a different long range intention than the one that the free radicals came from and a storm is not far off. Darwin begins to step in to determine natural selection. Will the free radicals cause the new acquirer to adapt to them? Will the new acquirer cause them to adapt? Both? Neither? This becomes pivotal because free radicals are typically too wise to simply roll over and play dead.

The choices are 1) the free radicals get on the new bandwagon, 2) they remain free radicals in an organization who's antibodies begin to isolate them for extraction 3) They re-invent themselves, 4) They cause a re-invention of the enterprise, or 5) They move on to do something that they like and feel passionate about where they can get what they want.

The impact on strategic execution is that if the strategy of the new enterprise depends on the retention of the free radicals, a leadership intervention is the only thing that will prevent a catastrophic loss of talent and therefore a loss of strategic options. People contribute their best based on their ideation. If the ideation of the free radical becomes incompatible with the new enterprise, the best thing a free radical can do is exit. Incompatibility is not hard to measure. Frustration level, stress level and bottom line positive emotional response versus negative response to being in the organization is the best metric for the free radical to gage their direction. This is not to suggest a "if it feels good, do it" strategy but on the other hand, why would talented people be willing to contribute long term to a cause they do not feel right about?

Many acquisitions do not succeed because the free radicals who are strategically critical are not given enough consideration in the transaction. In business, we have progressed far beyond the acquisition of factories, equipment and fields. We now acquire human networks. And yet our merger and acquisition processes, systems and post merger leadership are still stuck back in the days of trucks and tractors as if people were fungible.

To acquiring companies, I say pay attention to the non-balance sheet assets... they are what you really paid for.

To free radicals I say adapt and stay or quit and leave but do not quit and stay... your energy is best utilized where it does not involve tilting against wind mills.

The Smallest Building Block of Strategic Execution

Have you ever thought of the smallest increment of what it takes to get something done? I may be alone here but it seems to me to be a matter of incremental choices. Stephen Covey's quote for the day today is that we are a product of our choices. No argument there. But what actually influences choice? How are choices made? Are choices controllable?

This is an important question because the big choices made by a company to enter markets, create new products or implement new systems must be supported by all the choices made by the people in the organization or the big choice becomes a big flop.

Shad Helmstetter once pointed out that there are thousands of choices in a day and all of them count. If your organization has thousands of people, then there are at least a million choices in a day for each thousand people you have. Do the math. This is a critical issue.

So the thought for the day is this... based on my experience there are the following influencers on choice that boil down to strategic execution

A sense of why we are here in the first place
Development of character
The ability to take the longer term view and defer gratification
The climate we create around us
The culture we manifest as style
How we organize the support network around us
The goals we set
How we measure success
Milestones we adopt
Objectives we choose
The basic design of how we intend to get to where we want to be

Coherence among these aspects are the heavy influencers of choice and choice is imbedded in some of them. We choose our goals for instance. But if our choices of action do not align to our choice of goals, there is a critical lack of integrity that derails our efforts to reaching the goal

So the control point is choice. If we want to get something done, it is a matter of choices. If we influence the choices we make and those that others make, we stand a really good chance of getting something done. If not, at least we know where to keep working.

Good luck on the choice of today and if you read this, thanks for making that choice.

Mark

Why purpose drives execution

December 4, 2007

With the availability of our new book, Executing Your Strategy, strategic execution will take on a new era in getting the strategic agenda of the organization accomplished. Piecemeal approaches to organizational development, organizational change and strategic planning have delivered less than optimum results for enterprises in general. So whats the problem?

I was reading Fortune magazine two days ago and turned to the cover article that reads "Confessions of a CEO" which is about Dominic Orr, CEO of Aruba Networks. The article chronicles Dominic's journey through life as a corporate whiz in HP and in several other endeavors. In the article it becomes apparent that Dominic payed a huge price for his success on the home front. A really bad relationship with his son and a divorce not withstanding, Dominic says"I wanted to make peace with all the people I had hurt". So what does that have to do with strategic execution? Everything, actually. You see, what most people do not see is that what got Dominic into the shape of sitting on a psychiatrists couch and procaiming that his goal was to die a complete man in the wake of having made huge amounts of cash but having trashed his relationships that counted most is all about strategic execution. Dominic executed his plans for money, power and influence but had a fundamental misalignment with a key element in the system. Purpose. He forgot Purpose. He forgot that meaning comes from other things than money. He neglected the idea in the Toyota way handbook that says the enterprise must be dedicated to more than just making money to be sustainable and generate real performance.
Purpose guides decisions at the portfolio level of life and enterprise execution. This may be radical but becomes critical as we move into the next phase of organizational development fundamentally run by the human network, not the business machine.

That is one of the foundational concepts contained in our book called "Executing Your Strategy"

Read more about it at executingyourstrategy.com or look up Executing Your Strategy on Amazon.com