ValuExecBlog

Making Sense of it All

Nature is a wonderful teacher. If you have ever witnessed a fire, fanned by gale-force winds, race across a bushland, you will know that the resultant destruction is often swift and devastating. Anything that is dry and brittle is devoured with a ferocity that defies belief. The direction of the fire can change quickly as it is guided by winds over which we have no control. The heat and the roar of the fire can be felt and heard meters away and the smoke and the ash can be seen for miles providing a warning to those not immediately in its path to prepare for its impact. At its very centre, there is nothing that you nor anyone can do for the heat is just too intense. So you concentrate around the edges, beating back the feeder flames so that they don't become monsters in their own right. In addition, you work quickly to build a buffer by back-burning a barrier over which the flames can not cross. You work fast, and untiringly willing the wind to die down and the heavens to open up so that you can restrain the fire. Eventually, the fire devours itself and dies as there is no more fuel that it can feed off. Your buffer has kept it in check. All that is left now is a devastated landscape, a scorched earth and smoldering trees that once stood tall. You are exhausted, and you go home too numb to count the cost.

But whilst you lie exhausted, the process of birth begins almost immediately. Nature begins to rebuild. Green shoots of grass break through the earth's crust and a few months later what was once a blackened, charred earth, is now littered with green tufts of grass. New trees are emerging and those trees that had been healthy and strong before the fire, although scarred, are showing signs of growth again as new leaves appear on its branches. The landscape has indeed taken on a different appearance from what it once was. Not only is it marked by burnt monuments of trees that once stood tall but it is also marked by new varieties of flowers, grass and saplings. You grieve over the burnt monuments but as you look at their charred remains, you realize that they were hollow and that they were dead internally long before the fire; a fact that nature knew a long time ago. Then you marvel at the growth and the beauty around you.

As Nature teaches us - despite outside appearances, companies that are internally weak or hollow on the inside, will be destroyed by the current crisis. Companies that are healthy and strong internally will, although scarred - survive. Throwing money at the weak is like throwing more wood on the fire. The landscape is changing but just as Nature begins the building process immediately, so too must we.

We need to review our current business models of growth. We need to review our strategy within the changing landscape. We need to review our processes and our internal systems and be ruthless in discarding those that are monuments of landscapes of long ago. We need to review the talent that we have left in our company, and know how we will retain them. We need to plan for the day we will need to attract the best of talent back into our fold when growth occurs and it will. We need to review how we are going to keep our loyal customers who are lying exhausted and who have lost so much. We need to find ways to strengthen our companies so that they will in fact grow because through growth will come confidence. Importantly, we need to review shareholder and investor expectations of what is considered reasonable growth. 

So, I ask you - now that you have made all the cuts and have laid off people by the droves; reduced your advertising and administration spend; downgraded travel and closed unprofitable branches and knowing that as one business journalist put it, 'the hangover from 2008 will last long after the last firework is heard exploding in the night sky.' - I ask you, 'What's next? and have we in fact learned anything from what Nature teaches us.

ian

"Shut up! You had me at hello."

There is a wonderful scene in the movie Jerry Maguire where Jerry, played by Tom Cruise, is standing before his estranged wife, played by Renee Zellweger and he is rambling on about his undying love for her and the fact that she 'completes him.' She stands there in total silence listening to him and then not able to take it any more she blurts out, 'Shut up, just shut up! You had me at hello.' Call me soft, but I love that moment and the comment, 'Shut up! You had me at hello.' For me it was the defining moment of the movie and Cruise's character for that matter because it was at that moment that he actually really connected with her for the first time. The rest was superfluous. And so it is when we connect with others. There is a defining moment when the other party can say 'Shut up! You had me at hello,' and the rest will be superfluous.

'Connecting' as defined by The Concise Oxford Dictionary is 'uniting with others in relationship' and must not be confused with the notion of 'touching' which is simply the means of 'coming into contact' with a person and does not imply the formation of a deep relationship. In alignment surveys that we have undertaken with our clients, we have found that one of the biggest barriers to strategy execution and individual performance is a lack of connection that people have with the strategy they are meant to execute as well as the lack of connection they have with their managers. In such instances the employees become disengaged and just go through the motions although their hearts and minds are elsewhere. As a result, strategy execution suffers.

The power of 'connecting' with people became evident to me when a company I was managing a while ago divested of one of its core businesses which as you would expect, created a lot of uncertainty and angst amongst the employees who were afraid of losing their jobs. (As a side bar: The uncertainty was fueled further by the fact that we had heard of the divestiture via the internet and not through company channels.) However despite their underlying fear, we were able to have on of our best years ever. The reason: we were connected with our employees. Their pain was our pain and they knew it.

Managers have opportunities to 'connect' with their employees and customers daily. However, there is one time when the need to connect is of paramount importance and that is on the first day of an individual's employ. Most people that I have spoken to remember the first day that they walked into their company. They remember how they were treated by the receptionist, the HR manager, their manager's PA and their boss. They also remember the actions of their peers throughout the day and whether they were made to feel welcome or unwelcome;  whether they were made to feel included or excluded. Managers that I have spoken to admit however, that they do not spend enough time on that first day trying to connect with their new employee. 

In a nutshell, if your employees or customers aren't able to say, "Shut up! You had me at hello,"  then you are probably not connected.

ian  

Aligning incentives to strategy

It is generally a well known fact that people will give priority to those activities for which they are rewarded. I have written before that if you want to change culture, change the incentives or metrics by which you measure individuals in the organization. This will change their performance which over time, will lead to a change in culture. Yet, individual incentives or metrics are often out of sync with strategy. A survey carried out by Kaplan and Norton in 1996, found that only 30% of companies linked incentive compensation to strategy and that fewer than 10% of employees understood their company's strategy. ('The Execution Premium: Linking Strategy to Operations for Competitive Advantage; Kaplan R.S, Norton D.P; Harvard Business Press; 2008). Admittedly, the survey was carried out a while ago, but recent experience would tend to support the view that companies still have a long way to go in aligning individual incentives or metrics with strategy.

Which begs the question - why? I think that there are 3 main factors at play: First, for subsidiaries incentives are usually dictated by corporate policy. Strategic dynamics may differ from one country to another and what may be a priority in one country may not be applicable to another. Market dynamics do differ from country to country but local subsidiaries tend to have little room to move when dealing with their employees' incentives. Secondly, incentives have a very nasty tendency to become a 'fixed' and 'expected' component of an individual's remuneration package. This is particularly true in those industries where there is a shortage in skilled talent. But, the good news is that this is beginning to change. Finally, changing incentives based on strategy is, let's face it - hard and time consuming. I mean if we are really honest about it, even annual budgets are seldom linked to strategy as subsidiaries are directed to add on a percentage to last year's numbers when setting their budgets.

If companies are to get individuals aligned with strategy and to understand how their roles actually do contribute to strategy, they are going to have to make sure that individual goals are aligned with company priorities at all levels and that incentives are actually aligned with those goals. Good incentives will reward the right behavior. It simply does not make sense to expect a certain strategic outcome and then reward other outcomes or behaviors. Rewarding the wrong things will frustrate the execution process of that you can be guaranteed. 

ian

This is Your Captain Speaking ....again!

Boy, I sure know how to pick them! On November 5, 2007 I wrote about Chiquita Brands in a blog entitled 'Slipping up on their own skins.' In it I raised concerns about their restructuring plan and their focus on reducing debt as opposed to focusing on the�consumer.�After they announced their profits for the year,�I�wrote a further blog to say that�I got it wrong and that I was sorry. On January 9th of this year, I wrote a blog on Starbucks called 'Deja Vu - Spilling the Beans' in which I spoke about the need to bring back the Founder of the company.�Since those blogs and despite the apology,�both of�these companies are currently going through some tough challenges.�Chiquita has lowered its profit forecasts blaming factors beyond its control, and Starbucks is closing stores left-right-and-centre�blaming factors in its control. And, last week, I wrote about Qantas - and how the actions of their captain and crew, after a gas explosion blew a hole in�the�aircraft in mid-flight,�filled me with confidence that it was�still one of the safest airlines to fly.�Then came�news that�a further two Qantas flights were�aborted due to safety issues.�Qantas employees are demanding answers. They want to know�from their senior management that the airline is safe.

When you have your employees�questioning the very thing that their company has built its reputation on, then you had better think hard, very hard about what you say to them. If Qantas' senior management tries�to sweep the employees'�demand for answers�aside, then they will destroy the company's reputation and the very thing that has made the airline successful.�On the other hand,�if they treat their employees as the critical stakeholders that they are, and win back their confidence, then the company's reputation will remain in tact and the airline will continue to be successful regardless of these 3 setbacks.�It is my hope that Qantas management frames its answer very carefully to the satisfaction of its employees.

Which brings me to a little story as to why we all like to fly Virgin Airlines every now and then. As the story goes, on this particular day the airline had to cancel a flight and reallocate all displaced passengers on to other flights or airlines. One irate passenger, refusing to wait in the queue, stormed to the front and threw his ticket on the counter and demanded of the Virgin attendant�that he be put on the next available flight immediately.�She very politely�said that she would do what she could but that he would need to wait in line for his turn. At which, the man stormed,'Do you know who I am?' Without so much as a second thought, the attendant picked up the microphone and said for the whole airport to hear, ' Ladies and Gentlemen, please may I have your attention - there is a gentleman at Counter 55 who does not know who he is - if you are aware of someone who may be lost or suffering from amnesia, please come to Counter 55 and claim him. Thank you.' The gentleman was not amused and shouted, "F- - - you!' To which the attendant said, 'Ahh! for that Sir, you will need to get back in line!'

Whether the story�is an urban myth or�true, I have no idea;�but it would not surprise me if, first it was�true�and secondly, that the attendant was indeed from Virgin Airlines. Why, because that is how�I would expect someone from Virgin Airlines�to act. The point is -�employees are a�company, and if your employees�are questioning the very essence of what made the company great - then you had better come up with some pretty damn good answers.

ian

Navigating the Minefields of Power & Influence

At some point in your career, you will need to navigate the minefields of power and influence that exist within your organization. You will need the support of others to enable you to execute your strategy effectively or you will need to influence others to act in a certain way or to change their behavior so that you can meet your needs. You will need to either exert power and influence or tap into the power and influence of others.

Power is the opposite of dependency. The more dependent a department is on another to provide say, technical support, or key data etc, the more power and influence that department has over the department requiring the support or data. Power and influence is also related to the ability of a department to monopolize what other departments require. In other words, if a department can not obtain its technical support or data from any other source, then its dependency on and the power of the department providing what it needs is greater.

The same applies to people. People on exactly the same hierarchy level in an organization often enjoy different levels of influence. Therefore, when executing strategy, it is important that you recognize and understand the sources of power and influence within the organization. The following 3 actions will assist you in navigating the minefields of power and influence in the execution of strategy:  

1. Define the power bases and relationships in the organization
Map out the key dependency relationships affecting power or social influence within the organization. Who are the main players that affect what you do in your job (i.e., what departments do your department depend on for knowledge, data, technical support, etc), and conversely, which departments or SBUs depend on your department?

2. Form coalitions with those in power
It is important that you get power people in your corner in order to reduce resistance to your strategy or plan. The larger the power base that you create, the less likely that you will be ignored.

3. Focus on value-added, measurable results so as to gain influence and ensure that you achieve successful execution outcomes
Results do count. Individuals that create value obtain power. Therefore, when putting forward a strategy or plan, focus on the benefits that will accrue as a result of executing your plan. Measurable outcomes are important since hard measures are what people can see clearly and understand fully. To that end, try and express a problem in a way that people can identify with by providing data on the cost of the problem (i.e., the real hard numbers); then position your plan as the way to solve the problem. Finally, having a history of successful execution and positive results will increase your power and influence. 

I saw first hand the use of power and influence when working for a global food company. One of the Directors of the company had used his power and influence to push hard for expansion into Asia, particularly into Indonesia. Because of his power and influence, he was able to secure the resources for expansion. However, 2 years later, the Director retired and his replacement lacked the power and influence of his predecessor. As a result, resources that were once readily available dried up and further expansion into the territory was halted. 

Whereas the 3 actions described above will assist you in executing strategy, you need to bear in mind the downside to power and influence of which there are two:

1. People in power tend to want to stay there, and

2. Power is slow to change.

If you want to change the power structures that exist within the organization or more specifically your department, then you need to focus on and change the conditions that bestow power:

• Change Strategy
• Alter structure
• Reduce resource allocations & dependencies
• Create different levels of centrality & importance

Ultimately, the challenge for management is to ensure that power and influence furthers  the achievement of organizational or department goals and the execution of strategy.

ian

Compelling Reasons

I was reminded the other day as to the importance of the notion of 'compelling reasons.' I was cold calling a prospect and thought that I knew the compelling reason as to why the prospect would buy the particular service that we were offering. It wasn't the two questions of "why should I buy your service?" and "what's in it for me?" that had me a little nervous because, quite frankly, I was prepared for them; rather it was the numerous "So what!'" comments that seemed to follow my every response that had me squirming over the phone and really tested my understanding of what our 'compelling reason' really was. It was only after my response to the tenth 'So what!' that I finally struck gold and had the compelling reason that satisfied my prospect and which lead to the sale. I was lucky that I had a prospect who was willing to keep on asking the questions. On another day, I could have so easily have lost the prospect after the first question.

It's funny how the mind works, because two days after having had that rather insightful discussion with the prospect (now our client), I found myself standing in a queue at a Starbucks and I began to ask myself, not as a provider of services this time, but as a customer - what was the compelling reason as to why I was prepared to stand there and waste time; waiting to be served by someone who although friendly, had not acknowledged that there were people waiting and getting impatient? You see, I had progressed beyond Maslow's basic need of survival and had ascertained that I needed a coffee (for whatever reason) - but my choice as to where I bought my caffeine fix rested on my interpretation of the 'compelling reason'. In the end, the wonderful friendly environment and large choice of products and cup sizes were not compelling enough to overcome the poor service and so I left sans coffee and purchased my coffee elsewhere.   

"Slipping up on their own skins" - Revisited

Ok! So I got it wrong. In a previous blog I posted entitled 'Slipping up on their own skins,' I wrote 'If Chiquita management believes that their restructuring plan and their management changes are the answer to implementing their previously announced strategy, then they may well slip up on their own banana skins. Only time will tell. But from what I have read, I wouldn't hold my breath.' Well, fourth-quarter results are in - net sales rose about 6% year-on-year and full year net sales have risen 4%. So, I admit it - I was wrong.

The concern that I had previously, was their admission that the execution of their strategy had since 2005 slowed down as a result of market dynamics and the competitive landscape; and that it had taken them up to 2 years to do something about it. But do something they did and to his credit, Chairman and CEO Fernando Aguirre has got his company focused on 3 priorities - no more. That in itself is positive and the results are showing.

I have no doubt that the activities and behavior of the employees of Chiquita at every level are now aligned with the strategic direction that Aguirre has in place. There is a very simple test that you can do to see how well your employees are aligned with your strategy. Next time you see them ask these 3 questions:

1. What is the strategy of the organization (or department/SBU)?
2. What do you (the employee) do?
3. How does what you do support the strategy?

It is the answer to question 3 which may astound you. They are 3 very simple questions but powerful nevertheless in telling you whether your employees are aligned to your strategy.

ian

Deja Vu ~ Spilling the Beans

What is currently unfolding at Starbucks has left me with a sense of Deja Vu. The Starbucks saga reminds me of the return of Steve Jobs to Apple when he came back to lead that company out of the black hole in which it was slowly (or quickly) sliding. In both cases, the respective Boards turned to the Founders of the company to steady the sinking ship. The question is "why do Boards look to the Founders in time of need?"

If strategy defines the arena in which execution is played and if there is no doubt that bad strategy begets poor execution, then the strategy followed by James Donald, the former CEO of Starbucks, to accelerate market penetration by increasing the number of stores across the USA appears in hindsight, to have been a bad strategy. But hindsight is a wonderful thing and Donald did not have the benefit of hindsight. In addition, I can not believe that Donald did not have the backing of his Board, one of whom was none other than the man who has now replaced him, to pursue such a strategy. So what went wrong? Simply, the answer lies in an aspect of execution that although difficult to measure, is often overlooked when pursuing strategy but which is the fundamental reason why Boards so often turn to the Founders to bail them out.

Skirting the fringes of reality

In the main, we are all optimists when it comes to developing our business strategy. And it is no wonder for there are alot of pressures or expectations placed on us from several groups of interested parties to either grow the business or improve returns and / or increase market share etc., etc. Over the years I have sat through a large number of strategic presentations and I have found that the best presentations are those that are immersed in reality whilst being challenging at the same time. 

To be honest, I have given my fair share of "Opportunistic" strategy presentations; presentations that have skirted the fringes of reality. Generally, those presentations have all begun with a very simple question: What does my boss want? What will be acceptable to him? Usually, what he wants and what the business is capable of delivering are miles apart and then the scramble to fill the gap commences over the entire strategic period.

Someone once told me that "if you want to see what the future has in store for you, look at your past results, and then ask the question - so what is different?" Perhaps one of the best strategic presentations that I have given to a senior management team was when I presented a plan that basically said "if you want this, we will need this because the market will only deliver this and the reason it will only deliver this is because of this and this." It was steeped in reality and the discussion that followed was strategic-based and not financed-based.

In their book "Execution - The Discipline of getting Things Done," (Crown Business, 2002) Larry Bossidy and Ram Charan suggest that the discussion at a strategy review must answer the following key questions:

• Is the plan plausible and realistic?
• Is it internally consistent?
• Does it match the critical issues and the assumptions?
• Are people committed to it?

Do not skirt along the fringes of reality; but rather embrace it and then once armed with it, challenge its boundaries.

ian

All Geared Up but with No Where to Go!

I was reminded of the importance of having a clear vision this week whilst working on a project for a client. After spending some time interviewing the senior management of the company, one message was coming through clearly. Without exception, every one of the senior managers said "We need direction." When I approached the Managing Director about this, he said that usually the direction was passed down from Head Office in terms of sales numbers and EBIT. I suggested that those were targets and not what the senior managers were asking for. His response was then, "Well, the corporate vision is .....but the senior managers know that." And there-in lies the fundamental issue.

What the senior managers were asking for was to have a very clear understanding of where the local business unit was going. I think that one of the most difficult tasks confronting a Managing Director of a local operation or a GM of a business unit is to develop a vision statement for his/her unit that supports the corporate global vision and which local managers and employees can own and which importantly they believe enables them to contribute to global vision of the company. Too often, local GMs take the global vision statement, frame it and place it on a wall in the reception area and say, "That is our vision." The problem with that is first, it may have no relevance to the local operation, and secondly, there may be no buy-in from employees regardless of their level within the company.

Asking, "How can we as a local business unit contribute to the global vision and capture that contribution in our own vision statement of where we are going to take this unit over the next 5 years?" will assist in developing a statement and direction for the unit that has relevance and buy-in. The same can apply to departments within the local business unit.

There is an excellent article written by Gordon Quick entitled, "Fired Up and Ready to Go - Now What" that is well worth the read. Quick suggests and I quote,"Creating an inspirational direction for a company - a clear vision statement - is not easy. It takes a complete understanding of your business, disciplined reasoning and a dose of creativity. That's one of the reasons many companies have vision statements so vacuous that they are meaningless to the majority of employees." Having a clear vision statement ensures that employees do not prioritize personal career goals over company goals.

It never ceases to amaze me how energized people become when they have a clear direction. Execution then becomes so much easier.

ian