Time to make a shift

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few years ago, the consulting firm PwC asked global CEOs a simple question: How successful did they feel their organizations were at executing on their company’s strategy? The answer was not encouraging. Only 40 per cent felt they were successful. Why so low?

Enter Kathryn Brohman, associate professor and Distinguished Faculty Fellow of Information Systems at Smith. Brohman has conducted research on more than 750 organizations to uncover why strategy fails to translate into results. The findings are in her new book: Shift: A New Mindset for Sustainable Execution [University of Toronto Press], written with Eileen Brown, a former executive at IBM, Celestica and Blackberry, and Jim McSheffrey, a former executive at 3M. In Shift, they explain common causes of execution failure and offer useful ways for organizations to do better. Of special interest to company leaders, they quantify what they call the “Cost of Execution” (COx) to explain why some companies perform better than others.

Brohman says organizations misdeliver on their strategy due to a number of execution barriers. Among them: poorly allocated resources, employees saddled with meaningless work and a lack of collaboration across departments and people. Sometimes, “companies admit that when it comes to execution, their strategy is surprisingly unclear,” she says. Her book describes 12 barriers that create “drag”. Higher drag causes strategy execution to become more expensive and less effective. Smith Magazine recently spoke with Brohman about her book and why so many companies struggle to execute.

You write that companies need to make a “shift” to what’s called “sustainable execution.” First, what is sustainable execution?

Classic approaches to execution are too focused on the short term. They drive to achieve quarterly results or project deadlines without considering the implications on the long-term sustainability of the company. This explains why so many companies are exhausting their workforce and facing fines from regulators for lack of compliance. Sustainable execution is a modern execution approach that recognizes the need to drive short-term results in ways that keep the long-term viability of the company in mind. 

And so what “shift” needs to happen?

The way most companies connect strategy to execution is through structure and governance – defining roles, standardizing business processes and establishing decision authority. What we say is that people are key to executing strategy, so perhaps organizations need to focus less on prescribing how people need to do their work and more on removing barriers that get in the way.

Leadership is often guilty of complicating execution. The way they distribute resources, structure the organization and design incentives are often counterintuitive to driving effective results. This is “drag” – the obstacles that get in the way of getting things done. When these barriers are removed, people spend their time and energy on the most important work. This becomes especially exciting when you think about how today's workforce is empowered by technology and analytics. People are extremely capable of doing amazing things, so companies that execute well make sure their strategy is clearly communicated and resist top-down control and over-governance. That’s the “shift”.

Are employees wasting too much of their energy now?

Yes. In fact, we measure the concept of energy loss as “drag” in the book. The cost of execution (COx) is calculated by identifying the number of barriers that get in the way of execution. We define it as a factor. For example, COx = 0.42 generally means that five of the 12 barriers we identified were present within a company. The idea that companies can quantify wasted energy, or “drag”, is exciting for senior leaders.

Can you give examples of some of these barriers?

Sure. Most people think about execution barriers as the “hoops” people need to jump through to get things done. Sometimes these hoops are created by heavy internal controls or too much corporate bureaucracy. Another well-recognized barrier is “alignment”, where the strategy of the organization is not effectively translated into the day-to-day operations, so people do not understand what they need to do to deliver. These are all examples of what we call “structural barriers”.

“People are extremely capable of doing amazing things, so companies that execute well make sure their strategy is clearly communicated and resist top-down control and over-governance. That’s the ‘shift’.”

Two other types of barriers we call “rhythm” and “awareness”. Rhythm barriers impede action. They make it difficult to focus on the most important work and adapt to change. A good example is a “tension barrier” that arises when organizations suffer from either complacency, which is too little tension, or stress, where pressure to adapt is too intense.

Awareness barriers impede the organization’s ability to pay attention to what is really going on and take appropriate action. The classic “silo mentality” is a good example. Departments are so focused on the needs of their own line of business that they lose sight of how their behaviour impacts the rest of the organization.

How much do these barriers cost firms?

The average “drag” in our data set is 0.32, but it ranges dramatically. The best we have seen is 0.19 and the worst is 0.80. In terms of cost, a 0.32 suggests that 32 per cent of each dollar or hour invested in work is wasted on overcoming execution barriers. However, it is important to note that the cost of execution (COx) factor is not intended to be used in absolute. Based on our research, we know a lower COx factor significantly correlates to an increase in financial performance. But its most common use is to measure and compare factors across departments or industries.

What are some of the problems you’ve observed in companies with a high cost of execution?

Where a lot of barriers exist, overall productivity is low and people are very disconnected from the company and the work they do. It goes beyond lack of engagement to an overall sense of complacency. Projects are launched but struggle to deliver. Work just seems to be caught up in a spin where people are going through the motions but make little impact. If barriers are ignored, eventually the inability to execute impedes financial performance.

What do companies with a low cost of execution get right?

For one, they have really high awareness. Their leadership truly invests time and energy to keep up with what is really going on. They understand the importance of communication and keeping an open mind. Sustainable execution companies also make wise investments in digital technology and analytics to empower people with the information they need to do their jobs. Finally, they are bold and brave in the way they allocate resources. They’re always thinking about better ways to use their money and expect departments to be resourceful.

You’ve spoken about the role of the chief financial officer in strategy execution. Why is the CFO so important?

A key driver of execution is resource allocation. People tend to invest their time and energy in initiatives where funds are allocated. CFOs who understand their role in removing execution barriers can make significant improvements. A CFO who resists removing execution barriers can derail improvement efforts. Other than the CEO, I’d say the CFO is the next in line when it comes to important execution leaders. 

What mistakes do company leaders make in executing?

They separate strategy from execution. They focus too much on where the company needs to go and too little on how it will get there. I’m not talking about deficient operating plans, I’m talking about company leaders disconnecting from the day-to-day realities of the business. The best analogy here is Undercover Boss, the TV show, where CEOs go undercover to work within their own organizations. And so here’s the boss who thinks all day about strategy suddenly confronted by the reality of employees who are tired and overworked, and struggling to find balance, and filled with anxiety.

The biggest problem I see when I work with company leaders is they don’t see that stuff. Today's leaders need to be more fundamentally aware of what’s going on within their organizations. They need to invest more time out of their office talking to people. Leaders who are good at execution recognize the need to do a deep dive every once in a while to find out what's really going on. A lot of leaders don’t do that. They don't feel it’s their job. They think their job is the strategy.

So what lessons do you hope leaders take away from your research?

The first is that investing in your capability to execute is as important – if not more important – than investments in strategy. So, for example, transform your two-day offsite to focus one day on strategy and the next on identifying execution barriers and creating plans to remove them. A good strategy well executed is better than poor execution of a great strategy.

Next is the shift in mindset, which I spoke about earlier. Challenge traditional management models and accept the fact that experience can have a downside when it comes to navigating strategy and execution in a digital age. Lastly, I’d say display true value in your people. Do an inventory of your internal controls and decision-making procedures. Ask whether your employees have the authority they need to do their job. Identify barriers that are impeding your skilled, talented employees from getting things done. And then remove them.