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1、Steve SherrettaMay 16, 2021Performa nee Man ageme nt:Enhancing Executi on Through a Culture of DialoguePeter is Chief Executive Officer for a medical supply mult in atio nal that rece ntly crafted a new strategy to coun ter competitive threats. The pla n stressed the n eed to cut cycle time, concen

2、trate sales on higher-marg in products and develop new markets.Four mon ths after circulati ng the pla n, Peter did a“ walkaro und to see how thi ngswere going. He was appalled. Everywhere Peter turned people, departme nts whole bus in ess un its simply did n' t “get it.First surprise: Engineeri

3、ng. The group had cut product design time 30%, meeting its goal to in crease speed-to-market. Good. The n Peter asked how manu facturi ng would be affected. It turned out the new design would take much more time to make. Total cycle time actually in creased.“ Our strategic pla n message is not reall

4、ygett ing through, Peter thought.Second surprise: Sales. The new strategy called for a shift emphasize high margin sales rather that push ing product dow n the pipeli ne as fast as possible. But just about every salespers on Peter spoke to was making tran sact ional sales to high- volume customers;

5、hardly anyone was buildi ng relati on ships with the most profitable prospects. Sales is doing just what it' s aiwayerdhiaeight.Worst surprise: Even his top team, the people who' d helped him craft the strategy,was not stick ing to pla n. Peter asked a team member:“ Why are you spe nding all

6、your time making sure the new mach inery is work ing in stead of develop ing new markets? “ Because my unit ' s chief goal was to improvetiore delivery, he answered.“ But what about company goals? said Peter. “ We came up with a good plan and com muni cated it very clearly. But nowh ere it isn &

7、#39; t being carried out. Why? Many orga ni zati ons create good strategies, but only the best execute them effectively.Fortune magazine estimates that when CEOs fail, 70% of the time it' s because ofbad executio n.by Ram Charan and Geoffrey Colvfnprtune magazine, June 21, 1999. Weak executi on

8、is pervasive in the bus in ess world, but the reas ons for it are largely misunderstood. Why is it that no one in Peter' s organization wasacti ng in sync with the strategy? Un less we un dersta nd the reas ons, we can' t hopeto solve the problem.Imagi ne some one hitt ing a tennis ball. Whe

9、n the brain says“ hit the ball, it does n 'automatically happe n. The message travels through n erve pathways dow n the arm and crosses gaps between the nerve cells. These gaps, or“ synapses, are potentialbreaks in the connection. If neurotransmitters don' t carry the message across the gap,

10、 the message never gets through, or it gets distorted. When that happens, either the arm doesn ' t move at all, or it moves the wrong way.Creati ng a “ culture of dialogue Just like a n ervous system, orga ni zati ons also have gaps that block and distort messages.Why CEOs Fail,The secret to eff

11、ective strategy executi on lies in cross ing hierarchical and fun cti onal gapswith clear, consistent messages that relay the strategy throughout the organization.Sound simple? It's not. The reason is that the“ neurotransmitters in organizatiohuman beingsexecutive team members, senior managers,

12、middle managers and supervisors whose job it is to make sure that people's behavior is aligned with theoverall strategy. Doing what it takes to achieve alignment is very difficult. It is what Ram Charan calls, the“ heavy lifting of management, and it's the key to executingstrategy.As we'

13、ll see later, there is an important difference between companies that successfully align behavior with strategy and those that do not. Companies that effectively execute strategy create a“ culture of dialogue. A culture of dialogue encourag-es pervasive twoway communications where individuals and gr

14、oups 1) question, challenge, interpret and ultimately clarify strategic objectives; and 2) engage in regular performance dialogue to monitor behavior and ensure it is aligned with strategy.Three keys to managing performance1. A culture of dialogue doesn't happen instantly, any more than a flsuti

15、rdokt ennisdoes. It takes practice, persistence and hard work. So how exactly can leaders ensure that strategy messages go all the way down the linethat the tennis ball gets hit correctly? The three keys to managing performance effectively are:2. Achieving radical clarity by decoding strategy at the

16、 top. Many organizations think they send clear signals but don't. In some cases, managers subordinate broadstrategic goals to operational goals within their silos. That's what happened wiPeter 's top team. Elsewhere, top team members often have too many“top priorities we' ve seen as

17、many as 100 in one caswehich results in mixed signals and blurred focus. Strategy decode requires winnowing priorities down to a manageable number as little as five.3. Setting up systems and processes to ensure clarity. Once strategy is clear, organizations must create processes to ensure that the r

18、ight strategy messages cascade down the organization. These include: strategy-centered budget and planning sessions; staff and team meetings to discuss goals; performance management meetings; and talent review sessions. Dialogue drives all these processes. Each represents a “ transmitter opportunity

19、, where strategic messages are conveyed andbehavior is aligned with goals.4. Aligning and differentiating rewards. Leaders must make sure rewards encourage behaviors consistent with strategy, which sounds easy but isn't. Differentiation isabout making sure that stars get significantly more than

20、poor performers. But almost everywhere managers distribute rewards more or less evenly. As we'll see, lack ofeffective performance dialogue is a key contributor to dysfunctional reward schemes.We list these three items separately but they are, of course, in terc onn ected. Systems and processes

21、depe nd on clarity from the top. Differe ntiatio n and alig nment of rewards depe nd on man agers using performa nee systems effectively. Dialogue is the glue that holds it all together. But not just any dialogue will do. It must be dialogue with purpose, focused on performa nee.Link to compa ny val

22、uati onCompa nies that man age performa nee weGe neral Electric comes to mi nd have higher market valuati ons. Why? Because, more and more, i nstitutio nal inv estors view strategy executi on as a vital factor in flue ncing stock prices.Just a few years ago institutional investors relied almost excl

23、usively on financial measures for compa ny valuati ons. Now 35% of a market valuati on is in flue need byo n- finan cial, i ntan gible factors, accordi ng to a study by Ernst & YoungBased on a study con ducted by Sarah Mavri nac and Tony Siesfeld for the Ernst & You ng Cen ter for Busin ess

24、Inno vati on. The study showed that “ execution of corporate strategyand “ management credibility ranked number one and number two in importance to institutional investors out of 22 non-financial measures. Joh n In ch, a man agi ng director and an alyst at Bear Stear ns no tes that in some sectors,

25、such as diversified in dustrial compa ni es, in tan gibles acco unt for eve n mo-up to half a compa ny' s value.“ You can take eve n a mundane asset and inject good man ageme nt andhave someth ing pretty strong, says In ch.1. Achieve Radical Clarity by decoding strategy at the topThe first step

26、in successfully executing strategy is achieving clarity on the top team, which is freque ntly the source of garbled sig nals.Lack of Clarity at the Top3A rece nt Hay Group study shows a disturb ing lack of clarity on top teams(orga ni zati onal clarity measures the exte nt to which employees un ders

27、ta nd what isexpected of them and how those expectations connect with the organization' s largergoals). The chart below shows dramatically higher levels of clarity on outstanding vs. average teams. In fact the biggest si ngle differe nee betwee n great and average top teams and typical ones was

28、in the level of internal clarity. See Figure 1.Figure 1: Organizational Climate and TeamsChange Hay/McBer to“ Source: Hay Group, Inc. in final versionAnd a Lack of Clarity BelowWorkers at lower levels stro ngly feel this lack of clarity. Figure 2 looks at satisfact ion levels for workers pla nning t

29、o leave their orga ni zati ons within two years versus those pla nning to stay Ion ger. This study showed that a key reas on people leave their jobs is that they feel their compa nies lack direct ion. Eve n among employees pla nning to stay more tha n two years at their compa ni es, only 57% felt th

30、eir orga ni zati ons had a clear sense of direct ion.Figure 2: Key reas ons why employees leave their compa niesTotal % SatisfiedHay Group part nered with Richard Hackma n of Harvard Un iversity and Ruth Wagema n of Dartmouth College to ide ntify the dyn amics of top executive teams and their impact

31、 on performa nee. From an in itial group of 48 teams, the researchers n arrowed their study to 14 teams, many from large global orga ni zati ons. Each team member represe nted the head of an orga ni zati on, a major bus in ess divisio n, or a major geography. Source: Hay Group, Inc. The results are

32、from our Employee Attitude Survey, which sampled some 300 companies representing more than 1 million workers. Our survey queried management, professionals,salespeople, information tech nologists, and clerical and hourly workers. The“ gap referred to in the tis the “ satisfacti on gap betwee n worker

33、s pla nning to leave with in two years and those pla nning to stay lon ger.Satisfacti on with:Employees pla nning to stay more tha n two years (%)Employees pla nning to leave in less tha n two years (%)GAP(%)1. Use of my skills and abilities83%49%34%2. Ability of top man ageme nt74%41%33%3. Compa ny

34、 has clear sense of directi on57%27%30%NOTE; HIGHLIGHT SECTION 3; MAKE IT POP GRAPHICALLYClarity mattersWhy do employees crave clarity? Think about it. What could be more demoraliz ing tha n the realization that your hard work is not contributing to overall company goals?Employees want to do the“ ri

35、ght thing, but they can only do so if they know what theright things are.Unfortunately, as we saw in our openni g vignette, companies often don' t communicatestrategic goals effectively. An oil refinery client, for example, set a strategic goal to cut costs. To see how well the message had gotte

36、n through, an operations team leader held a strategy decode session where he quizzed his team members on what they felt was the chief priority. Ten team members produced four different“ top objectives, includingcost-cutting, safety, environmental compliance and reducing sales processing time. The me

37、ssage hadn ' t got thgrohu. The team leader called his team together and created a “ transmitter opportunity.“Don' t you guys realize that if we can't cut our refining costs by three cents a gallon,they ' re going to shut us down? he said.“ Is that all you need us to do? ied theteare

38、mplmembers, taken aback. United by a clear direction and shared ownership of the cause, team members enthusiastically cut costs by five cents per gallonover the following year while continuing to maintain good safety and environmental records.Narrowing prioritiesHaving too many priorities can lead t

39、o lack of clarity. AeroMexico, for example, had worked with a strategy consulting firm that delivered a 249-page report listing key performance indicators (KPIs) for measuring progress by the enterprise. The good news was that the KPIs gave the top team metrics for measuring success. The bad news wa

40、s that there were 100 of them, and they weren' t prioritized.“ It was clear that execution would suffer unless we identified the most important ones, says AeroMexico CEO Arturo Barahona.“ So we discussed which ones connected mostdirectly with our strategic priorities and where we were in the bus

41、iness cycle, and each team member settled on five chief goals. By gaining clarity on key objecmtives, the teagreatly increased the odds that signals would transmit clearly down the line.Getting buy-in at the topHay research on teams has shown that it' s not uncommon for team members to nod their

42、heads in agreement when new strategies are set in meetings, then go back to their division or department and carry on exactly as they had before. In effect, they end up sabotaging the plan. That 's why gainin-ignbisuyessential to effective execution, anddialogue is what makes it happen.IBM creat

43、ed an executive team consisting of six Ph.D-level technical leaders at an applied research unit. Their mission: build strong relationships with top research universities so that IBM could recruit innovative scientists capable of developing breakthrough products. The problem was that the Ph.Ds, all w

44、orld-class scientists, were used to competing for research dollars and dismissing each other's ideas to advance their own. Getting them to work jointly and be held accountable for business results was going to be very difficult.In the first group meeting, the vice president simply assigned accou

45、ntabilities to the various team members. "I could see the scientists digging in their heels, says Harris Ginsberg, an internal leadership consultant who attended the meeting. "No one was going to dictate to them what they should do." Even if they'd said yes to the VP's directi

46、ves, adds Ginsberg, they would never have followed through.Ginsberg, who helps IBM business units clarify and execute strategy, knew the key was to get the scientists talking to each other. So he coached the vice president to change her behaviors. Rather than hand out directives, he suggested ways s

47、he could stimulate team dialogue about how to meet objectives. Ginsberg also counseled other team members about the need for a "consensus process" on an interdependent team.They all "got" it. At the next meeting the VP said, "Our mandate is to create breakthrough products. W

48、ithout access to talent at the top universities, we won't succeed. How are we going to get it?" At first, Ginsberg recalls, she met silence. Finally one team member raised her hand. She was willing to "get out there to the universities, and be more visible, go out with the recruiter an

49、d the senior human resources people," said Ginsberg. She also agreed to help some up-and-coming scientists learn how to develop relationships with universities.A second team member said he would "help her make some calls." The ice was broken and all the team members eventually took on

50、 group responsibilities. "It was all about dialogue," says Ginsberg. "Until the individual leaders embraced the unifying elements of the strategy for the good of the enterprise, they only attended to their own mission. The dialogue helped them buy-in, agree to some shared activities,

51、and begin to work more collaboratively."2. Set up systems and processes to create clarityWhy is executing strategy so difficult, even when the plan is clear? Because good execution only happens when employee behavior is aligned with strategy. And many managers can' t, won 't or dcorneat

52、e'thte “ transmitter opportunitiesrequired to get people to do the right things. Managers: can'btecause they don 't know how to talk with their subordinates about change and/or poor performance; won' t,because they find it uncomfortable to give candid feedback; or, simply don't r

53、ealize that successful strategy execution will never happen without ongoing performance dialogue.Part of the solution to this problem is creating systems and processes that force performance dialogue. General Dynamics Defense Systems (GDDS) in Pittsfield, MA, is one company where creating such syste

54、ms has contributed to dramatic results. From 1999 to 2001, attrition among its valued software engineers dropped from 20 percent to 2.4 percent. Union grievances dropped from 57 to zero, saving hundreds of thousands of dollars. And, best of all, earnings and profit margins doubled.What GDDS didIn 19

55、99 the $200 million plus defense contractor challenged its employees to improve the company' s negioating leverage on bids, and thereby increase margins and profitability. To accomplish this goal, senior management directed all departments to chase out costs, and created numerousprocessesto tran

56、smit the cost-cutting strategy down the managerial ranks right to the shop floor, which is where they felt many of the best cost-cutting ideas would come froms goal wCarmen Simonelli, director of facilities and security, says his department push labor costs 5 percent below budget, with a“6stpretrche

57、nt.Tghaotalwoafsambitious given that direct applied labor costs had been running 10-15 percenotver budget. But Simonelli's team slashed applied labor hours to an un2th0inpkearcbelent below budget. Annual savings amounted to about $440,000 on a $2 million budget, or nearly $10,000 per worker.How

58、did they do it? The key, Simonelli says, was the processes the company put in place to enhance dialogue and carry the message to the shop floor. For example:The Learning MapThe company made it easy for employees to understand its broad goals by creating a “ learning map, which graphically outlined h

59、ow each department and team linked directly to core objectives. All employees saw at a glance how their jobs fit in. Supervisors and assemblers in Simonllei ' s group, for example, could readily see that by reducing applied labor hours in a project, GDDS could increase margins, shorten delivery schedules and raise the chances for winning new contracts.The ScorecardManagers and direct reports at GDDS meet one on one to create Scorecards, which set out five to seven personal annual goals. For example,