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1、Steve SherrettaMarch 12, 2019Performance Management:Enhancing Execution Through a Culture of DialoguePeter is Chief Executive Officer for a medical supply multinational that recently crafted a new strategy to counter competitive threats. The plan stressed the need to cut cycle time, concentrate sale

2、s on higher-margin products and develop new markets.Four months after circulating the plan, Peter did a“ walkaround ” to see how thwere going. He was appalled. Everywhere Peter turned people, departments whole business units simply didn 't “get it. ”First surprise: Engineering. The group had cut

3、 product design time 30%, meeting its goal to increase speed-to-market. Good. Then Peter asked how manufacturing would be affected. It turned out the new design would take much more time to make. Total cycle time actually increased.“ Our strategic plan message is not really getting through, Peter”th

4、ought.Second surprise: Sales. The new strategy called for a shiftemphasize high margin sales rather that pushing product down the pipeline as fast as possible. But just about every salesperson Peter spoke to was making transactional sales to high-volume customers; hardly anyone was building relation

5、ships with the most profitable prospects. Sales is doing just what it's alPweatyesr dthoonueg,ht.Worst surprise: Even his top team, the people who'd helped him craft the strategy,was not sticking to plan. Peter asked a team member:“Why are you spending allyour time making sure the new machin

6、ery is working instead of developing new markets? ”“ Because my unit 's chief goal was to impr-otvime eondelivery, ” he answered.“But what abouctompanygoals? ” said Peter.“We came up with a good plan andcommunicated it very clearly. But nowhere it isn't being carried out. Why? ”Many organiza

7、tions create good strategies, but only the best execute them effectively.Fortune magazine estimates that when CEOs fail, 70% of the time it's because of badexecuti on. Weak executi on is pervasive in the bus in ess world, but the reas ons for it are largely misunderstood. Why is it that no one i

8、n Peter' s organization was acting in syncwith the strategy? Un less we un dersta nd the reas ons, we can' t hope to solve the problemImagi ne some one htti ng a tennis ball. Whe n the brain says“ hit the ball, ” it does nautomatically happe n. The message travels through n erve pathways dow

9、 n the arm and crosses gaps between the nerve cells. These gaps, or“ synapses, ” are potential breaksthe conn ecti on. If n eurotra nsmitters don' t carry the message across the gap, the message n ever gets through, or it gets distorted. Whe n that happe ns, either the arm does n'at all, or

10、it moves the wrong way.Creating a “ culture of dialogue ”Just like a n ervous system, orga ni zati ons also have gaps that block and distort messages.The secret to effective strategy executi on lies in cross ing hierarchical and fun cti onal gaps with clear, con siste nt messages that relay the stra

11、tegy throughout the orga ni zati on.Sound smple? It ' s not. The reason is that the“neurotransmitters” in organizatiorhuma n beings executive team members, senior man agers, middle man agers and supervisors whose job it is to make sure that people' s behavior is aligned with theoverall strat

12、egy. Doing what it takes to achieve alignment is very difficult. It is whatRam Charan calls, the“ heavy lifting” of management, and it ' s the key to executingstrategy.As we' ll see later, there is an important differenee between companies that succelssf alig n behavior with strategy and tho

13、se that do not. Compa nies that effectively execute strategy create a “ culture of dialogue. ” A culture of dialogue en courages pervasive two way com muni cati ons where in dividuals and groups 1) questio n, challe nge, in terpret and ultimately clarify strategic objectives; and 2) en gage in regul

14、ar performa nee dialogue to monitor behavior and ensure it is aligned with strategy.Three keys to managing performanceA culture of dialogue doesn' t happen instantly, anyn m coukthannis stroke does.It takes practice, persistence and hard work. So how exactly can leaders ensure that strategy mess

15、ages go all the way down the linthat the tennis ball gets hit correctly?The three keys to man agi ng performa nce effectively are:1. Achieving radical clarity by decoding strategy at the topMany organizationsthi nk they send clear sig nals but don' t. In some cases, man agers subord in ate broad

16、strategic goals to operati onal goals with in their silos. That' s what happe ned wiPeter ' s top team. Elsewhere, top team members often have too many“top ”prioritieswe' ve see n as many as 100 in one casehich relts in mixed sig nals and blurred focus. Strategy decode requires winnowing

17、 priorities dow n to aman ageable nu mbeas little as five.2. Setting up systems and processes to ensure clarOynce strategy is clear,orga ni zati ons must create processes to en sure that the right strategy messages cascadeWhy CEOs Fail,by Ram Charan and Geoffrey ColvFortune magazine, June 21, 1999.d

18、ow n the orga ni zati on. These in elude: strategy-ce ntered budget and pla nning sessi ons; staff and team meeti ngs to discuss goals; performa nee man ageme nt meet in gs; and tale nt review sessi ons. Dialogue drives all these processes. Each represents a“ transmitter opportunity,” where strategi

19、c messages are conveyed andbehavior is alig ned with goals.3. Aligning and differentiating rewards. Leaders must make sure rewards encourage behaviors consistent with strategy, which sounds easy but isn' t. Differentiation isabout maki ng sure that stars get sig ni fica ntly more tha n poor perf

20、ormers. But almost everywhere managers distribute rewards more or less evenly. As we' ll see, lack ofeffective performa nee dialogue is a key con tributor to dysf un cti onal reward schemes.We list these three items separately but they are, of course, in terc onn ected. Systems and processes dep

21、e 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 valuat

22、i 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 exclusi

23、vely 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 & Young. The study showed that “ execution of corporate strategyand “ management credibility ranked number one and number tw

24、o in importanee 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, 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 tak

25、e eve n a mundane asset and inject good man ageme nt andhave someth ing pretty strong, ch.says In2Based on a study con ducted by Sarah Mavri nac and Tony Siesfeld for the Ernst & You ng Cen ter for Busin ess Inno vati on.1. Achieve Radical Clarity by decoding strategy at the topLack of Clarity a

26、t the Top A rece nt Hay Group studyThe first step in successfully executing strategy is achieving clarity on the top team, which is freque ntly the source of garbled sig nals.shows a disturbing lack of clarity on top teams(orga ni zati onal clarity measures the exte nt to which employees un dersta n

27、d 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 sin gle differe nee betwee n great and average top teams and typical ones was in th

28、e 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 BelowgeographySource:Workers at lower levels stro ngly feel this lack of clarity. Figure 2 looks at satisfact ion levels for worke

29、rs pla nning to 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 nieso nly

30、 57% felt their orga ni zati ons had a clear sense of directi on.Figure 2: Key reasons why employees leave their companies4 Qb Satisfied1 Total %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 an

31、d abilities83%49%34%2. Ability of top man ageme nt74%41%33%3. Compa ny has clear sense of directi on57%27%30%Hay 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 on performa nee. Fr

32、om 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 majorHay Group, Inc. The results are from our Employee Attitude Survey, which

33、 sampled some 300companies 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 workers pla nning to leave with in two yea

34、rs and those pla nning to stay lon ger.NOTE; HIGHLIGHT SECTION 3; MAKE IT POP GRAPHICALLYClarity mattersWhy do employees crave clarity? Think about it. What could be more demoralizing than the realization that your hard work is not contributing to overall company goals? Employees want to do the“ rig

35、ht ” thing, but they can only do so if they know what theright things are.Unfortunately, as we saw in our opening 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

37、message hadn ' t got through. 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?” replied

38、 the team members, taken aback. United by a cleardirection 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

39、lead to 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 n

40、ews was that there were 100 of them, and they weren' t prioritized.“ It was clear that execution would suffer unless we ideifnietd 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 t

41、he business cycle, and each team member settled on five chief goals.” laBryitygaoin iknegycobjectives, the teamgreatly 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 the

42、irheads 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 cre

43、ated 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

44、 world-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 acc

45、ountabilities 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 direc

46、tives, 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

47、 she 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.

48、 Without 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

49、and 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

50、on 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 claritydcorenaWhy 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 managerscan' t, won 't or

52、dcorenate'thte “ transmitter opportunities” required to getpeople to do the right things. Managers:can'btecause they don ' t know how to talk with their subordinates about change and/or poor performancew;on' tb, ecause they find it uncomfortable to give candid feedback; or, simplydon

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

54、 systems 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 di

55、dIn 1999 the $200 million plus defense contractor challenged its employees to improve the company' s negotiating leverage on bids, and thereby increase margins and profitability. To accomplish this goal, senior management directed all departments to chase out costs, and created numerousprocesses

56、to transmit 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 fromCarmen Simonelli, director of facilities and security, says his department' s goal wpush labor costs 5 percent below budget, with a

57、“ stretch ” goal of 6 percent. That wasambitious given that direct applied labor costs had been running 10-15 percenotver budget. But Simonelli' s team slashed applied labor hours to an un2th0inpkearcbelentbelow budget. Annual savings amounted to about $440,000 on a $2 million budget, or nearly

58、$10,000 per worker.How 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, ” whi

59、ch graphically outlined how each department and team linked directly to core objectives. All employees saw at a glance how their jobs fit in.Supervisors and assemblers in Simonelli' s group, for example, could readily see that byreducing 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 ex