Execution

Writers: Larry Bossidy and Ram Charan

Principal concepts:

1 - Assessing an individual's intellect is straightforward for those involved in hiring and promotion, but evaluating their ability to effectuate outcomes, particularly in collaborative environments, is challenging.

2—Occasionally, leaders reject reality. When prompted to articulate their firms' strengths and shortcomings, they often emphasize the positives, although they struggle to recognize the problems.

3 - A leader who claims, “I have ten priorities,” lacks understanding. He is uncertain about which matters are most significant. A limited set of pragmatic priorities affects the organization's overall performance.

4 - Informality is crucial for transparency. This was one of Jack Welch's principles. Formality obstructs communication; informality facilitates it. Formal discussions and presentations provide less opportunity for debate. Casual conversation is permitted. It prompts inquiries, fosters spontaneity, and stimulates critical thinking.

5 - A leader must never transfer the responsibility of selecting the appropriate individuals for certain roles. Dell surpassed Compaq, a far bigger corporation, due to Michael Dell's diligent selection of individuals proficient in executing his business strategy with precision.

6—Corporate-level strategy evaluates the company portfolio and determines necessary adjustments to optimize sustainable returns. For instance, GE divested from the aircraft sector after the Reagan administration ended, and Jack Welch allocated resources to the most lucrative sectors.

7 - Strategy delineates the destination of a firm, while the personnel selection process determines who will facilitate its achievement. The operational strategy delineates the trajectory forward. It decomposes long-term outcomes into short-term objectives.

About the authors:

Larry Bossidy had a long and esteemed career with General Electric and transformed AlliedSignal into one of the most respected organizations globally. He assumed control of Honeywell after its merger with AlliedSignal. He departed from the firm in 2001 and rejoined as chairman and CEO of Honeywell in July 2001.

Ram Charan is a highly esteemed consultant to CEOs and C-suite executives. He is the author of many publications and has taught at Harvard Business School and the Kellogg School at Northwestern University.

Introduction

The capacity for execution will assist you, as a corporate leader, in selecting a more coherent approach. One cannot formulate an effective plan without certainty that the organization has or can acquire the necessary resources and personnel for its execution. Leaders with a culture of execution develop plans that resemble roadmaps rather than the inflexible formulae included in extensive planning manuals. This enables them to react promptly to unforeseen events. Their techniques are intended for implementation. Execution maintains alignment with all aspects. It enables you to observe developments within your sector. It is the superior instrument for transformation and transition—more effective than culture, more profound than philosophy. Execution-oriented organizations adapt more rapidly than their counterparts due to their proximity to the circumstances.

PART I – The Importance of Understanding Execution

Chapter 1 - The Unrecognized Discrepancy

This narrative exemplifies the unnoticed disparity. This reflects the most significant issue confronting organizations today. Numerous firms, including Aetna, AT&T, British Airways, Campbell Soup, Compaq, Gillette, Hewlett-Packard, Kodak, Lucent Technologies, Motorola, and Xerox, are often highlighted in the media as having underperformed despite expectations. The leaders of all the aforementioned firms were esteemed at the time of their selection and seemed to possess the requisite qualities. However, they all lost their positions due to their failure to fulfill their commitments. In the year 2000, 40 CEOs from the top 200 Fortune 500 businesses were dismissed, not of their own will, but by termination or coercion into retirement. When 20% of America's top corporate executives are terminated, a significant issue is evidently present. The ordering system optimizes time throughout the whole order-to-delivery process. Dell can fulfill a computer order within one week or less. This technology minimizes inventory at both the incoming and outgoing stages of the pipeline. It enables Dell customers to access the newest technological breakthroughs more often than those of its rivals. Producing on demand enhances inventory turnover, hence increasing asset velocity, a critical factor in revenue generation. Velocity is the proportion of cash generated from sales to net assets inside a firm, often defined as plant and equipment, inventory, and accounts receivable, less accounts payable. Enhanced velocity increases productivity and lowers working capital. It enhances cash flow, the essential element of every enterprise, and may contribute to the improvement of margins, sales, and market share. An organization can only function effectively if its CEO is fully dedicated to the enterprise. Leadership encompasses much more than only conceptualizing grand ideas or engaging in discussions with investors and legislators, although these aspects are integral to the role. A leader must be intimately and profoundly engaged in the enterprise. Execution requires an in-depth understanding of the firm, its personnel, and its surroundings.

Chapter 2 – The Disparity in Execution

Assessing an individual's intellect is straightforward for those involved in hiring and promotions; nevertheless, it is challenging to investigate someone's past and evaluate their competence in achieving results, especially when achievement is contingent upon collaborative efforts. Articulate and clever individuals do not inherently possess the ability to execute well. Many fail to comprehend the necessary steps to convert a vision into concrete activities due to their too broad high-level thinking. They lack follow-through and fail to actualize plans; minutiae disinterest them. They fail to clarify their thoughts or foresee challenges. They lack the ability to choose individuals proficient in execution. Their absence of engagement deprives them of astute discernment of individuals, which is acquired via experience. Similar to other CEOs, Joe held the conviction that it was the responsibility of the chief operational officer to pose further inquiries, while the executive vice president was tasked with ensuring those questions were articulated. However, Joe failed to choose the appropriate individuals for the respective positions. Neither party shown much concern for execution. The executive vice president was a "card-picker" who switched positions every three years. The production director was an astute financial professional from a consulting business, regarded as a high-potential contender to replace the CEO within five years. However, he has little knowledge of operations and was challenging to collaborate with. The factory managers under his supervision lacked respect for him. The new structure served as more than a mere method for segmenting the corporation into markets. It was meant to enable EDS to fully use its intellectual capital for the first time, motivating individuals from all sectors of the firm to provide solutions for its clients. Interdepartmental collaboration enabled EDS to provide each customer with a comprehensive value proposition derived from its whole range of skills, including corporate strategy consulting, process transformation, and web hosting management. It would be ineffective unless individuals from the former business divisions acquired not just their new roles but also novel collaborative methodologies. The radical restructure was successful because Brown entrusted its implementation to those responsible for its execution.

SECTION II – The Components of Execution

Chapter 3 – Element 1: The Seven Fundamental Behaviors of a Leader

The seven enumerated behaviors are as follows:

1 - Understand your personnel and your organization.

2 - Emphasize reality.

3 - Establish explicit objectives and priorities.

4 - Accomplish tasks.

5 - Compensate those who take action.

6 - Improve individuals' competencies via coaching.

7 - Understand oneself.

Occasionally, leaders exhibit denial about reality. When prompted to articulate their company's strengths and flaws, they often articulate the strengths well, although they struggle to identify the drawbacks. When we inquire about their plans to address the flaws, their responses are seldom clear or cohesive. They assert, “We must achieve our financial objectives.” Indeed, we must attain our goals; the pertinent inquiry is how to do this. Individuals with a business-oriented mindset will see that concentrating on three or four goals yields optimal outcomes from given resources. Secondly, individuals in modern businesses need a limited set of explicit priorities to excel. A leader claiming, “I have ten priorities” lacks understanding. He is unaware of which matters are paramount. It is essential to establish some pragmatic goals that will influence the organization's overall success.

Chapter 4 – Element 2: Establishing the Framework for Cultural Transformation

The majority of cultural reform projects are unsuccessful due to their lack of connection to enhancing business outcomes. The concepts and instruments for cultural transformation are ambiguous and detached from strategic and operational realities. Transforming a business's culture requires a series of processes—social operating mechanisms—that alter individuals' attitudes and actions to enhance their direct connection to the bottom line. Ram Charam said, “Throughout my career as a consultant to major corporations and their executives, I have observed numerous instances, even at the highest organizational tiers, where silence prevails, and the absence of closure results in erroneous decisions.” They are 'false' because they eventually do not materialize owing to unspecified circumstances or lack of effort. These instances of uncertainty exhibit a familial similarity, reflecting a deficiency in human intents that are intended to yield outcomes. The individuals responsible for making decisions and implementing actions do not connect or interact with one other effectively. Daunted by hierarchical group dynamics and hindered by formality and distrust, they express themselves awkwardly and without assurance. In the absence of emotional commitment, those tasked with executing the strategy fail to act with decisiveness. Informality is crucial for transparency. This was one of Jack Welch's principles. Formality obstructs communication; informality facilitates it. Formal discussions and presentations provide less opportunity for debate. They propose that all events are preordained and programmed. Casual conversation is permitted. It prompts inquiries, fosters spontaneity, and stimulates critical analysis. In a formal and hierarchical gathering, an influential individual may ultimately undermine a viable concept. However, informality promotes individuals to evaluate their reasoning, engage in experimentation, and verify the accuracy of their concepts. It enables people to undertake risks with peers, superiors, and subordinates.

Chapter 5 – Element 3: The Task No Leader Should Delegate – Ensuring the Appropriate Personnel are Positioned Correctly

Considering the many factors outside their control, such as the volatile economic environment and unpredictable rival behavior, one would expect corporations to focus intently on aspects they can influence, particularly the caliber of their personnel, especially within the leadership team. The personnel of a firm are its most dependable asset for consistently achieving outstanding outcomes annually. Their perspectives, experiences, and competencies distinguish success from failure. Dell outperformed Compaq, a far bigger corporation, due to Michael Dell's diligent efforts in placing the appropriate individuals in suitable positions, individuals who comprehended how to execute his business plan with precision. Nokia, a negligible participant in the mobile phone industry throughout the early 1990s, ascended to worldwide prominence because to its workforce. Under CEO Jorma Ollila's leadership, who transitioned from banking to oversee the diverse corporation, Nokia adopted digital technology before than Motorola, the prevailing competitor. Larry Bossidy asserts, “Greatness is not achieved by chance.” I dedicated what some saw as an excessive amount of time and emotional investment to recruitment, facilitating appropriate experiences, and cultivating leadership. 30% to 40% of my day for the first two years and 20% thereafter. Spending such an extensive amount of time on a single assignment as a CEO is considerable, although I am certain it significantly contributed to AlliedSignal's success. I assessed not only my immediate subordinates but also the subordinates of their subordinates, sometimes extending the evaluation to the lowest tiers of the organization. During the first three years at AlliedSignal, I conducted interviews with several members of the 300 new MBAs we recruited, whom I see as our prospective leaders. SECTION III – The Three Essential Processes of Execution

Chapter 6 – The Human Element: Integrating Strategy and Operations

Talent evaluation is the fundamental Social Operating Mechanism of the human resources process. At Honeywell, these evaluations are referred to as Management Resource Assessments (MRAs). They occur in the spring and autumn over a span of two days, interspersed between the strategy and operations sessions. They are executed throughout the company, commencing at the top echelons with the CEO, and inside the business units with general managers. They evaluate individuals in existing roles and those qualified to replace them. They select individuals who should be relocated in the next year according to their potential. Talent evaluations also evaluate underperforming individuals and consider alternatives. Will coaching be beneficial for them, or are they misaligned in their role? Leaders must demonstrate the existence of alternative prospects to succeed individuals who are transitioning or departing from the organization. Talent evaluation evaluates not just individual performance but also the organizational structure, the comprehensive development of talent, and the performance deficiencies that must be addressed to implement the plan effectively. Larry Bossidy: “Failure does not imply that they are inherently flawed individuals.” It signifies that they are not operating at the requisite level necessary for the company's success. You address them promptly and equitably. Rob, a proficient manufacturing professional, was elevated to the position of plant manager. However, after one year, it became evident that he was not suited for the role. He was unable to manage an inflated cost structure and could not promptly fulfill essential operational positions. We needed to determine his fate. We were reluctant to release Rob; he had technical proficiency and was a nice person. We decided to assign him a new function that we believed he might excel in and evaluate his subsequent progression. We accomplished it, and he remains present. Critical responsibilities are not inherently high-level positions. “They may be positioned four tiers below,” states Mike Tucker, Baxter’s senior vice president of HR. “For instance, it could involve an individual overseeing a chemical trial and a product that is essential to your strategy for the forthcoming three years.” We will assess the renal specialty's position over the next three years to identify the essential objectives the plan must achieve and the vital responsibilities necessary for their execution.Subsequently, we evaluate the individual in the position and the requisite skill set. The rationale is that for responsibilities essential to implementing the plan over the next three to five years, we need the most qualified individuals to occupy them. We must identify them immediately, since the jobs are crucial to us and we cannot afford to wait for someone to be developed to occupy them. This compels CEOs to thoroughly analyze and determine which positions are essential to the plan.

Chapter 7 – The Strategic Process: Integrating Personnel and Operations

A contemporary strategic plan must serve as an actionable framework for organizational leaders to attain their objectives. As a leader developing a strategic plan, you must inquire if and how your firm can accomplish the necessary actions to attain its objectives. Formulating such a plan starts with the identification and delineation of the fundamental questions that underpin the strategy. What is your company's positioning within the business environment, including its market prospects and threats, as well as its competitive advantages and disadvantages? After formulating the strategy, it is essential to evaluate the validity of the underlying assumptions. What are the advantages and disadvantages of the alternatives? Does the organization has the capacity to implement the plan? What actions are necessary in the near and medium term to ensure the plan's long-term success? Can you modify the strategy to accommodate swiftly changing business environments? Corporate-level strategy evaluates the business portfolio and determines necessary adjustments to optimize sustainable returns on the company's capital. For instance, GE withdrew from the aerospace sector after the conclusion of President Reagan's administration, foreseeing a significant reduction in military expenditures and rapid consolidation within the industry. Jack Welch suggested that financial and managerial resources might provide superior returns in other avenues. Strategic value is generated via organization-wide performance improvement projects, including Six Sigma, digitization, and the establishment of effective human resource processes. GE's renowned people process originated from a Jack Welch effort aimed at human resources to provide a systematic method for talent assessment to cultivate future leaders.

Chapter 8 – Conducting a Strategy Review

Participants convene for a strategy review, during which planners present a comprehensive report, meticulously examining it page by page in a lecture format, with little opportunity for inquiries. The CEO will undoubtedly pose many inquiries. It is often developed by the planners to demonstrate their expertise and maybe stimulate discussion. Individuals find it challenging to remain alert throughout the funeral rites. After four hours, there has been no meaningful dialogue and almost no choices around activities to further the company. That is an improper method of execution. The business unit strategy review serves as the principal Social Operating Mechanism within the strategic process. This is the last venue for evaluating and confirming the strategy, the final opportunity to rectify any issues before the plan undergoes its ultimate real-world assessment. Consequently, it must be inclusive and interactive: it should include a vigorous discussion, maintained within the framework of an execution culture, with all principal players present and articulating their perspectives. Conduct a follow-up. Upon conclusion of the strategy review, compose a letter to each leader to formalize and affirm the agreements reached. This is an example of a letter that business unit executives received at AlliedSignal and continue to get today at Honeywell: To: Jene Smith. Sender: Larry Bossidy. Subject: Evaluation of the X-Systems Strategic Plan. Presented below are few remarks: We must acknowledge that we are a target for our rivals. Consider how we might undermine ourselves if we were their adversaries. These corporations possess significant capabilities, and we must not get complacent. Many organizations that see a decrease in their excellent market position are outperformed in terms of cost or technology. We must be ready to contend on two fronts. It is evident that we cannot finance every initiative included in this proposal. Prioritize your prospects, and for those at the bottom of the list, pursue innovative financing sources, such as government initiatives. We must enhance our manufacturing capability prior to introducing new items. Despite our advancements, the parts delivery rate remains unsatisfactory. Prioritize training and ensure it is as complete as feasible.

Chapter 9 – The Operations Process: Integrating Strategy and Personnel

The strategy process delineates the business's objectives, whereas the people process identifies the individuals responsible for achieving those objectives. The operating strategy directs these individuals accordingly. It disaggregates long-term outcomes into short-term objectives. The attainment of immediate objectives influences choices made and implemented throughout the company, both at the outset and in reaction to evolving business circumstances. It makes the figures plausible. An operational plan differs from a projection, which just states, “We performed better than last year.” While a forecast reflects on past performance to establish objectives, an operating plan focuses on the methodologies for future execution. The operational strategy starts with the identification of primary objectives—revenue, operating margin, cash flow, productivity, market share, etc. The specifics differ every unit; nevertheless, the essential aspect is that it offers a concise one-page summary, emphasizing factors that will impact the bottom line. These are established externally and hierarchically. The term "outside in" signifies that these figures must represent both the economic and competitive landscape, as well as the criteria investors need to determine that your stock has more value than that of your rivals. Top down refers to the establishment of objectives from the overarching company level, which are then divided into subgroups for its numerous components. Numerous organizations reverse this approach, use the budgeting process to build plans at different tiers inside each company before consolidating them into a comprehensive whole. This expends considerable work, since the figures must be recalculated many times throughout transactions.