Barbie: Hello, and welcome everyone to today’s webinar: “Are Your People Undermining Your Strategy (Execution)?” This is one in a series of webinar where we connect for about 30 minutes to bring to life the challenges we see in the market and what to do about them. During today’s session Tim Altaffer and David Kallas will engage in a dialogue and provide insights on the effective path to impeccable execution and what happens if you don’t get the mix between tools and skills. They’ll also share some examples of companies that get it right. We’ll host a Q&A session at the end of the webinar so if you have any questions that might pop up during the call, you can use the question function in your control panel and we’ll answer them at the end of the presentation. And with that, I’ll hand it over to you, Tim and David.
Tim: Thanks, Barbie. It’s great to be here. Welcome everyone. Welcome David. So my name is Tim Altaffer. I’m a consultant, I’ve been a consultant with Axialent for about six years now, six, seven years. I have worked with top executives and big, large companies in the US and in Brazil. My friend David here has been working with me on many projects. David?
David: Hi, Tim. Hi, everybody. My name is David. I am consultant associated Axialent for five years now and it’s a pleasure to be here with you.
Tim: So we’re here to talk about what I consider one of the biggest challenges that any CEO or any executive for that matter has in terms of what he is supposed to do and that’s basically executing the strategy. It’s nice to have a great strategy, but a strategy without execution is kind of a waste of time in my opinion. I know that’s something I lost a lot of sleep with in the past. So let’s start off with a little poll. Let’s test the system and see if this works. What we’d like to do is ask all of you out there that are listening here to answer this question. What do you think is the success rate for strategy execution in large organizations? Barbie, if you can put up the poll, we have a couple of options, a few options, and if you could choose one of those and let us know what’s your opinion. How successful are organizations in executing this strategy? Go ahead, choose one. And we’ll see what comes up. I don’t think we’ll be very surprised.
Barbie: We have 60% of the votes so far.
Tim: Okay. So come on guys, gals. Well, maybe we should shut it down.
Barbie: It’s time to close the poll.
Tim: Okay. So what do we have here, Barbie? So a large major … Not large. A majority of you answered 35 to 45% and the the other was 15 to 25. David, this seems very low. The success rate is very low.
David: People are not optimistic here.
Tim: And in effect, I think that matches research. So congratulations, this has been real interesting that you do have that reality or that knowledge. One of the latest research is that we have pieces of studies that we have is published in Harvard Business Review in 2015 shows that 66 to 75% of large organizations struggle to implement their strategies. That is a large number I don’t think this a surprise, though. You guys came up with the same numbers. So is this consistent with your research as well, David? What do you find?
David: It is, but actually it’s improving. There are other researches showing even worse results. For example, there was one research from 1998 that shows the failure rate at a level of 90%.
Tim: Wow, so I mean, what’s going on. We’ll pay you to execute strategy, how can we live with a 90% failure rate?
David: Well, the first point is that most companies, they perform their strategic formulation and execution process in the same way we used to do in the 50s. You perform your strategic plan once a year. You take this plan and then you [inaudible 00:05:28], you communicate, and you regard budget you don’t have … Most companies don’t have critical and formalized process to monitor and adapt while the environment was changing.
Tim: So it’s like they plan and let it happen. It’s amazing how some of the senior executives, how much time they spend planning but not executing.
David: Yeah, it is. There’s another research saying that senior executives, they spend around one to three hours a month on strategic thinking.
Tim: Is that it?
Tim: This is something that they’re responsible for. How can they spend so little time on strategy execution.
David: Yeah. The point is that it’s not true that all other points are not important, but you spend much time on crisis management, operation management, and a lot of other important things. You don’t leave time for strategic thinking.
Tim: Okay, so we’ve identified one problem. What other problems could come up? What are the barriers, if you will, to strategy execution? So we have another poll and we’d like to invite you and let’s see if we can get a higher percentage rate here, participation rate. Let’s beat 64%. So the question is here in your experience in your company what are the barriers to successful strategic execution and we have some options here. What do you think? Let see the answers.
David: People are starting voting already.
Tim: We’re up at 47%. Come on. 53. I’m sure everybody has an opinion on this. Let’s blame the president or let’s blame the market. Okay, 73% voted. 80%, great. So Barbie, let’s shut it down. I think we’re at 80 is great. What is the result here? What do we get? Okay, interesting. 50% poor coordination and monitoring. 25% had poor or uncommitted leadership. 17% had strategy not understood and 8% had bad strategy. What do you think, David? Is that consistent with your research?
David: Well, let’s see the research results and compare. I think it’s interesting. The point is there are both a combination of … Let’s see the results.
Tim: Yeah, let’s go to that.
David: Well, this is the research performed by Professor [inaudible 00:08:41] on Harvard Business Review where we can see that around 40% of the direct senior executives from a sample of more than 200 companies that responded, around 40% do not get or do not realize that the performance [inaudible 00:09:04]. When we compare those numbers, we can see that strategic communicational strategy is important. We have here in our poll 17% and the third item compared to the second item in the other research, the coordination and monitoring for us is bigger than their research. But all of the items I think in the most results are consistent.
Tim: So our audience knows their stuff.
David: Oh, yeah, sure.
Tim: But what’s amazing here David is that most of these, in fact all but one of these factors on this list is really the responsibility of leadership.
David: Yeah, they are. And they are both related to a soft and hard skills, they’re not just one side of the [inaudible 00:10:05].
Tim: So what do you mean by that?
David: Well, by hard skills I mean the process, maps, and tools to organize ideas and establish indicators. Among other management tools we learn that business tools.
Tim: Mm-hmm (affirmative). So on the other side, by strategy execution soft skills and let me call them skills, we’re talking about the intra- and interpersonal attitudes and behaviors that really engage or inspire or commit people to deliver on the promise. So let me go back to hard skills first. David, when you talk about execution tools, the first thing that comes to mind is balanced scorecard or management by objectives or another slew of management execution tools. Is that what we’re talking about?
David: Yeah, yeah. Although the balanced scorecard is just one tool and not all of them. For those who don’t know, the balanced scorecard is a tool like a [inaudible 00:11:21] where you translate your strategy into strategic map and you select strategic indicators and monitor the performance of those indicators in a monthly or bimonthly basis. This is a very important tool as a growing base of tools but it’s not. There are several other tools we can use when you talk about the hard tools.
Tim: So can you give us a quick overview of some of these tools and how the relate to each other?
David: Yeah, sure, I while. We have this picture on the screen developed from Kaplan and Norton, the creators of the balanced scorecard in their most recent book. I’m not going to go into details on this but basically the idea is that the strategic management is a closed loop. You start by formulating your strategy then you have to translate it into operational terms until you get into the operations, you go out to the day-to-day processes and initiatives and on the right side of the picture, you have also to establish some routines for monitoring and learning.
So you might have some kind of routine to monitor if you are executing your strategy, that’s stage four and also you should have a different stage where you develop your executing strategy, but you make questions about if the strategy’s working and if you have to change it. Then if you have to change it, you go start again to the step one. In the middle of the picture, you have some of the tools we can use to organize all those ideas. You have the strategic plan, you have the balanced scorecard, you can have dashboards for professional indicators, budgets, and the assortment of different tools.
Tim: So, David, this sounds really great and wonderful and there’s a lot of interesting tools in the market. Makes me wonder, why is the failure rate so high when we have so many tools to help us execute our strategy?
David: Well, first of all, I must say that I feel frustrated as well because those tools those processes, the failure rate shouldn’t be that high. But there are some learnings from this field. The first learning, the first thing is that this process should be an integrated process and it should have an owner for the whole process.
Tim: Is that it? It’s that simple? Just indicate the process and have an owner and then you have success?
David: This is the first step. You must go have another, another, another points. But the main point also is that besides having this owner, you must have a alignment across the organization and even more than alignment, you need to have coordination.
Tim: Alignment and coordination. What do you mean by that?
David: Well, let’s go then to the next slide and then you can see the alignment is the flow, you just cascade your strategy. First, you start on the level one performing the strategic plan and then you cascade into all other levels. What is a strategy on the first level become a goal in the second level and just going forward. This is what we call alignment.
Tim: Great. So, I’m sorry, so you have alignment. And what happens?
David: Yeah. This is another research saying that alignment by itself is not really a problem. You see that people mostly rely on their direct boss and on their direct reports. You see that 84% agreed on this research. But when you go into coordination that’s not vertical way but horizontal way you see that the reliable, reliance on colleagues and external partners is below this kind of alignment one. So you must have alignment and alignment doesn’t seem to be a problem but it needs to have coordination
Tim: So in effect, those results that we saw or the struggling as we put it in the poll has to do with a breakdown of coordination and the question is how do we get this coordination? So let me step in here and say a little bit about my experience, David. As you know, as an executive, this was one of my largest frustrations because we have the balanced score card and we had the meetings and we had everything in it. It didn’t some to work that well. So one of my biggest learnings at that time is that it’s not the systems that are important as much as it is the people that make those systems work. As we go into this integral approach that we like at Axialent, we start understanding what happening.
So if we look at the product … Let’s say the product is a successful execution, but to get to that product, you need a process. The process is how I relate and how I work in the team, how I work together, how I communicate, how I coordinate. But to do that, you have to go one level further and talk about the intrapersonal skills which have to do with unconditional, responsibility, integrity, and emotional mastery. Not only that, we also like to look at an integral approach. It’s not only the IT that we’re looking at. It’s not only delivering the execution, which usually is the focus in many companies, at least was when I started in the executive career and executive ladder.
To get to the IT on an integral basis, you also have to look at the relationships within the company, how the different areas, how the different business units, how the matrix is working and to be able to make that sustainable, I as an individual need to be motivated, need to be engaged, and need to feel that I’m contributing to this system. What do you think, David?
David: Well, I have a question here. Those things you are saying that they are not in the balance, is it true?
Tim: Yes, they are very dependent on each other and you can at one time focus on one or another one of these dimensions, but over time if you don’t have them well-balanced, you don’t have a sustainable operation.
David: So balance is the …
Tim: Balance is it. So let’s dive a little bit deeper than on what I mean by conscious behaviors and attitudes. At the do level, you have, I mentioned communications, negotiation, and coordination, but when we look at, when we’re trying to coordinate the efforts in the company, it’s the ability to communicate and understand, to respect each person’s point of view. When we look at negotiation, we look at common concerns, we look at a larger picture, a purpose if you will. When we look at coordination, we look at commitments, the quality of that commitment, the integrity in delivering that and also how much we’re going to take care of our creditor. When we look at conscious behaviors at the do level, then we have here … I’m sorry, conscious attitudes at the be level, we have humility, the ability to learn, the ability to listen. We have responsibility, what we need to focus on, how accountable we are with that, essential integrity is the way we put ourselves into it and make it happen, and finally mastery, how we hold ourselves together in light of pressure.
The important thing here is to put these all together and to make them work in an environment where you have some very good tools to execute. So make sure you show that David in this simple model here that tries to graph or plot the tools with the skills. The tools on the vertical and the skills on the horizontal. So if we start here in the lower left hand column, we have a situation that is very rare, extremely rare because if the company’s down here with low execution tools and low execution skills, it’s really a road to nowhere and it’s not very sustainable. There is no execution and you really depend more on luck than anything else.
David: It sounds very interesting. You know, when you go to the left upper side, that’s the mechanical one, the mechanical process. When you have the tools but you don’t have the skills, I have lots of skills of that’s on the plot but remember some of that … One, it’s one client service company. We haven’t remembered the balance scorecard and we haven’t done anything. We have implemented the process of meeting with the project management office, but there was one executive that at every strategic meeting, he did not accomplish his promises. He was getting consistently negative feedback from the CEO meeting after meeting, all times. It seems that he doesn’t care about this process. But then once I had the opportunity to talk to him and he confessed me that he simply didn’t know how to coordinate, sustain, and deliver his promises. The behavior he used to do it is to make more promises. That was very difficult for me to help to change this because the tools were already there but there were no skills.
Tim: Interesting. So if you allow me, David, we just had a meeting this morning with a large multinational. It’s a holding company and their biggest frustration is that they have the tools, they know how to prioritize their projects, they don’t know how to say no. So their list of potential projects from one year to the next keeps growing and growing and it just becomes sort of a factory project center. They don’t have any resolution or any solution.
David: Yeah, and the other thing interesting from this client we’ve heard is that they have, they conclude, they complete the project, but they do not check if the project does accomplish have any impact on the performance, the desired performance, they should have a look at that.
Tim: So they’re afraid of having some let’s call them difficult conversations about it?
David: Oh, yeah, for sure they are.
Tim: So in the lower right hand corner, we have what we call unleveraged energy here, you do have the skills but you don’t have the tools. Maybe it’s counterintuitive, but it does happen and I have a client, he is another multinational who has all the right energy and who has all the right … They do have an open forum, they do know how to talk, they get along very well, but they don’t have the tools to make it happen so at the end of the day, they lose a lot of time. They’re highly ineffective in the way they deliver their commitments and their results.
David: Yeah. I have another one, another example from another client, a datacomm company, very big here in Brazil, that was really … They had ten regional units and we tried to make an inventory of the projects for the first time, they didn’t have any process for that. Then at the time, we asked each of the regional units to send us their ideas for the projects for the following year and then we got more than 300 initiatives. There was no coordination between them. By just getting all along and identified repeated projects we were able to reduce six million dollars just on repeated projects.
Tim: Just by bringing in a simple system to organize it.
David: Yeah, yeah. We just looked at them and integrated. We created some tools to identify the multiplications. That was also a case of people, very good skills, but no tools at all.
Tim: Which brings us, David, to the last quadrant up here on the right which is where I think we’d like to go and invite everybody to go as well. It’s really the path to impeccable execution. It is the right balance between tools and skills and being able to use them right. Unfortunately in my experience, it’s still not there. I think we see a trend of this improving as more companies become aware of the need to work skills as well as tools, but I think part of the culvert here is that business schools are focused so much on tools and not on skills that we’ve become a little bit too dependent on the tools as we move up the executive ladder.
But I do see some positive signs and I would like to show one case at Axialent which is a very successful case and we’re very proud of it. This was Microsoft. In fact, we partnered with Microsoft to come up with a system that we call strategic alignment. This system, it integrates very well the hard let’s say and the soft part. Don’t have to say very much about hard parts or systems and processes at Microsoft. There’s a key to that. Sometimes they have a hard time aligning and coordinating amongst themselves. So what we did is first of all embark on a project to align the leadership team. We brought them together to set overall regional direction and establish goals and strategies. We also worked across them and promoted conversations amongst them so that we would have an improved effectiveness among this leadership team.
Then we cascaded down to the next level and we cascaded down in the same way with the same way we worked the coordination at the leadership level, we aligned with the cross-business segments and coordinated among them. Then we took it down to the next level and we finally landed in the field and each of these process was done in a step fashion. You would align, bring down the strategies, and then coordinate at those levels. It was highly effective. We had a lot of people involved, a lot of managers communicating, being aware, being made conscious of what was going on. Then we incorporated some of these learnings into some of the systems and processes and indicators and roles. We integrated into their rhythm of the business so that the conversations would happen every day at all their meetings.
Then we took it a step further and started incorporating this whole process in the long term planning and eventually … And I say eventually because the human dimension really was the most important part. But through this process, we were able to bring them into a consciousness of how important it was to open up dialogue and coordinate among the people. The human dimension actually being key to the leverage that created a closed loop, the same way that if you talk about closed loop in a systemic fashion, we can talk about closed loop here in a skills fashion. Basically what we did was take this model that she talked about at the beginning and level by level, at each level, we aligned the strategies and we coordinated among the levels.
David: Fantastic and it seems like a lot of work.
Tim: It was a lot of work but it was a lot of fun and it was especially good because of the results we had. At the end of this process, we had many, many managers that were engaged, that were knowledgeable, that worked with common goals, that shared their action plans, they were committed, inspired, and what’s best, the company actually did have some tremendous return on investment. They grew their revenues from this process almost 50% in four years. They had a very high employee engagement score and the planning process in and of itself became a benchmark for Microsoft. The best I think was there was a strong organizational alignment that went from the top to bottom. So we’re very happy with that and I think this is a model that we can use. So Barbie, I think we’re coming up on the time. We would like to-
Barbie: I think you answered it in your last sentence, but maybe you can elaborate a little bit more. The question is, “What is a totally top down process and approach in the way we worked on the Microsoft case?”
Tim: Yes, it was. It came out of a concern, the same concern that we’ve been talking about here, Barbie. The top management was not happy with the execution and Microsoft has another situation that was very interesting which compounds this problem in that they are a highly matrix organization. So that coordination between levels becomes even tougher. It did come top down, the briefing came top down and the work was top down. We did start at the top, we were cascaded down, aligned, and coordinated with a lot of involvement and a lot of work from everybody involved.
Barbie: We have a follow-up question for that.
Barbie: Yes, “How did people then feel involved and empowered and how were they able to bring their own ideas?”
Tim: So this was done in the conversations that were done in the coordination steps. What we would do is as we cascaded down to the next level, we would sit down with that level and we would hold open conversation. “What does this mean to you? How can you contribute to it?” So it did invite involvement, it did invite ownership. We actually did incorporate a lot of the ideas. In fact, if I may, if I may go back to a couple of slides. I think to answer your question, Barbie, in this triangle here, if you look at the green and the blue, the green and the blue areas are actual contributions that are relevant to each level that might not be part of the corporate alignment if you will. But these areas of contribution came through these efforts that we were doing at each level. So their contributions were incorporated and were part of the execution.
Barbie: Thank you, Tim. I have another question. “I’m seeing our strategy execution derailing because we do not include all the steps that you mention. How do I start a conversation about this in my organization?”
Tim: Well, that conversation has to come really at the top and based on my experience, sooner or later, the CEO is going to get the message it’s not happening. His initial reaction will be probably to look at improving in the system. It can evolve so far with that but at one point, he’s going to have to say, “What’s really happening?” That’s where maybe somebody from human resources or some of the other areas can have that conversation with them. What are people doing? How engaged are they and how effective are we at executing?
David: Yeah, and the reason research from unknown what are the motives that unfreezes an organization? The motivations? Then he found three main reasons for starting a change process. The first one, that’s the most obvious one, it’s a crisis. You have a big crisis, you can just do things like you did before and there was this need for change. The second motive is when the future is different from the past and you anticipate that instituted planning process. When you have some great change on technology or on the competition and on the market, regulation, other things. Then you just can’t do things the same way. The third reason is when you have a great leader and from it, results are good, but they’re not great and then you need to have some changes. So those are the main points that start a change process for this research.
Tim: Just to confirm that then, I don’t think you really need a quote, unquote “great leader” to make it work. You need a conscious leader. And what is a conscious leader? Somebody who’s aware that things are not working, aware of this environment, aware of the situation and has the humility to listen to his people. If you do have a conscious leader then these conversations are easier. Does that make sense, Barbie?
Barbie: It does to me. I’m just reading the questions. Remember, this is the audience asking the questions.
Tim: Well, but maybe we should ask – I’m sorry?
Barbie: No, no, no. I have another question. This is from somebody in an HR role. “How can I get more involved from my role in the execution? Is there specific tasks in my area or role that helps me maximize results?”
Tim: That’s a great question. I get this question all the time in different ways. I have a belief that HR is a critical area of the company and can be a huge contributor to the successful execution of any strategy. I’d like to see HR take a more active role in that execution. My experience is many times HR has important roles in this but, they’re more like sideline roles. “How can we help an area execute? How can we do this? How can we prepare people?” And so forth. I think HR has a critical role in not only helping to prepare the people but in driving the strategy. What strategy makes sense for the people that we have? What are the choices that we can make given our resources and so forth? David is anxious to jump in here.
David: Because I think there is another contribution from HR … Sometimes what we see is that HR cannot communicate his strategic contribution. Here the balanced scorecard could help. We have seen some initiatives from HR areas or departments or unit. When they do their balanced scorecard, they build their strategy map and on the strategy map, you can communicate to the senior leadership HR is operational, contributions from HR which are all the normal chart processes related to hire to fire, but also the strategic contribution of this area related to development, human development, and orientation and partnership of business unit. When you translate this into a strategy map, you can make more clear your contribution and you are invited more to a strategic meetings or strategic forums.
Tim: So the tools actually put HR into the middle of the game?
David: It helps to communicate.
David: At least to manage it as well.
Tim: Just one last comment about that also. If you go back to the case that I just talked about, Microsoft. HR was involved the whole way and they actually had a very important strategic place at the table. They were involved in all the communications, they were involved in all the decisions, they were involved in all the cascading. So HR has a critical role in executions of the strategy.
Barbie: Thank you Tim and David. I have another question. “Are there any good indicators we can use to measure the soft skills and their alignment with the company strategy execution?”
David: Well, when it comes to specific indicators and the most difficult part is when you go to what we call the learning and growth perspective where exactly HR is, it’s much more difficult to manage because here, you cannot find what they call lag indicators. Usually go for lead indicators, indicators that show a path but they are not exactly measures what you want. For example, how do measure if you have aligned culture? It’s very difficult. But then you measure if you are performing what we want to do. But on their third book, Kaplan and Norton, which is called Strategy Maps, Kaplan and Norton, they have proposed very interesting indicators called the Readiness Report. It’s when you try to map which are, well, in their case the drop off other competencies and something like that. Then from the strategy map, you try to identify all the contributions you need, all the job indicators you need, all the competencies you need and to try to see what leverage you can off each one. At the end, you have a numeral score that can give you some direction in order to the mapping, the human capital. So for those who want, I would invite you to go to this book. It is called Strategy Maps from 2004 from Kaplan and Norton. We can send them after the complete reference.
Tim: So I also have a take on, as David says, it’s harder to measure the so-called soft skills. And plus on top of that, when you are using a hard tool such as balanced scorecard, you are being sort of forced into a mindset of hard indicators. The balanced scorecard concept is predicated upon being able to establish goals, measure them, and monitor them. It becomes a little bit harder if you’re talking about soft skills.
So I would challenge HR executives to make a hard connection, let’s say it’s hard, not in terms of hard to, but to make a good connection between a person’s engagement, commitment, motivation, and the actual results that are coming from the hard part if you will. I think that connection can be made. In addition, you can work with some indicators as Microsoft does in our case, where they do measure organizational climate, they measure leadership, engagement, and so forth. So yes, you can come up with some indicators, but you have to be able to make the connection between the soft and the hard.
David: Microsoft had the balanced scorecard, right?
Barbie: I have a follow-up question to ask Tim and David. “You talk about alignment. However, sometimes that can bring paralysis in big organizations if we don’t have a clear decision taken. What is the balance that you recommend?”
Tim: So in … I’m not sure I understand this question well, but let me put it this way. I don’t think alignment is decisioning. I would say if you don’t have clear decision, it’s because you don’t have an understanding. You don’t have a clear commitment around it. There could be some other issues involved. The way to work around that is to get the people involved, basically. As you align down the levels, you get them involved and through that involvement, you empower them, you delegate decisions, and you make sure that they are recognized for making those decision and they’re not punished if they make a wrong decision. So I’m not sure I answered the question, but in my mind, they’re two different issues that we can cascade down at the same time. David, do you have any opinion on that?
David: One interpretation is when Christine says, “When you don’t have clear decision, we don’t have a clear strategy.” If this understanding is correct, yeah, it’s very difficult to have alignment if you don’t have direction, if you don’t have a clear strategy. So in fact, you should work to have this clear strategy very focused and to make the decision about what do you want to go, where do you want to go, what clients do you want to get, and what clients you don’t want to get. So it’s very difficult.
The cases I see that companies that don’t have this strategic direction very clear, but they have alignment are the companies that are very well results in terms of [inaudible 00:47:06] in terms of values. Toyota is a great example. When Toyota came to the United States in the 80s and was later market leader. They asked them about that and they said they didn’t have a strategy, but they have very shared values. That’s why you can around it. But I would recommend to decide and define a very clear strategy because if you have a confusion in your senior leadership, this will spread out among the company.
Tim: So this was not really the objective of this webinar and we’ll be happy to do another one on defining a clear strategy, mission, and vision and so forth. But the raw material for a successful execution really starts at a compelling vision, an inspiring purpose around a successful business model. We’d love to explore that later on. If you don’t have this, then you, in fact, will not have successful execution. You’re starting from a wrong place.
David: Yes, sir.
Barbie: Thank you, Tim. Thank you, David. This was the last question so I propose that we close the webinar here. Is there any last words that two of you have?
Tim: No, this was great and I enjoyed the format, David. It was sort of like a conversation between two friends and I liked that so thank you and thank you everyone who had the patience of listening to our stories. I certainly hope it added value to everybody.
David: I thank as well to everybody
Barbie: Great. Thank you both.
David: I hope to do a few soon again.
Barbie: Thanks everyone for joining. Have a great rest of your day.