Got a New Strategy? Now Make it Happen
By Michael Beer and Russell A. Eisenstat
Despite widespread rhetoric about the need for organizational agility, an astonishing number of businesses stay stuck in neutral when they need to implement a new strategy.
Consider the situation that Lynne Camp faced in July 2000. Camp, the vice president and general manager of Agilent Technologies' Systems Generation and Delivery Unit (SGDU), was charged with creating a single global company from a set of fragmented businesses in Asia, Europe, and the United States. To gain control over product decisions being made by the regional teams she had inherited, Camp and her senior team had originally adopted a functional organization structure. This enabled them to exit many marginal, local businesses and focus on the opportunities that were most promising from a global perspective. It also allowed them to introduce more efficient shared processes.
Despite these strengths of the new structure, problems began to emerge. The functional departments didn't give the new businesses the attention they needed. The staffs of the regional field organizations were in a funk; they thought their customer perspective was being overlooked. Conflict between the functions, the businesses, and the field organizations was growing. The senior team was slow to make decisions, and no one took responsibility for the performance of the developing businesses.
2. A lack of openness lies behind many failures to implement strategy.
Camp surveyed the problems and concluded that the best way to increase accountability and speed up decision making—and thus to support the strategy of focusing on a few promising businesses—was to switch to a matrix structure. Members of the senior team strongly disagreed. A matrix would not work, they thought, and besides, they were too overloaded to undertake another major reorganization. Camp could have imposed her solution unilaterally, but she knew that if she did, she'd undermine the senior team's commitment, which was critical to making this complex global structure work. She needed to find a different way out of the impasse.
As Camp searched for an approach that would jump-start change at SGDU, she began to suspect (correctly) that people throughout the unit were talking about its strategy—and she further suspected that plenty of managers a couple of layers down had insights that she needed to hear. But these conversations took place behind closed doors, for the most part. And private conversations, by their nature, can't mobilize an organization to address the gaps between its business strategy and the structure, capabilities, and market realities it faces.
In our experience, the challenge Lynne Camp faced—SGDU's collective inability to talk openly about its problems—is common. This lack of openness lies behind many failures to implement strategy. We've become convinced that the most powerful way for leaders to realign their organization is to publicly confront the unvarnished truth about the barriers blocking strategy implementation. Typically, this involves looking closely at the roles and decision rights of various parts of the business, as well as changing the behavior of people at all levels. Public, organization-wide conversations about such fundamental issues are difficult and likely to be painful. But pain contributes to a species' survival by triggering learning and adaptation; it can have the same effect on organizations. Businesses and the people inside them don't learn to change unless they have the courage to confront difficult truths.
3. The Strategic Fitness Process
Because most initiatives fail to uncover the truth, they lead to only superficial change. Employee surveys, 360-degree feedback, interviews by external consultants, and even relatively honest one-to-one conversations between a key manager and the CEO (remember the courageous discussion Sherron Watkins had with Kenneth Lay at Enron) typically do not move the organization forward. They do not convince employees that management wants to know the truth and is ready to act. Quite the reverse—all too often, these methods lead to cynicism, and cynicism is the enemy of commitment to change. In one highly regarded company we studied, a task force of respected managers rebelled when asked by senior management to conduct and analyze a worldwide employee survey. They refused to get involved in yet another hopeless exercise. Meanwhile, senior managers fully believed that they had acted on past feedback.
We believe that organization-wide conversations are essential, so about fifteen years ago we launched a research program to develop a process that leaders could use to engage their people in an honest conversation. The "strategic fitness process" was designed in partnership with senior executives to enhance their capacity to implement strategy quickly and effectively. It does so by fitting the organization to the strategy and increasing fitness, the capacity of the organization to learn and change. Since then, this process has been used in more than 150 businesses in the retail, hospitality, high technology, banking, and pharmaceutical industries.
4. Crafting a conversation that matters
After more than a decade of implementing the process and researching its consequences, we have identified several overriding lessons that we believe are relevant in any organization-wide conversation, whether or not leaders use our particular process. To wit:
# Leaders need to advocate, then inquire, and repeat as needed.
A conversation about strategy needs to move back and forth between advocacy and inquiry. Most failures in organizations start when top management advocates a new direction and begins to develop programs for change without finding out what influential people in other parts of the organization think of the new focus. They thereby set themselves up to be blindsided by concerns that emerge much later. A smaller number of well-intentioned top managers make the opposite mistake. They do not advocate at all. Instead, in the name of participation and involvement, they depend entirely on inquiry—assembling a large group of managers and asking them to define a direction. The result is often widespread frustration. Managers and employees look to leaders to articulate a point of view about where the business is going, a point of view to which they can respond. Leaders need to advocate, then inquire, and repeat as needed.
The conversation has to be about the issues that matter most. To energize the organization, the conversation must be focused on the most important issues facing the organization—the company's strengths and the obstacles to performance. It's all too easy for senior managers to become swamped in the operational details of managing a business. What gets crowded out are tough and honest conversations about the fundamental issues that will determine long-term success. Do we have a distinctive business strategy that key managers believe in? Do we have the capabilities to execute that strategy? Is our leadership effective?
The conversation has to be collective and public. Successfully realigning an organization with a new strategic direction almost always requires simultaneously changing the worldview and the behaviors of a whole set of interdependent players—the CEO, the senior leadership team, and managers down the line. This won't happen without a collective, public conversation. By "collective" we mean that several levels of management across important functions and value-chain activities have to be engaged. By "public" we mean that senior managers need to keep everyone three to four levels below them informed about what has been learned, as well as what changes are planned.
# When people hear "honest," they tend to think "spontaneous." But public conversations in organizations are rarely spontaneous.
The conversation has to allow employees to be honest without risking their jobs. In most of the companies we've studied, managers talked about strategic problems with one or two people they trusted but pulled their punches in more public settings. In Agilent's SGDU division, for example, everyone knew about the tensions between the regional entities and the functional departments. Everyone was aware that the senior team wasn't managing effectively, and many managers doubted Camp's ability to lead the organization out of the morass. But none of these issues was discussed publicly, for two reasons. First, managers feared that being honest would hurt their careers or even endanger their jobs. Second, they were afraid that Camp and her senior team would feel so hurt and defensive that the conversation would not lead to change and might even set back the organization.
The conversation has to be structured. When people hear "honest," they tend to think "spontaneous." But public conversations in organizations are rarely spontaneous, as Lou Gerstner found out when he took charge at IBM in 1993, because the stakes are so high. Gerstner describes a strategic meeting at which managers sat at a large conference table with scores of assistants behind them, all listening to a PowerPoint presentation and engaging in little or no discussion. He was so frustrated by the lack of real dialogue that he turned off the overhead projector, with what he calls "the click heard around the world." Gerstner learned, as we have in our work, that the "free-for-all of problem solving" so essential for high performance "does not work so easily in a large, hierarchically based organization." Paradoxically, to achieve honesty and full engagement in these organizations, you need to structure the conversation carefully.