How Much Does Execution Really Matter?

A number of independent studies performed over the past few years indicate that execution is the clear differentiator of company value, financial performance and employee engagement.

In this post , Max Goldman references Becker and Huselid’s “High performance Work Systems and Firm Performance" and Joyce, Nohria, Roberson' similar ratio in their 2003 book “What Really Works.”

How much does execution matter?

According to these researchers, 85% of your sustainable success depends on execution, and 15% depends on your strategy.

BOTTOMLINE: Execution of the strategy is 6 times more important than the strategy itself!

Going Into 2010 - Too Few Are Planning Ahead

Although businesses around the world are entering 2010 with an appropriately sober view of the business climate, too few companies have taken or plan to take the long-term, defensive measures necessary to survive and thrive during the economic recovery.

The Boston Consulting Group's (BCG) survey of 434 executives from seven countries revealed

• 28 percent say that reducing labor costs is a priority for 2010
• 26 percent have made managing cash flow a priority
• 16 percent say that balance sheets and debt restructuring are a priority
• 13 percent have put exiting noncore businesses on the list of priorities

The vast majority of executives see significant changes in the economic order:

• 69 percent believe there will be negative attitudes toward Western capitalism
• 68 percent project lower profit levels
• 64 percent believe growth will be more difficult
• 71 percent anticipate an increase in labor protection
• 81 percent anticipate an increase in regulation
• 87 percent see increased consumer price sensitivity

BOTTOMLINE: "Companies seem quick to jump, but not to do the tough stuff. It is telling that the organizations most likely to be planning the hard, defensive measures are the market leaders, not the middle-level players."

Additional survey findings are here.

Top 10 Reasons For Failed Execution of Strategy

In a survey by Quality Digest, the Top 10 Leadership Pitfalls are revealed:

1. Past habits (35%)
2. Economic climate or budget (29%)
3. Company culture (23%)
4. Way they work together (20%)
5. Senior management team (18%)
6. Customers (14%)
7. CEO/president lack of confidence (13%)
8. Technology (11%)
9. Middle management (9%)
10. Reputation, human resource management or employees (7%)

BOTTOMLINE: Respondents indicated that the most important things to ensure successful strategy execution include creating a clear strategy, adding a specific plan, communicating what the plan is, rewarding employees for following the plan and continuing employee communication.

However, even when companies do the alignment process well, their past and culture can derail execution, as the alignment of people and strategy isn’t enough for long-term success.

Six Enemies of Post-Recession Performance

The Corporate Executive Board put together a teleconference called Executive Guidance for 2010, with the goal of helping companies with post-recession recovery.

Their research offers Six Key Enemies of Post-Recession Performance:

1. Changed Customer Needs - A shift in consumer buying behavior (e.g. increased emphasis on value, perceptions about pricing, etc.) should force organizations to actively revisit their customers' needs and adapt selling models to challenge their beliefs and educate them about their own business.
2. Top Talent Disengagement or Flight - The average organization faces an imminent 7 percent productivity loss from the combination of departing top talent and undermanaged recruiting pipelines. Companies must carefully manage employee engagement and keep recruiting pipelines full to ensure that as economic conditions improve, key initiatives and projects are not crippled if even a small segment of high performers leave. With the prediction that as many as 30% of staff are looking to leave their companies when the economy improves, this becomes a critical factor in treating staff the right way - now.
3. Increased Risk Velocity - While there is a need for faster, more agile risk management strategies, companies that build risk response capabilities stand to gain 20 percent higher revenue growth than those that focus only on risk assessment.
4. Higher Levels of Employee Misconduct - Organizations already lose an estimated 7 percent of annual revenues to employee fraud, and CEB research shows that employee misconduct has increased at a rate of 20 percent. Organizations that take an active role in exhibiting corporate values can improve employee performance.
5. IT Budgets Targeting a Shrinking Share of Enterprise Information - Today, 40 percent of the most valuable information created by employees is out of reach of corporate IT systems. Companies need to create policies to create productive exchanges and educate employees on the use of new mediums, particularly social media.
6. Misplaced and Untrained Leaders - Companies seeking better leaders need look no further than their own organizations. CEB has found that correct reassignment and proper support of existing leaders can improve revenue and profit by more than 10 percent.

Ten Step Method To Continuous Improvement

From the QualityGuru, comes the Ten Step Method to Continuous Improvement.

Continuous improvement is a type of change that is focused on increasing the effectiveness and/or efficiency of an organization to fulfill its policies and objectives.

It is not limited to quality initiatives. Improvement in business strategy, business results, and customer, employee, and supplier business relationships can be subject to continual improvement.

Putting it simply, it means "getting better all the time."

Here are the ten steps to undertaking continuous improvement:

1. Determine current performance.
2. Establish a need to improve.
3. Obtain commitment and define the improvement objective.
4. Organize the diagnostic resources.
5. Carry out research and analysis to discover the cause of current performance.
6. Define and test solutions that will accomplish the improvement objective.
7. Produce improvement plans which specify how and by whom the changes will be implemented.
8. Identify and overcome any resistance to the change.
9. Implement the change.
10. Put in place controls to hold new levels of performance, and repeat step one.

Building A Strategy-Focused Organization

Robert Kaplan and David Norton are respectfully, the "fathers of the Balanced Scorecard."

In this article, Building a Strategy-Focused Organization, Kaplan and Norton land on a number of principle "truths" about strategy - and execution:

• A recent study of 275 professional portfolio managers reported that the ability to execute
  strategy was more important than the quality of the strategy itself.
• In the early 1980s, a survey of management consultants reported that less than 10% of effectively formulated strategies were implemented successfully.
• A 1999 F ortune Magazine article, in a cover story of prominent CEO failures, concluded that the emphasis placed on strategy and vision created a mistaken belief that the right strategy was all that was needed to succeed. The authors concluded that “…in the majority of cases—we estimate 70 percent—the real problem isn’t [bad strategy]…it’s bad execution.

BOTTOMLINE: "Strategy must be understood and executed by everyone. The organization must be aligned around its strategy, and performance management systems help create that alignment."

How CEOs (Should) Spend Their Time

Dr. Theresa M. Welbourne from both the Ross School of Business, University of Michigan and eePulse, Inc. released research examining how leaders (CFO) spend their time and how that time spent is associated with firm performance.

The basis for the study is assessing manager and leader performance based on five roles. These roles have been found to be critical for understanding overall, individual and firm performance and include:

• Job: Reflects the basic core job one is hired to perform and is often well described in the typical job description
• Team: Reflects responsibilities for ongoing and project-based teams
• Career: Includes responsibilities to enhance career and skills
• Innovator: Covers work spent to develop new ideas, create new routines or improve on process
• Organization Member: Reflects work done to support company overall, when it is not part of the other roles

The study indicated the average, overall percentages of time spent in each role, from high to low, as follows:

• Job - 45%
• Innovator 19%
• Team 16%
• Organization 12%
• Career 8%

BOTTOMLINE: “The average time spent by CEOs in particular in the job role, within a high performing company, is 36% versus 46% for the low performing firms. This is not surprising in that we know long-term competitive advantage comes from a workforce that is spending time doing things other than the ‘core' job. If employees are focused only on the job, everything that your company does can be easily copied by your competitors and replicated easily. Long-term
competitive advantage comes from the right combination of core job and non-core-job roles.”

Is It Really Employee Engagement?

In the wake of the downturn, American workers seem more appreciative of their jobs and enthusiastic about their organizations, according to Modern Survey's Employee Engagement Index (as reported by Harvard Business Publishing.)

The fraction of employees who said they took pride in their work rose from 71% in 2008 to 79% in 2009, and the fraction who said they would recommend their employers to other workers rose from 53% to 58%

Their conclusion? --- "Employees Feeling More Engaged"

Hold on..not so fast....

Could there be other "conclusions"?

Fear, perhaps? Gratitude of having a job, perhaps? More willingness to conform, perhaps?

Not to be a Doubting Thomas....just sayin'...

Communicate Your Organization's Goals - Or Else!

Here's a major wake-up call!

According to research commissioned by the UK's Department for Business, Innovation and Skills, only 24% of employees know their firm’s goals for 2010.

Other key findings:

• 32% even doubted there was a plan for their business at all.
• Only 27 per cent of people said they were fully prepared for the challenges they would face at work in the year ahead.

"This is just one example of how poor employee engagement can put the brakes on improved business performance. If leaders don't explain where the business is going and what it's seeking to achieve, how can people be motivated or know what they're meant to contribute? Clear goals are a key ingredient for achieving performance and productivity - but worryingly, this research suggests many employers haven't yet grasped this for 2010."

BOTTOMLINE: Here are some specific steps you can take now to ensure employees are engaged and ready to do their part for executing strategy in 2010.

1. Renew your organization's mission, vision, shared values, strategic position, create a short list of vital few objectives, and put together a list of things to stop doing.
2. Develop a strategic plan that outlines a short list of key initiatives that will drive activity toward meeting those objectives. Assign responsibility, key targets, outcomes and create measures to track progress.
3. Communicate the results of #'s 1 and 2 to everyone in the organization - in multiple ways, on multiple occasions. (That means two-way communication, which includes listening.)
4. Align the organization's resources (people, technologies, processes, policies, measures) to support these initiatives.
5. Have each person in the organization develop an individual plan of activities for the quarter, which align with the key initiatives they're working on. Hold short status meetings with team leaders weekly to track progress, to identify areas of risk, and provide enough time for continual course correction.
6. Measure results quarterly (not activity), review individual performance (and use 360 feedback surveys), survey stakeholders' satisfaction regularly, and review internal strengths, weakesses and external opportunities and threats.

(Want more specifics on how to accomplish these steps? Read Six Disciplines for Excellence.)

What is a Repeatable Business-Building Methodology?

If one of the four required components of a complete strategy execution program is "a repeatable, business-building methodology" - what exactly is that?

A repeatable business-building methodology is a holistic business improvement framework that can be used by an organization (guided by a licensed business coach) for continual performance improvement.

The methodology described in the graphic above consists of six interrelated business improvement disciplines, each consisting of a number of specific steps (processes) that are practiced repeatedly (annual, quarterly, weekly, or daily.)

The methodology consists of an on-going cycle of strategy formulation, planning, organization, execution, measurement and learning.

Just a few of the benefits of using such a repeatable, business-building methodology?

• It can be scheduled on everyone's calendars (because, what gets on your calendar, gets done...)
• It fosters new organizational learning habits (encouraging continual improvement)
• It's flexible, yet consistent (not a cookie-cutter approached shoe-horned into every organization)

BOTTOMLINE: Intrigued? The methodology described above is unveiled - in detail - in the award-winning business handbook, Six Disciplines for Excellence", which is available here from Amazon, Barnes & Noble, or from Six Disciplines Publishing.

Why Your Organization Needs More Than A Business Coach

In sports, no one questions the importance of having a good coach.

In music, art, science, no one questions the importance of having a good mentor.

If you're running a small business, why should it be any different?

Yet, everyday, leaders of small and emerging businesses continue to waste thousands (if not tens of thousands) of dollars on ineffective means to the end: learning to develop a top-performing business.

We hear it from our clients all the time: "I spent thousands on books, seminars, consultants; we've gone through planning sessions, brainstorming, etc. - and none of it has lasted."

Frustrating? You bet.

Common place? More than we all want to admit.

For 2010, are you hoping for the best? Well, hope - is not a strategy.

Well, there's always "business coaching" - but buyer beware: You actually need more than just a "business coach."

You need a holistic approach - a complete program that includes a repeatable business-building methodology, an external business coach (for accountability), execution software that enages every person, every day, and access to a shared learning community for faster adoption and stronger organziational engagement.

Do you - and your organization- need more than a business coach? Are you challenged with any of these?

• A lack of a solid strategic plan - mission, vision, values, strategic position, vital few objectives
• A lack of well-defined goals - specific, measurable, attainable, realistic and tangible (deadlines and attributable responsible people)
• Wasted time and resources - your people are working on things that do not align with your strategy
• Procrastination, distractions and working on "urgent" things - rather than "vital" things
• Lack of individual accountability - and organizational "entropy"

Do any of these sound familiar? How about all of them? You aren't alone. Every client we talk to has one or more (and sometimes, all) of these challenges.

It's time you looked into Six Disciplines....

What We Have Here - Is A Failure To Communicate

(This guest post was authored by Eric Kurjan,President of Six Disciplines Ohio/Indiana. Six Disciplines brings “big company” process improvement to organizations looking to break from the status quo. For more information visit www.SixDisciplines.com, email ekurjan@sixdisciplines.com or call 419-348-1897)

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As businesses are coming out of the economic downturn, they are starting to recognize that they need to do something different. However, that is a highly complex statement. What can you possibly do differently? Well, in most cases the list is enormous. There are plenty of things to work on.

If you followed my advice in my October article, then you are headed down the right path. There is a long way to go to get to the final destination but if you have defined that destination at least you know where you want to go. Now, how to do I get there? The first step is to communicate that information to the rest of the team. Where are we going, what will we do to get there, how will we do it and who is responsible for the various steps and actions? Those four basic tenets are the key drivers of strategy formation and more importantly the execution. But there is something more.

For some reason, asking CEOs/Presidents/Owners to share this type of information with their teams seems to be a very foreign concept. There is the unreasonable expectation that the team members/employees somehow already know where they are going and how to get there. Most folks are not great mind readers and then they end up doing whatever they think is best because as leaders we have not communicated what we need or want. As someone wise once said, “The biggest problem with communication is the illusion that it has taken place."

In fact, the larger the organization is, the greater this illusion becomes. As organizations grow, communication challenges grow as well. These challenges will grow dramatically faster than the organization headcount. To illustrate:

• In an organization with 3 people, there are only 3 possible different interactions.
• In an organization with 25 people (8 times as many people), there are 300 possible different interactions = 100 times increase in the complexity of communications
• In an organization with 100 people (33 times as many people), there are 4,950 possible different interactions = 1,650 times increase in the complexity of communications

Growing organizations respond to increased complexity by creating layers (business units, divisions, departments, teams, groups, etc.). Add to this challenge -- 55% of communication really takes place through non-verbal body language (not phone, not email, not IMs, not video conferencing.)

So, we have some pretty big issues to overcome to get people on the path we want. Unfortunately, we have leaders who don’t share the company message, direction or expectations with their employees, and then couple that with the complexity of a growing organization. In the absence of leadership, employees decide their own direction. Often times the intentions are good; however, they do not always align with what management sees as important.

Gary Harpst, the founder of Six Disciplines, tells a very poignant story of “Susan”. “Susan” works for a very good commercial HVAC (heating, ventilation, air conditioning) contractor in the Midwest. She has been an excellent, loyal, hard working inside sales employee for the past seven years.

This morning she has a conversation with her leader, the manager of inside sales. He tells Susan that the numbers on the commercial business are off for the month. Their normal commercial clients are not upgrading and new construction is terrible. He tells her that she needs to get more deals in the door, somehow. Seems pretty straightforward and probably a conversation repeated in organizations all across America. Being a creative and hard working person, Susan is looking for any new business she can find. In good times, the pipeline has been plentiful with commercial deals and anytime a residential sales/service call came in she turned them away.

However, now based on the conversation she had with her manager this morning, she “decides” to take on a residential opportunity. She completes the paperwork, sends a service crew to the residence and thinks she has uncovered a new opportunity. However, she has created a nightmare. The work crew is not trained to work on residential HVAC systems, they do not carry the parts, the business model and cost structure are not compatible, and on and on. Susan’s decision is full of good intentions but her self-directed approach is fraught with issues. And it all started with a lack of clear direction and communication.

This type of disconnect is very common, and it is all about the lack of communication.

Communication also ties to overall employee performance. Yes it is true, not only do you need to tell your employees what they need to do and what you expect of them but you also need to share with them how well they are doing their jobs.

SuccessFactors surveyed 3,600+ workers at 291 companies and found, among other things,
• 51% of employees don’t know whether their performance is where it should be
• 66% say they have too little interaction with their boss
• 55% don’t get enough timely constructive criticism

BOTTOMLINE: It all comes down to communication. You should try it. Set the direction, define the actions and measure the results. The investment is small, but the rewards are huge.

ENTERPRISECORP Joins the Six Disciplines Business Coaching Network

Business Development Arm of Greater Louisville’s Chamber of Commerce Sees Growth through Strategy Execution Coaching Program

FINDLAY, OHIO – December 2, 2009 — Six Disciplines announced today that it has added ENTERPRISECORP, the enterprise development arm of Greater Louisville’s Chamber of Commerce, to its nationwide network of business coaching practices that offer the Six Disciplines® strategy execution program to its clients.

Six Disciplines is unique in the growing industry of business coaching because of its completeness, which includes the synergy of a repeatable business-building methodology, execution coaching, an execution software system, and a shared community to accelerate organizational learning.

“I can readily see the value that Six Disciplines will bring to our clients,” said Mark Crane, Executive Director of ENTERPRISECORP. “The Six Disciplines methodology, coaching and software will help them achieve their goals, not just through planning, but through focused execution.”

“Six Disciplines is the perfect complement to our business advisory services,” added David Oetken, Director of Business Advising ENTERPRISECORP’s. “By using the Six Disciplines methodology and software tools, our clients will be able to connect their vision to their strategies, and align their plans and activities for more consistent and predictable execution.”

“Forward-looking CEOs are starting to understand their biggest challenge is not what they think it is,” said Gary Harpst, founder and CEO of Six Disciplines. “They’re finally figuring out that it’s all about the balance of strategy and execution. ENTERPRISECORP understands the tremendous opportunity ahead of them with Six Disciplines, and because of their expertise and proven success, we’re excited to welcome ENTERPRISECORP to our quickly-growing business coaching network.”

About ENTERPRISECORP

ENTERPRISECORP is the enterprise development arm of Greater Louisville Inc., whose mission is to dramatically increase the number and quality of fast-growth companies headquartered in the Louisville region – companies that create the vast majority of new wealth, new revenue and new jobs. For existing businesses that want input and guidance on how to generate growth, ENTERPRISECORP offers Business Advising, which uses detailed assessments and case review by an advisory council of seasoned professionals to create custom recommendations on how businesses can take advantage of opportunities for growth. When a management team is ready to embrace change and pursue the next level of performance, we are the place to start. Visit www.EnterpriseCorp.com.

About Six Disciplines

Six Disciplines offers a complete strategy execution coaching program, optimized for small and midsized organizations. The Six Disciplines program enables organizations to get better – and stay better – with less stress and more fun. The breakthrough program is detailed in the best-selling book “Six Disciplines Execution Revolution” by founder and CEO Gary Harpst. Six Disciplines is offered exclusively through a growing nationwide network of licensed Six Disciplines coaching practices. Visit www.SixDisciplines.com.

A Christmas Gift for CEOs

If you're a regular visitor to Be Excellent, you're familiar with Six Disciplines.

Here's a thoughtful holiday gift idea for you - or for the CEO of a small or midsized business that you know.

Share award winning and best-selling business improvement books, written by veteran CEO and strategy execution expert Gary Harpst.

Both of Gary’s books, Six Disciplines for Excellence, and his newest best-selling book, Six Disciplines Execution Revolution, are now available on Audio CD - exclusively at Six Disciplines Publishing.

Audio books make the perfect holiday gifts -- for the busy business people in your life.

During the month of December, we’re offering a 25% discount on all purchases of Six Disciplines books, including the new audio books.

INTERNATIONAL ORDERS WELCOME!

To get your 25% discount, visit http://www.sixdisciplinespublishing.com/, and use the coupon code “GIVE” when checking out.

Best Wishes for the Holiday Season, from the staff at Six Disciplines Publishing!