It’s that time of year when business owners and senior executives take stock of the past twelve months. What did 2011 look like for you and your company? The questions you could ask during your year-end review are endless. But, there’s only one that really matters: Did your company effectively execute its business goals?
If an organization can’t achieve results, nothing else matters—not the smartest strategy, not the most innovative business model, not even game-changing technology. And for many companies, there is a clear gap between strategy and execution—we’ve seen plenty of evidence this year.
Our research uncovered five characteristics, which we call “The Five Bridges,” that enable people to traverse this execution gap. It is these bridges that differentiate the companies that are consistently able to achieve results. To learn from the “living laboratory” of real-world companies, here are six of this year’s headline makers and the lessons we can take away from their struggle.
Execution Gap Maker #1: The Japanese Government
Facing the possible meltdown of the Fukuskima Daiichi nuclear reactor, Prime Minister Naoto Kan asked a small circle of trusted advisors to weigh the risk of injecting seawater into the reactor to cool it down. Unfortunately, because of Mr. Kan’s distrust of bureaucrats, he did not make use of Japan’s crisis management system which brought bureaucrats from various ministries under the direct command of the prime minister. As a result, he did not involve members of Japan’s Nuclear Safety Commission or Tepco, the company that ran the power plant.
Not involving these key stakeholders prevented him from quickly grasping the severity of the situation and adversely impacted the quality of Mr. Kan’s decisions and the speed with which he acted. For example, he did not know that the plant manager had already started using seawater and continued to do so, despite being told to stop by his bosses at Tepco. As it turns out, the plant manager’s act of defiance may have prevented many deaths. In addition, Mr. Kan and his team were not aware of the resources they did have available like a national system of radiation detectors. If they had been aware of this system, which predicts the direction radiation is moving, they would have been able to prevent residents who were evacuating from heading directly into the radioactive plumb.
The “BRIDGE” that failed: Involving Others in Decision Making.
THE LESSON:
In order for any organization to execute successfully, the right people have to be involved in the right decisions. The Prime Minister of Japan provides a devastating example of what can happen when this isn’t the case.
Obviously, this lesson is even more critical when there is as much at stake as there was in the Japanese disaster. But really for any company trying to gain footing in a constantly changing business environment and tough economy, empowering the right people to make the right decisions can be the difference between landing that next great customer or account.
Execution Gap Makers #2 and #3: Connecticut Light and Power (CL&P) and the State of Connecticut
Few of the people who live in Connecticut would argue that CL&P was not prepared for October’s nor’easter. It appears that CL&P’s emergency response plan was woefully inadequate. The plan’s worst case scenario considered outages of 100,000 customers, or less than 10% of the customer base. At its peak, the outage was over 800,000 customers, or about 66% of the company’s base. Partly because of the original planning assumption, CL&P did not pre-stage adequate restoration resources in advance, which delayed the recovery effort in the first few days.
In addition, there appears to have been a lack of coordination among local and state government which contributed to shortcomings in preparedness, communication and private sector cooperation. Although there were plans at the state and municipal levels, there was not one centralized master plan that shows how state government should interact with its own agencies and how the state should coordinate its own activities with those of the utilities and municipal governments.
At the company level, the lack of coordination and collaboration is illustrated by CL&P’s promise to restore power to 99% of customers by November 6 without vetting it internally. Not surprisingly, they missed this self-imposed deadline (as well as the one after that), which seriously undermined confidence in CL&P’s management team’s ability to deal with the crisis.
The “BRIDGES” that failed: Translating Strategy into Action and Coordination and Cooperation.
THE LESSON:
Execution starts with a plan. Although most organizations and leaders understand the value of developing a plan that outlines how a goal will be accomplished, the most effective leaders also ensure that plans are aligned and mutually supportive across organizational boundaries. It’s also critical that organizations learn to coordinate decisions and actions across functions and levels. But doing so requires more than faith and words alone.
Shared goals and clearly defined roles provide the foundation upon which cooperation and coordination can be built. In addition, people must be held accountable for results. This requires a combination of leader behavior and systems that reinforce the appropriate behavior among employees.
Execution Gap Maker #4: UBS
In September 2011, a “rogue trader” was arrested for a scheme that lost UBS $2.3 billion. Although UBS hoped to show that this trader’s activities were an aberration, it appears that the unauthorized trading was just the latest in a series of ethical and legal lapses at UBS. For example, in 2008 UBS settled charges brought by New York State that it misled customers when it sold them what it described as nearly risk free auction-rate securities even as its executives knew the market was collapsing. In 2009, the Justice Department contended that UBS conspired to enable 17,000 wealthy Americans to engage in tax fraud. In return for a deferred prosecution agreement, the bank agreed to pay a $781 million fine and divulge the names of the account holders. In May of 2001, UBS paid $160 million and admitted that its employees had conspired to rig bids in the municipal bond derivative markets.
It appears that the most recent case of unauthorized trading is consistent with a culture at UBS that stressed individual advancement over team effort and personal achievement over ethical and legal considerations.
The “BRIDGE” that failed: Alignment Between Leader Actions and Company Values and Priorities.
THE LESSON:
A company’s culture is made up of the values and beliefs held by a majority of its employees. Contrary to the common belief that values are “soft” and amorphous, they are quite concrete and drive behavior and systems. Therefore, an organization’s culture is known or “recognized” by the behavior of its leaders and its work processes.
Leader behavior must be aligned with company objectives and values. While I admit this phrase has been said so often it’s become a cliché, companies can’t afford to ignore it. You don’t really understand how important value alignment is or the impact it has on effective execution until you see what happens when it’s not there. That’s why stories like the UBS one are so important. They remind us not to take it for granted or assume it’s a ‘no-brainer.’
Execution Gap Makers #5 and #6: Netflix and Research in Motion (RIM)
Ironically, Netflix was on our 2010 list as a Gap Closer and an example of the same Bridge – Managing Change – that failed in 2011. Partly because of the dramatic change in what was regarded as an almost flawless track record, Netflix’s missteps caught the media’s attention and were very well documented this year. From its attempt to change its pricing structure to the announcement that they would rebrand the DVD service as Qwikster (which they quickly cancelled in the face of customer outrage). In both cases, it was apparent that Netflix misread its customers and their expectations.
As CEO Reed Hastings admitted, Netflix had become overconfident, which was a contributing factor in the mismanagement of these key changes.
RIM gets an “un-honorable” mention in this category. It appears that the Canadian company is having difficulty responding to the change created by the entry of Apple’s iPhone and iPad and Google’s Android technology. Unlike when RIM dominated the market, their traditional customer, corporate IT, is starting to look at these new technologies more favorably and relaxing the distinction they had made between personal and business use. This shift in perspective and the performance and features of their competitor’s products is forcing RIM to step up their game and rethink how they will compete in both the enterprise and consumer markets.
However, RIM has been unable to launch new products with the same appeal as its rivals (or even with its previous products) and it has suffered a number of significant service interruptions that have angered customers. This has caused customers and potential customers to lose confidence in the company and encourage them to look at competing products. RIM’s poor execution may actually end up being the antidote to the “crackberry” addiction they created.
The “BRIDGE” that failed: The Ability to Manage Change.
THE LESSON:
Effective execution requires vigilance. Just because you’ve got it right today doesn’t mean you’ll get it right tomorrow. As the Netflix example illustrates, the Bridges are quite fragile and require constant attention. Arrogance and complacency are the beginning of the downward spiral into the execution gap.
It’s also important to remember that, despite all the effort and resources that have been devoted to helping leaders and companies manage change, they still often get poor marks in this area. That said, yet another change management process or program is not the solution, emphasizes Lepsinger.
Our research, as well as the research of others, indicates that successful change is connected more to the individual and collective mindsets of employees and customers than any process. People change when they are ready—not just when they understand the need for change. The most successful companies facilitate change-readiness and don’t just rely on making the business case to drive people’s motivation to change.
As these stories illustrate, execution is the real bottom line and it’s what every business needs to focus on as they seek to improve organizational performance—and it’s the lens all leaders should look through as they review 2011 and make their “business resolutions” for 2012.
Execution is not a single-point event. It’s an ongoing process. But since your ability to execute well and consistently is the very fabric of success, I can think of no better place to focus your time and energy.
