The Secrets to Successful STRATEGY EXECUTION Research shows that enterprises fail at execution because they go straight to structural reorganization and neglect the most powerful drivers of effectiveness — decision rights and information flow. by Gary L. Neilson, Karla L. Martin, and Elizabeth Powers ‘A BILLIANT STRATESY, blockbuster product, o¢ breakthrough tmehnokogy can put you on the competitive map, bat only sold execution can keep you there. You have to be able to Gellver on your tntent. Unfortunaie'y the majority of compe ales arent very 00d aft, by their own almission. Over the ast five years, we have invited many thousands ef employees (about 299 of whom came from executive ranks) to complete an online asessment oftheir organization’ capabilities, a pre- cassthat's gunerated a database of 125,000 profiles presenting more than 1,00 companies, government agencies arc noo" profits nner So countries Employeesat three outor every ive cero | June 2008 | Harvard Business Rewow 61‘The Seerels to Successlul Stretesy Execution ‘companies rated their organization weai at execution —that Is, when asked if they agieed with Ue statement. “Important strategic and operational decisions are quiMy translated into jonthe majority answered no Execution i the rerul of thusandk of decisions made ev ery day by employees acting according to the information they have and cheir own selfinterest. In our work helping more than 259 companies learn to execute more effectively, ‘weve idencined four fundamental bullaing backs executives an use (0 Influence those ‘actions clarifying decision rights designing information flows, aligning motivators, ‘and making changes to struc ture. (For simplicity’: sake we reer to them as decision rights, information, motiva- tors.and structure.) Im efforts to improve per formance, most organizar ‘tons go right to structural measures because meving lines around the 078 chart seers the most obvious olt- tion and the changes ae vis {le and concrete. such steps penerally reap some short team effkiencies quickly, but in so doing address only the symptoms of dysfunction, not its root causes. Several years later, companies usuallyend up in the came place they started. Structural change can and should be patt of the path to im: proved execution, aut it's best to think of i as the capstone, ‘not the comerstone, of any organizational transformation. in fac, our research shows that actions naving to do with dec son rights and information ave far more important ~ about twice as effective as improvements made to the otter (wo building blocks (See the exhibit What Matters Most to Sti gy Execution”) Tale, for example the case Fa global consume: packaged goods company that lurched down the recrganization path inthe early 19906 (We have altered identifying dell in this and other cases that follow) Disappointed with company performance, senlor management did what mos: comps- ales vere delng at that me: They restructured, They elim nated some layers of management and broadened spers of control. Management staffing costs quickly ell by 384, Eight years later, however it was dja vu. The layers had crept back in, and spans of control had once again narrovied. in 2é- essing only structure, management had attacked the vie ‘le symptoms of poor performance but aot the underlying ‘cause ~how people mace cecisions and how they were helé accountable 62 Hervar Bushess Review | June2008 | her.ora What Matters Most to Strategy Execution shows thatthe fundomweatel of good exccutonstar wih ‘laying oeciton ent and making sure ntrnaton tes < dears TT 25 so As pa This cime, management looked beyond Lines and bores to the mechanics of hew work gor done. Instead of searching for ways to strip aut casts, they focused on improving exect= tion—and in the process discovered the true reasors for the performance shortill. Managers didn’: have a clear sense of their respective roles and responstilities. They did not intui- tively undertard which decisions were thers to make. More- cover, the link between performance an rewards was weak This was 2 company long on micromanaging and second- ‘guessing, and short on accountab= fy Middle managers spent gon of ‘their time justifying and reporting upward er questioning the tactical cisions thei direct reports. ‘Armed with this understanding, the company designed new man agement model that established ‘who was accountable for whet and ade the connection between per formance and reward. For instance, ‘the norm at this company, not un- ‘ul inthe incustry, had been to promote people quicly, within 18 Imenths to tao years, before they had. a chance to s@2 thei initic- ‘ives through. AS 2 result, manag- — ery at every evel Kept doing their (ld Jobs even after they ha been promoted, peering over the shou ders of the direst reports who were now in charge of thelr projects and, all too frequently, taxing over: Today, people stay in their positions longer so they can follow through on thet own initiatives, and they'e sil around when the Fits oftheir Iabars start to kick in. What's more, rel from those inuatives continue to count in thelr performance reviews for soine tine ater they ve been promoted, forcing managers to live ith the expectations they Wet in their previous jobs As @ consequence, forecasting has become more accurste and rllable These actions di yield a structure with fewer layers and greater spans of control, but that wasa side effect, notthe primary focus, of the changes, The Elements of Strong Execution (Gur conclusions arse out of decades of practical application and intensive research, Nearly ive years ago, we and our co leagues set out to gather empirical data to identify the actions that were most effective in enabling.an organization to imple- ‘ment strategy. What particular ways of restructuring, moti- ‘ating, improving information flows, and clarifying decision rights mattered the most? Westarted by craving up alist of 17 teats, each corresponding to ore or more of the four building blocks we knew could enable effective execution traits like the tree flow of information across organizational bouncariesThe 17 Fundamental Traits of Organizational Effectiveness rmarethan 26020 pepo” ‘or the degree to which senior lesders refrain from get ting involved in opecting decisions. Vth these factors in mind, we developed an online profiler that allows individuals to assess the execution capabilities oftheir longaniuations. Over the neat four years or so, ne col- lected data from many thousands of profiles wich in turn allowed uso more precisely calibrate the impact ‘ofeach trait on an organization’ ability to execute. That allowed us to rank all 17 traits in order of thelr relative influence. (See the exhibit"The 17 Fundamental Traits of Organizational Hiectiveness) ‘Ranking the traits makes clear how tmpartant deci- son rights nd information ate to effective strategy 2x- ‘ecutlon. The Gist eight waits map directly to decision rights and information. Only thes ofthe 17 traits relate to structure, and none of those ranks higher than 13th. ‘Well walk through the top five traitshere, 1. Everyone has a good idea of the decisions and actions for which he or she is responsibl n comps nies trong on execution, 71% of individuals agree with ‘this statement; tat gure drops to 32% in organizations ‘weak on execution. ‘Blurring of decision rights tends to occur as & om pany matures. Young orgenizations ere generally too busy getting things done to dene roles apd responsibili- sesclearly at the outset. And why should they? Inasmall ‘company, ts aotso dificult to now what other people sre up to. So fora time, things work out well enough, As the company grows, however, executives come and 0, binging tn with them ard taking away diferent ex- Dectations and over time the sppruval process gets ever ‘mpre convoluted andl musky. It becomes increasingly tanclear where one person's accountability begins and another's ends. One global corsumerdurables company found this ‘out the hard way. tt was so rite with people making ‘competing anc conilicting decisions that it was hard ‘find anyone below the CEO who felt tty account able for protapiley The company was organized into 16 product divisions aysregated into three geographic ‘groups—North America, Furope, and Intemational. Each ofthe divisions wes charged with reaching explicit performance targets, bat fanctional staff at corporate ‘headquarters controlled spending targets —how R&D dollars were allocated, for instance. Decisions male by divisional and geographic leaders were routinely over ridden ty functional leaders. Overnead costs beyan to mount as the divisions ade staf to nel them create ‘pubetproct cases to challenge corporate decisions. Decisions sallod while divisions negotiated with fune sons, each Iyer weighing in with quostions. Functional staffers inthe divisions (financial analysts, for example) often deferred to their higherups in corporate rather Rewow 62 hracorg | June 2008 | Haar Busine