Imagine that you are now the CEO. Further imagine that your organization is underperforming. Worse yet, your organization has low employee morale, high labor turnover, declining market share, falling profits, competitors that are under-pricing you, and constant criticism from your board of directors, investors and investment analysts.
Sound like a fun job? What are you going to do?
You start building. How different would this challenge be than accepting a head coaching position for a college sports team that has been winless for the last four years? You begin looking for the athletes who want to win. But that is not enough. You need to grow talent and lead them to work with each other.
Being a CEO is not much different.
Starting the Rebuilding Journey
Where do you begin? There is no road map. There is no stepwise sequence. So many things need to get fixed. When you are alone, in solitude, you need to dwell on the right vision and mission for the organization from which to formulate your strategy. That is your primary job – to set direction. Everyone will want to know your answer to the question, “Where do we want to go?”
You don't have to fully decide yourself. That is what your executive team is there for – to bounce your ideas off. They may not all want to get on the bus with you. Choose quickly who should stay with you and who should not. It is not going to be an easy journey.
You have so many secondary jobs besides just direction setting and strategy formulation. And there is little time to delay. Of course, there are dozens of best-selling books on leadership. Perhaps one will provide you a winning formula. If it were my decision, I would create a culture for metrics. You cannot manage what you cannot measure.
I suggest you also create a culture of manager and employee involvement. My favorite methodology for this is constructing a strategy map and quickly delegating to your managers the task of identifying a few manageable projects, as well as the core processes, to implement and improve.
Also, ask them to propose the key performance indicators (KPIs) that can be monitored to assess the progress of achieving the strategic objectives in your strategy map. The KPIs will monitor those same projects and core processes. The benefit of this approach is that your managers and employees will have ownership of the actions and more easily accept the accountability they will be responsible for. You asked, “Where do we want to go?” They must answer, “How are we going to get there?” and also “How are we doing on what is important?”
Next Step: Customers
Are you done? No. What about your customers? You can try to make them all happy. However, my suggestion is to first identify which types of customers to retain, to grow, to win back and to acquire – and which types not to. You are not a charity organization; you have shareholders expecting financial returns from your business. You do not want to just grow sales. You want to grow profitable sales. This will require measuring, reporting and analyzing customer profitability and their future potential value.
Treat customers as investments in a portfolio. The ones with the highest financial return will translate into increasing the rate of shareholder wealth creation. This can silence the criticism of your board of directors and the investment community.
Innovation? Today it is an entry ticket to compete, no different than was high quality in the 1990s. Business process improvement? Same answer. Better, faster and cheaper, regardless of what product you make or service you deliver. But good business processes will never trump a poor strategy, or poor execution of a good one. You need managers and employees who hold strategy execution as a high priority.
Strategic Decision Making
What is critical for strategy execution? Executives are routinely tempted to address improved strategy execution with the relatively lower-impact solutions of reshaping the boxes and lines of the organizational chart and instituting better reward and recognition systems. These are secondary and address symptoms, not root causes.
More critical to understand is that good execution is the consequence of thousands of daily decisions made by employees based on the limited information they have and their own self-interest. What does this mean as to what you as the CEO should do? There are two powerful levers for strategy execution: clarifying decision rights and designing effective information flows.
Clarifying decision rights: As organizations grow in size, the approval process gets complex and foggy. Employees become unsure where one person's accountability begins and another's ends. Work-arounds then subvert formal hierarchical reporting relationships. Clarifying who has what decision-making authority and empowering decentralized decisions lower into the organization brings mission-critical agility – as long as trust is given by the executives and second-guessing by supervisors is minimized.
Designing effective information flows: Decisions are based on information. Too often information flows are blocked by organizational silos. Collaboration is important. To complicate matters, logical and judicious decisions are constrained by the type and quality of information available to employees. Some organizations simply have inconsistent and poor-quality data.
Even with a new transactional business system, such as an enterprise resource planning (ERP) or customer relationship management (CRM) system, organizations drown in oceans of data but starve for information in a form that can be quickly interpreted in the context of a problem or needed decision.
What to Do As the CEO
Team-building and strategy execution are challenges for all CEOs. Now you too are faced with the tasks of a turnaround. Do not immediately redraw the organizational chart. Find employees who are winners and team players. Give them your vision and inspire them. Grow them. Set the direction.
Communicate the executive team's strategy to everyone, and develop cascaded and causally related performance measures with reasonable targets to align everyone's behavior with the strategy. Ensure that managers and employees unambiguously understand what they are responsible for and who has authority for decisions. Increase accountability.
Finally, provide employees with the information they need to fulfill their responsibilities. Accomplish this by providing employees with analytics horsepower, including predictive analytics, to convert huge volumes of data into a much smaller amount of information and insight. Business analytics amplifies the value of data.
You may not have wanted to be the CEO. But you are now one. Can you do the job? New coaches of sports teams have successfully turned around teams with losing records. You can, too.
Gary Cokins is an internationally recognized expert, speaker, and author on advanced cost management and performance improvement systems. He is product marketing manager with business analytics software and services vendor SAS. Cokins also serves with Professor Robert S. Kaplan on the International Monetary Fund's activity-based costing advisory panel.