December 21, 2005

How Can David Beat Goliath?- Strategy #9: Execute against Execution!

Posted in culture, David vs. Goliath, Execution, management, Metrics at 6:01 pm by scottmaxwell

Up until now I have focused on how the emerging growth company can gain strategic advantages and minimize the large company advantages. If you have taken the best of the ideas, distilled them to their essence, and applied them to your emerging growth business, then you should have a very clear idea of what you are trying to achieve (a.k.a. your vision) at this point.

This post is about how you best execute toward your vision, which I think of as punching the fast forward button (like you do on your DVD player) so that your organization moves rapidly toward nailing a series of short-term goals and, ultimately, your longer-term vision.

Quite a bit has been written on execution (I list my favorite books on the subject at the end of this post). If you have been studying the topic, you have found there are many possible inter-personal and inter-group issues, many different types of people and situations, and lots of advice on leadership methodology for approaching each situation.

What I have done with this post is to boil away all of the tactical details and present what I believe are the most important skeletal components for execution (you will find these components in all companies that have been high achieving for a long period of time). If you get the skeleton right, you should be 80% of your way toward optimal execution. Get these wrong, and your results will be significantly lower that they could be (you still might get lucky with a unique product or a unique product market for some period of time, but you will regress toward the mean over a longer period of time).

The essence of execution is fourfold:

  1. Genetically engineer your organization. You need the right people doing the right activities in each position. Recruiting, training, motivation, reward, and separation systems that are 100% aligned with performance are key.
  2. Create challenging focal points. Every group and individual in your organization needs 2-4 short-term, challenging focal points that are aligned with the company milestones and interdependencies.
  3. Measure progress and make adjustments to close gaps frequently. Every individual and workgroup needs to review progress, understand gaps, and get help closing the gaps on a regular basis. Weekly, monthly, and quarterly reviews are a necessity.
  4. Be flexible. Adjust your longer-term goals based on short-term results. The world rarely turns out the way you expect.

These skeletal ingredients are very similar to agile software development principles applied to the entire organization (although I have tried to make the key ingredients more black and white for the purposes of clarity). If you have just these ingredients, you will execute at least 80% well against your game plan. Each of these four ingredients is discussed in more detail below.

Genetically engineer your organization…

Genetically engineering your organization means getting the right people doing the right activities, with a management approach that is merit based (a.k.a., the meritocracy). Each of these is outlined below:

  • Right people. I have already posted on the topic of recruiting best practices for hiring “A” caliber people. There are two additional thoughts that I would like to make here. First, if you want to get something done quickly, you need to hire a person that both knows how to do it AND has done it before successfully. Additionally he or she needs to be passionate to do it again (not people who have read a book or watched someone else do it, but rather people that have managed the activities that you are trying to set up). Even better, if you can find people who have both set up and managed the activities before, you will have much better execution as the skill to set up the group in the first place is much different than the skill to manage a group once it has been set up! For example, if you are developing a database application on SQL server in C++, getting a person that has been developing successfully in SQL server and C++ makes sense. Likewise, if you want to start a telesales group, getting a manager that has been highly successful setting up and managing a telesales group makes sense (rather than hiring a field sales manager to manage telesales). This is a simple point, but not followed as closely as I would expect. Second, you need to hire people that fit with the culture that you are trying to set. Either you need to hire experienced people that have the culture, or you should hire entry level people (“A” caliber!) directly out of schools and train them into your culture (this is the best long-term approach in my view, especially if you supplement the entry level people with the managers that have the direct experience. However, it will be less effective in the short-term, so you need to determine the trade-off you are willing to make).
  • Right activities. Just to reinforce my point above, you need to hire people that know how to do the right activities into the leadership positions of your company. If you supplement the leaders with entry level “A” caliber people, then you will form a team that should generally be doing the right activities. The major point is that the right people should know the right activities and naturally set them up and proper oversight will make the activities even more “right.” You need to be EXTREMELY careful that you are sure your hires know exactly what they are doing, however, as good people will do a good job executing what they think is right. If they do not know exactly what they are doing, you will end up with the wrong activities and it will be much more difficult to changeover to the right activities!
  • Meritocracy-based management system. If you want a management system to maximize execution, you need to set up a culture that makes it so that top performers that want to win will love working for your company (and lower performers won’t like working for your company). Generally this means compensation and advancement goes to those that perform and separation goes to those that can’t or won’t perform. The trick here is to start at the point of recruiting and let the recruits know that you have a performance-based culture that rewards top performance and does not have time for underperformance (this will both set expectations and help to attract the top performers and reduce the attraction from the underperformers). Once people are hired, set up goals (more on this point below), and then reward the performers in various ways (rewards can include the obvious compensation and advancement, but other rewards are in many cases more valued, such as publicly thanking people, giving them awards of various kinds, and giving them challenging new opportunities and leadership roles). For the non-performers, moving them into less critical positions and/or helping them find jobs outside of your company will help you maximize your execution while doing the right thing for your underperforming employees.
  • Prevent “bad behavior.” Finally, you must make sure that “favorites,” “sacred cows,” “politics” and other management approaches that are not merit-based do not creep in your organization. These approaches not only hurt execution short-term, but also dramatically impede your ability to build a long-term sustainable execution advantage. Merit-based approaches get high-performers focused on results, non-merit-based approaches disengage high performers and get everyone else focused on issues other than results. Managing for high performance will significantly reduce the energy focused on “bad behavior”, but you will also need to manage away these behaviors (and potentially the people exhibiting these behaviors!) before they breed in your organization (this is particularly difficult as you grow into a large organization, as their are more places for these behaviors to breed).

Create challenging focal points…

Given your staff is in place, you need to disaggregate your longer-term vision into a series of goals for each department, group, and person in your company. Overall, this gives everyone in your organization a focal point to think about and act on when they come into work every day. Generally, the more they focus on the goal, the more their activities and actions will be aligned with the goal. The goals need to be:

  • Specific. It is very important that the goals are very specific. For example, “have the best product” is not at all specific and very difficult to take actions against. However, product download speed, installation time, alignment with specific use cases, and user satisfaction are all much more specific.
  • Measurable. Measurability goes hand-in-hand with specificity. If you can measure your performance against your goals, you can determine that pace of improvement. For example, product download time from a broadband connection, number of “clicks? to install, install time, number of clicks to complete a given action, wait time for a given action, and user survey results are all measurable and repeatable so that you can both benchmark yourselves and measure your progress against your goals.
  • Short-term. Having the goals be short-term is highly important, as an immediate goal creates a sense of urgency in the business. Forget goals that are one year out, and set goals that need to be accomplished this month, this week, or today. This is probably the most important factor in execution!
  • Stretch. The goals need to take real work to meet, as goals that are too easy to accomplish will create a sense that “this can wait until tomorrow.” You want your staff to be working toward the goal every day!
  • Achievable. Ultimately you want everyone to build excitement around achieving the goals AND you want everyone to know that you are serious about everyone meeting their goals. The only way to do this is to set goals that can be achieved if people work hard (if you truly work on this, then you will get better at setting your goals over time so that they are both stretch goals and achievable goals). The more people think that the goal is not possible, the less they will work toward achieving it (why work hard if they are going to miss nailing the goal anyway?)

Some examples (note that these may or may not apply to your business):

For Product Development, make the next build by Friday, release the next version of the product to customers by next month, work toward builds every other day by the end of the quarter, work toward customer releases every 6 weeks by the end of the quarter. Build specific use cases into the product by a certain date, improve download time to 1 minute by a certain date, etc.
For Marketing, create 100 qualified leads (with a specific, measurable definition for “qualified”) a day by the end of the quarter with an average cost of $10; generate at least one featured article in a trade magazine this month. Generate at least 30 customer referral leads per week by the end of the quarter, etc.
For Sales, Make 50 new customer contacts each day, create $1 million in bookings this month and build a $20 million of qualified pipeline by the end of the quarter, etc.
For Customer Service, pick up the phone by the second ring 95% of the time and don’t leave anyone for more than 2 minutes. Resolve 95% of customer issues while they are on the phone and the remaining 5% within 3 business days. (Of course, you would expand this into e-mail support, self-help tools, VRU approaches, etc.)
For Finance, reduce days receivable down to 50 days by the end of the quarter (and many other possibilities depending on your current situation).
For Business Development, create and propose at least 3 partnership proposals to the 3 our of the list of targets by the end of the quarter, close on one deal that generates a specific revenue stream in a specific time period.
For (insert the right department) increase pageviews per visitor by 10% within 30 days, reduce customer churn by 15 percent by the end of the quarter, increase.

These are just meant to be thought starters. The more your goals disaggregate to specific people across your organization, the more the people know the dependencies with other parts of the organization, and the more your people help each other to meet their goals, the more setting these focal points will drive execution.

Measure progress and make adjustments to close gaps frequently…

The focal points are only words on paper (or e-mail?) until you put the proper management model in place that reviews progress against goals and make adjustments as you determine gaps in progress against the goals. Your management model should give everyone the opportunity to review their results vs. their goals and also has the opportunity to hear the ideas of others to help them improve on their goals both during the review meetings and in between the review meetings. Everyone should have review sessions at least weekly (more likely daily or intra-day for some of your work groups), and less frequent, more in depth meetings as well (I think about weekly reviews that are short and to the point unless there are gaps emerging, monthly in-depth reviews for everyone to get a detailed understanding of what is going on and to offer their ideas and assistance, and quarterly meetings to have even more in depth reviews and to set up the next set of goals. These time periods are rough, but the nature of the work week/weekend cadence requires at leas one checkpoint each week).

As a separate point, these review sessions are better when they are not meant to put people on the spot or to create unhealthy stress, but rather to be collaborative sessions to truly understand progress and to help people nail their goals. If they are set up in the right way, the combination of individual and group accountability, problem solving/idea generation, and resource adjustments based on results, will make the sessions an extremely important part of your execution program and something that people will look forward to (would you rather feel like you are being judged in a session or feel that you are going into an environment where people are going to acknowledge your hard work and help you achieve your goals?)

Be flexible…

Most emerging growth companies are working in extremely dynamic markets and their companies are extremely dynamic as well. The nature of the business is such that sketching out the long-term and then focusing on the short-term is a necessity. But sticking to the longer-term when market opportunities change or execution challenges become apparent is not a good idea.

This brings up the issue of annual budgeting and planning sessions. My view is that thinking through an entire year and sketching out a plan and budget are very important to making sure that you are rethinking the big picture at least once a year. However, the annual planning cycle in my view is more of a starting plan rather than the last plan for emerging growth companies each year. Each day, month, and quarter will bring its own surprises, and reviewing and adjusting your plan each quarter is totally appropriate (you will have plenty of time for long-term planning when you are a large public company that must implement these approaches as control systems!)

Wake Up to Your Current Situation
The four skeletal ingredients for execution are pretty obvious, perhaps too obvious. I can’t tell you how many companies and mangers think that these points are obvious, unnecessary or think that they are doing these things well, but actually are quite average at execution (roughly half the companies are actually below average!!). Every once in a while, however, I meet a senior manager or a team that has implemented these principals and the results are truly phenomenal.

When I was a young McKinsey & Company Consultant, I had an assignment working with a senior manager at a client that was extremely capable at execution. He had just given a similar framework to one of his junior staff members and the junior staff member said “any monkey could do this!” The senior manager’s response was “yes, any monkey could do this, but no monkey does do this!” It takes a capable leader to manage execution, even though the steps are very basic.

How do you determine where you stand with respect to execution right now? Start by taking a baseline audit of your current approach. The best approach that I have found is to ask a cross section of employees several questions:

  1. What are the short-term goals of our company? What are the measurements? Are they easy for you to measure? Are the measures objective?
  2. How does your group (or team or department) contribute to those goals? What are the measurements? Are they easy for you to measure? Are the measures objective?
  3. How do you contribute to your group, thereby contributing to those goals? What is the deliverable that you are currently working on? When is it due?
  4. How does your supervisor, team members and/or other groups review progress and assist you in achieving your goals? Do they know this? Do they have measurable goals against this? Are they easy to measure?
  5. What are the rewards for nailing your goals? What happens if you don’t nail your goals?
  6. Do you think that everyone in the company understands their goals and is working hard to achieve them?

If you are like most companies, the results will be awakening. You will probably find a complete lack of consistency in the answers, which is the key indicator that they ingredients described above are not in place (or if they are in place, they are not being executed against). If you are a high performing company with high performing teams and individuals, you will both see a consistency across answers and see a clear enthusiasm for the processes that have been established.

Execution is not rocket science. It is all about getting the right people, telling them what is expected in the short-term, reviewing progress, making adjustments, and making sure success is rewarded and the less successful processes and people are managed out of the organization.

The approach outlined here takes some level of management discipline. I find that a lot of people lack the discipline to either implement these items or to continuously executed against the items. You may want to make someone responsible for making sure that the processes are followed and/or sit in on conversations periodically and give friendly reminders to all of the managers responsible for execution.

I left out mention of interpersonal behavior as an item above. There are several very good books on the subject if you need them. In my experience, if you take the steps outlined above, then people will not have a lot of time for bad behavior and that some combination of 360 degree reviews and one-on-one feedback will help you both determine the issues and help you address the issues. Ultimately, there is some level of interpersonal behavior that is acceptable and you will need to separate the people that tend toward extreme unacceptable behavior, even if they have high performance.

Reference Books
There are a lot of details beyond my outline above that will help bring you from 80% to 100% in terms of execution. The first three books below are some of my favorite books long-term that I keep as references. The fourth is a quick read and has some good ideas as well. My strong advice is to focus your attention on the outlined points above, as all companies can move the needle quite a lot by executing against these points. If you have the time and inclination, pick up one or more of these books:

  1. The Breakthrough Strategy by Robert Schaffer is my all time favorite book on execution. Robert does a great job of distilling execution down into what you need to do and what you need to look out for. Summarized here.
  2. The Wisdom of Teams by Jon Katzenbach and Doug Smith is getting to be a classic on building high performing teams. I was lucky enough to contribute to the book when I was a McKinsey & Company consultant, working with the authors. Summarized here.
  3. Double Your Profits in 6 Months or Less by Bob Fifer. While this book is not directly about execution, Bob has some great ideas that are completely aligned with getting things done in the short-term.
  4. Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. This book also has some great ideas, although it is probably a bit too heavily weighted toward large companies (rather than emerging growth companies). PDF Summary here.

1 Comment »

  1. […] Execute Against Execution. All of the prior posts are about what the emerging growth company can do to create a strategic advantage. This post is about how to maximize the pace of your company toward the series of goals that you have set for your company. The higher your pace toward your goals, the faster your company will develop into a large profitable company with a defensible competitive advantage. […]

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