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19个DOC版PerformanceManagement:

EnhancingcutionThroughaCultureofDialogue




PeterisChiefcutiveOfficerforamedicalsupplymultinationalthatrecentlycraftedanewstrategytocountercompetitivethreats.Theplanstressedtheneedtocutcycletime,concentratesalesonhigher-marginproductsanddevelopnewmarkets.

Fourmonthsaftercirculatingtheplan,Peterdida“walkaround”toseehowthingsweregoing.Hewasappalled.EverywherePeterturnedpeople,departments—wholebusinessunits—simplydidn’t“getit.”

Firstsurprise:Engineering.Thegrouphadcutproductdesigntime30,meetingitsgoaltoincreasespeed-to-market.Good.ThenPeteraskedhowmanufacturingwouldbeaffected.Itturnedoutthenewdesignwouldtakemuchmoretimetomake.Totalcycletimeactuallyincreased.“Ourstrategicplanmessageisnotreallygettingthrough,”Peterthought.

Secondsurprise:Sales.Thenewstrategycalledforashift—emphasizehighmarginsalesratherthatpushingproductdownthepipelineasfastaspossible.ButjustabouteverysalespersonPeterspoketowasmaking

“Butwhataboutcompanygoals?”saidPeter.“Wecameupwithagoodplanandcommunicateditveryclearly.Butnowhereitisn’tbeingcarriedout.Why?”



Manyorganizationscreategoodstrategies,butonlythebestcutethemeffectively.FortunemagazineestimatesthatwhenCEOsfail,70ofthetimeit’sbecauseofbadcution.Weakcutionispervasiveinthebusinessworld,butthereasonsforitarelargelymisunderstood.WhyisitthatnooneinPeter’sorganizationwasactinginsyncwiththestrategy?Unlessweunderstandthereasons,wecan’thopetosolvetheproblem.

Imaginesomeonehittingatennisball.Whenthebrainsays“hittheball,”itdoesn’tautomaticallyhappen.Themessagetravelsthroughnervepathwaysdownthearmandcrossesgapsbetweenthenervecells.Thesegaps,or“synapses,”arepotentialbreaksintheconnection.Ifneurotransmittersdon’tcarrythemessageacrossthegap,themessagenevergetsthrough,oritgetsdistorted.Whenthathappens,eitherthearmdoesn’tmoveatall,oritmovesthewrongway.

Creatinga“cultureofdialogue”
Justlikeanervoussystem,organizationsalsohavegapsthatblockanddistortmessages.Thesecrettoeffectivestrategycutionliesincrossinghiechicalandfunctionalgapswithclear,consistentmessagesthatrelaythestrategythroughouttheorganization.Soundsimple?It’snot.Thereasonisthatthe“neurotransmitters”inorganizationsarehumanbeings—cutiveteammembers,seniormanagers,middlemanagersandsupervisors—whosejobitistomakesurethatpeople’sbehaviorisalignedwiththeoverallstrategy.Doingwhatittakestoachievealignmentisverydifficult.ItiswhatRamCharancalls,the“heavylifting”ofmanagement,andit’sthekeytocutingstrategy.

Aswe’llseelater,thereisanimportantdifferencebetweencompaniesthatsuccessfullyalignbehaviorwithstrategyandthosethatdonot.Companiesthateffectivelycutestrategycreatea“cultureofdialogue.”Acultureofdialogueencouragespervasivetwo-waycommunicationswhereindividualsandgroups1)question,challenge,interpretandultimatelyclarifystrategicobjectives;and2)engageinregularperformancedialoguetomonitorbehaviorandensureitisalignedwithstrategy.

Threekeystomanagingperformance
Acultureofdialoguedoesn’thappeninstantly,anymorethanafluidtennisstrokedoes.Ittakespractice,persistenceandhardwork.Sohowexactlycanleadersensurethatstrategymessagesgoallthewaydowntheline—thatthetennisballgetshitcorrectly?Thethreekeystomanagingperformanceeffectivelyare:

1.Achievingradicalclaritybydecodingstrategyatthetop.Manyorganizationsthinktheysendclearsignalsbutdon’t.Insomecases,managerssubordinatebroadstrategicgoalstooperationalgoalswithintheirsilos.That’swhathappenedwithPeter’stopteam.Elsewhere,topteammembersoftenhavetoomany“top”priorities—we’veseenasmanyas100inonecase—whichresultsinmixedsignalsandblurredfocus.Strategydecoderequireswinnowingprioritiesdowntoamanageablenumber—aslittleasfive.
2.Settingupsystemsandprocessestoensureclarity.Oncestrategyisclear,organizationsmustcreateprocessestoensurethattherightstrategymessagescascadedowntheorganization.Theseinclude:strategy-centeredbudgetandplanningsessions;staffandteammeetingstodiscussgoals;performancemanagementmeetings;andtalentreviewsessions.Dialoguedrivesalltheseprocesses.Eachrepresentsa“transmitteropportunity,”wherestrategicmessagesareconveyedandbehaviorisalignedwithgoals.

3.Aligninganddifferentiatingrewards.Leadersmustmakesurerewardsencouragebehaviorsconsistentwithstrategy,whichsoundseasybutisn’t.Differentiationisaboutmakingsurethatstarsgetsignificantlymorethanpoorperformers.Butalmosteverywheremanagersdistributerewardsmoreorlessevenly.Aswe’llsee,lackofeffectiveperformancedialogueisakeycontributortodysfunctionalrewardschemes.

Welistthesethreeitemsseparatelybuttheyare,ofcourse,interconnected.Systemsandprocessesdependonclarityfromthetop.Differentiationandalignmentofrewardsdependonmanagersusingperformancesystemseffectively.Dialogueisthegluethatholdsitalltogether.Butnotjustanydialoguewilldo.Itmustbedialoguewithpurpose,focusedonperformance.

Linktocompanyvaluation
Companiesthatmanageperformancewell—GeneralElectriccomestomind—havehighermarketvaluations.Why?Because,moreandmore,institutionalinvestorsviewstrategycutionasavitalfactorinfluencingstockprices.

Justafewyearsagoinstitutionalinvestorsreliedalmostexclusivelyonfinancialmeasuresforcompanyvaluations.Now35ofamarketvaluationisinfluencedbynon-financial,intangiblefactors,accordingtoastudybyErnst&Young.Thestudyshowedthat“cutionofcorporatestrategy”and“managementcredibility”rankednumberoneandnumbertwoinimportancetoinstitutionalinvestorsoutof22non-financialmeasures.JohnInch,amanagingdirectorandanalystatBearStearnsnotesthatinsomesectors,suchasdiversifiedindustrialcompanies,intangiblesaccountforevenmore—uptohalfacompany’svalue.“Youcantakeevenamundaneassetandinjectgoodmanagementandhavesomethingprettystrong,”saysInch.



1.AchieveRadicalClaritybydecodingstrategyatthetop
Thefirststepinsuccessfullycutingstrategyisachievingclarityonthetopteam,whichisfrequentlythesourceofgarbledsignals.

LackofClarityattheTop
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