The Two Numbers on Every Executive’s Mind

Today’s blog will be brief. Today, we are looking straight at reality. We are considering the two numbers that summarize the plight of most leaders: 90% and 95%.

Bad and Not Getting Better

In 2005, famed Harvard researchers Robert Kaplan and David Norton published a groundbreaking article on strategy.

The opening salvo of their research was a sobering number: out of nearly 2,000 large corporations round the world, 90% of them failed to achieve their strategic targets. Worse, the vast majority of them failed to achieve profitable growth
– they did not grow enough to earn their cost of capital.

You may think that the state of business has improved since then. It has not. In 2013, McKinsey considered how companies generate economic profit. The landscape it revealed was as dire as when Kaplan and Norton published their paper. McKinsey found that 60% of companies in the “big middle” of the economic profit curve generated
very little profit: only $29 billion. Most of the profit was created by the 20% of companies in the top quintile: a whopping $677 billion, 70x more than the middle. The bottom 20%
of companies were destroying a staggering $411 billion of profit.

The Fastest Way to Destroy Value

Why does the vast majority of companies fail to meet their goals and grow? That is where the second number comes in. Kaplan and Norton found out that the single biggest factor to determine whether the strategy will be successful is obvious:
the entire comp any must be aware of the strategy.

In their own words, “If the employees who are closest to customers and who operate processes that create value are unaware of the strategy, they surely cannot help the organization implement it effectively.”

Their research revealed that 95% of a company’s employees were unaware of, or did not understand, its strategy.

Here too, the number has barely budged since their article. In fact, The Predictive Index’s
most recent CEO survey shows that in 2022 less than 1 in 2 companies have a business strategy to start with. The number has steadily eroded: it was 66% in 2020 and 76% in 2021, when the pandemic forced companies to be surgically focused on survival and adaptation strategies.

The absence of strategy in most companies
means that employees are left on their own devices when it comes to figuring out on which basis to make key decisions.

How Do You Become a Member of the Club?

… The elite club of companies that achieve their objectives and create more value than
they consume, that is.

The antidote to destroying value is simple. As Kaplan and Norton summarize with simplicity: “The goal is to make strategy everyone’s job.”

In small and medium-sized businesses, that means taking simple actions:

• Documenting the
  strategy, you are pursuing; if that strategy is in the head of the founder or the CEO, it is just a matter of writing it down and setting clearly stated objectives.

• Leadership more focused on empowering teams for creativity

• Flatter structure, more cross-functional to accelerate problem resolution in the
  face of new challenges

• Talent: more electrical engineers, battery experts, materials specialists

H-D rightly understood that execution and strategy must be in sync. In fact, they did not choose one strategy over the other: they intend to maximize the remaining potential of the traditional large bike market, while building market leadership in electric bikes; but
they identified the risk of pursuing two very different strategies with a single execution model.
What are you trying to do and how well are you doing it?
Not every company needs to spin off some of their operations to succeed. But every company CEO should be crystal clear about their goals and able to determine whether they are executing them well.
One Line-of-Sight client is a large family office and wealth management firm. Employees’ morale was
low, and the firm struggled to reach its goals for assets under management.
After running a Health Scan on their operations, they realized they were in fact pursuing
two very different segments with a single operating model: on one end, high net-worth individual requiring individual touch and a delivery model based on customer intimacy, and on the other end, mid-market clients who needed to be serviced at scale to be
profitable. The mix of high-service and phone-based support was inadequate for either segment, costing both sales and profit.
After a comprehensive review of their execution capabilities, they set up two delivery models in two divisions for their two segments: a customer-intimacy based model to
serve clients with very high investable income, and an operational excellence-based
model for mid-market. As a result, the client increased their retention in both
segments, and they doubled their assets under management despite the pandemic.
Where to start
If you feel that your execution capabilities and your strategy are increasingly at odds,
run a health scan to evaluate how clearly you have articulated your strategy (to yourself,
to your executive team, and to your employees), and how much your execution
capabilities are enabling, or preventing success. Are employees focusing on the right things, and are you helping them do so? It’s
ok to develop new goals when
circumstances demand it, but goals and execution should remain in lockstep.
If you want to evaluate how much execution tax you’re paying due to misalignment with your
objectives, give us a call. We can discuss how other companies have done it, and
how you can do it too.

The post The Line-of-Sight – Two Numbers appeared first on EmFluent.

  Having your cake and eating it: When do you need a
new structure to execute in the new normal?

If your company underwent drastic changes in its strategy or operating model during the
past 2 years, you are not alone. Back in 2020, garment companies started to produce
face masks, and appliance manufacturers churned out respirators. Not every CEO
made such dramatic shifts in their operations, but many of us needed to re-orient our goals and execution to survive and thrive.

In addition, some sectors have experienced fundamental shifts accelerated by the
pandemic and are most likely permanent. For example, mall operators have seen a
radical shift in consumer behavior relative to in-person shopping; car manufacturers are
facing a permanent transition to electric mobility.

The question is: if your strategy changed, should our organization change too? Do you need to execute differently? The answer is yes.

Different goals, different execution: the Harley-Davidson LiveWire story

Harley-Davidson is one of the most iconic brands in the world. Like all global brands, its
appeal is grounded in consumer perceptions about tradition and the permanence of its values.

Tradition can be an asset, but when it comes to the transition the motorcycle market is
undergoing, H-D was at risk of staying mired in producing increasingly outdated products in the middle of a fundamental shift to electric mobility.

H-D saw the opportunity and launched an electric motorcycle, the Livewire, which existed alongside their line-up for some time. But H-D realized it could not properly
execute its electric strategy while still focusing on its more traditional bikes. As a result, it announced in December 2021 that it would spin off LiveWire as an entire brand and
operations.

One goal, well executed

H-D’s story is not isolated. Ford Motor Company made a similar announcement for the
same reason: the execution capabilities to support a strategy based on innovation (in this case, transitioning to electric bikes) cannot durably co-exist with those required to enable a strategy based on efficiencies at scale.

While H-D has yet to reveal how LiveWire is set-up, we can expect that many execution aspects are different from their traditional, scale-based
operations:

• Strategic goals and metrics geared towards innovation & speed to market vs. production volume

• Leadership more focused on empowering teams for creativity

• Flatter structure, more cross-functional to accelerate problem resolution in the
  face of new challenges

• Talent: more electrical engineers, battery experts, materials specialists

H-D rightly understood that execution and strategy must be in sync. In fact, they did not choose one strategy over the other: they intend to maximize the remaining potential of the traditional large bike market, while building market leadership in electric bikes; but
they identified the risk of pursuing two very different strategies with a single execution model.

What are you trying to do and how well are you doing it?

Not every company needs to spin off some of their operations to succeed. But every company CEO should be crystal clear about their goals and able to determine whether they are executing them well.

One Line-of-Sight client is a large family office and wealth management firm. Employees’ morale was
low, and the firm struggled to reach its goals for assets under management.

After running a Health Scan on their operations, they realized they were in fact pursuing
two very different segments with a single operating model: on one end, high net-worth individual requiring individual touch and a delivery model based on customer intimacy, and on the other end, mid-market clients who needed to be serviced at scale to be
profitable. The mix of high-service and phone-based support was inadequate for either segment, costing both sales and profit.

After a comprehensive review of their execution capabilities, they set up two delivery models in two divisions for their two segments: a customer-intimacy based model to
serve clients with very high investable income, and an operational excellence-based
model for mid-market. As a result, the client increased their retention in both
segments, and they doubled their assets under management despite the pandemic.

Where to start

If you feel that your execution capabilities and your strategy are increasingly at odds,
run a health scan to evaluate how clearly you have articulated your strategy (to yourself,
to your executive team, and to your employees), and how much your execution
capabilities are enabling, or preventing success. Are employees focusing on the right things, and are you helping them do so? It’s
ok to develop new goals when
circumstances demand it, but goals and execution should remain in lockstep.

If you want to evaluate how much execution tax you’re paying due to misalignment with your
objectives, give us a call. We can discuss how other companies have done it, and
how you can do it too.

The post The Line-of-Sight – New Strategy appeared first on EmFluent.

  Culture and Strategy Are Two Sides of the Same Coin

If there is one positive consequence of the pandemic, it is how companies have become more thoughtful about their culture.

In the dark days of 2020, business owners and CEOs sought the right balance between empathy and expectation for performance, leading them to redefine their values and
culture. And of course, a tight job market encouraged companies to be more explicit about their culture because candidates now seek greater purpose.

The question is – how do you define (or redefine) company culture? Can it just be about posting a new set of value statements by the water cooler? Probably not, HBR stated in March 2022, “Despite its sudden elevation in corporate life, purpose remains a confusing
topic.”

Here is how to solve the confusion.

On paper, culture is simple

Defining culture is simple enough: The Predictive Index defines “Organizational culture
(as) your business core values, rewarded behaviors, and ultimately, performance
drivers.”

Any company can define a set of aspirational values; after all, who does not want to be “innovative,” “competitive,” or “customer
– minded”? But which one matters the most?

However, the key is not to determine great values and behaviors; it is to determine the right ones, those which will translate your business goals into the daily actions of your
employees, those that will inch you closer to your goal. They must eliminate any confusion among employees as to what they are supposed to be doing.

Your strategy feeds your culture

The only way to define the right culture for any organization is to start with strategy.

That may sound like a tall order when less than 50% of small and medium
-sized businesses in 2022 have an explicit strategy, according to The Predictive Index.

The good news is that many SMB owners and CEOs may not have their strategy documented as thoroughly as a Fortune 500 would, but they have their goals and how to attain them clearly spelled out in their minds; the trick is to write them down and to share them with employees.

It can be as simple as documenting which broad type of strategy they are pursuing: are they competing based on innovation? Based on operational effectiveness and low costs? Based on customer intimacy?

We often run strategy sessions with our clients. They are always exciting because they
result in clarity and simplicity of purpose that has often evaded leaders before. But the trick is for employees, not just leaders, to experience that clarity and simplicity and fully
understand the strategy.

Do your employees understand your strategy?

Many leaders, including in large organizations, believe that the job is done when the
strategy or the strategic plan has been defined. Quite the opposite: the job starts when the goals are set.

What matters the most is not that the strategy exists (this is a prerequisite), but that it is understood by employees. When it is, associates behave in ways that will get you closer to your goals, and they will all behave the same way, “rowing in the
same direction.”

A clear strategy reduces and eliminates the execution tax that otherwise stems from conflicting goals and behaviors: for example, the Product team may try to create innovative products, but the Procurement team may still focus on purchasing lowest-cost components. When a company experiences these conflicting goals, it undermines the new product quality which results in delayed rollout, lost sales, and internal strife.

You don’t know what you don’t know until you know it

You need data to
assess if employees understand the strategy. Randomly asking employees over lunch break does not do it.

In our firm, we use Line-of-Sight SM, a strategy execution platform that, like an X-ray, cuts
through appearances and establishes whether employees understand the company’s intent, and how confident they are that they really get it.

With that kind of data, the leadership can then determine whether more efforts are required to share and explain the strategy and perhaps address skepticism or simply misunderstanding. Remember, your strategy is effective only when employees start to
behave in ways that get you closer to the company’s objectives.

Where to start

Don’t take our word for it: in an article
published in early 2022, HBR bluntly states that
“a business’ culture can catalyze or undermine success”.

You need data to
assess if employees understand the strategy. Randomly asking employees over lunch break does not do it.

We hope you are now seeing how culture and strategy really are the same thing. A strong culture unites people around simple goals and helps everyone get the job done, which means meeting your strategic business and revenue goals.

If you want to be deliberate about your culture and align it tightly with your business
goals, give us a call. We can discuss how other companies have done it,
and how you can do it too.

The post The Line-of-Sight – Culture and Strategy appeared first on EmFluent.

  Your Strategy Will Help You Retain Employees if You Do This

You can boost your employees’ morale with a clear strategy. Clarifying your strategy
and communicating it to employees can help them focus on the future, get a new sense of purpose, and focus on what matters.

Who Needs a Strategy Anyway?

Business strategy has become a rare commodity lately. In their 2022 State of Talent Optimization report, the Predictive Index has found that only 46% of small to medium business CEOs have a strategy.

One wonders how any business can operate without any sense of where they are going. And that is the crux of the matter: they can, but at the cost of a massive tax on execution.

When It Comes to Strategy, Less is More

In the world of Fortune 500 companies, a business strategy is the result of months of
planning. In the SMB world, we think that a strategy is simply the clarification of the goals the company leaders seek to achieve.

A strategy does not need to be fancy or complicated. The simpler the better, because the only purpose of the strategy is to point people to what matters: it helps employees
make decisions that will get everyone closer to the goals.

In fact, most business owners and CEOs already have a strategy; this is the set of implicit assumptions and goals that guide each daily action. But that strategy does not really exist until it can be communicated to employees.

A
Piece of Paper Might Suffice

In our work, we often help CEOs and business owners clarify their
objectives and discuss the unspoken assumptions that support these objectives.

There is no official definition for what strategy is; we define it as the guiding principle
that directs decision-making towards desired outcomes. It may be as simple as defining
your goals for the year and how you will reach them.

You’d be surprised how re-energized they feel just from seeing on paper what they want
to achieve. It somehow feels like these goals are more achievable once we’ve put a
name to them. And this is exactly what happens.

What matters is to have words to describe the strategy because words force you to be specific and avoid ambiguity. And when words describe goals, these goals can be communicated to employees.

Strategy is Like Vitamins for Your Employees

The pandemic crisis has first and foremost been a mental health crisis. The pervasive
sentiment is of exhaustion, confusion, and anxiety. Frankly, we believe that the Great Resignation is really people’s attempt to seek relief from that funk.

As a CEO, you can use strategy to help your employees out of the gloom. How? This is incredibly simple: strategy gives employees a purpose, and it takes them out of the
present to focus on the future.

What’s Your Purpose?

Purpose is
the essence of life. As human beings, we need meaning and purpose – the
feeling that we matter and that we can make an impact. Purpose is what makes
someone want to get up every morning. Unfortunately, that rarely happens at work:
in a recent article, McKinsey reports that over 80% of employees declared it as important to have a purpose, but less than 50% report their company’s purpose actually having
impact.

As a leader, it is your job to give purpose to your employees. We are not talking Dalai Lama –
level meaning of life. We mean:

• Explaining what your goals for the year
• How your company competes (
  e.g.,
  based on cost, on customer intimacy, on
  innovation)
• Why customers buy from you

Back to
the Future

A simple strategy will also project employees into the future. While the present may not be fun, the future is full of promise. The future is where dreams get realized and where hope lives

When you make employees realize how they can each contribute to your goals, when you paint them
a future that looks better than the present, you give them an extra boost.
Not everyone rows in the same direction with renewed energy. And employees want to stay because you give them a reason to.

Your Strategy Only Exists if
Your Employees Understand
It

Documenting your goals is the first step. The second step is to make sure that everyone is aware and understands them.

This is where many leaders stumble: they think the hard work is to define the strategy, and that it will be smooth sailing from here. In reality, this is the opposite: the hard work is to communicate the strategy over and over again to employees to make sure they
understand it.

It is a case of perception vs. reality: the real execution of your strategy depends on how your employees perceive the strategy.

Therefore, your #1 job as a leader is to constantly speak about your goals, and make sure your
people “get it”.

You Can Measure How Well Employees Understand (and Execute) Your Strategy

As you may already know, we use Line-of-Sight to assist business owners and CEOs in
documenting their goals and ensuring their employees understand these goals.

Line-of-Sight uses rigorous surveys to accurately measure how employees perceive their company’s operations. One of several critical areas we measure is literally how
well employees have internalized the strategy: do they know what the strategy is? Do they know on which basis the company competes? Do they trust the leadership?

When we point out to leaders how much (or how little) their employees truly understand their goals, they have a chance to course-correct and re-explain what they want to
achieve.

Sometimes, it is as simple as scheduling townhall meetings with employees to go over
the strategy again, and regularly walking the floors to reinforce it by “catching
employees in the act of doing it right”.

Don’t Pay the Execution Tax, and Retain Your Employee

The single, most effective way to execute your strategy well is to make sure everyone
understands it. When that happens, you minimize the “execution tax” that otherwise comes from employees behaving in ways that are counter-productive
– because they don’t know better.

Our interventions are simple: we use Line-of-Sight to measure how well employees know the company’s
goals; if needed, we help leaders clarify and document their strategy; and we help them make sure it is known, understood, and embraced by
employees.

If it has been a long time since you documented and discussed your goals with all your
employees, let’s talk.

The post The Line-of-Sight – Strategy appeared first on EmFluent.

  The secret of execution is people. Ask these 1,700 executives.

If you are reading this, chances are that you are, or you will be, adapting your business to be more digital. In her groundbreaking study led by Harvard and Salesforce during the pandemic, famed innovation expert Linda Hill asked 1,700 executives: 97% said that their companies would not remain competitive unless they embarked on a digital transformation.

Digital transformation? It’s for you and me

You don’t need to be Amazon or Microsoft to go digital. Companies go digital because customers demand it, period. Executives from the survey said “customers want frictionless, end-to-end experiences with companies. Digital natives in particular expect customer-company interactions, even in business-to-business industries, to be as fast and intuitive as tapping out a text or playing a video game. Not only must a company offer high-quality products or services, but the way they deliver them to the customer matters much more today than in the past.”

People, people, people

What is the secret sauce to succeed in making your business more digital? It is people. This is a dramatic change from even a few years ago, when the key to success was your tech stack and technical skills. Today, it is all about how your employees will execute your digital adaptation.

Linda Hill defines 7 guiding principles for successful execution, and all of them are about people (read the survey summary shared by Harvard here):

• Recognize the emotional side of the change
• Align your employees around a customer-centric narrative
• Upskill your talent
• Address the resistance to data-based decisions
• Better connect leadership with the rest of the organization
• Create more connections outside your company
• Develop ethical practices and compliance

Hill is right: your employees make or break your execution

Frankly, we love it when someone like Linda Hill stresses the importance of people in execution. As you know we use an approach called Line-of-Sight to help our clients improve their execution. And that approach is all about people.

The Line-of-Sight principle is pretty simple: your employees’ perception is reality. If your employees don’t understand your strategy, your strategy is useless. If your employees think they are incentivized to cut costs rather than deliver great service, your costs will be low and your customer experience will be bad. If your structure encourages silos, employees won’t collaborate. This is true whether companies are trying to be more digital or just want to be more profitable.

Why don’t you ask your employees how to execute better? They know the issues

Line-of-Sight uses rigorous surveys to accurately measure how employees perceive how their company operates. Believe us, this is the most accurate picture of your company’s performance you will ever have.

And in our experience, CEOs have a rosier picture than their employees (this is a well-known bias, which even has a name: the “leadership knowledge ceiling”). This is because CEOs can’t be as plugged in the details as their employees. So they ignore the issues that get in the way of employees.

The hard truth is, unless you use a tool like Line-of-Sight, you don’t really know what is happening in your organization and where you’re paying an unnecessary tax on execution.

Don’t pay the execution tax

Hill says it best: “Digital Transformation is more about people than technology”. And this is true for execution in general. Once you have an measurable, accurate picture of your operations, which Line-of-Sight provides, you can make decisions to reduce and eliminate your execution tax. You can make your employees focus on what matters (for example on the customer experience, as Linda Hill points out).

If you are making your company more digital, or if you’d like to improve your profitability by executing better, give us a call. We can discuss how other companies have done it, and how you can do it too [add partner contact information].

The post The Line-of-Sight – The secret of execution is people. appeared first on EmFluent.

  Six leadership paradoxes for the post-pandemic era

EmFluent helps companies execute better using Line-of-Sight to measure and manage five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline – the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.

Line-of-Sight led a survey of more than 100 CEOs to measure how they evaluated the execution capabilities of their organization. This survey took place in Q1 2021, when most businesses were transitioning to the post-pandemic era.

Out of the five KSEs, Leadership is the one that showed the widest variation depending on companies’ growth rates. CEOs of companies growing moderately (+5% +50%) or very fast (higher than 50%) rated their executive team’s leadership as the second lowest KSE after human capital (74 points and 62 points, respectively). Conversely, CEOs leading organizations that contracted or did not grow rated their leadership significantly higher (79 points and 77 points respectively) – in the case of declining companies, giving themselves the highest rating across all five KSEs.

It is naturally challenging to try and establish causality between a company growth rate and how its executives rate their own leadership. But the humility displayed by CEOs of growing companies hints at what Paul Leinwand, the co-author of a recent HBR article, calls “the paradoxes of leadership in the post-pandemic era”.

He shows that leaders of companies which have successfully adapted to the pandemic “seek to be proficient across a wide set of characteristics rather than relying solely on their areas of strength”.

The characteristics that leaders the authors interviewed considered most important in this new era align well with the six paradoxes of leadership described in Blair Sheppard’s book, Ten Years to Midnight. For leaders, these “personas” embody the tension that comes from mastering different, and sometimes conflicting perspectives and skills:

 1.     Strategic Executor

The pandemic may increasingly be in the rearview mirror, but the world continues to be highly uncertain. Leaders must be visionaries able to spot opportunities for value creation, and able to direct their organizations to seize these opportunities.

But as the recent Line-of-Sight survey highlights, strategy is nothing without execution. So leaders must also appreciate the operational complexity and execution excellence required to make their new strategy a success.

2.     Humble Hero

The crises that unfolded in 2020 demonstrated the value of decisiveness – many leaders had to step up and make bold and high-stake decisions in a very uncertain environment.

Yet, leaders also had to step down from their position of authority and be more vulnerable and humble; employees were craving a more humane approach to management, and leaders themselves understood the importance of creating psychological safety in their organizations.

3.     Tech-Savvy Humanist

Technology is ubiquitous in business and the pandemic accelerated digitization. It is so embedded in the front office and the back office that leaders must be or become conversant in tech – if only to make decisions based on the recommendations of their CTO.

At the same time, technology’s role is to serve people and leaders must keep in mind the human dimension of tech decisions. It is especially important for roles that are impacted by AI and robotics and will undergo transformation with significant impact on employee development.

4.     Traditioned Innovator

Balancing core, traditional operations with innovation is as old a tension as business itself. Leaders grapple with resource allocation, organizational considerations, and risk management as the post-pandemic era continues to be unpredictable. On one end, continued uncertainty calls for prudent management and stability in the products and services companies offer; yet, the speed at which demand has shifted in the pandemic creates many new areas of growth. More than ever, clarity of purpose and a well-defined strategy are key to inform decisions and determine what new opportunities to pursue. More than ever, leaders need a dual agenda that combines good stewardship of the core business and an embrace of experimentation, but this agenda must still be directed by a single, unifying vision.

5.     High-Integrity Politician

Close collaboration is more essential than ever – with suppliers, with employees, with local, state and federal stakeholders, and with a broad range of social stakeholders.

Leaders certainly need to take a transactional approach to many of these partnerships, rigorously assessing how value gets distributed, how advantages are gained, and how multiple parties are made to win together – while serving their own shareholders.

At the same time, the very complexity of business and social collaboration has raised the bar on integrity. Trust is at a premium, not least with consumers who have become very attentive to how their data is being used. Being a shrewd but trustworthy and reliable partner is now an imperative for leaders to be good stewards of their organizations and their communities.

6.     Globally Minded Localist

The pandemic reminded us of the importance of physical distance:  disrupted supply chains attracted attention to the vulnerability of global manufacturing footprints; at the same time, consumers discovered or rediscovered the pleasure of running errands locally and supporting smaller, regional businesses. The physicality of operations is again at the forefront and requires active management – to acknowledge local tastes, to build resilience in global supply chains, and to balance scale with service.

Line-of-Sight survey data supports the emergence of these new paradoxes: by being clear-eyed about their own leadership performance, the CEOs of growing companies, i.e. those who have successfully adapted to the disrupted landscape of the pandemic, acknowledge that building strong leadership capabilities is a balancing act, a continuous learning process that strives for excellence but cannot, and should not, ever quite reach it.

How well is your business executing? To find out, please reach out to us and we will initiate an assessment of your execution capabilities.

The post Leadership – Six leadership paradoxes for the post-pandemic era appeared first on EmFluent.

   The Importance of Activities and Structure

EmFluent helps companies execute better using Line-of-Sight to measure and manage five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline – the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.

Line-of-Sight led a survey of more than 100 CEOs to measure how they evaluated the execution capabilities of their organization. This survey took place in Q1 2021, when most businesses were transitioning to the post-pandemic era.

Among the five KSEs, the one with the broadest variation between CEOs is “activities and structure”, defined as the ability for an organization to focus employees on the tasks that matter the most to execute the strategy. CEOs who rate their execution capabilities the highest in this area lead organizations experiencing moderate growth (between +5 and +50%); on average they rate their capabilities on activities and structure at 78 points; compare that to CEOs of organizations that contracted (by 5% or more), at 59 points, and those of high-growth companies (growing 50% or more) at 63 points.

Clearly, there are best practices when it comes to activities and structure, and there is obvious correlation between growth and a deliberately designed structure.

These practices come into focus when we also consider the type of strategy that companies pursue: CEOs pursuing operational excellence strategies focused on efficiency have the highest rating for activities and structure, at 80 points, because efficiencies and scale require tightly controlling well-defined processes. On the other hand, CEOs pursuing customer intimacy strategies have lower ratings – 71% on average – because meeting customer expectations and needs by essence requires some flexibility and freedom from tightly scripted procedures.

How to balance control with freedom in organizational structure, then?

An HBR article, “Structure That’s Not Stifling”, hints at an answer. The author, Ranjay Gulati, highlights that “leaders often cling to the notion that freedom and control are zero-sum, often oscillating between the extremes”. However, he reviewed organizations across a range of industries and found that guidelines are not the death of freedom if they’re well designed and well implemented. They feed autonomy by giving people a clear and positive sense of where the organization is going, and how they can contribute to it.

Gulati called this model “freedom within a framework”, framing the organization’s purpose, priorities, and principles in a set of guidelines. Leaders who have embraced “freedom within a framework” describe how they use it to think about employee decision-making (the same approach applies to business units or individual brands in relation to the central management structure). As Gulati states, “Freedom” can mean many things, but in this case, it means trusting employees to think and act independently on behalf of the organization”.

Research on organizational behavior shows that most people want some form of choice and voice in what they do at work, and that this can spark greater commitment and improve performance. Freedom also means more possibilities to express themselves: compared to the expansive social media platforms for self-expression, the workplace can feel stifling. “The freedom of the outside world is banging at the corporate door, demanding to come inside” as Gulati says. Yet most leaders are still afraid to open it because they continue to view freedom and frameworks as antagonists in an intense tug-of-war.

Gulati used the example of Netflix leaders wanting to give their people “oxygen to make mistakes.” “They assume that people do their best work when they don’t have to ask for approval at every turn. The company describes its culture as a blend of “freedom and responsibility.” That means employees are at liberty to use their own judgment within the strategic priorities articulated in “foundational” documents. According to Gulati, employees are also encouraged to communicate openly and to argue their points of view.

Employees are also responsible for this model: it is their job to read, understand, and debate the ideas in the foundational documents that determine their span of control.

To balance guidelines and freedom, a company needs to:

• Articulate its purpose—a shared goal that sums up the “why” of the organization
• Establish priorities—behavioral rules that reflect the organization’s goals and help employees determine what matters
• Develop a simple set of principles to help employees make decisions in their day-to-day work.

Depending on their strategy, CEOs can determine how much autonomy the principles should give to employees; principles can and should be adjusted regularly to reflect the reality of the operational environment. This is why the CEOs surveyed by the Line-of-Sight rate their capabilities in activities and structure on such a wide scale: the “freedom within a framework” approach is a living model that provides the flexibility companies need to continue to adapt to constantly changing circumstances in the post-pandemic.

How well is your business executing? To find out, please reach out and we will initiate an assessment of your execution capabilities.

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Make sure to answer these five questions when establishing your metrics

EmFluent helps companies execute better using Line-of-Sight to measure and manage five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline – the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.

Line-of-Sight recently surveyed more than 150 CEOs to evaluate their execution performance. When CEOs self-assessed the execution capabilities of their organization, balanced metrics received the second lowest score, with 69 points out of 100  (the lowest score was on human capital, with 67 points).

This highlights the importance and difficulty to put in place a good set of metrics to manage any business. You can only manage what you can measure, and what you measure drives people’s behavior.  In turn, employee behavior is what determines what gets done and in what priority across the organization.

Therefore, selecting metrics is of paramount importance. Here are the five questions that you need to ask and answer when implementing a new set of metrics or evaluating an existing set:

1. Do we have a mix of leading and lagging indicators?

A leading indicator is a predictive measurement. For example, the percentage of people wearing hard hats on a building site is a leading safety indicator. A lagging indicator is an output measurement. For example, the number of accidents on a building site is a lagging safety indicator. 

Leading indicators are generally more difficult to determine than lagging indicators. They require understanding the chain of causation between the metric and the event or value you measure. Leading indicators can also leverage past data to make forecasts. An example of leading indicators used in retail is the 12/12 and 3/12 rate-of-change KPIs that are used to evaluate sales trends. A balanced dashboard typically includes both leading and lagging indicators. For example, employee satisfaction, especially in service industries, is a leading indicator of customer satisfaction. Customer satisfaction in turn can be measured with lagging indicators such as NPS scores.

2. What will we do with the information?

Because an activity is easy to measure does not make it worth measuring. Is what you are measuring representative of what you really want to know? What decision will you make based on the measurement? How different will that decision be if the metric value is low vs. high? If the information is not absolutely critical, leave it aside. Less is more.

3. Is the measurement process itself impacting the data?

When the items to be measured are influenced by the process of measurement, measurement becomes less reliable. This is because people react to the measurement in ways that can distort the results. This is often the case of employee engagement surveys. On the other hand, if the metric relates to a manufacturing process or an objective outcome, it is likely to be reliable.

4. What are the costs of getting the data?

Information is not free, and its costs may not be readily apparent to those who want more of it. Collecting, processing, and analyzing data takes time, and a large part of this expense lies in the opportunity costs of the time put into developing the metrics, then managing the data collection process and its analysis.

5. Do we have the expertise to analyze the data?

Metrics are more likely to be meaningful when they are developed and analyzed with the right level of understanding of what the metric measures and what it means. This means asking those with the knowledge that comes from direct experience to provide suggestions about how to develop appropriate performance metrics, and to interpret them. If a metric requires excessive interpretation, if its meaning is ambiguous, or if proper analysis requires the participation of unique individuals whose availability is not guaranteed, this may not be the right metric.

Balanced metrics are an essential component of execution excellence, for organizations of any size. CEOs of smaller organizations may think that the size of their company allows them to manage the business without a comprehensive dashboard. But in reality, CEOs of companies of less than 150 employees rate their performance of metrics the lowest (65 points vs. 69 on average). Interestingly, CEOs of larger organizations (more than 500 employees) do barely better at 72 points.

Midsize companies between 150 and 500 employees appear to have the most effective metrics with 80 points – highlighting the balancing act that is the development of a solid, reliable set of metrics to manage their operations.

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   The Importance of Leadership

EmFluent helps companies execute better using Line-of-Sight to measure and manage five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline – the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.

In our always-on world, burnout has long been a reality. But in 2020 burnout and chronic stress became rampant as a third of U.S. employees started “living at work” and face threats to their health, economic insecurity, and concerns for their loved ones.

Although the concept of occupational burnout originated in the 1970s, the medical community has long argued about how to define it. In 2019 the World Health Organization finally included burnout in its International Classification of Diseases, describing it as “a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed.”

This language acknowledged that burnout is more than just an employee problem; it is an organizational problem that requires an organizational solution.

With support from Harvard Business Review, Jennifer Moss gathered feedback from more than 1,500 respondents in 46 countries, in various sectors, roles, and seniority levels, in the fall of 2020. Sixty-seven percent of respondents worked at or above a supervisor level.

What did she learn, in a nutshell?

• 89% of respondents said their work life was getting worse.
• 85% said their well-being had declined.
• 56% said their job demands had increased.
• 62% of the people who were struggling to manage their workloads had experienced burnout “often” or “extremely often” in the previous three months.
• 57% of employees felt that the pandemic had a “large effect on” or “completely dominated” their work.
• 25% felt unable to maintain a strong connection with family, 39% with colleagues, and 50% with friends.
• Only 21% rated their well-being as “good,” and a mere 2% rated it as “excellent.”

For leaders, the key learning is simple: they made things worse.

They often tried to compensate for physical distance by intensifying the scrutiny of employees’ work, or they expected people to forge ahead without acknowledging the stress that their employees (or themselves) were experiencing.

As we ease into the post-pandemic, the crisis offers lessons and best practices to not go back to the old ways, and save our employees and our companies from the personal and business cost of burnout:

Managers must learn to adjust workloads

Overwork was the most-cited reason for burnout. Research from Gallup has shown that the risk of occupational burnout increases significantly when an employee’s workweek averages more than 50 hours and rises even more substantially at 60 hours. The average workday is now 48 minutes longer compared to pre-pandemic data.

Leaders must give people more control and flexibility

The pandemic brought employees a host of new challenges. Childcare options were limited, parents were grappling with homeschooling children while working from home and dealing with increased household chores resulting from suddenly having everyone under the same roof 24/7. In the post-pandemic, employees who work fully or partially remotely will continue to face some of these challenges; and those who embrace virtual work for this flexibility will value having more control anyway.

Leaders should limit meetings and screen time

We talk about Zoom meeting burnout as if it is a new thing, but we have had meeting fatigue forever. The amount of time employees spend in meetings has increased by 13%. According to Steven Rogelberg of UNC Charlotte, who wrote The Surprising Science of Meetings, pre-Covid-19 studies showed that about 55 million meetings a day were held in the United States alone and that U.S. organizations wasted $37 billion annually because most meetings were unproductive.

Leaders must learn to recognize the extent of people’s struggles.

Leaders must create psychological safety in their organizations, so that employees feel allowed and supported to talk about their mental health at work. This means leaders themselves must lead the way and be role models for the behaviors they want to encourage. This is a challenge for many leaders, who believe they must show toughness to be respected. In fact, the opposite will happen – respect will come from showing up as an authentic leader.

Leaders must remind employees of their strategy and purpose

Business strategy is supposed to be what unites employees around a shared purpose. As companies pivot again to post-pandemic strategies, now is the time to revisit and communicate broadly about the strategy: not only will it clarify the value proposition of the company, it will also create an anchor point and a sense of purpose for employees, and a way to connect again with their peers after a year when distance and remote work frayed social networks.

If there was an area where we don’t want to go back to the “old”, it is employee stress. Leaders can take advantage of the relative fresh start of the post-pandemic to create the right organizational environment for employees to thrive and for their organizations to avoid the cost of burnout.

Our upcoming blogs will mine Line-of-Sight^SM execution data to provide actionable advice for leaders seeking to maximize their organization’s execution capabilities.

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   Less is More: How to select strategic initiatives that create value.

EmFluent helps companies execute better using Line-of-Sight to measure and manage five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline – the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.

Line-of-Sight led a survey of more than 100 CEOs to measure how they evaluated the execution capabilities of their organization. This survey took place in Q1 2021, when most businesses were transitioning to a post-pandemic world.

In the post-pandemic, companies are restarting projects that got paused or side-tracked during the COVID crisis. But as employees are adjusting to being back in the office and consumer demand remains unpredictable, leaders should avoid the trap of doing too much, too soon.

In a recent article titled “Eliminate Strategic Overload”, HBR makes the case that less is more when it comes to strategy and related initiatives: companies that achieve enduring financial success create substantial value for their customers, their employees, and their suppliers. This post summarizes the HBR article.

Therefore, a strategic initiative should be “value-based” – worthwhile only if it does one of the following:

• It creates value for customers by raising their willingness to pay (WTP)

If companies find ways to innovate or to improve existing products, people will be willing to pay more. For example, Gucci increases customers’ WTP by creating products that confer social status. WTP is the most a customer would ever be willing to pay. Think of it as the customer’s walk-away point.

Too often, managers focus on top-line growth rather than on increasing willingness to pay. A growth-focused manager asks, “What will help me sell more?” A person concerned with WTP wants to make her customers clap and cheer. A value-focused company convinces its customers in every interaction that it has their best interests at heart.

• It creates value for employees by making work more appealing
  

Companies can attract talent even if they do not offer industry-leading compensation, if the work they offer to employees is attractive. Offering better jobs not only creates value, but it also lowers the minimum compensation that you have to offer to attract talent to your company, or what is commonly known as an employee’s willingness-to-sell (WTS) wage.

Value-focused businesses think about the needs of their employees (or the factors that drive WTS). The article takes the example of the Gap, where one of retail workers’ biggest problems was the lack of predictable and personalized schedules. It standardized work shifts and used an app that allowed workers to trade shifts freely. During a 10-month test period, labor productivity went up 6.8% and sales rose nearly $3 million in participating stores.

• It creates value for suppliers by reducing their operating cost

Like employees, suppliers expect a minimum level of compensation for their product. A company creates value for its suppliers by helping them raise their productivity. As suppliers’ costs go down, the lowest price they would be willing to accept for their goods—what is called their willingness-to-sell (WTS) price—falls. This is an approach well-known in strategic sourcing, but one that is rarely used to evaluate whether a new strategic initiative is worth pursuing.

“The essence of strategy is choosing what not to do”, as Michael Porter so simply stated. To put it in practice, CEOs can use the Value-Based Strategy model and only move forward only with projects that create value for customers, employees, or suppliers.

Upcoming blogs will mine Line-of-Sight^SM execution data to provide actionable advice for leaders seeking to maximize their organization’s execution capabilities.

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