Willie’s Blog Posts

Great Decisions: An Art of Sacrifice

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Before you can decide what you will do, you have to decide what you won’t.

Albert Camus famously said that our lives are the sum of the choices we make. The same holds true for organizations. Executives and their teams are charged with making momentous decisions that will shape the destiny of their organizations and impact, in some cases, thousands or even millions of people.

Effective decision-making is, however, fraught with difficulties. The world is constantly changing and the future is uncertain. We will never have perfect information, and we are prone to all manner of biases that can trip us up. But one crucial requirement of decisiveness is frequently overlooked: deciding what not to do.

The Latin root of the word decide is caedere, meaning to “cut down” or “kill.” Yet we tend to balk at this act of sacrifice — and this failing carries a heavy cost.

A decision is a choice between alternatives in service of a desired outcome. The reality of limited resources makes this a zero-sum game: every additional thing we do subtracts attention and energy from everything else we do. Choosing a series of actions without any subtraction is just “piling it on,” which, eventually, will stifle an organization, blurring its focus and sapping its resources.

A choice is not a choice until we decide what we will give up. We must subtract first, then multiply.

Learning from nature

Nature can be our best teacher. Successful adaptation in the natural world occurs through favorable variations that confer a survival advantage on organisms within their niches.

In this battle for survival the common red clover has devised a remarkable strategy. Its flower has a unique feature — a long, thin funnel leading to the nectar at its base. Only bees, which have very long tongues, can reach the sweet nectar. Other insects are shut out. It’s a strategy based on what this plant has “decided” not to do.

The beauty of this choice is that bees fly farther than other insects, stopping at more flowers and thus increasing the chances of successful pollination. In effect, the red clover has formed an exclusive alliance with bees that ensures that its pollen is distributed more widely than other plants, giving it a crucial competitive advantage.

This strategy is not without risk of course, no decision is. What if another plant produces a sweeter-tasting nectar and bees “switch brands”? What if the bees themselves are outmaneuvered and become extinct? Yet for the red clover this trade-off has captured a significant advantage that no other plant has been able to usurp.

Deciding what not to do

Just as in nature, human decisions are about creating favorable variations that confer competitive advantage.

Some years ago a friend of mine, Commander Noel Evans, retired from the British Royal Navy and bought a fruit farm in the Elgin Valley, a lush region known for its orchards, near Cape Town in South Africa.

It was planting time, but having spent his whole life at sea, Evans knew nothing about farming. So, he drove up and down the valley and asked his new neighbors for their advice on what he should plant: plums or peaches?  The majority agreed: “There has been a glut of peaches this year. You should plant plums.”

Evans assessed his three alternatives. He could plant plums as recommended by his neighbors; a mixture of plums and peaches to hedge his bet; or peaches only. His decided on the last.

With his neighbors all planting plums, Evans sought to corner what was sure to be an undersupplied market. Sure enough, when the trees matured, Evans was one of the few with a full crop of peaches. By deciding not to plant plums, he became one of the most successful farmers in the valley. His success was driven not by expertise in farming, but by skill in decision-making.

Deciding what not to do takes courage, particularly in business where it often means turning away from the apparent safety of the herd, and Evans had it in spades.

Steve Jobs provides another telling example. Nearly universally heralded for turning Apple around and setting it on the road to becoming the most valuable company in the world, Jobs has been hailed by commentators for his creativity, his aesthetic sensibilities, and his keen understanding of the customer. All no doubt played a role, but Walter Isaacson, in his wonderful biography of Jobs, stresses one strength above all others: Jobs’ ability to focus on very few things and exclude the rest.

Jobs would typically charge 15 teams with exploring new opportunities. Three months later each team would eagerly report its recommendations. Jobs would huddle briefly with his top team and deliver his verdict: “We will do these three things. The other twelve are off the table.” No back burners, no side shows; everyone’s energy would be devoted exclusively to those three things. Even today, Apple has a leaner portfolio than its competitors. It has steadfastly avoided the deadly trap of “all things to all people.”

The importance of priorities

An organization without clear priorities is like a ship without a rudder. But defining those priorities is not as simple as it sounds.

First we must define the outcome we seek, otherwise priorities have no meaning.

The crucial outcome in a competitive world is your winning proposition, the unique benefits you will offer your customers that give them a compelling reason to choose you. It is a statement that clarifies how your organization will capture competitive advantage in the marketplace. For Amazon, for example, the winning proposition for its online retail business is, “We make it easy for people to buy things by offering a wide range of products at great prices with fast delivery.”

Your priorities then define the crucial steps necessary to achieve that winning proposition.

Amazon has succeeded brilliantly by focusing the entire organization on its winning proposition and lining their priorities up behind it. Paramount among these priorities is an obsession with making the shopping experience easier and more enjoyable, even at the expense of short-term profits or the share price. In the words of Amazon CEO, Jeff Bezos, “Determine what your customers want and work backwards. If customers don’t want something, it’s gone, even if that means breaking down a once-powerful department.”

When it comes to setting priorities, it’s essential to remember the Pareto principle, more commonly known as the 80/20 rule. The rule tells us that there is an imbalance between inputs and outputs, that the majority of inputs have little effect while a small minority (the “vital few”) make a huge difference. Identifying and leveraging the vital few is essential for success.

That raises the question, how many priorities should there be? The common answer is between three and five. Research by psychologist Nelson Cowan suggests that the right number is four (a finding that appeals to reason given that four is the only number between three and five!), but the key is this: if you can’t remember them, you are in trouble.

The vital need for simplicity

The principle of decision-making as sacrifice serves a greater purpose — that of simplicity, for simplicity demands the ability to streamline and subtract. Albert Einstein was renowned for his ability to simplify complex ideas. He admonished, “Any intelligent fool can make things more complex. It takes a touch of genius — and a lot of courage — to move in the opposite direction.”

Complexity paralyzes organizations. Simplicity empowers them. A crucial role of leaders is to create simplicity in a world of increasing complexity. If we cannot do that we cannot succeed.

Marco Pierre White, a British chef who, at the age of 33, became the youngest person ever to receive three Michelin stars, ran a string of successful restaurants under this credo:

Complexity causes confusion. Confusion creates inconsistency. Inconsistency creates failure.

These same rules apply to all organizations, large and small.

Posted by Willie Pietersen at 12:03 PM | 0 Comments

Why Strategy Is Everyone’s Job

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Strategy is often thought of as the exclusive preserve of top management, but organizational alignment is impossible without everyone’s participation.

“The purpose of an organization is to get ordinary people to do extraordinary things,” management guru Peter Drucker once wrote.

But that’s only part of the story. For these “extraordinary things” to enhance the organization’s competitive effectiveness they must directly support the organization’s strategic goals. If a strategy exists only at the top of an organization, it will have little effect.  To produce unity of action, strategy must be translated to and acted on at every level within the organization. No one is exempt.

An apt metaphor is the teamwork that propels a rowing eight. Any rower who falls out of rhythm or reduces the team’s pulling power will impede the progress of the boat. Everyone must, quite literally, pull their weight. There is simply no room for passengers.

Yet most companies fail to achieve this level of strategic alignment. A survey by Right Management Consultants found that two-thirds of employees do not know or understand their company’s strategy, and only one-third felt fully engaged with their jobs and their company.

I suggest there is a connection between these outcomes. It is hard to imagine employees feeling engaged in companies that have no defined sense of purpose they can relate to. The cost of this engagement deficit is heavy. A 2013 Gallup survey found that companies in the top quartile for employee engagement achieved 10 percent higher customer ratings and 22 percent greater profitability.

This challenge goes to the heart of what it takes to be a leader. We cannot think of strategy and leadership as separate domains. They are essential parts of each other. Every failure of strategy is a failure of leadership – either to set the right priorities or to mobilize the hearts and minds of employees. It is strategy and leadership working hand in hand that is the key to success.

For a strategy to be translated to every unit in an organization, there needs to be a shared understanding of the process by which this will be achieved. The graphic below describes a method I have found to be successful in numerous companies I have worked with.

                                                            

Here is the logic: Strategy is about harnessing insight to make choices on where to compete and how to win the competition for value creation in an organization’s chosen markets. At the corporate level, the primary choices on those questions must be made. Then within each organizational unit, these primary choices need to be translated into derived choices in a process of systematic alignment.

Within each organizational unit the first order of business is to develop a clear line of sight to the corporation’s strategic goals, and then to use this as the springboard and inspiration for this process of translation.  In military parlance an operating unit must first understand the “commander’s intent” and then set priorities and commit resources accordingly.

Executives in staff functions sometimes ask why they need to have a strategy since they don’t generate revenue, and are therefore simply cost centers. My response is to counsel them not to think of themselves as cost centers but as value centers. With this change of mindset, their mission becomes clear: to generate greater value than the costs they incur. If they fail to do this, they will simply be reducing their company’s profits.

I often hear managers complain that the top executives have not clarified the organization’s strategic goals. But we need to accept that leaders are not perfect, and do not always present this kind of clarity on a plate. Life is messy. The answer is not just to sit back and complain, or simply take shots in the dark. That is victimhood, not leadership.  Effective managers take on the responsibility of finding clarity through dialogue with their leaders; they are able to lead both up and down. They know they owe this to their teams.

Organizations create their future through the strategies they pursue. In a dynamic world, this invariably involves change and uncertainty. As employees seek clarity of purpose, there are always three questions in their minds. At times of change, the need for clear answers is intensified:

1) What are we aiming to achieve, and why should I care?

2) Where does my department fit in, and what is expected of me?

3) How will we measure success, and what’s in it for me?

The task of strategic leadership at every level is to ensure that these questions are answered honestly and clearly, and that everyone has the chance to contribute meaningfully to the end result.  As Henry Kissinger observed, “No strategy, no matter how ingenious, has any chance of succeeding if it is born in the minds of a few and carried in the hearts of none.”

In a seminar I ran for a major corporation one of the participants asked the CEO how he saw his role as the head of such a big enterprise. He walked up to a flip chart and drew a gearbox. Then he explained: “I see my responsibility as controlling the large wheel in a gearbox. The role of a gearbox is to transmit power. Every time I turn that large wheel just one notch, all the smaller wheels will spin progressively faster. Those smaller wheels are you and your teams. My most important job is to turn the big wheel on just the right issues so that all the energies of the company are driving the few things that matter most to our success.” He paused for a moment, and went on to make the clinching point: “All of you also have your hands on a large wheel, and you owe it to your teams to turn that wheel on just the right issues – those that line up with our corporate priorities.”

Whenever the challenge of strategic alignment comes up in that company, the executives remind themselves of “the parable of the gearbox.”

All too often top leaders believe that their key task is to “communicate” the strategy to the organization in a one-way process. But just telling people what to do produces compliance at best and resentment at worst. It is a fact of life that people will support what they help to build. As the German philosopher Friedrich Nietzsche wrote, “People will do almost any what if you give them a good why.”

True commitment comes from the dedication to a cause greater than ourselves combined with the knowledge that we can make a difference that matters. All the motivational research points to one fundamental truth. Success resides in the gap between compliance and commitment.

Willie Pietersen

Posted by Willie Pietersen at 3:47 PM | 0 Comments
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