Here are the ways a CEO can get sacked. . .Terrible strategy with good execution.
Think Krispy Kreme Doughnuts, which made terrific hi-carb donuts in the midst of a national obsession with lowering carbs. Think doggie sock puppets. Think the Ford Denali--a beautiful car featured in a humorous set of commercials during the recent NBA playoffs—but which just happens to get 12 MPG as gas escalates above $4 per gallon.
Terrible strategy with terrible execution.
Think Internet Bubble. Think the last 20 years at GM. Think the new Yahoo.
Good strategy with terrible execution.
This is the poster child for the business press. These are companies that have discovered a successful niche—or even a killer product—but then proceed to get wound around their own axles. These are the companies that stumble and get sold before their time. These are the companies that can break our hearts.
But, these are also the companies we actually stand a chance of fixing.
In the June 2008 issue of the Harvard Business Review, Gary L. Neilson, Karla L, Martin and Elizabeth Powers make a startling, data-driven (i.e.--31 companies, 26,000 people) discovery about these good strategy/bad execution companies.
When execution fails, the authors say, these companies often go straight to structural reorganization. You know the drill. The org chart appears and the boxes get shuffled. Decentralized is centralized. Centralized is decentralized. New product groups appear. Old market groups dissolve.
The problem is, according to the authors, that structural reorganization misses the two most powerful drivers of true, executional effectiveness:
Decision Rights.
Information Flow.
In fact, of the four broad groups of activities managers undertake to improve operational effectiveness, figuring out who can make decisions, and improving information flows are TWICE as powerful as structural reorganization and new motivational programs.
This is the kind of insight that you can put into use immediately:
What are the ten key decisions facing the company? Does the staff know who is empowered to make them?
What are the five critical information flows in the company? On a scale of one-to-ten, how would your team rate their quality?
Here are my three key takeaways from the article:
1. In efforts to improve performance, most organizations go right to structural measures because moving lines around the org chart seems the most obvious solution and the changes are visible and concrete. Such steps generally reap some short-term efficiencies but, because they treat the symptom and not the disease, leave companies in the same place they started.
2. The four building blocks of executional success are decision rights, information, structure and motivators. Actions that managers take having to do with decision rights and information are about twice as effective as structural changes and motivators.
3. The most powerful trait of an organization that executes effectively is that “Everyone has a good idea of the decisions and actions for which he or she is responsible.” The marvelous feature of this strength is that most managers are only too happy to let you know when it isn’t true. Following closely behind are:
Important information about the competitive environment gets to headquarters quickly.
Once made, decisions are rarely second-guessed.
Information flows freely across organization boundaries.
And, the fifth most powerful indicator of strong execution is that “Field and line employees usually have the information they need to understand the bottom-line impact of their day-today choices.”
See the mindmap (above) for the top 15 and their relative strengths.
Incidentally, there is one other common way for a CEO to get fired, and it is the most painful:
Good strategy with good execution.
This might involve launching a business in a recession, having an 800-lb. gorilla enter a market (whose attractiveness you’ve demonstrated by your success), or having a new technology appear from nowhere. Sometimes it involves an act of God.
Which means (to paraphrase Napoleon), whether a CEO creates good or bad strategy, or provides good or bad execution, more than anything, he or she needs luck.
You don’t see it on any resumes, but it sure would be nice to read, just once: “Faster than a speeding bullet. More powerful than a locomotive. Screwed a few things up. Got darn lucky.”
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