Execution

■■ The Discipline of Getting Things Done

In this issue: by Larry Bossidy and Ram Charan

■ Focus... A summary of the original text.

on the most important job
of any business leader —
execution, which is the gap n recent years, companies no longer measured over
between a company’s goals
and its ability to get results.
I have embraced big business
ideas like revolution, reinven-
years. A company can win or
lose serious market share
■ Improve... tion, breakthrough thinking, before it even realizes what
your company’s performance audacious goals, learning has hit it.
by linking the three core organizations, and the like.
processes of execution: peo- While all of these ideas can Execution is now tested sev-
ple, strategy, and operations. make a huge impact on any eral times a year. Securities
business, they're pointless analysts look to see whether
■ Develop...
the seven essential behav- unless you translate them a company is showing
iors that are shared by into concrete steps for action. progress toward meeting its
virtually all effective, quarterly goals. If they think
execution-driven leaders. Without execution, the it isn’t, their downgrades can
breakthrough thinking wipe out billions of dollars in
■ Select...
the right people for your
breaks down. Learning adds market capitalization. The
business by hiring candi- no value. People don't meet reason for this is simple:
dates who have the four key their stretch goals. And the Most often today, the differ-
characteristics that identify revolution stops dead in its ence between a company and
them as top performers. tracks. its competitor is the ability
to execute.
■ Create...
a powerful strategy by Execution is the missing link
addressing nine questions between aspirations and The absence of execution is
that will help you evaluate results. Because it must be the single biggest obstacle to
your most crucial chal- part of the company's strate- success and the cause of
lenges and increase your gy and its goals, it is the most of the disappointments
chances of success. most important job of any that are mistakenly attrib-
business leader. uted to other causes. When
■■ a company executes well,
In the past, businesses got people are not brought to
Volume 11, No. 8 (2 sections). Section 1, August 2002 away with poor execution by their knees by changes in
© 2002 Audio-Tech Business Book Summaries 11-15.
No part of this publication may be used or reproduced
pleading for patience. But the business environment.
in any manner whatsoever without written permission. the business environment is
To order additional copies of this summary, reference always tough, and success is Execution is not just
Catalog #8021.
something that does, or CEO’s strategy was wrong. the three core processes: the
doesn’t, get done. Execution But the strategy by itself is people process, the strategy
is a specific set of behaviors usually not the cause. process, and the operations
and techniques that compa- Strategies most often fail process. Every business and
nies need to master in order because they aren’t executed company uses these process-
to have a competitive advan- well. es in one form or the other.
tage. It is a discipline of its But more often than not, they
own. And in big companies To understand execution, you stand apart from one another
and small ones, it is critical need to keep three key points like silos. People perform
to success. in mind. them by rote and as quickly
as possible, so they can get
To prepare you for what's The first point is that execu- back to their perceived work.
ahead, here is a brief tion is a discipline, and This is a formula for failure.
overview of this program: it is integral to strategy.
Don’t confuse execution with These three core processes
We'll start by explaining the tactics. Execution is a sys- are where the things that
discipline of execution, and tematic process of rigorously matter about execution need
why it is so important today. discussing hows and whats, to be decided. Furthermore,
questioning, tenaciously fol- they are tightly linked with
Next, we'll discuss the reality lowing through, and ensuring one another, and should not
that execution doesn't just accountability. be compartmentalized among
happen. We'll describe the staffs. Instead, the leader of
most important building It includes several key the business and his or her
blocks: the leader's personal activities, including: leadership team should be
priorities, the social software deeply engaged in all three.
of culture change, and the • Making assumptions
crucial job of selecting and about the business The second point is that exe-
appraising people. environment. cution is the major job of
the business leader. An
Finally, we'll focus on the • Assessing the organiza- organization can execute
three core processes of exe- tion’s capabilities. only if the leader’s heart and
cution: people, strategy, and soul are immersed in the
operations. • Linking strategy to company.
operations and the peo-
■■ ple who are going to Leading is more than think-
implement the strategy. ing big and inspiring people
THE DISCIPLINE OF with a vision. The leader
EXECUTION • Synchronizing those must be in charge of getting
people and their various things done by running the
In the year 2000 alone, disciplines. three core processes —
40 CEOs of the top 200 com- picking other leaders, setting
panies on Fortune’s 500 list • Linking rewards to the strategic direction, and
were removed from their outcomes. conducting operations.
posts. When 20 percent of Leaders cannot delegate
the most powerful business It also includes mechanisms these actions, regardless of
leaders in America lose their for changing assumptions as the size of the business.
jobs, something is clearly the environment changes
wrong. and upgrading the company’s The third point is that execu-
capabilities to meet the tion must be a core element
What is the problem? When challenges of an ambitious of a company’s culture. It
companies fail to deliver on strategy. isn't a program you graft
their promises, the most fre- onto your business.
quent explanation is that the The heart of execution lies in Everyone must understand
2 AUDIO-TECH
and practice the discipline of have seven essential behav- grasp. Why just a few?
execution. It has to be iors in common. Let’s discuss
embedded in the reward each of those behaviors. • First, anybody who
systems and in the norms thinks through the logic
of behavior that everyone The first leadership behavior of a business will see
practices. is to know your people and that focusing on three or
your business. Leaders have four priorities will pro-
Leaders who execute look for to live their businesses. In duce the best results
gaps between the desired companies that don’t execute, from the resources at
and actual outcome in every- the leaders are usually out of hand.
thing, from profit margins to touch with the day-to-day
the selection of people for realities. They’re getting lots • Second, people need a
promotion. Then they move of information delivered to small number of clear
to close the gaps and raise them, but it’s filtered. They priorities to execute well.
the bar still higher across the aren’t engaged with the
whole organization. business, so they don’t know Along with having clear
their organizations compre- goals, you should strive for
The discipline of execution hensively, and their people simplicity in general. One
doesn’t work unless people don’t really know them. thing you’ll notice about
are schooled in it and prac- leaders who execute is that
tice it constantly. It doesn’t Being present allows you, as they speak simply and direct-
work if only a few people in a leader, to connect personally ly. They talk plainly and
the system practice it. with your people, and person- forthrightly about what’s on
Execution has to be part of al connections help build their minds. They know how
an organization’s culture, your intuitive feel for the to simplify things so that
driving the behavior of all business as well as for the others can understand them,
leaders at all levels. people running the business. evaluate them, and act on
You’d be hard-pressed to them.
■■ name a great leader, in busi-
ness or any other field, who The fourth leadership behav-
BUILDING BLOCK #1: THE didn’t have these personal ior is to follow through. The
LEADER’S SEVEN ESSENTIAL connections. failure to follow through is
BEHAVIORS widespread in business, and
The second leadership behav- a major cause of poor execu-
A moment ago, we said that ior is to insist on realism. tion. How can you avoid this
there are three core process- Realism is the heart of inertia? In many cases, a
es essential to execution: the execution, but many organi- simple three-point plan will
people process, the strategy zations are full of people who do.
process, and the operations are trying to avoid or shade
process. But before we can reality. Why? Because stark 1. Don’t just hope or
talk about those core process- reality can make life uncom- assume that people will
es, we need to discuss the fortable. How do you make buy into an idea.
three building blocks that realism a priority? You start Instead, dig for their rea-
those core processes rest on. by being realistic yourself. sons for resisting it, and
Those building blocks are Then you make sure realism address those concerns.
leadership, establishing a is the goal of all dialogues in
framework for cultural the organization. 2. Create a follow-through
change, and getting the right mechanism that ensures
people in the right jobs. The third leadership behav- that everyone will do
ior is to set clear goals and what he or she is sup-
First, we’ll talk about lead- priorities. Leaders who exe- posed to in order to
ership. Virtually all effective, cute focus on a very few clear execute an idea. Often, a
execution-driven leaders priorities that everyone can monthly meeting will be
BUSINESS BOOK SUMMARIES 3
 sufficient, provided This is how you expand the confidence to encourage and
that the CEO and other capabilities of everyone else accept challenges in group
high-ranking executives in your organization, individ- settings. It enables you to
participate. ually and collectively. It’s deal with your own short-
how you will get results comings, be firm with people
3. As the CEO, make it today and leave a legacy that who aren’t performing, and
clear that you are not you can take pride in when to handle the ambiguity
going to forget about the you move on. inherent in a fast-moving,
initiative at hand, and complex organization.
that everyone involved Good leaders regard every
should expect frequent encounter as an opportunity As everyone knows, the best
follow-through actions. to coach. The most effective leader is often not the most
way to coach is to observe a brilliant person in the com-
The fifth leadership behavior person in action and then pro- pany, or the one who knows
is to reward the doers. If vide specific useful feedback. the most about the business.
you want people to produce The feedback should point Emotional fortitude is what
specific results, reward out examples of behavior and gives the person the confi-
them accordingly. Many performance that are good or dence to be a leader who
corporations do such a poor that need to be changed. delivers results.
job of linking rewards to per-
formance that there’s little The seventh and final leader- ■■
correlation at all. They don’t ship behavior is to know
distinguish between those yourself. Everyone pays BUILDING BLOCK #2: THE
who achieve results and lip service to the idea that FRAMEWORK FOR CULTURAL
those who don’t, either in leading a business requires CHANGE
base pay or in bonuses or strength of character. In exe-
stock options. cution, it’s absolutely critical. The second building block of
To know yourself, you must execution is to create the
When companies don’t develop emotional fortitude: framework for cultural
execute, the chances are an awareness of your person- change.
that they don’t measure, al strengths and weaknesses,
don’t reward, and don’t especially in dealing with Most efforts at cultural
promote people who know other people, and the ability change fail because they are
how to get things done. A to build on the strengths and not linked to improving the
good leader ensures that the correct the weaknesses. outcomes of the business. To
organization makes these change a company's culture,
distinctions and that they Without emotional fortitude, you need a set of social oper-
become a way of life. If you you can’t be honest with ating mechanisms that will
want your company to have a yourself, deal honestly with change the beliefs and
culture of execution, make it business realities, or give peo- behaviors of people in ways
clear to everybody that ple forthright assessments. that are directly linked to
rewards and respect are And if you can’t do these bottom-line results.
based on performance. things, you can’t execute.
You don’t need a lot of
The sixth leadership behavior It takes emotional fortitude complex theory or employee
is to expand people’s capabili- to be open to whatever infor- surveys to use this frame-
ties through coaching. As a mation you need, whether it’s work. Instead, you need to
leader, you’ve acquired a lot what you would like to hear change people’s behavior so
of knowledge and experience or not. Emotional fortitude that they produce results.
along the way. One of the gives you the courage to First, you tell people clearly
most important parts of your accept points of view that are what results you’re seeking.
job is passing it on to the the opposite of yours and Next, you discuss how to get
next generation of leaders. deal with conflict, and the those results. Then you
4 AUDIO-TECH
reward people for producing presentations, or any other with open minds. They’re
the results. forum where dialogue takes not trapped by preconcep-
place. Two elements make tions or armed with a private
If people come up short, you them social operating mecha- agenda. They want to hear
provide more coaching, with- nisms, and not just meetings: new information and choose
draw rewards, give them the best alternatives, so they
other jobs, or let them go. • First they’re integrative, listen to all sides of the
When you do these things, cutting across the firm's debate and make their own
you create a culture of getting traditional boundaries. contributions.
things done. They create new informa-
tion flows and working Finally, robust dialogue ends
There are four keys to creat- relationships. They let with closure. At the end of
ing the type of behavior that people who normally the meeting, people agree
supports an execution-driven don’t have much contact about what each person has
culture. Let’s look at each of with one another to do and when. They’ve com-
these keys. exchange views, share mitted to it in an open forum,
information and ideas, and they are accountable for
The first key is to link and learn to understand the outcomes.
rewards to performance. their company as a whole.
This is a vital tool for chang- How do you get people to
ing behavior. A business’s • Second, social operating practice robust dialogue when
culture defines what gets mechanisms are where they’re used to the games and
appreciated and rewarded. the beliefs and behaviors evasions of classical corporate
It tells people what’s valued, of the social software are dialogue? It starts at the top,
and in the interest of trying practiced consistently with the dialogues of the
to make their own careers and relentlessly. They leader. If he or she is practic-
more successful, that’s where spread the leaders’ ing robust dialogue, others
they will concentrate. If a beliefs, behaviors, and will take the cue.
company rewards and pro- mode of dialogue
motes people for execution, throughout the organiza- The fourth and final key
its culture will change. tion. Other leaders learn to creating the type of
to bring these beliefs and behavior that supports an
The second key is to develop behaviors to their own execution-driven culture is to
the social software of execu- lower-level meetings, and understand that leaders get
tion. Like a computer, a to use them in giving the behavior they exhibit and
corporation has both hard- coaching and feedback. tolerate.
ware and software. The
hardware of the organization The third key to creating an To build the culture, the
includes such things as execution-driven culture is to leader has to create and rein-
strategy and structure. The recognize the importance of force the social software with
social software includes the robust dialogue. Robust the desired behaviors and
values, beliefs, and norms of dialogue makes an organiza- robust dialogue. He has to
behavior. Just as computer tion effective in gathering drill them relentlessly in the
hardware is useless without information, understanding social operating mechanisms.
software, the hardware of a the information, and reshap- For example, some leaders
business cannot perform ing it to produce decisions. use regular conference calls
without the software of It fosters creativity. And as an operating mechanism
beliefs and behaviors. ultimately, it creates more to drive change in the culture
competitive advantage and by forcing new realism in
The social software of execu- shareholder value. the dialogues and decision
tion relies on social operating making of the company's
mechanisms. These are Robust dialogue starts when top leaders. The calls
formal or informal meetings, people go into discussions introduce accountability and
BUSINESS BOOK SUMMARIES 5
follow-through. The leader's scenarios reflect one absolute- high water. Too often the lat-
own behavior reinforces the ly fundamental shortcoming: ter are given short shrift.
beliefs and behaviors his The leaders who make these But if you want to build a
people need to learn. errors aren’t personally com- company that has excellent
mitted to the people process discipline of execution, you
But the leader can't be every- and deeply engaged in it. have to select the doer
where. Once he builds the instead of the talker.
culture and models the right To avoid such problems,
behavior, all he can do is to Bossidy believes that leaders The kind of people you are
make sure that he has the need to commit as much as looking for in leadership roles
right people in the right jobs 40 percent of their time and should possess four key char-
to execute. We'll discuss that emotional energy to selecting, acteristics. Let’s examine
building block next. appraising, and developing each of these characteristics:
people. This immense
■■ personal commitment is • First, leaders know how
time-consuming and fraught to energize people. This
BUILDING BLOCK #3: THE with emotional wear and tear is not the same thing as
RIGHT PEOPLE IN THE RIGHT in giving feedback, conduct- inspiring people through
JOBS ing dialogues, and exposing rhetoric. Too many lead-
your judgment to others. ers think they can create
We’ve just talked about lead- energy by giving pep
ership and cultural change, But the foundation of a great talks. The leaders whose
two of the three building company is the way it devel- visions come true are
blocks of execution. Now we ops people. If you spend the those who build and
turn our attention to the same amount of time and sustain their people’s
third and final building block. energy developing people as momentum. They bring
This is the most important you do on budgeting, strategic things down to earth,
job that leaders do: selecting planning, and financial moni- focusing on short-term
and evaluating people. toring, the payoff will come in accomplishments on the
sustainable competitive way to bigger goals.
If you look at any business advantage.
that’s consistently successful, • Second, leaders are deci-
you’ll find that its leaders All of this raises the ques- sive on tough issues.
focus intensely and relent- tion: What kind of people Decisiveness is the ability
lessly on people selection. are you looking for? In many to make difficult decisions
Common sense tells us the ways, the answer to this swiftly and well, and to
right people have to be in the question is deceptively sim- act on them. Most corpo-
right jobs. Yet, so often they ple. CEOs and other senior rations are filled with
aren’t. What accounts for executives are too often people who dance around
the mismatches you see seduced by the educational decisions without ever
every day? The leaders may and intellectual qualities of making them. Some
not know enough about the the candidates they inter- leaders simply do not
people they’re appointing. view. They evaluate how have the emotional forti-
They may pick people with articulate and visionary the tude to confront the tough
whom they’re comfortable, candidate is. They don’t ask ones. When they don’t,
rather than others who have the most important question: everybody in the business
better skills for the job. How good is this person at knows they are wavering,
getting things done? procrastinating, and
Or they may not have the avoiding reality.
courage to discriminate There’s very little correlation
between strong and weak between those who talk a • Third, leaders get things
performers and take the nec- good game, and those who done through others.
essary actions. All of these get things done come hell or This is a fundamental
6 AUDIO-TECH
 leadership skill. Yet, poor • How did she set priorities? the roles played by the people
leaders smother their assigned to her?
people, blocking their • Did she include other
initiative and creativity. people in the decisions Bossidy personally checks
They’re the microman- she made? the references of candidates
agers — insecure leaders he interviews, instead of del-
who can’t trust others to • Can she justifiably take egating the job to Human
get it right because they credit for good financial Resources. He believes that
don’t know how to moni- results, or was she just you can't spend too much
tor their performance. moving from position to time on hiring and develop-
Other leaders err in the position, one step ahead ing the right people for your
opposite direction and of calamity? company.
abandon their people,
tossing the ball entirely There are far too many exam- The questions he asks are
into their court. Then, ples of people who have different from most calls to
when things don’t get chalked up an admirable references because he focuses
done as expected, they’re record by the numbers at on the candidate's energy,
frustrated. Both types the expense of people and accomplishments, and will-
reduce the capabilities of then left behind a weakened ingness to put in extra hours
their organizations. organization. They jump to get things done. He
ship at the right time, and asks the same type of ques-
• Fourth, leaders follow their successors have to clean tions that he asks during
through. Follow-through up the mess. Even when interviews, including:
is the cornerstone of interviewers check refer-
execution, and every ences, they often fail to get • How does she set
leader who’s good at exe- the true picture of a person's priorities?
cuting follows through performance and skills.
religiously. Following • What qualities is she
through ensures that When Bossidy interviews a known for?
people are doing the candidate for an executive
things they committed position, the first traits he • Does she include people
to, and according to the looks for are energy and in decision making?
agreed timetable. enthusiasm for execution.
Does the candidate get excit- • What is her work ethic
You won't be able to identify ed by doing things, as and energy level?
people who have these char- opposed to talking about
acteristics by conducting a them? Has she brought that Those types of questions get
traditional job interview. energy to everything she's at the person's real potential.
Such interviews are not use- done, starting with school?
ful for spotting the qualities Bossidy doesn't care if she There's nothing sophisticated
of leaders who execute. Too went to Princeton or Podunk about the process of getting
often, they focus on the State; he wants to know the right people in the right
chronology of an individual's what she accomplished there. jobs. It's a matter of being
career and the assignments systematic and consistent in
the person has had. Bossidy also considers what interviewing and checking
Interviewers rarely dig into the candidate wants to talk references.
the person's record to see about. Does she talk about
how she actually performed the thrill of getting things ■■
in her previous jobs. done, or does she keep wan-
dering back to strategy and THE PEOPLE PROCESS
In contrast, Bossidy asks philosophy? Does she detail
questions like these: the obstacles that she had to The three building blocks
overcome? Does she explain we've just discussed are
BUSINESS BOOK SUMMARIES 7
essential for execution. If consists of four components.
FOUR TOOLS TO DEVELOP THE
you have leaders with the LEADERSHIP PIPELINE
right behavior, a culture that The first component is link-
rewards execution, and a ing people to strategy and There are four highly pow-
system for placing the right operations. To a large extent, erful tools that managers
people in the right jobs, the the success of the people have at their disposal to
foundation is in place for process lies in its linkage develop their company’s
leadership pipeline:
a company that executes to strategic milestones over
effectively. the near, medium, and • The Leadership
long terms, as well as the Assessment Summary.
But what do you do once this operating plan targets. The
foundation is in place? In the business leaders create this • The Continuous
final part of this program, linkage by putting the right Improvement Summary.
we’ll explore the three core people in place to execute the
• The Succession Depth
processes of execution: the business strategy. Whether Analysis.
people process, the strategy they're expanding overseas
process, and the operations or launching a new product • The Retention
process. line in the domestic market, Analysis.
leaders must ask, "Who are
We’ll begin with the people the people who are going to First, let’s discuss the
process, which is the most execute the strategy, and can Leadership Assessment
Summary. This summary,
important. After all, it’s the they do it?" which can take the format
company's people who make of a simple four-quadrant
judgments about how mar- Meeting medium- and long- graph, compares both per-
kets are changing, create term milestones greatly formance and behavior for
strategies based on those depends on having a pipeline a group of individuals.
judgments, and translate the of promising and promotable Furthermore, the
Leadership Assessment
strategies into operational leaders. That’s where the Summary gives an
realities. To put it simply, if second component of the overview of those in the
you don’t get the people people process comes in: It’s group who have high
process right, you will never essential for every execution- potential and those who
fulfill the potential of your driven company to develop are promotable.
business. the leadership pipeline.
Those who have both qual-
ities are placed in the
A robust people process Assess your leaders constant- upper right-hand quadrant.
achieves three goals: ly and decide what each of Similarly, it shows who
your leaders needs to do to surpasses the standards
• First, it evaluates indi- become ready to take on in terms of performance
viduals accurately and in larger responsibilities. The but needs improvement in
depth. dialogue resulting from this behavior, as well as those
assessment will reveal the who are below standard in
both areas.
• Second, it provides a adequacy of the leadership
framework for identifying pipeline in terms of quality For an example of a
and developing leadership and quantity. Nothing is Leadership Assessment
talent. more important to an Summary, please refer to
organization’s competitive the chart on page 9.
• Third, it fills the leader- advantage.
The Leadership
ship pipeline that is
Assessment Summary is
the basis of a strong To learn about four useful often based on the results
succession plan. tools that managers have at of the other tools we're
their disposal to develop the about to discuss: the
In order to accomplish these leadership pipeline, please Continuous Improvement
goals, a people process refer to the following section.
8 AUDIO-TECH
LEADERSHIP ASSESSMENT SUMMARY

Summary, the Succession CONTINUOUS IMPROVEMENT SUMMARY

Depth Analysis, and the
Retention Risk Analysis.

The second key manage-

ment tool for developing
the leadership pipeline
is the Continuous Improve-
ment Summary. The
Continuous Improvement
Summary looks much like
a traditional performance
appraisal. Where it differs
is that it not only captures
the key performance
highlights, but also
includes clear, specific,
and useful information on
development needs.

Thus, the Continuous

Improvement Summary
helps the individual
become a better per-
former. In this way, it
helps form the foundation
of succession.

For a sample of the

Continuous Improvement
Summary, please refer to
the accompanying chart.

The third and fourth

key management tools
for developing the leader-
ship pipeline are the
BUSINESS BOOK SUMMARIES 9
 Even the best people process that he hasn't performed it
Succession Depth
Analysis and Retention
doesn’t always get the right well.
Risk Analysis. Analyzing people in the right jobs, and
succession depth and it can’t turn everybody into a Tell the person that although
retention risk is the good performer. That’s why you have to make a change,
essence of building a it is necessary to include the you want to do it in a way
leadership pipeline of third component of the peo- that allows him to preserve
high-potential people. ple process, dealing with his dignity. You could offer
Taken together, they put nonperformers. a year's salary, the opportu-
meaning into the slogan nity to resign rather than
"people are our most Sometimes managers have being terminated, and an
important asset" and are been promoted beyond their honest but fair appraisal
the foundation for a capabilities and need to be when a new employer calls
robust discussion of indi- put in lesser jobs. Others for a reference.
vidual needs as well as just have to be moved out.
lateral and upward job
moves. They also focus The test of a people process The fourth and final compo-
on what needs to be done is how well it distinguishes nent of the people process is
to retain critical people between these two types of linking HR to business
and replace those who people, and how well leaders results. Human Resources is
leave unexpectedly, are handle the painful actions more important than ever,
promoted, or who fail. they have to take. but its role has to change
radically. HR has to be
The Retention Risk
Analysis looks at a per- No matter how successful a integrated into the business
son’s marketability, her person has been so far, every process. It also has to be
potential for mobility, and promotion is a new decision. linked to strategy and
the risk a business faces You can’t take it for granted operations. In this new role,
if she leaves. Meanwhile, that he’s going to succeed in HR becomes recruitment-
the Succession Depth the next job. oriented and a far more pow-
Analysis determines
whether the company has
erful force for advancing the
enough high-potential peo- Nonperforming people are organization than it was in
ple to fill key positions. It essentially those who aren’t its typical staff function.
also looks at whether meeting their established
there are high-potential goals. They’re unable, on a The right people are in the
people in the wrong jobs regular basis, to accomplish right jobs when information
and whether key people what they are responsible about individuals is collected
will be lost if a job is not
unblocked for them. for. Or maybe they failed to constantly and leaders know
exercise the leadership the people, how they work
Using these four manage- expected of them in a situa- together, and whether they
ment tools to identify tion. There are many ways deliver results. It’s the
high-potential and pro- in which people can fail. consistency of practice that
motable people avoids develops expertise in
two dangers. One is Whatever the reason, some- appraising and choosing the
organizational inertia, the
practice of keeping peo- times you have to let people right people. The people
ple in the same jobs for go. But you have to do it as process begins with one-
too long. The other is constructively as you can. on-one assessments, but
moving people up too For example, Bossidy sug- when developed and prac-
quickly, as many of the gests that instead of telling ticed as a total process, it
dot-coms did. the person he's fired because becomes incredibly effective
he didn't get good results, as an execution tool.
■■ you could share the blame.
Admit that you might not ■■
have explained the job as
well as you should have, and
10 AUDIO-TECH
THE STRATEGY PROCESS are the assumptions on Question one: What is the
which the plan hinges? Do assessment of the external
We now turn our attention you have the organizational environment?
to the strategy process, the capacity to execute the plan?
second of the three core Can you adapt the plan Every business operates with-
processes of execution. to changes in the business in a shifting political, social,
environment? and macroeconomic context,
The basic goal of any strate- and the strategic plan must
gy is simple enough: to win To have realism in your explicitly state the external
the customer’s preference strategy, you have to link it assumptions that manage-
and create a sustainable to your people process. Do ment is making. The leaders
competitive advantage, while you have the right people in of a business unit have to
leaving sufficient money on place to execute the strategy? scrutinize its environment
the table for shareholders. It If not, how are you going to carefully and understand it
defines a business’s direction get them? well. They should examine
and positions it to move in everything from economic
that direction. Why, then, do Finally, you’ve got to link and demographic trends and
so many strategies fail? your strategic plan’s specifics regulatory shifts to new tech-
to your operating plan, so nologies, alliances between
Few people understand that that the multiple parts of the competitors, the drivers of
a good strategic planning organization are aligned to increasing or decreasing
process also requires the get you where you want to go. demand for its products, and
utmost attention to the hows so forth.
of executing the strategy. Its The substance of any strate-
substance and detail must gy is summed up by the Question two: How well do
come from the minds of the half-dozen or fewer key con- you understand the existing
people who are closest to the cepts and actions that define customers and markets?
action and who understand it. Pinpointing these key
their markets, their resources, concepts forces leaders to Perhaps not as well as you
and their strengths and be clear as they debate and think you do. People tend to
weaknesses. discuss the strategy. It helps look at their businesses from
them judge whether the the inside out. That is, they
A contemporary strategic strategy is good or bad, and get so focused on making and
plan must be an action plan why. It also provides a basis selling their products that
that business leaders can for exploring alternatives if they lose awareness of the
rely on to reach their busi- needed. needs and buying behaviors
ness objectives. In creating of their customers. The issue
it, you have to ask whether, A strategy itself should not here is to spend time under-
and how, your organization be complex. Every strategy standing the specific people
can do the things that are ultimately boils down to a who make the purchasing
needed to achieve its goals. few simple elements. decisions and their buying
Developing such a plan Furthermore, to be effective, behavior.
starts with identifying and a strategy has to be con-
defining the critical issues structed and owned by those Question three: What is the
behind the strategy. who will execute it. They best way to grow the business
know the business environ- profitably, and what are the
For example, how is your ment and the organization’s obstacles to growth?
business positioned in the capabilities because they live
context of its competitive with them. Answering this question
environment, including its requires asking a host of
market opportunities and A strong strategic plan must others:
threats, and its strengths address nine key questions.
and weaknesses? How good • Does your business need
BUSINESS BOOK SUMMARIES 11
 to develop new products? Sometimes businesses miss that doesn’t deal with the
the emergence of new com- near-term issues of costs, pro-
• Does it need to take petitors. For example, while ductivity, and people makes
existing ones into new Staples, OfficeMax, and getting from here to there
channels and to new Office Depot were competing unacceptably risky, and often
customers? with each other, they failed impossible.
to see that Wal-Mart was
• Does it need to acquire penetrating the market for Question eight: What are
other businesses? discount office supplies. All the critical issues facing the
three have since been losing business?
• How are its costs com- market share.
pared with those of its Every business has half a
competitors? Question five: Can the dozen or so critical issues —
business execute the strategy? the ones that can keep it from
One tool that’s useful in reaching its goals. Addressing
defining growth opportuni- If you’re doing your job as a these critical issues in the
ties is market segment leader, you can’t help but strategic plan helps focus the
mapping. The tool is simple have an idea of your capabili- preparation and dialogue
enough, and any business ties. But don’t stop there. when it comes time to review
can be segmented. Many Listen to your customers and the strategy. Many strategies
consumer goods companies your suppliers. Get all your fall apart because the right
use it to great advantage. leaders to do the same, and critical issues aren’t raised.
ask them to report what
For example, a simple map they’ve heard. Question nine: How will the
of A.T. Cross's segments of business make money on a
the luxury pen market iden- Question six: What are the sustainable basis?
tifies three different types of important milestones for
customers: executing the plan? Every strategy must lay out
clearly the specifics of the
• The first is the customer Milestones bring reality to a anatomy of the business, how
who wants to buy such a strategic plan. If the business it will make money now and
pen for himself. doesn’t meet the milestones, in the future. That means
leaders have to reconsider understanding the following
• The second is the person whether they’ve got the right foundations, the mix of which
who buys a pen as a gift strategy after all. A good is unique for every business:
for another individual. strategic plan is adaptable. the drivers of cash, margin,
Periodic reviews of the plan velocity, revenue growth, mar-
• The third is the corpora- can help you understand ket share, and competitive
tion that buys thousands what’s happening and what advantage.
of pens with its logo on turns in the road are going to
them and gives them as be necessary. By now, it should be evident
gifts. that a strategic plan contains
Question seven: Are the short ideas that are specific and
For each market segment, term and long term balanced? clear. It is not a numbers
the product is basically the exercise. A good plan
same, but the strategy is dif- Balancing the short run with requires relatively few num-
ferent because the company the long run is a critical part bers, and the ones you need
has to deal with different of a strategic plan. Most are those that add to the
competitors, channels, and plans don’t address what a power of the ideas in the
pricing. company has to do between strategic plan.
the time the plan is drawn up
Question four: Who is the and the time it is supposed to The nine questions are also
competition? yield peak results. A plan quite important. Of course,
12 AUDIO-TECH
the importance of each ques-
involved and an assess- people processes
tion will vary from situation ment of their potential for becomes critical. Without
to situation, and from year to promotion. And you’ll the right people in place,
year. So will the answers. have had opportunities to the organization is unlike-
Yet, a plan prepared accord- coach people. ly to execute the strategy
ing to the guidelines and successfully.
questions outlined here pro- In the end, the discussion
vides the foundation for a must answer four key The third question is: Is
questions: the plan scattered or
robust dialogue linking the sharply focused? As busi-
strategy to the people process • Is the strategy plausi- nesses pursue growth by
and to the operations process. ble and realistic? expanding their offerings,
they often end up trying to
■■ • Is it internally consis- provide more goods and
tent? services than they can
handle comfortably. It’s
HOW TO CONDUCT A STRATEGY • Does it match the crit- far better to do a good job
REVIEW ical issues and the executing a less ambi-
assumptions? tious plan than it is to do
Properly conducted, the a poor job of executing an
business unit strategy • Are people committed overly ambitious plan.
review is the prime social to it?
operating mechanism of The fourth question is:
the strategy process. It’s Once people are comfort- Are we choosing the right
the last chance to get able with the plan itself, ideas? This is a question
things right before the there are five critical that is best answered by
plan faces the ultimate questions that need to be more questions:
test of the real world. As addressed. You’ll notice
such, it has to be inclu- that some of these ques- • Is the idea consistent
sive and interactive. It tions are similar to those with the realities of
must feature a solid that need to be asked dur- the marketplace?
debate, conducted in the ing the creation of the
robust dialogue of the strategic plan. However • Does it mesh with
execution culture, with all it’s crucial to revisit some our organization’s
of the key players present key questions and ask a capabilities?
and speaking their minds. few new ones right before
you attempt execution. • Are we pursuing more
The review should be a ideas than we can
creative exercise, not a The first question is: How handle? Will the idea
drill where people regurgi- well-versed is each busi- make money?
tate data. People have to ness unit team about the
leave with closure to the competition? It goes You get the answers to
discussion and clear without saying that the these questions through
accountability for their strategy review needs to robust dialogue among the
parts in the plan, and the analyze the competition. relevant decision makers.
leader must follow through But what really counts is Only after this dialogue
to be sure that everyone is not pages of data about takes place can you make
clear about the outcome what the competition has a decision about which
of the review. done in the past, but real- ideas to pursue.
time reporting on what
The strategy review is they’re up to and likely to The fifth question is: Are
also a good place for a do next. the linkages with people
leader to learn about and and operations clear?
develop people. You’ll The second question is: Linking the strategy
find out about their strate- How strong is the organi- process to the people
gic thinking capabilities, zational capability to process and the opera-
both as individuals and as execute the strategy? tions process is critical.
a group. At the end of the Here’s where a tight and The more you and your
review, you’ll have a good consistent linkage people know about all
perspective on the people between strategy and three, the better
BUSINESS BOOK SUMMARIES 13
 output into short-term that is based on realities.
judgments and trade-offs
you can make about how targets. For example, what do the
well your strategy mesh- capital markets expect,
es with your capabilities Meeting those here-and-now and what are your assump-
and whether it has a rea- targets forces decisions to tions about the business
sonable chance of being be made and integrated environment?
profitable across the organization, both
initially and in response to Debate on assumptions is
A good way to follow
through at the end of the changes in business condi- one of the most critical parts
strategy review is to tions. It puts reality behind of any operating review. You
write a letter to each of the numbers. cannot set realistic goals
the leaders to solidify and until you’ve debated the
confirm the agreements An operating plan includes assumptions behind them.
you made so that later the programs your business This is often a difficult
you can use them as the
is going to complete within process, because in budget
basis for reviewing
progress. The letter one year to reach the desired and operating plan negotia-
should talk about growth levels of such objectives as tions, there’s an inherent
and new products, and it earnings, sales, margins, and conflict of interests.
should establish the link cash flow. The assumptions
between strategy, people, on which the operating plan Yet, debating the assump-
and operations. is based are linked to reality tions and making trade-offs
and are debated among the openly in a group is an
■■ finance people and the line important part of the social
leaders who have to execute. software. It builds the busi-
ness leadership capacities of
In other words, the operating all the people involved. As
plan specifies how the vari- they construct and share a
THE OPERATIONS PROCESS ous moving parts of the common picture of what’s
business will be synchronized happening on the outside
Having discussed the people to achieve the targets that and the inside, they hone
and strategy processes, we have been set, deal with the their ability to synchronize
will conclude with the trade-offs that need to be efforts for execution. And
operations process, the made, and look at contingen- they publicly make their
third of the three core cies for the things that can commitments to execute.
processes of execution. go wrong or offer unexpected
opportunities. Once the assumptions are
The operations process pinned down, the next step
focuses on the specifics of In the operating plan, in the operations process is
operating and executing on a the leader is primarily to build the operating plan
short-term time scale of four responsible for overseeing the itself, which is a three-part
quarters. This process is seamless transition from process that takes place in
where all of the parts in an strategy to operations. He the operating review. Let’s
organization are aligned, and has to set the goals, link the look at each part of the
where the link with strategy details of the operations process.
and people is made. process to the people and
strategy process, and lead the The first part of the process
If the strategy process defines operating reviews that bring is setting key targets for rev-
where a business wants to go, people together around the enues, operating margin,
and the people process operating plan. cash flow, productivity, and
defines who’s going to get it so forth. The participants in
there, the operating plan An operating plan addresses this part of the process will
provides the path for those the critical issues in execu- vary from business to busi-
people. It breaks long-term tion by building a budget ness, but what’s important is
14 AUDIO-TECH
that they give a one-page ends with closure and follow- takes energy, commitment,
overview focused on the through. One powerful enthusiasm, and above all, a
thing that will drive the technique is to send each focus on execution.
improvement in results. person involved a memo out-
lining the details of the
In the second part of the agreements. Quarterly ■■
process, you develop action reviews are another tool that
plans, including making the helps keep plans up to date
necessary trade-offs between and reinforce synchroniza-
short-term objectives and tion. They also give a leader
long-term goals. Also, some a good idea about which
strategies contain very spe- people are on top of their
cific and clear ideas that business, which ones aren’t,
will grow the business and what the latter need to
profitably but that require do.
investment in the current
operating periods. ■■

In the third and final part of he fortunes of every busi-

the process, you get agree-
ment and closure from all
T ness depend on how well
the three core processes link
the participants, establishing together: the people process,
follow-through measures the strategy process, and the
to make sure people are operations process. You need
meeting their commitments. to master each of these indi-
vidual processes and the way
One outcome of the opera- they work together as a
tions process is identifying whole.
targets that clearly and
specifically reflect not only In addition, you must use the
what a business wants to three building blocks that
achieve but also what it is serve as the foundation for
likely to achieve, because the the core processes. Those
targets are based on the building blocks are the seven
most realistic assumptions behaviors of leadership,
and on the hows of achieving establishing a framework for
them. cultural change, and getting
the right people in the right
In addition to clear targets, jobs.
the operations process yields
a lot of learning. The leaders None of this work is extraor-
who participate in the dinarily hard. But it is
reviews are thinking about extraordinarily important.
and debating the very guts Without these building
of the business. They get blocks and processes, even
to see the company as a the best plan is nothing more
whole and how each of their than a plan. The difference
moving parts fits into it. between a great strategy
They learn how to allocate that succeeds, and a great
and reassign resources when strategy that fails, lies in
the environment changes. how well everyone in the
company gets things done to
Of course, any good review carry out that strategy. This
BUSINESS BOOK SUMMARIES 15
 ABOUT THE AUTHORS
Larry Bossidy is chairman and former CEO of Honeywell
International, a Fortune 100 diversified technology and manufacturing
leader. Earlier in his career, he was chairman and CEO of
AlliedSignal, chief operating officer of General Electric Credit (now
GE Capital Corporation), executive vice president and president of
GE’s Services and Materials Sector, and vice chairman of GE.
Ram Charan is a highly sought advisor to CEOs and senior execu-
tives in companies ranging from start-ups to the Fortune 500, includ-
ing GE, DuPont, EDS, and Colgate-Palmolive. He is the author of
What the CEO Wants You to Know and Boards That Work and the
coauthor of Every Business Is a Growth Business. Dr. Charan has
taught at both the Harvard Business School and the Kellogg School of
Northwestern University.

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Execution summarized by arrangement with Crown Business, a member of the Crown Publishing Group,
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