Performance, Strategy

Facilitating Autonomous Strategic Behaviour

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When it comes to strategy there are many illusions. We would like to think strategy is intentionally formulated (and then implemented) by top management. We imagine an off-site of the management team where strategy is dreamed up and designed. There are major decisions which are then carefully cascaded (down)  through the organisation ultimately resulting in a sustainable competitive advantage.

Many years ago Henry Mintzberg did something both simple and amazing… he became a “fly-on-the-wall” researcher following managers around, observing what they actually did when managing and when strategising. The result was quite demystifying. It turned out managers were not half as intentional as what management books had been telling us and what we thought they would be. It was a big surprise because even managers themselves – when we had asked – told us they were intentional planners.

So Mintzberg put this intentionality management illusion to bed and we now know there is sometimes intentional strategy but there is also very often emergent strategy originating from autonomous strategic behaviour within the company.

Emergent, autonomous strategic behaviour… it is quite scary to many a command-control manager. However, it turns out that it is actually very important and beneficial to the performance of a company. It starts as informal projects which can be somewhat dissonant to the current overall direction of the company but are inspired by a rationality of the “local” sort. Laurent Mirabeau and Steve Maguire illustrate this in a very interesting empirical paper recently.

Through time as these projects gain support (or not: ephemeral strategic behaviour) and this support happens through the introduction of new strategic categories or – more often – by stretching existing strategic categories (post-rationalising). In many ways it is like patterns of the past become plans for the future (see Mintzberg).

Conclusion: Improving strategy  is (also) facilitating autonomous strategic behaviour in your organisation. 

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Leadership, Performance, Strategy

The CEO Effect on performance is twice as big…

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Most of us have grown up appreciating one or more superheroes and now that we have grown up we still fancy the idea one person can truly matter. The effect a CEO can have on the performance (profitability) of a company has traditionally been measured in the 10-20 percent range. Depending on people’s  perspective this CEO effect can be heralded as negligible or as considerable.

CEO-effect guru Donald Hambrick (and associate) , recently, have taken an advanced approach to measuring the CEO effect. With the “CEO in context” approach Hambrick provides a much more accurate measurement of the CEO effect. Among others there is a much more accurate indicator of industry performance (excluding the focal company) and company performance (with controls for inherited profitability and company health). The results are – frankly – shocking.

With the traditional CEO effect being in the 10 – 20 percent range you could still argue whether this was small or big. With Hambrick’s new research the CEO effect is measured a whopping 38.5%. This is one big effect and it is for better or worse.

Hambrik provides convincing validity testing of the new technique. And, finally, he also illustrates the CEO effect with comparing Lou Gerstner and Sam Palmisano of IBM. The traditional indicators mis-identified Gerstner as a poor CEO. This new measurement puts him in the top decile. It is all very convincing.

Now, if you are a CEO…

What is it that you are thinking when you hear your impact is twice the size?

You definitely matter and because you do the essence of your job to make everybody else matter. The buck does not stop at your desk, it starts at your desk. Make sure the CEO effect will be a positive one because if it negative…the impact is also twice as big..

 

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Performance, Strategy

Two Types of Strategy

What is the first word that comes to mind when you think about strategy? Typically, the first word that is mentioned is plan or planning. (What is yours?) If you observe executives – which is very different from asking questions or sending surveys! – you find that there are two types of strategy, which happen alongside each other. No, it not strategy formulation versus strategy implementation. Strategy without implementation is not strategy.

Instead, there is strategy as design and strategy as practice.

Strategy as design is aimed at uniqueness, aimed at building competitive advantage.

  • The focus is on things that other companies cannot imitate and that are valuable, rare, and disguised within the organisation;
  • The process of strategy as design is not straightforward;
  • Unique business insights  often start as irritations with existing offers (iPhone) or as slow cultivated hunches. The process cannot be planned but it can be facilitated and encouraged by using a design approach (IDEO);
  • The resource-based view and concepts like resources, capabilities, dynamic capabilities, and transient competitive advantage are important for strategy as design.

Strategy as practice is aimed at excellence through publicly known, imitable practices which can be transferred across companies. (link)

  • The focus is on things that are common practices, which can significantly influence the performance of companies;
  • The process of applying (best) practices is relatively straightforward (in theory);
  • Implementing best practices – rather than mere business fads – is about “conscientious, explicit, and judicious use of practitioner expertise and judgment, evidence from the local context, a critical evaluation of best available research evidence, and the perspectives of those people who might be affected by the decision.” (evidence-based management);
  • Typical strategy concepts like the Five Forces, BCG matrix, and strategic groups analyses fit within strategy as practice. However, also best practice in communication, hiring, teamwork, project management, total quality management, etc. belong here.

Strategy as design – particularly when successful – is more dramatic and receives most of the attention. And, most executives, when they have the choice, would prefer to compete on uniqueness rather than excellence. However, there is no “choice”. The focus needs to be on both, but most of the managerial effort will need to be on strategy as practice.

Fascinating research by Bloom and others in Indian textile plants demonstrates the power of strategy as practice. The textile plants who were assigned to use standard best factory practices (regular maintenance, recording reasons for machine breakdown, removing trash from shop floor, etc.)  increased productivity by 11% compared to the textile works who were in the control group. (link)

There are two very distinct types of strategy that are both necessary for the prosperity of your company. And both types of strategy need to be intentionally managed and trained.

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Learning, Performance

The Impact of Training is seldom measured (correctly)

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The reputation of human resources departments continues to be problematic. This is partly because executives don’t back their written and stated people strategy with the behaviour which should accompany it. Perhaps more importantly, though, is the general lack of business, strategy, and organisational change understanding you find in HR departments.  If you like to read more about this, read this article.

However, when business literacy increases and HR is starting to reflect more on its impact there are interesting hurdles along the way. One important trap is the training measurement trap. 

We see this regularly when it comes to measuring the impact of HR training efforts. In most companies training efforts are evaluated through learner reaction measures (questionnaires filled out by training participants).

It seems rather self-evident learner satisfaction is important. And it is, but perhaps not in the way we would think. It is important in terms of continued interest in training efforts and that is why lots of effort should be given to improving learner reaction measures. It is a so-called hygiene factor.

However, when a learner is dissatisfied with a training effort research evidence shows this is unlikely to have much, if any impact of actual transfer of learning to on-the-job application.

And it is this on-the-job application (transfer of learning) measurement that is typically missing in corporate training efforts.

Learning Retention Rates:

  • 5%: The average retention rate of powerpoint-driven training efforts (measured 2 weeks after the event);
  • 10%: If participants also engage in reading;
  • 20%: Add audio-visual means;
  • 30%: Add demonstration… ;
  • 50%: Add group discussions;
  • 65%: Add personalisation – how do my personal qualities contribute to this;
  • 75%: Add practice by doing…;
  • 80%+: Add explaining to others.

Questions:

  1. Are you evaluating your training efforts?
  2. Are you using learner reaction measures?
  3. Are you using learner retention measures?

 

 

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Leadership, Strategy

It is resilience-to-change not resistance-to-change

When you focus on organisational change the term resistance to change is often mentioned. It is as if certain groups of employees intentionally won’t change – indeed, they resist it.

However, perhaps we should look at this phenomenon from a different – e.g. sociological – angle: institutionalisation. This is the process of “something” becoming embedded within an organisation as an established custom or norm. So, if your corporate values are honesty, trust and loyalty  it is the process of institutionalisation that created these.

When a company has strong norms and values you would say that it has attained a high degree of resilience. One way you measure this resilience is the time it takes for newcomers to adapt to this resilient way of doing things. The point is that most of the time resilience is a really good thing for an organisation. 

Tushman, Newman and Romaneli say: “The most successful firms maintain a workable equilibrium for several years (or decades), but are also able to initiate and carry out sharp, widespread changes when their environments shift . . . Less successful firms . . . get stuck in a particular pattern.”

Companies getting stuck are basically becoming too resilient and this is where the term organisational inertia is helpful. When environments shift parts of the organisation – often those parts closer to the shift – see the need for change. Meanwhile the rest of the organisation continues to be strong and resilient. Very often this is not intentional resistance, it is merely continuing on the ‘right path’.  It is only when the organisation as a whole experiences enough dissatisfaction with the current modus operandi that the desire for change becomes bigger than than the resilience (or inertia).

If we would see resistance to change for what it really is – resilience to change – repurposing this resilience will become easier and more ‘natural.

 

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Performance, Team

4 evidence-based tools to improve your hiring performance

There is Grand Canyon kind of gap between the science of management and the practice of it. And, having been on both sides regularly, I get that. Most of the scientific papers are very difficult to read and understand for the practitioner (so much terminology). Furthermore, if that were not a problem quite often what is being researched seems out-of-touch with the day-to-day business reality as well

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However, what I don’t get is that still so many companies when hiring new employees continue to rely on an unstructured interview (a conversation).  The typical questions you will get in this type of interview are:

  • Tell us about yourself? (and then you continue to ask-your-way-through their CV);
  • What is your strengths and weaknesses (I am persistent, but stubborn…);
  • Why did you apply for this job?
  • etc.

The reason why you are interviewing candidates is increased the odds of good future job performance.

If you would measure a candidate’s cognitive ability and their conscientiousness adding an unstructured interview increases these odds with just 1.5% (Erez & Grant, 2014).  Right, you might was well use your time for other matters.

Now, using standardised testing (BIG 5, etc.) requires a qualified psychologist, but there are 4 other evidence-based tools available to us all (Gary Latham, 2009) :

  • Situational interviews – What would you do in this situation?
  • Patterned behavioural description interviews – What did you do in that situation?
  • Job simulations – Show me how you handle this situation.
  • Realistic job previews – Here’s what is great about the job and what is not so great…

In the past I have been responsible for a team recruiting and hiring specifically to form self-starting teams, which would be send abroad to big cities to start new innovative charity projects.

In this team there was an HR specialist, a psychologist and myself. The HR specialist and the psychologist would engage in structured interviewing (both situational and patterned behavioural description) and they would run several robust assessments,  and perform reference and background checks (and asked references if they knew other references). Parallel to this, the candidates would go through an engagement process where they would face job simulations with other candidates and would get a better idea about what the job would actually entail (good, bad and ugly). I would participate in the simulations and interactions, but not in the interviewing and assessments. In the end the team would sit down together and I would give my ‘thin slice’ idea about the candidates followed by the professionals presenting their evidence plus “verdict”.

We hired many people through this process and the number of ‘miss-hires’ was extremely low. Moreover, for each of the miss-hires we reconstructed the hiring process and found that in each we did not stick to the process (most common cause: a not-to-be-missed candidate was presented at the last minute).

Hiring new employees is both an art and a science, but omitting the science is bad for your business.

 

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Leadership, Performance, Strategy

“Got” Strategy? – Why the trickling down effect does not work

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Crucial for the performance of companies is the so-called “embeddedness” of their strategy among the employees (i.e. is the strategy understood and accepted).

The understanding part is the first hurdle. Research indicates only 29% of employees in large corporations with well-advertised strategies can recognise the strategy (passive understanding). Recent research found that “Higher-level employees, employees who are happy with their compensation and work-life balance, and employees whose overall view of their company is positive are more likely than others to understand and agree with the company’s strategy.” This explains about 39% of variation.

Galunic and Hermreck found three determinants:

  • an employee’s job conditions (important),
  • the view of the quality and engagement of supervisor (not so important – only indirect influence via job conditions), and
  • the perception of and trust in top management (very important).

Of these the perception of and trust in top management was by far the most important underlining the problems found with trying to cascade strategy “down” the pyramid… Employees need to hear and understand the bigger picture. They need to hear it from leaders who can communicate both the universals of the strategy  (a better future) as well as the uniqueness of the strategy (turning talent into performance).

Strategy execution is this fascinating and challenging endeavour of combining universals with uniqueness or leadership with management. The joy and the benefits of seeing everybody “get” strategy is well worth the effort.

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