The following is a highlighted summary of the book, Execution, published by Crown Business. The statements below are key points of the book as determined by James Altfeld and have been made available at no charge to the ur.
Execution:
The Discipline of Getting Things Done
By
Larry Bossidy & Ram Charan
Introduction
Too many leaders fool themlves into thinking their companies are well run. They’re like the parents in Garrison Keillor’s fictional Lake Wobegon, all of whom think their children are above average. Then the top performers at Lake Wobegon High School arrive at the University of Minnesota or Colgate or Princeton and find out they’re average or even below average. Similarly, when corporate leaders start understanding how the GE’s and Emerson Electrics of this world are run—how superbly they get things done—they discover how far they have to go before they become world class in execution.
Here is the fundamental problem: People think of execution as the tactical side of business, something leaders delegate while thy focus on the perceived “bigger” issues. This idea is completely wrong. Execution is not just tactics—it is a discipline and a system. It has to be built into a company’s strategy, its goals, and its culture. And the leader of the organization must be deeply engaged in it. He can delegate its substance. We talk to many leaders who fall victim to the gap between promis they’ve made and results their organizations delivered. They frequently tell us they have a problem with accountability—people aren’t doing the things they’re suppod to do to implement a plan. They desperately want to make changes of some kind, but what do they need to change? They don’t know.
Execution is a specific t of behaviors and techniques that companies need to master in order to have competitive advantage.
The Gap Nobody Knows
When companies fail to deliver on their promis, the most frequent explanation is that the CEO’s strategy was wrong. But the strategy by itlf is not often the cau. Strategies most often fail becau they aren’t executed well. Things that are suppod to
happen don’t happen. Either the organizations aren’t capable of making them happen, or the leaders of the business misjudge the challenges their companies face in the business environment, or both.
Build-to-order improves inventory turnover, which increas ast velocity, one of the most under-appreciated components of making money. Velocity is the ratio of sales dollars to net asts deployed in the business, which in the most common definition includes plant and equipment, inventories, and accounts receivable minus accounts payable. Higher velocity improves productivity and reduces working capital. It also improves cash flow, the life blood of any business, and can help improve margins as well as revenue and market share.
Dell turns its inventory over eighty times a year, compared with about ten to twenty times for its rivals, and its working capital is negative. As a result, it generates an enormous amount of cash. In the fourth quarter of fiscal 1001, with revenues of $8.1 billion and an operating margin of 7.4 percent, Dell had cash flow of $1 billion from operations. Its return on invested capital for fiscal 2001 was 355 percent—an incredible rate for a company with its sales volume. Its high velocity also allows it to give customers the latest technological improvements ahead of other makers, and to take advantage of falling component costs—either to improve margins or to cut prices.
The gap between promis and results is widespread and clear. The gap nobody knows is the gap between what a company’s leaders want to achieve and the ability of their organization to achieve it.
Everybody talks about change. In recent years, a small industry of change-meisters has preached revolution, reinvention, quantum change, breakthrough thinking, audacious goals, learning organizations, and the like. We’re not necessarily debunking this stuff. But unless you translate big thoughts into concrete steps for action, they’re pointless. Without execution, the breakthrough thinking breaks down, learning adds no value, people don’t meet their stretch goals, and the revolution stops dead in its tracks. What you get is change for the wor, becau failure drains the energy from your organization. Repeated failure destroys it.
No company can deliver on its commitments or adapt well to change unless all leaders practice the discipline of execution at all levels. Execution has to be a part of a company’s strategy and its goals.
If you don’t know how to execute, the whole of your effort as a leader will always be less than the sum of its parts.
Execution Comes of Age
After Compaq’s board fired Pfeiffer, chairman and founder Ben Ron took pains to say that the company’s strategy was fine. The change, he said, would be “in execution…Our plans are to speed up decision-making and make the company more efficient.”
To understand execution, you have to keep three key points in mind:
1.Execution is a discipline, and integral to strategy.
2.Execution is the major job of the business leader.
3.Execution must be a core element of an organization’s culture.
Execution is a Discipline
No worthwhile strategy can be planned without taking into account the organization’s ability to execute it.
…execution is a systematic way of exposing reality and acting on it.
Much has been written about Jack Welch’s style of management—especially his toughness and blun
tness, which we would argue that the core of his management legacy process, making it a model of an execution culture.
The heart of execution lies in the three core process: the people process, the strategy process, and the operations process.
Execution is the Job of the Business Leader
Lots of business leaders like to think that the top dog is exempt from the details of actually running things. It’s a pleasant way to view leadership: you stand on the mountaintop, thinking strategically and attempting to inspire your people with visions, while managers do the grunt work.
An organization can execute only if the leader’s heart and soul are immerd in the company.
The leader must be in charge of getting things done by running the three core process—picking other leaders, tting the strategic direction, and conducting operations.
How good would a sports team be if the coach spent all his time in his office making deals for new players, while delegating actual coaching to an assistant?
Only a leader can ask the touch questions that everyone needs to answer, then manage the process of debating the information and making the right trade-offs. And only the leader who’s intimately engaged in the business can know enough to have the comprehensive view and ask the touch incisive questions.
Dialogue is the core of culture and the basic unit of work. How people talk to each other absolutely determines how well the organization will function.
…everyone likes to say that people are the most important ingredient in their success. But they often hand off the job of asssing people and rewarding them to the HR staff, then rubber-stamp the recommendations at their reviews.
Only line leaders who know the people can make the right judgments. Good judgments come from practice and experience.
But there’s an enormous difference between leading an organization and presiding over it. The leader who boasts of her hands-off style or puts her faith in empowerment is not dealing with the issues of the day. She is not confronting the people responsible for poor performance, or arching for problems to solve and then making sure they get solved. She is presiding, and she’s only doing h
alf her job.
Leading for execution is not about micromanaging or being “hands-on,” or dis-empowering people. Rater, it’s about active involvement—doing the things leaders should be doing in the first place.
The leader who executes asmbles an architecture of execution. He puts in place a culture and process for executing, promoting people who get things done more quickly and giving them greater rewards.
Jack Welch, Sam Walton, and Herb Kelleher …Leaders of this ilk are powerful and influential prences becau they are their business. They are intimately and intenly involved with their people and operations. They connect becau they know the realities and talk about them. They’re knowledgeable about the details. They’re excited about what they’re doing. They’re passionate about getting results. This is not “inspiration”through exhortation or speechmaking. The leaders energize everyone by the example they t.
Execution Has to Be in the Culture
Leaders who execute look for deviations from desired managerial tolerances—the gap between the
desired and actual outcome in everything from profit margins to the lection of people for promotion. Then they move to clo the gap and rai the bar still higher across the whole organization.
Why People Don’t Get It
The intellectual challenge of execution is in getting to the heart of an issue through persistent and constructive probing. Let’s say a manager in the X division plans an 8 percent sales increa in the coming year, even though the market is flat. In their budget reviews, most leaders would accept the number without debate or discussion. But in an execution company’s operating review, the leader will want to know if the goal is realistic. “fine,” she’ll ask the manager, “but where will the increa come from? What products will generate the growth? Who will buy them and what pitch are we going to develop for tho customers? What will our competitor’s reaction be? What will our milestones be?” If a milestone hasn’t been reached at the end of the first quarter, it’s a yellow light: something’s not going as planned, and something will need to be changed.“are the right people in charge of getting it done,” “and is their accountability clear? Who collaboration will be required, and how will they be motivated to collaborate? Will the reward system motivate them to a common objective?” In other words, the
leader doesn’t just sign off on a plan. She wants an explanation, and she will drill down until the answers are clear.
Organizations don’t execute unless the right people, individually and collectively, focus on the right details as the right time.
The Trouble with Joe
Joe, the CEO who downfall we described in chapter 1, is a typical leader who didn’t know how to execute.
How would Joe have behaved differently if he had had the know-how of execution? Firs, he would have involved all the people responsible for the strategic plan’s outcome.
They would have t goals bad on the organization’s capability for delivering results. Organizational capability includes having the right people in the right jobs.
Second, Joe would also have asked his people about the how’s of execution: how, specifically, were they going to achieve their projected demand on a timely basis, their inventory turns, and cost and quality goals? Anybody who didn’t have the answers would have to get them before the plan was la
unched.
Third, Joe would have t milestones for the progress of the plan, with strict accountability for the people in charge.
The Building Blocks of Execution
What exactly does a leader who’s in charge of execution do? How does he keep from being a micromanager, caught up in the details of running the business?
•Know your people and your business.
•Insist of realism.
•Set clear goals and priorities.
•Follow through.
•Reward the doers.
•Expand people’s capabilities.
•Know yourlf.
Know Your People and Your Business
Leaders have to live their business.
RAM:
Leaders who are connected have distilled the challenges facing the business unit they are visiting into a half dozen or fewer fundamental issues. The challenges do not change much over short periods of time, and the way leaders like Larry master the total company is through a short list that cut across multiple business units.
Being prent allows you, as a leader, to connect personally with your people, and personal connections help you build your intuitive feel for the business as well as for the people running the business. They also help to personalize the mission you’re asking people to perform
Larry: As a leader, you have to show up. You’ve got to conduct business reviews. You can’t be detached and removed and abnt. When you go to an operation and you run a review of the business, the people may not like what you tell them, but they will say, “at least he cares enough abo
ut my business to come and review it with us today. He stayed there for four hours. He quizzed the hell out of us.” Good people want that. It’s a way of raising their dignity.
It’s also a way to foster honest dialogue, the kind that can sometimes leave people feeling bruid if they take it personally.
At Honeywell, after I do a business review, I write the leader a formal letter summarizing the things he agreed to do. But then I also write a personal note the leader and say,“Gary, nice job yesterday. Productivity is not up to standards, and you need to work on it. Otherwi things are going great.” It’s just a note, takes five minutes.
If a manager is having trouble, you don’t want to threaten to fire him—you want to help him with his problem.
Insist on Realism
Sometimes the leaders are simply in denial. When we ask leaders to describe their organization’s strengths and weakness, they generally state the strengths fairly well, but they’re not so good on identifying the weakness. And when we ask what they’re going to do about the weakness, the answer is rarely clear or cohesive.
Was it realistic for AT7T to acquire a bunch of cable business it didn’t know how to run? The record shows it wasn’t.
How do you make realism a priority? You start by being realistic yourlf.
Set Clear Goals and Priorities
Leaders who execute focus on a very few clear priorities that everyone can grasp. Why just a few? First, anybody who thinks through the logic of a business will e that focusing on three or four priorities will produce the best results from the resources at hand. Second, people in contemporary organizations need a small number of clear priorities to execute well.
A leader who says “I’ve got ten priorities” doesn’t know what he’s talking about—he doesn’t know himlf what the most important things are. You’ve got to have the few, clearly realistic goals and priorities, which will influence the overall performance of the company.
