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HayGroup,Inc.Allrightsreserved1SteveSherrettaSeptember15,2019PerformanceManagement:EnhancingExecutionThroughaCultureofDialoguePeterisChiefExecutiveOfficerforamedicalsupplymultinationalthatrecentlycraftedanewstrategytocountercompetitivethreats.Theplanstressedtheneedtocutcycletime,concentratesalesonhigher-marginproductsanddevelopnewmarkets.Fourmonthsaftercirculatingtheplan,Peterdida“walkaround”toseehowthingsweregoing.Hewasappalled.EverywherePeterturnedpeople,departments—wholebusinessunits—simplydidn’t“getit.”Firstsurprise:Engineering.Thegrouphadcutproductdesigntime30%,meetingitsgoaltoincreasespeed-to-market.Good.ThenPeteraskedhowmanufacturingwouldbeaffected.Itturnedoutthenewdesignwouldtakemuchmoretimetomake.Totalcycletimeactuallyincreased.“Ourstrategicplanmessageisnotreallygettingthrough,”Peterthought.Secondsurprise:Sales.Thenewstrategycalledforashift—emphasizehighmarginsalesratherthatpushingproductdownthepipelineasfastaspossible.ButjustabouteverysalespersonPeterspoketowasmakingtransactionalsalestohigh-volumecustomers;hardlyanyonewasbuildingrelationshipswiththemostprofitableprospects.Salesisdoingjustwhatit’salwaysdone,Peterthought.Worstsurprise:Evenhistopteam,thepeoplewho’dhelpedhimcraftthestrategy,wasnotstickingtoplan.Peteraskedateammember:“Whyareyouspendingallyourtimemakingsurethenewmachineryisworkinginsteadofdevelopingnewmarkets?”“Becausemyunit’schiefgoalwastoimproveon-timedelivery,”heanswered.“Butwhataboutcompanygoals?”saidPeter.“Wecameupwithagoodplanandcommunicateditveryclearly.Butnowhereitisn’tbeingcarriedout.Why?”Manyorganizationscreategoodstrategies,butonlythebestexecutethemeffectively.FortunemagazineestimatesthatwhenCEOsfail,70%ofthetimeit’sbecauseofbadHayGroup,Inc.Allrightsreserved2execution.1Weakexecutionispervasiveinthebusinessworld,butthereasonsforitarelargelymisunderstood.WhyisitthatnooneinPeter’sorganizationwasactinginsyncwiththestrategy?Unlessweunderstandthereasons,wecan’thopetosolvetheproblem.Imaginesomeonehittingatennisball.Whenthebrainsays“hittheball,”itdoesn’tautomaticallyhappen.Themessagetravelsthroughnervepathwaysdownthearmandcrossesgapsbetweenthenervecells.Thesegaps,or“synapses,”arepotentialbreaksintheconnection.Ifneurotransmittersdon’tcarrythemessageacrossthegap,themessagenevergetsthrough,oritgetsdistorted.Whenthathappens,eitherthearmdoesn’tmoveatall,oritmovesthewrongway.Creatinga“cultureofdialogue”Justlikeanervoussystem,organizationsalsohavegapsthatblockanddistortmessages.Thesecrettoeffectivestrategyexecutionliesincrossinghierarchicalandfunctionalgapswithclear,consistentmessagesthatrelaythestrategythroughouttheorganization.Soundsimple?It’snot.Thereasonisthatthe“neurotransmitters”inorganizationsarehumanbeings—executiveteammembers,seniormanagers,middlemanagersandsupervisors—whosejobitistomakesurethatpeople’sbehaviorisalignedwiththeoverallstrategy.Doingwhatittakestoachievealignmentisverydifficult.ItiswhatRamCharancalls,the“heavylifting”ofmanagement,andit’sthekeytoexecutingstrategy.Aswe’llseelater,thereisanimportantdifferencebetweencompaniesthatsuccessfullyalignbehaviorwithstrategyandthosethatdonot.Companiesthateffectivelyexecutestrategycreatea“cultureofdialogue.”Acultureofdialogueencouragespervasivetwo-waycommunicationswhereindividualsandgroups1)question,challenge,interpretandultimatelyclarifystrategicobjectives;and2)engageinregularperformancedialoguetomonitorbehaviorandensureitisalignedwithstrategy.ThreekeystomanagingperformanceAcultureofdialoguedoesn’thappeninstantly,anymorethanafluidtennisstrokedoes.Ittakespractice,persistenceandhardwork.Sohowexactlycanleadersensurethatstrategymessagesgoallthewaydowntheline—thatthetennisballgetshitcorrectly?Thethreekeystomanagingperformanceeffectivelyare:1.Achievingradicalclaritybydecodingstrategyatthetop.Manyorganizationsthinktheysendclearsignalsbutdon’t.Insomecases,managerssubordinatebroadstrategicgoalstooperationalgoalswithintheirsilos.That’swhathappenedwithPeter’stopteam.Elsewhere,topteammembersoftenhavetoomany“top”priorities—we’veseenasmanyas100inonecase—whichresultsinmixedsignalsandblurredfocus.Strategydecoderequireswinnowingprioritiesdowntoamanageablenumber—aslittleasfive.2.Settingupsystemsandprocessestoensureclarity.Oncestrategyisclear,organizationsmustcreateprocessestoensurethattherightstrategymessagescascade1“WhyCEOsFail,”byRamCharanandGeoffreyColvin,Fortunemagazine,June21,1999.HayGroup,Inc.Allrightsreserved3downtheorganization.Theseinclude:strategy-centeredbudgetandplanningsessions;staffandteammeetingstodiscussgoals;performancemanagementmeetings;andtalentreviewsessions.Dialoguedrivesalltheseprocesses.Eachrepresentsa“transmitteropportunity,”wherestrategicmessagesareconveyedandbehaviorisalignedwithgoals.3.Aligninganddifferentiatingrewards.Leadersmustmakesurerewardsencouragebehaviorsconsistentwithstrategy,whichsoundseasybutisn’t.Differentiationisaboutmakingsurethatstarsgetsignificantlymorethanpoorperformers.Butalmosteverywheremanagersdistributerewardsmoreorlessevenly.Aswe’llsee,lackofeffectiveperformancedialogueisakeycontributortodysfunctional