The Discipline of Execution - Ram Charan

When companies fail to deliver on their promises, the most frequent explanation is that the strategy was wrong. But the strategy by itself is not often the cause. Strategies most often fail because they aren’t executed well — things that are supposed to happen don’t happen. Execution is the great unaddressed issue in the business world today. Its absence is the single biggest obstacle to success. As an adviser to senior leaders of large and small companies, I have observed that strategic plans often fail in practice. Many leaders place too much emphasis on intellectualizing and philosophizing about high-level strategy, and not enough on implementation.In fact, so much thinking has gone into strategy that it is no longer an intellectual challenge. You can rent any strategy you want from a consulting firm; However, most often, the difference between a company and its competitor is not its strategy, but its ability to execute. Execution helps business leaders choose a more robust strategy. You can’t craft a worthwhile strategy if you don’t at the same time make sure your organization has or can get what’s required to execute it, including the right resources and the right people. But far too often, execution is neglected, because it hasn’t yet been recognized or taught as a discipline. The real problem is that execution just doesn’t sound very sexy. People think of execution as the tactical side of business, something leaders delegate while they focus on the perceived “bigger” issue. 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. No worthwhile strategy can be planned without taking into account the organization’s ability to execute it. The heart of execution lies in three core processes: the people process, the strategy process, and the operations process. Every business and company uses these processes in one form or other. But more often than not, they stand apart from one another like silos. People perform them by rote and as quickly as possible, so they can get back to their perceived work. The key to successful execution is linking people, strategy, and operations together.

The People Process

The people process is the most important of the three processes. After all, it’s the people of an organization who make judgments about how markets are changing, create strategies based on those judgments, and translate the strategies into operational realities. To put it simply and starkly: If you don’t get the people process right, you will never fulfill the potential of your business.

A robust people process does three things:

1. It evaluates individuals accurately and in depth.
2. It provides a framework for identifying and developing the leadership talent needed to execute strategies down the road.
3. It fills the leadership pipeline that’s the basis of a strong succession plan.

The right people are in the right jobs when information about individuals is collected constantly and leaders know the people, how they work together, and whether they deliver results — or fail to.

The Strategy Process

Strategy is directly related to the people process, because strategy comes from the minds of people. If a company has the right people, in all likelihood its strategies will be in sync with the realities of the marketplace, the economy, and the competition.

The basic goal of any strategy is simple enough: to win the customer’s preference and create a sustainable competitive advantage, while leaving sufficient money on the table for shareholders. It defines a business’s direction and positions it to move in that direction. Why, then, do so many strategies fail?

Few understand that a good strategic-planning process also requires the utmost attention to the hows of executing the strategy. A contemporary strategic plan must be an action plan that business leaders can rely on to reach their business objectives. In creating it, you as a leader have to ask whether and how your organization can do the things that are needed to achieve its goals.

Developing such a plan starts with identifying and defining the critical issues behind the strategy. You don’t just put a plan together and then go back and see whether it can help you. Decide on the objectives at the beginning. What do you want to get done? What are the critical issues you need to understand better? Why is it going to be helpful to you? As you fill in the plan around those objectives, you have got a chance to accomplish something.

To be effective, a strategy has to be constructed and owned by those who will execute it. Staff people can help by collecting data and using analytical tools, but the business leaders must be in charge of developing the substance of the strategic plan.

Business leaders are in the best position to introduce new ideas, to know which ideas will work in their marketplace and which ones won’t, to understand what new organizational capabilities may be needed, to weight risks, to evaluate alternatives, and to resolve critical issues that planning should address but too often doesn’t.

When guided by a leader who has a comprehensive understanding of the business and its environment, all the members of the group can contribute something and benefit by being part of the robust dialogue that’s central to the execution culture. Discussing the strategy creates excitement and alignment, and the energy that these discussions build strengthens the process.

The strategy also has to include specific milestones to bring reality to the plan. If the business doesn’t meet milestones as it executes the plan, leaders have to reconsider whether they’ve got the right strategy after all. Periodic reviews can help you to understand what’s happening and what turns in the road are necessary.

The Operations Process

The strategy process defines where a business wants to go, and the people process defines who’s going to get it there. The operations process provides the path for those people. It breaks long-term output into short-term targets.

In the operating plan, the leader is primarily responsible for overseeing the seamless transition from strategy to operations. She has to set the goals, link the details of the operations process to the people and strategy processes, and lead the operating reviews that bring people together around the operating plan. She has to make timely, incisive judgements and trade-offs in the face of myriad possibilities and uncertainties. She has to conduct robust dialogue that surfaces truth. At the same time, the leader is learning — about her people, and how they behave when the rubber meets the road, and about the pitfalls that beset elegant strategies.

Again, as with the strategy process, it’s not just the leader alone who has to be present and involved. All of the people accountable for executing the plan need to help construct it.

Typically, operating plans are based on a budget that has been previously prepared. This is backward: the budget should be the financial expression of the operating plan, rather than the other way around.

Budgets often have little to do with the reality of execution because they’re numbers and gaming exercises; whereas, people spend months figuring out how to protect their interests instead of focusing on the company’s critical issues. The financial targets are often no more than the increases form the previous year’s results. The resulting rigid budget can lead to missed opportunities.

An operating plan addresses the critical issues in execution by building the budget on realities.

The first step in building an operations plan is to debate the assumptions behind your goals; for example, who is the customer? What’s the need? What is the competition doing? Is your value proposition good enough?

The next step is to build the operating plan itself. It’s a three-part process:

1. Set the targets.
2. Develop the action plans and make the necessary trade-offs between short- and long-term goals.
3. Secure agreement and closure from all the participants, establishing follow-through measures to make sure people are meeting their commitments.
4. Finally, follow through with the operating plan, making sure all parties take accountability for what they have agreed to do, establishing contingency plans, and conducting quarterly reviews.

To have realism in your strategy you have to link it to your people process. Do you have the right people in place to execute the strategy? If not, how are you going to get them?

Then you’ve got to link your strategic plan’s specifics to your operating plan, so that the multiple moving parts of the organization are aligned to get you where you want to go.

The result is successful execution, and, ultimately, a successful business.