strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
 / Autumn 2007 / Issue 48(originally published by Booz & Company)


Exercising Common Sense

As one CEO we worked with said, “If you’re the leader, you’ve got to define the problem, no matter how brutal, and you’ve got to use honest and unambiguous language. Your staff can’t do it. Only you can tell people about the reality you are facing. If you don’t, they’ll never accept it.”

This analysis must be “market-backed”: It must demonstrate a clear connection with the needs of the customers who keep the operation in business, and it must accurately depict the competitors who are trying to take customers away. The analysis must be forward-looking as well, providing a compelling picture of what the organization can be­come in the future. Details do not need to be mapped out, but the magnitude of the challenge must be made clear, and the commitment to a new aspiration must remain un­swerving as the particulars develop. The CEO must maintain a sense of urgency by continuing to press and elaborate on the case for change throughout its implementation.

The classic mistake we see at this stage occurs when the CEO is reluctant to make the case because he or she hasn’t hammered out all the details. Even with a “burning platform” (a clear and credible picture of the dire fate that looms if the organization doesn’t change), leaders are often unwilling to present a plan that does not feel fully “baked.” Yet not only is a detailed road map unnecessary at the start, it can actually be counterproductive. The presentation of too much detail gets people focused on particulars rather than on the larger purpose, which is nothing less than a new way of operating in the world. In addition, even if it were possible to offer a fleshed-out plan, doing so would leave no room for people to participate in its development, which is vital both for getting fresh ideas and for ensuring that people feel committed to the outcome.

2. Senior leaders set an aggressive, enterprise-wide target. Big goals are the key to driving big actions. An audacious, market-mandated target (“we have to get US$1 billion out of the cost of this enterprise or we’ll lose out to the low-cost provider within two years”) sends the message that transformation is not a matter of incremental changes, like trimming finance or putting HR on a diet. It will require a fundamental rethinking of current priorities, market position, and strategic intent.

Targets must push beyond the parameters of business-as-usual while remaining firmly tied to the business case.

Aggressive targets may seem brutal, but an incremental approach is rarely effective and often ends up inflicting greater pain. Small-bore targets enable people to deny the extent of the peril facing the organization while inadvertently encouraging them to find ways to exempt their unit or division from the overall effort. This waters down goals and pits business units against one another, inspiring cynicism and fomenting rivalries.

Facing that kind of evasive, passive-aggressive opposition, leaders are often tempted to say, “Well, if we can’t get $1 billion out, we’ll settle for $900 million,” and that in turn sends the message that the target is not an up-front, market-backed imperative but rather an arbitrary number subject to dispute. Once people start quibbling about the details of the targets, the company has started down a slippery slope of indecision, and it’s extremely difficult to regain the momentum.

Another common mistake we see in this area occurs when leaders feel they need to verify their analysis of stated targets and wait for additional data or details before moving forward. Such an approach encourages bottom-up analysis based on tactical targets, rather than supporting an integrated set of initiatives that connects business units, functions, and geographies. If an economic analysis of enterprise-wide targets is needed, it must be conceived firmly and convincingly at the top, and continually articulated, delivered, and enforced by the leadership. In other words, the leadership must present the kind of rationale for change that forces people to think big.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store


Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.