Every economic era has a theme. The 1960s are still recalled as the “Go-Go” years, when Wall Street was fueling mergers and conglomerations of unprecedented scale. The 1990s were the “Internet Boom” years, when a rising economic tide lifted the boat of just about any company with a plausible business model tale to tell. The agonizingly slow recovery since the Internet bubble burst has inspired the latest motif. Executives no longer believe that a strategy — consolidation, transformation, or breakaway — is enough. “We’ve made the right strategic decision, but my organization isn’t motivated or set up right to get on with it,” they are saying. “Everyone says they understand the vision, but the
businesses and functions just aren’t working together to get results.”

Welcome to the Era of Execution.

Execution has become the new mantra for this first decade of the new millennium. Larry Bossidy, who led AlliedSignal Inc.’s turnaround and its merger with Honeywell International Inc., wrote a book with Ram Charan, titled Execution: The Discipline of Getting Things Done (Crown Business, 2002), that’s been on the business bestseller lists for more than a year. Former IBM CEO Louis V. Gerstner Jr. put forth the same message in his memoir, Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround (HarperBusiness, 2002). In it, he says flatly that the revival of the computer giant wasn’t due to vision. “Fixing IBM,” he wrote, “was all about execution.”

Boards of directors, increasingly impatient with CEOs who don’t deliver, have climbed on the execution bandwagon too. Booz Allen Hamilton’s annual study of CEO succession trends showed that forced turnover of underperforming CEOs at major corporations reached a new high in 2002, rising a staggering 70 percent from 2001 and accounting for 39 percent of all chief executive transitions.

But is execution simply a matter of firing the CEO and bringing in a charismatic leader who can get on with “getting things done”? Not at all. Underlying the quest for an execution-driven enterprise is one central question: How does a company design its organization to execute the strategy — whatever the strategy is — and successfully adapt when circumstances change?

Illustration by Brian Cairns

Execution is woven deeply into the warp and woof of organizations. It is embedded in the management processes, relationships, measurements, incentives, and beliefs that collectively define the “rules of the game” for each company. Although we often think of companies as monolithic entities, they’re not. They’re collections of individuals who typically act in their own self-interest. Superior and consistent corporate execution occurs only when the actions of individuals within it are aligned with one another, and with the overall strategic interests and values of the company. Performance is the sum total of the tens of thousands of actions and decisions that, at large companies, thousands of people, at every level, make every day.

Because individual behaviors determine an organization’s success over time, the first step in resolving dysfunctions is to understand how the traits of an organization influence each individual’s behavior and affect his or her performance. We like to use the familiar metaphor of DNA to attempt to codify the idiosyncratic characteristics of a company. Just as the double-stranded DNA molecule is held together by bonds between base pairs of four nucleotides, whose sequence spells out the exact instructions required to create a unique organism, we describe the DNA of a living organization as having four bases that, combined in myriad ways, define an organization’s unique traits. These bases are:

Structure. What does the organizational hierarchy look like? How are the lines and boxes in the organization chart connected? How many layers are in the hierarchy, and how many direct reports does each layer have?