Monday, May 7, 2012

How many times can you fail at execution and still survive?

In Secrets to Successful Strategy Execution, Neilson, Martin, and Powers help explain how organization leaders should examine existing formal/informal decision making, information flows and motivators in order to best implement their strategy. Their research shows that organizations fail at execution because they choose structural reorganizations and often neglect the true drivers of effectiveness- decision drivers and information flows. In the article, decision rights and information flows had twice as much impact on strategy success as motivators and organizational structure.
According to the authors, the organization must start by identifying who "owns" each decision and who must provide input (decision rights), and information flows. They suggest that organizations can accomplish this by promoting managers laterally so they build networks needed for cross-unit collaboration. Once these drivers are address a company may alter organizational structures and realign incentives to support the initial strategic moves. In other words, until a company has its people working together and properly aligned to the strategy, it won't implement the right structure and incentives to achieve its strategy.
Reading these guidelines the authors make it seem like successful execution is in everyone’s reach. However, we’ve witnessed many companies consistently fail at execution. Let’s take Bank of America as an example. Since the 2008 financial crisis they have announced multiple reorganizations and yet to this day they continue to execute failed strategies. In late 2011 the CEO announced a major organizational shift to move BofA’s operating units with its core customer group, individuals, companies and institutional investors. This was their attempt to transform the bank into a company that placed customers first before profits. Some how this message was not communicated through the appropriate decision rights and information flows of the company. Instead of putting customers first, we’ve seen BofA increase banking fees on customers and focus on profit driven strategies that fail on arrival and do not strengthen consumer’s confidence in the bank. Most recently we’ve seen even popular magazines attack the bank—(i.e. Rolling Stones: “Bank of American too Crooked to Fail”) . What advice can one of the largest financial institutions implement across their organization to move away from this negative image and pursue successful strategies? How many times can BofA pursue failed strategies before they begin to see real consequences? Maybe when you’re big enough you can simply afford to ignore where you land on the effectiveness scale.

The Secrets to Successful Strategy Execution (Neilson, Martin, and Powers, Harvard Business Review, June 2008)

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