We are seeing the revolving door for CEOs spin faster and faster. “Two-thirds of all major companies worldwide have replaced their CEO at least once since 1995.” “More than 1,000 CEOs have left office over the past 12 months.” “In the year 2000 alone, forty CEOs of the top two hundred companies on Fortune’s 500 list were removed. When 20 percent of the most powerful business leaders in America lose their jobs, something is clearly wrong!”
So, what has brought down these capable executives? What is the biggest underlying issue? Is it: corporate dishonesty, the economic downturn, poor planning, the post-dotcom realignment, or unrealistic pressures for short-term gains? In a Fortune article titled, “What CEOs Fail,” the question was posed, “suppose what brought down all these powerful and undeniable talented executives was just one common failing?”
Let’s turn to the thoughts of BusinessWeek’s top two rated management gurus – Ram Charan and David Ulrich to explore the answer. Ram Charan concludes that the big issue is bad execution of corporate strategy. He states, it is “as simple as that: not getting things done, being indecisive, not delivering on commitments. …The results are beyond doubt.” In the book “The HR Scorecard” David Ulrich and other gurus refer to trends in the U.S. equity market “reflecting a growing shift from a focus on just tangible assets to intangible assets.” The authors refer to a study, conducted by Ernst & Young of financial analysts, to ascertain “measures that matter.” The most important nonfinancial variable that determines a company’s success or failure, is its “ability (or inability) to implement strategy.”
Other top management gurus seem to also be screaming for corporate America to better focus and execute. Moreover, workers are pleading for focus, clear expectations, and the opportunity to contribute to that focus.
A FranklinCovey study evaluated the characteristics of 52,000 managers across hundreds of organizations. More than 400,000 of the managers’ associates were asked to rank the managers. The areas where managers scored the lowest included:
- Prioritizing work so time is spent on most important issues (related to strategy)
- Setting clear expectations with employees (related to strategy)
- Providing feedback on how to improve
- Building teamwork by maximizing the talents of the workgroup
Gallup conducted a study of more than 80,000 managers in 400 companies to determine the most successful managerial behaviors. From that study, they drilled in on 12 key focus areas or traits - that best correlate with business success. These include:
- aligning each employee with the mission
- letting employees know what is expected
- tapping into the talents of employee
- talking with the employee about their progress
Any good CEO would ask the question, “how pervasive is the focus and execute problem, and what is potential payback?” The following data begins to open a vision of how deep and broad the opportunity might be:
- A Harvard Business Review article in February 2002, “Beware the Busy Manager” summarizes a ten-year management study. The findings were that fully 90% of managers squander their time in all sorts of ineffective activities. In other words, a mere 10% of managers spend their time in a committed, purposeful, and reflective manner.
- FranklinCovey conducted a study of 850 workers from many different companies and found that these (knowledge) workers typically spend 40% of their time on tasks related to the organization’s mission-critical objectives. “Imagine the impact on the organization if people were giving 80% or even 60% of their best efforts to your top priorities – instead of only 40%?”
- Knowledge workers make up 60% of the work force and are by far the organization’s largest investment. Knowledge workers typically give only around 40% of their time on organizational priorities.
- One estimate of the cost of productivity within the U.S. of “actively disengaged workers” is $300 billion.
- In a survey of management consultants reported that fewer than 10 percent of effectively formulated strategies were successfully implement.
- Fortune cover story of prominent CEO failures concluded that the emphasis placed on strategy and vision created a mistaken belief that the right strategy was all that was needed to succeed. “In a majority of cases – we estimate 70 percent – the real problem isn’t [bad strategy but]…bad execution.
So, we believe the biggest leadership challenge today centers around the substantive need for better focus and execution.
THE SOLUTION
Before jumping to conclusions about the solution, let’s take a look at how Stephen Cooper focuses and executes. Why Stephen Cooper? He is the interim chief executive & restructuring officer of the fallen energy giant Enron Corporation. He has one of the toughest jobs in America. Why was he selected? He is widely regarded as one of the top experts in reorganization. His job for over 30 years has been to take companies that are struggling and turn them around. An example of his success includes his work with Etec.
In January 1993, when Stephen Cooper arrived at Etec Systems Inc., the company was generating revenues at a rate of $56 million a year -- and red ink at the rate of $1 million a month. Worse, it had become an emblem of national decline. Stephen Cooper, the company’s new president, didn’t say much. Instead, he set an audacious goal by summer and generate revenues of $500 million by the year 2000 – and began creating a step-by-step plan to get there. Four years later (1997) Etec represented one of the most remarkable comebacks in Silicon Valley. The company is growing fast and making money. In 1996, revenues increased by more than 75%, to nearly $150 million. In 1998, revenue hit $288 million, with net income of $46.8 million.
So what did Stephen Cooper do to turn Etec around? Two simple disciplines are at the core of Etec's back-to-basics approach. First, there is a commitment to in-depth performance plans. All of Etec's 800 people have written personal plans that guide their decisions about what to work on when. The power of these plans is their ubiquity and uniformity. Each person identifies five to seven goals, creates metrics to track progress, and ranks each goal's importance relative to the others. And each person's plan -- from factory managers to the CEO -- must fit on one sheet of paper.
Phil Arnold, a precision-optics manager at Etec, runs a 40-person department in the company's Hayward factory. Like all factory managers, Arnold spends most of his time reacting to short-term crises. But amid the daily frenzy, he always knows what matters. Arnold has six specific goals that include increasing his department's production volumes by 30% and reducing cycle times by 10%. His most important goal has a 50% priority rating; his least important gets 5%. The 6 managers who report to Arnold have their own goals -- assignments to help the department achieve these main objectives. And the 34 shop-floor employees who report to these junior managers have daily checklists with tasks that relate to the managers' subgoals.
The value of this specificity, says consultant Daniels, is that it creates order in times of chaos: "It's not easy to maintain clarity when so much change is taking place. You need people to manage themselves on very short feedback horizons."
The second discipline at Etec is weekly reviews. Plans don't count for much unless people track their progress, and even the best plans need to be modified. Etec uses three rules to keep work reviews fast and focused. People should limit their status reports to a total of four minutes. For each goal, people should cover four elements: objectives, status, issues, recommendations. Finally, the reviews themselves should encourage joint problem-solving rather than just reporting.
….The end result is an organization where every person, every week, knows what they should be doing, how much weight it deserves relative to their other assignments, and how their goals relate to the goals of the people around them -- in short, an open system that's always running in high gear.
INFORMATION SOURCES
- Beware the Busy Manager. Harvard Business Review. February 2000.
- Closing the Personal Productivity Gap: Putting First Things First. (FranklinCovey, 2001)
- What your disaffected workers cost. Gallup Management Journal, 1:1 [15 Mar 2001]
- Walter Kiechel, “Corporate Strategists under Fire,” Fortune, 27 December 1982, 38
- R. Charan and G. Colvin, “Why CEO’s Fail,” Fortune, 21 June 1999
- Drake Beam Morin Inc.
- The CEO Trap Looking for superheroes to delivery sky-high growth ensures disappointment. Business Week. December 11, 2000,
- Why CEOs Fail? Fortune. June 21, 1999.
- Rating the Management Gurus. BusinessWeek. October 15, 2001.
- Why CEOs Fail? Fortune. June 21, 1999.
- J. Low and T. Siesfield, Measures That Matter (Boston: Ernst & Young, 1998).
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