Ensure that everyone in your company knows which decisions and actions they’re responsible for.The following levers matter most for successful strategy execution: Decision Rights Tackle decision rights and information flows first, and only then alter organizational structures and realign incentives to support those moves.
Ensuring information flows where it’s needed-such as promoting managers laterally so they build networks needed for the cross-unit collaboration critical to a new strategy.Clarifying decision rights-for instance, specifying who “owns” each decision and who must provide input.Research by Neilson, Martin, and Powers shows that execution exemplars focus their efforts on two levers far more powerful than structural change: Costs plummeted initially, but the layers soon crept back in. For example, one company reduced its management layers as part of a strategy to address disappointing performance. Though structural change has its place in execution, it produces only short-term gains. That’s because they overrely on structural changes, such as reorganization, to execute their strategy. Unfortunately, most companies struggle with implementation. But only solid execution keeps you there. How can you make the most educated and cost-efficient decisions about which change initiatives to implement? The authors have developed a powerful online diagnostic and simulation tool that can help you test the effectiveness of various approaches virtually, without risking significant amounts of time and money.Ī brilliant strategy may put you on the competitive map. Surprisingly, the most effective structural moves turn out to be promoting people laterally-and more slowly. That holds true for structural moves as well. Motivators-like performance appraisals that distinguish high, adequate, and low performers and rewards for fulfilling particular commitments-are also important but are most effective when applied after decision rights and information flows have been addressed.
Managers communicate the key drivers of success, so frontline employees have the information they need to understand the impact of their day-to-day actions. As a result, decisions are rarely second-guessed, and accurate competitive information quickly finds its way up the hierarchy and across organizational boundaries. The single most common attribute of such companies is that their employees are clear about which decisions and actions they are responsible for. From this data they have distilled-and ranked in order of importance-the top 17 traits exhibited by the organizations that are most effective at executing strategy. That conclusion is borne out by the authors’ decades of experience as Booz & Company consultants and by the survey data that they have been collecting for almost five years from more than 125,000 employees of some 1,000 organizations in more than 50 countries. Then, the right structures and motivators tend to fall into place. Far more effective would be to clarify decision rights and improve the flow of information both up the line of command and across the organization. Comments welcome.When a company finds itself unable to execute strategy, all too often the first reaction is to redraw the organization chart or tinker with incentives. Collectively, the evidence suggests that managers have self-serving attribution bias and this bias has implications for corporate policies. These firms also tend to have higher leverage, are more likely to repurchase stocks, and are less likely to issue dividends. Firms whose managers have more SAB have higher investment-cash flow sensitivity and experience more negative market reactions around acquisition announcements. Consistent with this argument, managers with more SAB are more likely to issue forward-looking statements and make earnings forecasts, the tone (e.g., positive versus negative) of their forward-looking discussions has smaller variation, and their earnings forecasts tend to be more optimistic. A consequence of SAB is overconfidence (i.e., overestimating the mean and underestimating the variance of future cash flows). Consistent with the existence of managerial SAB, I find that managers tend to use more first-person pronouns (relative to second- and third-person pronouns) in the Management Discussions and Analysis Section of the 10-K filings when firm performance is better. The self-serving attribution bias (“SAB”) refers to individuals taking responsibility for good outcomes and blaming others for bad outcomes.