Are you ready to rebound?

By

Donald Sull

Source : Harvard Business Review March 2010 issue

Before the recession, many companies relied on boom-time macroeconomic conditions (low
interest rates, ready capital, consumer confidence, and the like) to drive profitable growth. As a
result, organizational reflexes slowed, the sinews required for quick action atrophied. Now,
however, firms face tough market conditions and irreducible uncertainty along critical
dimensions—among them, inflation or deflation, exchange rates, and regulation, as
governments intervene in more sectors of the economy. And, of course, the usual sources of
market turbulence—geopolitics, technological innovation, and competitive dynamics—remain.

As companies crawl out of the recession, it’s not enough for leaders to craft the “perfect”
strategy, put their heads down, and make it happen, confident that the market will cooperate.
Instead, they must set a broad strategic direction but remain open to unexpected opportunities
that appear along the way. More than ever, companies need agility—the capability to
consistently spot and execute on unexpected opportunities before rivals do.

So how can managers assess whether their organizations are fit enough for the new business
environment? How can they identify the obstacles preventing their organizations from
executing effectively, and how can they overcome those barriers?

Over the past 10 years, I have studied firms that excelled at execution in some of the world’s
fastest-changing markets, such as China and Brazil, and most unforgiving industries, like
financial services and fast fashion. Through my research, I’ve identified common obstacles that
undermine firms’ ability to execute on their established strategies and take advantage of
unexpected opportunities. By asking themselves the seven questions below, managers can
quickly assess their companies’ readiness to rebound.

Question 1: Do you miss opportunities that others spot?

After massive investments in sophisticated IT systems, many companies continue to miss

market shifts that their rivals exploit. With IT investments, however, it’s not how much you
spend but how you spend it. To continually identify gaps in the market, firms need real-time
data and the ability to share it widely throughout the organization. Those hard data must be
supplemented with direct observations from the field.

Question 2: Are your hydraulics broken?

Organizational hydraulics are the mechanisms senior executives use to translate corporate
objectives into aligned action by individuals across the organization—that is, processes to set
strategic priorities, cascade objectives, and measure employees’ progress in achieving goals. In
many companies, execution stalls when top executives deluge the organization with multiple—
and often conflicting—priorities.

Question 3: Do you reward mediocrity and call it teamwork?

In many organizations, variable pay represents a tiny fraction of overall compensation, and the
range of possible bonuses is quite narrow, barely distinguishing between top and
underperforming employees. Executives socialize bonuses in the name of teamwork, arguing
that differential payouts could stifle cooperation and long-term thinking. This is a mistake. To
ensure execution, organizations should recognize and reward individuals who do what they say
they will with outsized bonuses. Paying for performance not only ensures execution but also
attracts and retains ambitious employees and encourages them to execute on current
priorities.

Question 4: Are your core values a joke?

Companies that execute on their strategies quickly and effectively tend to construct solid
organizational hardware: information systems, corporate priorities, hydraulics, incentives, and
so forth. But they also program in software—that is, the right culture, people, and leadership
for execution. Indeed, the most agile organizations I have studied share a core set of values:
achievement that recognizes and rewards employees for setting and achieving ambitious goals;
ownership to take personal responsibility for results; teamwork to foster coordination;
creativity to challenge the status quo; and integrity to offset the temptation to cut corners that
can arise when employees strive to hit ambitious performance targets.

Question 5: Are you talking about the wrong things?

Managers spend approximately three-quarters of their time in discussions—hallway

encounters, formal meetings, phone chats, and e-mail exchanges. So an organization’s
execution depends on how well managers, up and down the organization, are able to set up
and lead discussions for action. Execution requires four distinct types of conversations: making
sense of volatile situations; deciding what to do, not do, or stop doing; soliciting and monitoring
commitments to deliver; and making corrections midcourse.

Question 6: Have your Vikings become farmers?

Executives who excel at execution resemble Nordic Vikings, who attacked when they saw an
unprotected spot and retreated when they realized they couldn’t win, maneuvering their
longboats toward the next opportunity. Once Vikings seized a bit of land, however, they often
remained to farm it. Over time, they came to value the security of protecting what they had
more than the adventure of pursuing new opportunities. Organizations are susceptible to a
similar dynamic. As a business matures, early entrepreneurs may leave for new adventures or
settle into safe routines at the firm. New employees join the company for its perceived stability,
not for adventure. What started as a Viking outpost becomes a farming community. Firms need
farmers, of course. But companies with too few Vikings on the payroll struggle to execute with
sufficient urgency.

Question 7: Do you rely on heroic leadership?

Senior executives who dash from crisis to crisis are a sign of organizational weakness, not
leadership strength. The economic crisis forced many executives into firefighting mode, but
relying on ad hoc management in the postrecession economy is unacceptable. Senior leaders’
most important job is to build the organizational hardware and software for execution and
prevent it from falling into disrepair. Leaders must guard the culture—walking the talk on core
values, ensuring that career advancement is based on adherence to those values, and
sometimes walking away from attractive opportunities that would dilute the culture, such as
rapid growth or a merger with a dysfunctional company.

About the author:

Donald Sull (dsull@london.edu) is a professor and faculty director of executive education at

London Business School. His most recent book is The Upside of Turbulence (HarperCollins,
2009), from which some of the ideas in this article were adapted.