Strategy execution is clearly a key topic on the agenda of Boards and Executive Committees. In the work we do for our clients the question “how can we become more effective in turning our strategy into concrete results?” is very often one of the main questions. (In a previous article I mentioned the main reasons for this increased need for effective strategy execution). The increased focus by senior leadership on strategy execution is a good thing. If you’re not fast and effective enough at it, you quickly can get into trouble.
“Five percent of the challenge is the strategy. Ninety-five percent is the execution. At the end of the day, the most disciplined organization, the organization which gives a lot of importance to processes, ends up prevailing.” (Carlos Ghosn)
When we talk about improving strategy execution we actually talk about increasing our ability to deal with continuous change, and doing this successfully as an organization.
It is simple: the better the organization becomes at achieving strategic priorities and results, the more confidence and trust will grow within the organization. And the outside world (customers, suppliers, partners, the public) will recognize this.
Unfortunately not. Defining the right approach depends on the business sector, corporate culture, business model, market developments, etc. But the following list of questions might be useful. Leaders can use these questions as a checklist to analyse for themselves or together with their team how the organization is doing, and which points would need further attention.
What would you add to this list? I look forward to reading your reactions!
Like this post? Share it with others! Join us and register at the top of this page to stay up to date with LeadershipWatch articles and news. Your personal information will be kept strictly confidential. Photo: Shutterstock.comAad is a global business advisor, change leader, executive team facilitator, leadership coach, and frequently asked keynote speaker. He is founder and managing partner at HRS Business Transformation Services where he works with senior executives and leadership teams globally in three key domains: ‘leading complex change’, ‘cross-cultural leadership’, and ‘post-merger integration’. Find out more about Aad and our services. If you would like to invite Aad to your organization contact us.
Senior leaders regularly share with me their concerns about the level of collaboration in the company. They often mention the lack of cross-organizational collaboration they experience, and how this is hindering the company to execute its strategy successfully. They see how the company is not fast or flexible enough, how people and units do not align and combine their efforts quickly enough, how achieving results takes too much time, or how objectives are not met at all. They see it as an important issue and ask me for advice on how to improve the quality of the collaboration (mind you, the quantity is not always the problem).
I often witness the following reflexes in the behavior of executives when they are confronted with collaboration issues: intervene in the structure to force collaboration / change the composition of teams / have HR organize a collaboration skills training for employees. And yet, the results of these interventions are limited or at best only a part of the solution. Why?
Apparently some leaders do not see creating effective collaboration as an essential part of their own role. They believe strategy development is their role, not the execution process. ‘That is for line-managers and their teams, I do not have time for that; it is their job.’ When collaboration issues occur they are delegated to lower management or the HR department. This may have worked in the past, but in today’s business reality this is not working! What has changed?
Strategy execution today requires organizations to develop more flexibility, adaptability, and continuous navigation. People in organizations struggle with this!
Successful strategy execution requires leaders to develop new ways of collaboration. New ways in order to connect and align people, teams, units, regions across organizational borders. Connecting people and teams in such a way that information, knowledge, expertise, ideas and solutions get exchanged and aligned faster and more flexible throughout the organization. New ways to really create collective focus on priorities, resources, and actions. Ways of collaboration that stimulate people to deal differently with accountability. Ways of collaboration that help people to develop and increase their adaptability. Collaboration that is disciplined enough and leads to concrete results.
Successful strategy execution requires leaders to develop new ways of collaboration.
Two reasons why collaboration should be a top concern for every leader.
What are your thoughts? What should leaders do to create effective collaboration? What do you see working well?
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Aad is a global business advisor, change leader, executive team facilitator, leadership coach, and frequently asked keynote speaker. He is founder and managing partner at HRS Business Transformation Services where he works with senior executives and leadership teams globally in three key domains: ‘leading complex change’, ‘cross-cultural leadership’, and ‘post-merger integration’. Find more about Aad and our services. If you would like to invite Aad to your organization contact us.
Do business leaders and HR departments pay sufficient attention to equipping people preparing for international assignments, as well as managers leading cross-cultural teams, with sound cross-cultural leadership skills? Research conducted at Dutch Neyenrode Business University suggests they don’t. And that’s a pity, the same research points out: costs related to failed international assignments are sky high, while the one secret ingredient that turns the odds in favor of success – developing the right cross-cultural mindset – is something that can be trained and coached.
In our fast-paced globalized economy, international assignments are on the rise. According to KPMG’s yearly survey of global assignment practices, companies generally make it easier for employees and their families to work and live abroad, both for short- and longer-term assignments. They also invest significant amounts of time and money to make expatriate assignment a success.
Unfortunately, says Dutch economist Matthias Spaink who recently presented the results of his PhD study on “Characteristics of Intercultural Competence among International Business Assignees”, many such international assignments fail. ‘Failure rates of expatriate assignments have been estimated anywhere in between 16 and 50 percent, with financial consequences ranging from $200,000 to $1.2 million’, according to Spaink. Failed cross-cultural assignments can be very painful for the expat and his or her family, returning home without a sense of accomplishment. And they are always painful for the company concerned, both in terms of direct costs and in terms of reputational damage.
‘So what went wrong?,’ the question then becomes. Neyenrode’s Spaink, himself a seasoned businessman, decided to dig into the subject. ‘I wanted to provide more insight in key factors determining intercultural competence among Western international assignees, so that Western multinational companies can improve their decision making on both selection and training/development of international assignees, ultimately leading to reduced failure costs related with failed international assignments.’
What does his research (click here for background information) tell us? What determines a person’s effectiveness in cross-cultural business situations?
The key ingredient determining success in unfamiliar cultural settings is: MINDSET.
Sounds logical, right? And yet, companies pay very little attention to this aspect according to Spaink (which is in line with what I witness when supporting multinational companies and their leaders in improving cross-cultural effectiveness).
Not in the recruitment & selection process, where the focus is mainly on technical and functional competences.
Not in training & development processes. These traditionally focus on knowledge and skills as key elements of expat trainings. In fact, the development of attitudes is equally, if not more, important. Most importantly attitudes like “being open for the unexpected”, “strong self identity” and “seeking for diversity”.
In other words, preparing people by simply training the do’s and don’ts of cultural etiquette is not enough.
Cross-Cultural Booster Programs (find out more)
I see a huge potential for companies to increase their success in managing international expansions and assignments, and the cross-cultural challenges these bring. It is essential to pay more attention to stimulating people to develop an effective cross-cultural mindset. By incorporating this in the learning & development processes of the organization, by making it an important aspect of leadership development and team development programs. Not by focusing only on training, but by also putting in place on the job coaching and mentoring programs. And I mean coaching and mentoring in which the leaders of the organization play a central role.
Leaders who are able to support and coach their people and teams to deal effectively with cross-cultural challenges will boost the company’s success (read more here).
What are your thoughts? Do companies pay enough attention to developing cross-cultural competence? What is your experience?
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Aad is a global business advisor, change leader, executive team facilitator, leadership coach, and frequently asked keynote speaker. He is founder and managing partner at HRS Business Transformation Services where he works with senior executives and leadership teams globally in three key domains: ‘leading complex change’, ‘cross-cultural leadership’, and ‘post-merger integration’. Find out more about Aad and HRS’ services. If you would like to invite Aad to your organization contact us.
A senior executive recently shared with me: “I have been explaining our new strategy for months, and last week in a leadership meeting I got astonishing feedback. The main message was ‘we have no clue where we’re going with our strategy’. How is this possible?! Defining a good strategy, and executing this strategy successfully are two separate things. Why does strategy execution often fail?
The CEO of Philips, Frans van Houten, recently remarked: “We often have good ideas, but we have to execute these well, otherwise they are useless.”
In the words of former CEO of Royal Dutch Shell, Jeroen van der Veer: “The biggest danger for an organization is that you go too slow. You need to make clear choices and swiftly execute these.”
Defining a good strategy, and executing it successfully are two separate things.
In my work I see a lot of executives struggle with the switch between strategy development and strategy execution. Executive teams put a lot of time and effort in defining the new strategy, they put it on paper, communicate it, and expect the organization to take over and roll it out as was communicated. But that hardly ever happens …
Successful strategy execution (especially in today’s business environment with a high rate of change and complexity) requires leaders to be aware of three essential pitfalls. Pitfalls that occur regularly, and that you maybe also witness in your organization.
Communicating your strategy in a way that does not lead to a collective focus is very likely creating confusion, scattered actions, a lack of motivation, or even chaos. But still some leaders believe that a road show with a deck of slides filled with data and charts will do the trick.
Successful leaders approach it differently and pay special attention to creating a strategic road map, which communicates a clear message to everybody. And they engage their team or a group of key stakeholders in creating this road map; they make it ‘our’ road map. Their strategy road map describes:
A powerful strategy road map is channeling the energy and actions of the people involved. It creates focus and drive instead of a feeling of ‘more workload’. Make no mistake, having a collective focus has a direct impact on motivation and performance (read more about this in this New York Times article), and therefore on successful strategy execution. A good strategy road map stimulates this.
For more on our strategy execution services, click here.
Intermediate developments and issues that absorb people’s attention easily sidetrack strategy execution. Leaders are sometimes not aware of the negative consequences this can have on the longer-term success of their company. They sometimes even trigger this sidetracking by jumping on operational issues, which not necessarily have strategic relevance. They sometimes allow people to postpone strategy execution because of these operational issues. By doing this they create a feeling among employees that strategy execution is something that comes on top of their daily work; something that is actually less important.
Successful leaders understand the importance of creating a culture of disciplined execution. Jim Collins and Morten T. Hansen, the authors of ‘Great by Choice’, describe what this means in their article ‘How to Manage Through Chaos’ with the following nice example:
Imagine you’re standing with your feet in the Pacific Ocean in San Diego, looking inland. You’re about to embark on a 3,000-mile walk, from San Diego to the tip of Maine. On the first day you march 20 miles, making it out of town. On the second day you march 20 miles. And again, on the third day you march 20 miles, heading into the heat of the desert. It’s hot, more than 100˚F, and you want to rest in the cool of your tent. But you don’t. You get up and you march 20 miles. You keep the pace, 20 miles a day. Then the weather cools, and you’re in comfortable conditions with the wind at your back, and you could go much farther. But you hold back, modulating your effort. You stick with your 20 miles.
Then you reach the Colorado high mountains and get hit by snow, wind, and temperatures below zero — and all you want to do is stay in your tent. But you get up. You get dressed. You march your 20 miles. You keep up the effort — 20 miles, 20 miles, 20 miles — then you cross into the plains, and it’s glorious springtime, and you can go 40 or 50 miles in a day. But you don’t. You sustain your pace, marching 20 miles. And eventually, you get to Maine.
Now, imagine another person who starts out with you on the same day in San Diego. He gets all excited by the journey and logs 40 miles the first day. Exhausted from his first gigantic day, he wakes up to 100˚ temperatures. He decides to hang out until the weather cools, thinking, “I’ll make it up when conditions improve.” He maintains this pattern — big days with good conditions, whining and waiting in his tent on bad days — as he moves across the western United States. Just before the Colorado high mountains, he gets a spate of great weather and he goes all out, logging 40- to 50-mile days to make up lost ground. But then he hits a huge winter storm when utterly exhausted. It nearly kills him and he hunkers down in his tent, waiting for spring. When spring finally comes, he emerges, weakened, and stumbles off toward Maine. By the time he enters Kansas City, you, with your relentless 20-mile march, have already reached the tip of Maine. You win, by a huge margin. (read full article here)
Successful companies are recognized for being excellent in defining and achieving their strategy, but this is always related to having a strong culture of disciplined road map execution.
When I am asked by leadership teams to advise and support them with their strategy execution one of the questions I always ask is: ‘In what sense has your strategy road map changed over the past year’? Quite often the answer is ‘not much really’, or ‘oh yes, maybe we should revisit our road map once again’.
A successful strategy road map is not a static document. It is actually never complete, but always evolving. Your strategy road map should tell a story that people listen to and are eager to follow. It should be checked, discussed, updated, and communicated on a regular basis. The aim is to create a kind of rhythm, like a drumbeat, in the organization. Everybody knows it and it is simple for everybody to follow. Separate people can be the ‘owner’ of the strategic priorities in the road map. This means they update their part of the road map on a regular basis, communicate it, and gather feedback from colleagues. Business environments change, so do our strategic priorities, and so does our road map. If it never changes (or worse, nobody can remember it) something might be wrong.
Let me know: how do you stimulate successful execution? How do you engage your team in this process and create disciplined execution? Share your comments below!
Like this post? Share it with others! Join us and register at the top of this page to stay up to date with LeadershipWatch articles and news. Your personal information will be kept strictly confidential. Photo: FutUndBeidl/Flickr (Creative Commons)___________________
Aad is a global business advisor, change leader, executive team facilitator, leadership coach, and frequently asked keynote speaker. He is founder and managing partner at HRS Business Transformation Services where he works with senior executives and leadership teams globally in three key domains: ‘leading complex change’, ‘cross-cultural leadership’, and ‘post-merger integration’. Find out more about Aad and HRS’ services. If you would like to invite Aad to your organization contact us.
Business leaders do not often take the time to read (e)books. Are they making a mistake? Why do great leaders read books?
“Each employee is required to read one recommended book per year.” Here is what Chinese business tycoon Wang Jianlin, who leads the Dalian Wanda Group, asks his entire staff to do (The ‘Read One Book Per Year’ requirement is part of the company’s official mission statement).
While the book lover in me does not believe that reading should be mandatory, Mr. Wang’s action made me reflect on the possible leadership advantages of cultivating reading habits. Can reading – and not just expert articles and business books but also novels, narrative history and well written biographies for instance – make people better leaders?
Scientific research and experience suggest it can. Here is how.
Empathy, or the ability to step into other people’s (business partners, team member, clients) shoes and understand their feelings and perspectives, is a crucial leadership quality. Empathy, research suggests, is a something we can train. By showing genuine interest in the people we meet and work with, for instance, and be attentive listeners. Or by reading books. Psychologists David Comer Kidd and Emanuele Castano of the New School for Social Research have shown that reading, literary fiction in particular, enhances one’s ability to understand other people’s emotions. In a series of experiments, 1,000 participants were randomly assigned texts to read. The researchers then used a variety of techniques to measure how accurately the participants could identify emotions in others. Scores were consistently higher for those who had read literary fiction than for those with non-fiction texts. Discover more about how reading books can improve empathy.
When Jane Goodall, the 80-year young global leader in the effort to protect chimpanzees and the environment, spoke in Brussels in May 2014, she shared the following story:
‘I had the most amazing mother. She supported this love for animals that I had (…). She found books for me to read, about animals, because she thought ‘that will make Jane read faster.’ When I was ten years old, I found for myself a little book, called ‘Tarzan of the Apes.’ I had just enough pocket money to buy it, and I took it home with me, and took it up my favorite tree and I read it from cover to cover. Of course, I fell in love with Tarzan. This glorious lord of the jungle, of course I fell in love with him. Living with the animals… And what did Tarzan do? He married the wrong Jane! That is when I knew: I will grow up, I will go to Africa, I will live with animals and I will write books about them.’
What makes Goodall such a charismatic leader? Why do people all over the world listen to her message – ‘There is still much beauty left, but we have to get together to save it, for our children, and our children’s children’ – feel inspired by it, and decide to take action? Because she has such a strong and compelling vision. And it’s a book that helped her to create it.
If you only read the books that everyone else is reading, you can only think what everyone else is thinking. – Haruki Murakami
In our globalized economy, a leader’s ability to build successful teams and collaboration across cultures has become a crucial competency.
Reading across cultures can help you to develop your own cross-cultural leadership. By helping you to see beyond the cultural do’s and don’ts, and focus on the people behind unfamiliar habits and behavior. As Chinese writer Xue Xinran tells Westerners dealing with Chinese people: ‘Understanding the Chinese is just like how you would try to understand a tree. It is not just the leaves and the branches, your have to understand the roots as well.’
In addition, reading across cultures will likely make you question your own assumptions and business habits more. Research by Harvard Business School’s Roy Chua shows that leaders who develop this kind of ‘cultural metacognition’ build stronger trust, and increase cross-cultural effectiveness. Find more about Roy Chua’s findings here.
To conclude: history is littered with business leaders who successfully led change, often in the face of obstacles at least as big as leaders face today. Reading their stories can give you fresh perspectives, and make the leadership challenges that you face look less daunting.
Some examples:
Andrew Carnegie, born poor, built a steel imperium in times of unprecedented change, and proceeded to give his fortune away.
Gerard Heineken, recently brought to life by Dutch writer Annejet van der Zijl, bought a small brewery in Amsterdam – even when he knew nothing about beer and people at the time did not like drinking it. Thanks to Heineken’s leadership, that small brewery became the Heineken company the whole world knows today.
Or read how a more recent business leader, Richard Branson, ‘survived, had fun and made a fortune doing business his way’.
Books serve to show a man that those original thoughts of his aren’t very new after all. – Abraham Lincoln
Let me know:
If you could name one book to recommend to others, which one would it be? Share it below!
Like this post? Share it with others! If you want to receive upcoming LeadershipWatch articles and news in your mailbox, then register at the top of this page. Your personal information will be kept strictly confidential.___________________
Hanneke is Research Partner and Writer at HRS Business Transformation Services, and author of several books. Her research focuses on how leaders build successful organizations by increasing the quality and effectiveness of people collaboration, particularly in cross-cultural environments. She has a special interest in China and East-West relations. Her work is a constant source of refinement and enrichment for the HRS alignment methodology. Find out more about Hanneke and HRS services. If you would like to invite us to your organization, contact us here.
For multinational (and other) enterprises, competitive advantage and successful strategy execution increasingly depend on getting cross-company collaboration right. Executives understand that creating a culture of collaboration and trust, and building and leading teams that work effectively across company units has clear benefits (increased agility, higher level of innovative thinking, cost savings, etc.). ‘But what about accountability?’, I often hear. ‘How to ensure that collaboration in my teams is balanced with personal accountability?’ And it is a good question! The goal of collaboration, after all, is not collaboration but results (read more about the importance of successful collaboration).
And in order to achieve results, the last thing you need is a team where people hide behind each other and don’t feel personally accountable for their actions, where teams are merely brainstorm groups without taking ownership for results. Nevertheless, this is often what happens! You can assign tasks, but you cannot force people to be accountable. Accountability is an act of will.
A prerequisite for successful team collaboration is that team members embrace accountability. Accountability in the sense that they feel ownership for the team’s objectives, feel committed to achieve these objectives, and feel personally responsible for their contribution to the team’s success. Leaders play a crucial role in stimulating this.
These are 4 essential tips that help you create a culture of accountability, based on years of experience in working with teams in different organizations, business environments, and cultures.
Your team exists for a reason. What is the background/reason for establishing this team? What should be our contribution as a team to the organization and its strategy? What are our objectives? How are others depending on our output as a team? What are our key drivers for successful performance as a team? The more team members feel involved in defining the answers to these questions, the more they will embrace accountability.
Don’t:
Do:
Team members start to feel accountable when they feel they are in charge of their own success. A feeling of being accountable is often hindered by a lack of clarity about the results we expect from each other and from us as a team.
Don’t:
Do:
When everything goes well, practicing accountability– and taking credit – is easy. But what if things are not going as planned, what if expected results are not met? If you really want to know the level of accountability in your team, watch what happens when something goes wrong, and support your team to respond effectively.
Don’t:
Do:
Start by being accountable yourself. Like Carlos Ghosn did, the French-Lebanese-Brazilian CEO credited with turning around the Japanese carmaker Nissan and making the Renault-Nissan alliance a success. When he landed in Japan in 1999, he shook his head in disbelief: ‘If the company did poorly, it was always someone else’s fault. Sales blamed product planning, product planning blamed engineering, and engineering blamed finance. Tokyo blamed Europe, and Europe blamed Tokyo.’ (read his HBR article here ).
How did Ghosn succeed in transforming a blame culture into a culture of personal accountability? By setting the right example, and explicitly assuming his own accountability upfront. When he announced the Nissan revival plan, he publicly declared he would resign if the company failed to accomplish its objectives. ‘Judge me’, he told the world. The objectives were achieved, a year ahead of schedule.
It is in your own behavior that team members will look for inspiration. Set the right example, and you will be on your way to building a team that embraces accountability.
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Photo: shutterstock.com
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Aad is a global business advisor, change leader, executive team facilitator, leadership coach, and frequently asked keynote speaker. He is founder and managing partner at HRS Business Transformation Services where he works with senior executives and leadership teams globally in three key domains: ‘leading complex change’, ‘cross-cultural leadership’, and ‘post-merger integration’. Find out more about Aad and HRS’ services. If you would like to invite Aad to your organization contact us.
Do executive leaders always have a clear idea of what powerful collaboration looks like? Do they always understand what it takes to build high-quality, result-focused collaboration between and across teams, and how they themselves can set the right example for the organizations they lead? What can we learn from Abraham Lincoln when it comes to collaboration?
Today in 1865, Abraham Lincoln was assassinated, and it so happens that the highest standard of powerful collaboration I know was set by Lincoln and his Secretary of War, the short and sturdy Edwin Stanton.
Four things stand out in the way Abraham Lincoln collaborated with his War Secretary to lead his country through the civil war:
Don’t just take my word for it, and read what Stanton’s private secretary A.E. Johnson wrote about their collaboration back in 1891:
“No two men were ever more utterly and irreconcilably unlike. The secretiveness, which Lincoln wholly lacked, Stanton had in marked degree; the charity, which Stanton could not feel, coursed from every pore in Lincoln. Lincoln was for giving a wayward subordinate seventy times seven chances to repair his errors; Stanton was for either forcing him to obey or cutting off his head without more ado. Lincoln was as calm and unruffled as the summer sea in moments of the greatest peril; Stanton would lash himself into a fury over the same condition of things. Stanton would take hardships with a groan; Lincoln would find a funny story to fit them. Stanton was all dignity and sternness, Lincoln all simplicity and good nature…yet no two men ever did or could work better in harness. They supplemented each other’s nature, and they fully recognized the fact that they were a necessity to each other.”
“I cannot add to Mr. Stanton’s troubles. His position is one of the most difficult in the world. Thousands in the army blame him because they are not promoted and other thousands out of the army blame him because they are not appointed. The pressure upon him is immeasurable and unending. He is the rock on the beach of our national ocean against which the breakers dash and roar, dash and roar without ceasing. He fights back the angry waters and prevents them from undermining and overwhelming the land. Gentlemen, I do not see how he survives, why he is not crushed and torn to pieces. Without him I should be destroyed. He performs his task superhumanly. Now do not mind this matter, for Mr. Stanton is right and I cannot wrongly interfere with him.”
Or how is this for an effective order: ‘Appoint this man, regardless of whether he knows the color of Julius Caesar’s hair or not. A. Lincoln.’
Here’s the letter Stanton, devastated by Lincoln’s death, received from Lincoln’s private secretary John Hay:
“Not everyone knows, as I do, how close you stood to our lost leader, how he loved you and trusted you, and how in vain were all the efforts to shake that trust and confidence, not lightly given and never withdrawn. All this will be known some time of course, to his honor and yours.”
How did the two men, you might wonder, get to know each other? They first met during the trial of a patent case, six years before Lincoln was elected president. Lincoln, then an unknown lawyer, had worked day and night in preparation of his speech for the defendant. When he reached out to Stanton, the lead counsel, he was greeted with the words “Why is this long-armed ape here?” Stanton, educated at a fine university (Lincoln was self-taught), didn’t hide the fact that he looked down on Lincoln. He refused to let him give his speech. He never asked him out for lunch. He ignored him the entire trial.
Why did Lincoln, hurt and humiliated to the bone, sat down on his pride when he needed a Secretary of War? Why did he call Stanton to the White House six years later? Because he had seen how talented he was, and knew he would be the right man for the job. Now that’s collaborative leadership. That is why Lincoln still sets a great example for executive leaders, and indeed all of us, today.
‘Now he belongs to the ages’, Stanton said when Lincoln passed away in the Petersen boarding house right across Ford’s Theatre on April 15, 1865, 7.22 AM. So think about Lincoln and how he mastered the art of collaboration, and pass this story on.
Hanneke is Research Partner and Writer at HRS Business Transformation Services, and author of several books. Her research focuses on how leaders create success by increasing the quality and effectiveness of people collaboration, particularly in cross-cultural environments. She has a special interest in China and East-West relations. Her work is a constant source of refinement and enrichment for the HRS alignment methodology. Find out more about Hanneke and HRS services. If you would like to invite us to your organization, contact us here.
Inventing new and better products, technologies, and business models. Experimenting. Realizing smart breakthroughs. We all know that innovation is crucial to stay competitive in today’s business world. Much has been written on how to boost innovation, but do executive leaders pay enough attention to the one important aspect needed for new ideas to bear fruit: creating a culture of transparency and openness in which people dare to share successes as well as mistakes?
Here is what Tesla Motors CEO Elon Musk says about it:
‘Companies are often too conservative. They want to innovate, but create the wrong conditions, leading to stagnation. In many organizations, people do not dare to think big and take the necessary risks. If they fail, they get punished heavily, and lose their jobs or bonuses. This leads to risk averse behavior.’ (Elon Musk quoted in Dutch Managament Team Magazine, November 2013)
‘Companies are often too conservative. They want to innovate, but create the wrong conditions, leading to stagnation.’ – Elon Musk
Asked how he ensured his companies (Tesla Motors, Space X, Solar City) remained innovative, and what he would recommend to other people leading innovation, the 42-year old CEO explained:
‘My philosophy is: reward people who come up with daring ideas that work, and only ‘punish’ them lightly if they fail (…). But I expect my people to bring me the bad news immediately and clearly. Everybody makes mistakes, but somebody who doesn’t tell me about it, wants to solve things on his/her own and lets the situation spiral out of control: that person is in trouble.’
What can we take from Musk’s experience? When it comes to creating an environment where innovation thrives, what can leaders do to encourage that culture of transparency and openness?
There is a direct relationship between your communication style and the openness the other person will show. In this earlier article you find useful advice on which specific communication skills stimulate openness (the article refers to a situation with a cross-cultural team, but the communication tips are also applicable in other situations).
Read here specific tips on how to break through the fear of mistakes.
Musk’s advice made me think of something I read the other day: the story of explorer Henry Hudson’s first journey as a ship commander in 1607. Europe’s growth back then was running out of steam, much as it is today. The English Muscovy Company, dreaming of new horizons, hired Henry Hudson to find a northern trading route to Asia. Hudson, in for an adventure, tried something nobody had ever tried before. Instead of sailing northwest (via Canada) or northeast (around Russia), Hudson steered his 25-meter sailing ship straight up north, in the direction of the North Pole. Hudson and his crew of twelve (amongst which his own son John) battled their way through mist and ice. They lived off rotten bear meat, survived heavy storms and a head-on collision with a whale. Hudson’s first undertaking was, in the words of Russell Shorto who wrote about it in his book ‘The island at the center of the world’, ‘completely insane.’ As insane as some of the decisions Elon Musk took as he set out to build Tesla Motors (premium electric cars) and Space X (quickly reusable rocket technology that could be used to colonize other planets)? You tell me.
How did the Muscovy Company react when Hudson returned empty-handed, reporting that it had all been for nothing, that there was no passage via this route to be found?
Did they yell at Hudson for not living up to expectations?
Did they fire him?
Did they consider the trip to be a total loss?
Far from it! Hudson had seen numerous whales in the region (this opens up new hunting possibilities, they thought). One route could now be crossed of the list of possible passages to Asia (progress, they thought). The Muscovy Company listened to the details of Hudson’s stories, saw the trip as a success, and stimulated Hudson to have another go at it.
Henry Hudson, by the way, ended up discovering the fertile grounds that would become New York.
Photo: Robert Scoble/Flickr (Creative Commons) If you want to receive upcoming LeadershipWatch articles and news in your mailbox, then simply register at the top of this page. Your personal information will be kept strictly confidential.Hanneke is Research Partner and Writer at HRS Business Transformation Services, and author of several books. Her research focuses on how leaders create success by increasing the quality and effectiveness of people collaboration, particularly in cross-cultural environments. She has a special interest in China and East-West relations. Her work is a constant source of refinement and enrichment for the HRS alignment methodology. Find out more about Hanneke and HRS services. If you would like to invite us to your organization, contact us here.
Let me make a bold statement: When it comes to mergers & acquisitions we spend approximately 75% of our energy in the pre-deal phase on financial, legal, and technical aspects to come to a deal, but when it comes to the actual post-deal value creation it turns out that approximately 75% of our energy is taken by people aspects. This tells us something, doesn’t it? It is no secret that many mergers and acquisitions, a whopping 70 percent researchers claims, fail to achieve their promised value. And when that happens, the costs can be painfully clear: synergies fail to materialize, morale drops, people start heading for the exits. If we really want to create long-term value out of mergers and acquisitions we need to pay more attention to people aspects in the pre-deal phase.
A couple of days ago, I had a pleasant chat with the executive leader of a multinational company, which had recently acquired, and successfully integrated, another company. What preparatory action, I asked this executive, did he take to maximize the chance that this investment would live up to, even outperform, initial expectations? What aspects, in addition to choosing the right company and doing the necessary legal financial homework (due diligence), did he and his team pay close attention to? What, in his view, was the secret to a successful post-merger integration?
Here is what he said.
“The secret words are ‘people’ and ‘together’: creating something TOGETHER that will be, quite literally, more valuable than what existed until now. In my very first meeting with the CEO of the company we were looking to acquire I asked what the ground rules would be of what we wanted to achieve together. They thought we had a pre-cooked plan. But we were aiming for the best for all people concerned, not only for our people or for theirs. We worked together on this list of ground rules, paying close attention to people aspects within both organizations.“
Smart leaders know that focusing only on M&A’s financial, legal, and operational aspects does not guarantee success, and can even destroy value. Paying attention to the people and related cultural (corporate cultures and national cultures) aspects early in the process pays (read here why cultural alignment is a prerequisite for value creation).
Two main aspects stick out:
1. What will the new top team look like?
Create clarity about who will join the new top team. At the moment the deal is closed this should be clear to everybody. The new top team will play a crucial role in the post-merger integration phase. It will be the initiator and facilitator of the integration process, set out the direction and short-term focus, stimulate synergies, and ensures stability and confidence. Lack of clarity about the top team will not only lead to loss of time in the integration phase, it will create confusion, doubt, and apathy throughout the organization. It is an important and often mentioned reason for integration failures.
2. Know which people issues could cause integration problems
What are the specific mechanisms that drive people performance and collaboration within both organizations? What are the core values that drive people behavior? What do people expect from the merger? What are the key elements of the culture and corporate identity? Who is considered as key talent within both companies? At what points do all these elements match, or not? What are crucial differences? What are potential consequences if we do not address these aspects effectively? Starting to think about these questions when the integration starts is too late! The C-suite needs to be aware of these potential risks before the deal is closed. Not necessarily because it could be a deal blocker, but to be prepared for it and ready to deal with it as soon as the integration starts.
I hear you thinking: the heat of deal making precludes the luxury of an extended effort to assess soft people variables. How can this be done in a phase where confidentiality and non-disclosure agreements are essential? True, but there are ways to do this! A specific and focused approach that respects confidentiality can lead to a very insightful and important overview of potential integration risks. A report that is crucial input for the C-suite.
A thought to conclude. Major agreements freeing trade and investment across continents are currently being negotiated, or have recently been concluded. To name but a few: the Transatlantic Trade and Investment Partnership (TTIP); the Trans Pacific Partnership Agreement (TTP); the EU-Canada Free Trade Agreement, … The EU also just launched investment negotiations with China. If paying attention to the people and cross-cultural aspects of mergers & acquisitions is important now, imagine its importance in the future!
Let us know what your ideas are about people aspects in M&A. Leave a comment!
If you want to know more about how to address people aspects in mergers and acquisitions, check out our services page or contact us.
Join me in London at the MERGERS & ACQUISITIONS DUE DILIGENCE CONFERENCE on 17–18 July 2014 where I speak about this topic.
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Aad is a global business advisor, change leader, executive team facilitator, leadership coach, and frequently asked keynote speaker. He is founder and managing partner at HRS Business Transformation Services where he works with senior executives and leadership teams globally in three key domains: ‘leading complex change’, ‘cross-cultural leadership’, and ‘post-merger integration’. Find out more about Aad and HRS’ services. If you would like to invite Aad to your organization contact us.