【正文】 performance. Link to pany valuation Companies that manage performance well—General Electric es to mind—have higher market valuations. Why? Because, more and more, institutional investors view strategy execution as a vital factor influencing stock prices. Just a few years ago institutional investors relied almost exclusively on financial measures for pany valuations. Now 35% of a market valuation is influenced by nonfinancial, intangible factors, according to a study by Ernst amp。 hardly anyone was building relationships with the most profitable prospects. Sales is doing just what it’s always done, Peter thought. Worst surprise: Even his top team, the people who’d helped him craft the strategy, was not sticking to plan. Peter asked a team member: “Why are you spending all your time making sure the new machinery is working instead of developing new markets?” “Because my unit’s chief goal was to improve ontime delivery,” he answered. “But what about pany goals?” said Peter. “We came up with a good plan and municated it very clearly. But nowhere it isn’t being carried out. Why?” Many anizations create good strategies, but only the best execute them effectively. Fortune magazine estimates that when CEOs fail, 70% of the time it’s because of bad Hay Group, Inc. All rights reserved 2 Weak execution is pervasive in the business world, but the reasons for it are largely misunderstood. Why is it that no one in Peter’s anization was acting in sync with the strategy? Unless we understand the reasons, we can’t hope to solve the problem. Imagine someone hitting a tennis ball. When the brain says “hit the ball,” it doesn’t automatically happen. The message travels through nerve pathways down the arm and crosses gaps between the nerve cells. These gaps, or “synapses,” are potential breaks in the connection. If neurotransmitters don’t carry the message across the gap, the message never gets through, or it gets distorted. When that happens, either the arm doesn’t move at all, or it moves the wrong way. Creating a “culture of dialogue” Just like a nervous system, anizations also have gaps that block and distort messages. The secret to effective strategy execution lies in crossing hierarchical and functional gaps with clear, consistent messages that relay the strategy throughout the anization. Sound simple? It’s not. The reason is that the “neurotransmitters” in anizations are human beings—executive team members, senior managers, middle managers and supervisors—whose job it is to make sure that people’s behavior is aligned with the overall strategy. Doing what it takes to achieve alignment is very difficult. It is what Ram Charan calls, the “heavy lifting” of management, and it’s the key to executing strategy. As we’ll see later, there is an important difference between panies that successfully align behavior with strategy and those that do not. Companies that effectively execute strategy create a “culture of dialogue.” A culture of dialogue encourages pervasive twoway munications where individuals and groups 1) question, challenge, interpret and ultimately clarify strategic objectives。 and 2) engage in regular performance dialogue to monitor behavior and ensure it is aligned with strategy. Three keys to managing performance A culture of dialogue doesn’t happen instantly, any more than a fluid tennis stroke does. It takes practice, persistence and hard work. So how exactly can leaders ensure that strategy messages go all the way down the line—that the tennis ball gets hit correctly? The three keys to managing performance effectively are: 1. Achieving radical clarity by decoding strategy at the top. Many anizations think they send clear signals but don’t. In some cases, managers subordinate broad strategic goals to operational goals within their silos. That’s what happened with Peter’s top team. Elsewhere, top team members often have too many “top” priorities—we’ve seen as many as 100 in one case—which results in mixed signals and blurred focus. Strategy decode requires winnowing priorities down to a manageable number—as little as five. 2. Setting up systems and processes to ensure clarity. Once strategy is clear, anizations must create processes to ensure that the right strategy messages cascade 1 “Why CEOs Fail,” by Ram Charan and Geoffrey Colvin, Fortune magazine, June 21, 1999. Hay Group, Inc. All rights reserved 3 down the anization. These include: strategycentered budget and planning sessions。 The study showed that “execution of corporate strategy” and “management credibility” ranked number one and number two in importance to institutional investors out of 22 nonfinancial measures. John Inch, a managing director and analyst at Bear Stearns notes that in some sectors, such as diversified industrial panies, intangibles account for even more—up to half a pany’s value. “You can take even a mundane asset and inject good management and have something pretty strong,” says Inch. 2 Based on a study conducted by Sarah Mavrinac and Tony Siesfeld for the Ernst amp。s ideas to advance their own. Getting them to work jointly and be held accountable for business results was going to be very difficult. In the first group meeting, the vice president simply assigned accountabilities to the various team members. I could see the scientists digging in their heels, says Harris Ginsberg, an internal leadership consultant who attended the meeting. No one was going to dictate to them what they should do. Even if they39。 won’t, because they find it unfortable to give candid feedback。s directives, adds Ginsberg, they would never have followed through. Ginsberg, who helps IBM business un