Control organizational fires before they start

by Pamela Harper

In today’s “Web speed” economy where the demand for quick results requires launching ambitious initiatives, CEOs and business leaders in nearly every industry routinely find themselves in the midst of corporate fires. 

“CEOs must now provide analysts with pinpoint accuracy in their earnings forecasts,” said J. Terence McCarthy, senior managing director of the global financial services group of DHR International, a major executive search firm. Motivated by escalating pressures to meet or beat Wall Street’s expectations, many CEOs are often rushed to implement substantial plans that appear logical, figuring they can fix any problems that may crop up at a later date.

However, company stakeholders are no longer allowing CEOs and other high level executives the liberty of repeated firefighting.  In fact, in recent years there has been an unprecedented rise in turnover among CEOs. It’s no longer uncommon to see tenures as short as one year, as investors and corporate directors grow increasingly intolerant of disappointing results.

A recent survey conducted by the National Association of Corporate Directors (NACD) and the Center for Board Leadership indicated that disagreements over development, execution and modifications of strategy between boards and CEOs has led to shorter CEO tenure in general, and sudden departures at many major companies. Even the savviest executives are not immune from this trend.

Just in the past year, Rick Thoman of Xerox, Jill Barad of Mattel, and Durk Jager of Procter & Gamble, among others, were asked to turn in their resignations within a few years of becoming CEO of their respective companies. In each case, these leaders were unable to take control of persistent organizational fires that caused their business initiatives to grind to a halt.

In order to succeed in this turbulent business environment, it’s important to uncover and remove the hidden sources of organizational fires through a systematic process of strategic thinking and organizational reality assessment before finalizing and executing plans. By doing this, leaders in every industry can hit business targets more accurately, implement more focused and effective actions, and reduce organizational resistance to change.

The missing piece of strategic thinking
Preventing organizational fires before they start begins with a complete strategic thinking process prior to strategic planning. Too often, unpleasant surprises occur when executives focus on the future, base their plans to get there on the past, and overlook their current reality. Leaving strategic thinking out of the process inevitably leads to what I call strategic gridlock: a series of urgent and unexpected problems that eventually spread throughout the organization, causing the company’s business strategies to grind to a halt.

For example, in a commonly observed scenario, executives in a manufacturing company developed sales projections based primarily upon their customers’ historical buying habits. Since they tended to overlook current reality, they missed a series of small signs indicating that fundamental changes were taking place in their customers’ industry.

Taken by surprise, the company was unprepared to handle the decline in sales when a key customer changed their inventory requirements and purchased a substantially lower quantity of product. As a result of the decreased revenue, manufacturing company executives found themselves in the midst of a major corporate fire. This caused them to scramble to reverse the situation by setting unrealistically high sales goals while downsizing their production staff to reduce expenses.  What started out as a logical plan became snarled in gridlock as the organization resisted the changes, and problem piled up upon problem.

Strategic thinking in today’s rapidly changing business climate can’t rely on history as a primary guide to the future. In the above scenario, if the manufacturing company’s executives had based their sales projections upon an understanding of current industry reality and where it could lead, they wouldn’t have relied so heavily upon their customers’ past buying habits to set production goals and sales strategies.

In addition, if they had better insight into how their organization’s culture reinforced its backward focus and reduced its attention to their customers’ warning signs, they would have been better able to start a proactive course of action before the fires erupted.

Hidden roadblocks to success
One of the most common assumptions that CEOs make is that poor execution of strategic plans by managers and employees causes organizational fires and strategic gridlock. While this is sometimes true, more often than not, unexpected organizational problems stem from a hidden cause: unresolved issues that were not uncovered and addressed in the strategic thinking phase.

Frequently, CEOs and executives push what they think should work over what actually will work in their organization. For example, they may assume that since a particular business initiative delivered favorable results for one company, it should deliver identical results in their company. Unfortunately, this is not always the case.

One client company learned this lesson the hard way when the new CEO chose to reorganize his company into cross-functional teams. Under pressure to meet ambitious targets, he had quickly selected this approach based upon its success in other organizations.

Managers introduced the initiative with great fanfare, and there was tremendous excitement about the potential for new results. However, the logical move to cross-functional teams erupted in organizational fires almost as soon as it started.

Despite their extensive training, the new teams failed to work together as a whole, and individual teams fought for control of projects. In hindsight, the CEO realized that he had made assumptions and overlooked information about his company’s existing corporate culture, which was rooted in hierarchical “silos," and recognized and rewarded individual, rather than team, accomplishments.

Once the upper level executives uncovered and addressed these issues, the CEO was able to move forward with executing his plan.

Understanding your company’s entire organizational reality -- its capabilities, resources and culture, as they exist today -- is an essential part of strategic thinking. Assuming that the organization will operate according to the formal culture that is officially expressed in vision and value statements, policies, position statements and so forth can be dangerous.

To take control of organizational fires, you need to move beyond assumptions and determine if your employees really do have the proper mindset to accept the changes you believe are required, if they are technically capable to perform the new duties you intend, and if they have access to the resources they require to successfully implement the change. If any of these items are out of line, your plans can easily backfire.

An effective strategic thinking process opens up new opportunities by systematically uncovering the assumptions behind the logic of your initiatives. By involving key stakeholders early in this process of strategic thinking, exchanging mutual concerns, identifying areas of agreement and difference in outlook, and negotiating joint solutions, you increase everyone’s commitment to making the change successful.

During this questioning process, objectivity is crucial to gain new insights and information, build on agreements and constructively resolve differences.

For instance, the executive team of a technology company had been mired in disagreements that threatened to derail their ambitious targets. Each person had strong views about how an individual area should operate and was unwilling to move from his or her position. Once the team was able to objectively challenge their assumptions and clear up misunderstandings, they were able break through the gridlock, synthesize their views, develop more effective action plans and achieve their goals.

Transforming strategy into high performance
When you look beyond your assumptions and analyze how your proposed strategy or initiative will be supported by your organization’s reality, you can determine the specific steps required to transform your plan into high performance.

For example, suppose your company has decided to launch a new and innovative product within a year. However, after going through the strategic thinking process, including an organizational reality check, you realize that your company culture discourages innovation by punishing people for making mistakes in a variety of overt and covert ways.

Not only are policies and procedures geared to reinforcing the status quo, but also anyone who makes mistakes risks criticism and missing out on promotions. Since mistakes are a natural part of innovation, this would be a setup for organizational fires and strategic gridlock that could seriously damage your product launch.

Having conducted a complete strategic thinking process, you are now able to incorporate this organizational insight to develop specific plans and steps for implementation that eliminate the anti-innovation bias and encourage employees to take the necessary risks to produce a successful product in a tight time frame.

Balancing thought and action
Many CEOs cite lack of time as the No. 1 reason why they conduct only limited strategic thinking before moving to planning and implementing initiatives. What they don’t realize is that a complete strategic thinking process doesn’t have to take long. Even a brief review of organizational reality can uncover potential smoldering fires. A few days devoted to a well-designed strategic thinking process can ultimately save time, as unforeseen problems are less likely to stall the initiative, and you’ll devote less time and energy to addressing these issues.  

The strategic thinking process also includes setting checkpoints or milestones to evaluate your efforts and rethink the plan’s purpose. At these designated times, scrutinize the results to date along with the current circumstances. Stay focused on the big picture, but be prepared to adjust the plan if necessary. Since every company is different, there’s no set timeframe for evaluating the plan’s effectiveness. You need to set the checkpoint at a time that’s comfortable for you and that meets your company and your market’s needs.

While no company will ever be totally free of corporate fires or strategic gridlock, conducting strategic thinking that incorporates an organizational reality assessment before undertaking the planning process can help CEOs and business leaders uncover many potential problems before they occur.

This integrated approach can significantly reduce organizational fires and enhance your efforts to achieve the kind of high performance that today’s high-pressure business environment demands.

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