The CEO (Mayor, Chair, Director)helps a
transformation succeed by communicating its
significance, modeling the desired changes, building
a strong top team, and getting personally involved.
Third and Last Installment
In today’s business environment, companies
cannot settle for incremental improvement; they must
periodically undergo performance transformations to
get, and stay, on top. But in the volumes of pages on
how to go about implementing a transformation,
surprisingly little addresses the role of one important
person. What exactly should the CEO be doing, and
how different is this role from that of the executive
team or the initiative’s sponsors?
As the interviews in this publication show, there is
no single model for success. Moreover, the exact
nature of the CEO’s role will be influenced by the
magnitude, urgency, and nature of the transformation;
the capabilities and failings of the organization; and
the personal style of the leader.
Adopt a personal approach
Openly engage others
‘Sharing success stories helps crystallize the
meaning of the transformation and gives people
confidence that it will actually work’
Spotlight success
Role-modeling desired mind-sets and
behavior
Transform yourself
Take symbolic action
Building a strong and committed top
team
The CEO’s team can and should be a valuable
asset in leading any transformation. As Deutsche
Post’s Zumwinkel suggests, “You need excellent
individual players, but you also need players who are
dedicated to playing as a team.” Sharing a meaningful
story and modeling the right role will certainly increase
the odds of getting the team on board, but it is also
vital to invest time in building that team.
Assess and act
Successful CEOs take time to assess the abilities
of individual members of the team and act swiftly on
the result. In some cases, input from third parties
(such as executive search firms) is sought to create a
more objective fact base. Many CEOs find it useful to
map team members on a matrix, with “business
performance” on one axis and “role-modeling the
desired behavior” on the other. Those in the top-right
box (desired behavior, high performance) are the
organization’s stars, and those in the bottom-left box
(undesired behavior, low performance) should be
motivated, developed, or dismissed. The greatest
potential for sending signals involves the employees
in the box of “undesired behavior, high performance.”
When clear action is taken to improve or remove these
managers, the team’s members know that role-
modeling and teamwork matter. Banca Intesa’s
Passera affirms that, “If necessary, you have to get rid
of those individuals, even the talented ones, who
quarrel and cannot work together.”
How do CEOs know when to intervene with the
strugglers? They can reflect on the following
questions:
- Do team members clearly understand what is
expected of each of them in relation to the
transformation?
- Is the CEO serving as a positive role model?
- Does everyone recognize the down- side and
upside of getting on board and doing what is
required?
- Have struggling team members received a chance
to build the needed skills?
If the answer to all of these questions is yes,
decisive action is justified.
Experienced CEOs attest to the positive impact
this can have on the rest of the company. EMC’s Tucci
says he had to take “public” action to tackle the “whiff
of arrogance” that used to characterize certain parts of
the company. TXU’s Wilder recalls that “When we did
a cultural audit, we found that the number-one
complaint was that management was not dealing with
employees that everyone knew weren’t carrying their
load.“
Invest team time
Even with the right team in place, it takes time for a
group of highly intelligent, ambitious, and independent
people to align themselves in a clear direction.
Typically, the first order of business is for members to
agree on what they can achieve as a team (not as
individuals), how often the team should meet, what
transformation issues should be discussed, and what
behavior the team expects (and won’t tolerate). These
agreements are often summarized in a “team charter”
for leading the transformation, and the CEO can
periodically use the charter to ensure that the team is
on the right track.
Intesa’s Passera speaks of how he brought his
team together regularly to “share almost everything,”
to make it “clear to everyone who is doing what,” and
to “keep the transformation initiatives, budgets, and
financial targets knitted together.” P&G’s Lafley
emphasizes the importance of spending the time
together wisely: “You need to understand how to enroll
the leadership team.” As a rule of thumb, 80 percent of
the team’s time should be devoted to dialogue, with
the remaining 20 percent invested in being “presented
to.”
Effective dialogue requires a well-structured
agenda, which typically ensures that ample time is
spent in personal reflection (to ensure that each
person forms an independent point of view from the
outset), discussion in pairs or small groups (refining
the thinking and exploring second- and third-level
assumptions), and discussion by the full team before
final decisions are made. In this process, little
tolerance should be shown for minutiae (losing the
forest for the trees) and for any lack of engagement.
Face-to-face meetings, as opposed to conference
calls, greatly enhance the effectiveness of team
dialogue.
Relentlessly pursuing impact
As this publication consistently emphasizes,
organizational energy—collective motivation,
enthusiasm, and intense commitment—is a crucial
ingredient of a successful transformation. There is no
substitute for a CEO directing his or her personal
energy toward ensuring that the company’s efforts
have an impact.
Roll up your sleeves
Initiatives with a significant financial or symbolic
value require the CEO’s personal involvement for
maximum impact. There may be several beneficial
effects, among them ensuring that important
decisions are made quickly—without sacrificing the
value of collective debate—and sowing the seeds of a
culture of candor and decisiveness.
Leaders must be willing to leave the executive
suite and help resolve difficult operational issues.
Peter Gossas, president of Sandvik Materials
Technology and a man with lifelong experience in the
steel industry, observes, “If there’s a problem, it can
be helpful if I come to the work floor, step up on a crate
so that everyone can see me, and hold a discussion
with a shift unit that may be negative to change.” He
adds, “It’s hard for me to walk into a melt shop and not
begin discussing ways to solve operational problems.”
Hold leaders accountable
Successful CEOs never lose sight of their
management responsibility to chair review forums.
Through these, they compare the results of the
transformation program with the original plan, identify
the root causes of any deviations, celebrate
successes, help fix problems, and hold leaders
accountable for keeping the transformation on track,
both in activities (are people doing what they said they
would?) and impact (will the program create the value
we anticipated?). A central role for the CEO during
these review forums is to ensure that decision making
stays grounded in the facts. As Narayana Murthy wryly
observes, “We have embraced the adage 'In God we
trust; everyone else brings data to the table.’”
The CEO also plays a critical role in ensuring an
appropriate balance between near-term profit
initiatives (those that deliver performance today) and
organizational-health initiatives (those that build the
capacity to deliver tomorrow’s results). This is a
lesson applied by John Varley, CEO of Barclays: “For
several years, the focus on initiatives to improve
financial performance dramatically crowded out
attention on franchise health, leaving us with a set of
issues in some businesses that needed urgent
attention. We are addressing those issues.” During
the transformation, some CEOs even choose to hold
separate review meetings for short- and long-term
objectives in order to ensure that companies maintain
a balance between operational improvement (tactical
strategies, wage management, productivity, and asset
management) and long-term growth (revenue and
volume growth through market share, new products,
channels and marketing, M&A, talent, and capability
management).
For CEOs leading a transformation, no single
model guarantees success. But they can improve the
odds by targeting leadership functions: making the
transformation meaningful, modeling the desired
mind-sets and behavior, building a strong and
committed team, and relentlessly pursuing impact.
Together, these can powerfully generate the energy
needed to achieve a successful performance
transformation.
Source: McKinsey & Company, Inc.