Recently I listened to a brilliant presentation on a company’s new business strategy. The person leading it was the company’s head strategist—a very smart guy with an MBA from a great business school. He took the group I was in through a detailed and elegant explanation of the process the company used to create a new approach.
Then he introduced the strategy in a very easy-to-understand way. We covered customer needs, business capabilities, the new operating model, and the integrated activities the company would follow to ensure uniqueness and advantage. There was only one thing missing. He never mentioned people, the one element the company really needed to address so it could change the way it did business and adopt the new strategy.
This was even more noticeable because at the time of the presentation the company had several high-level searches going on for talent absolutely essential to implementing the new direction. I see this all the time, and it mystifies me. When I talk to executives, most of them define their strategies with great clarity and confidence.
Then I’ll ask, “What keeps you awake at night?” All over the world they get a very serious expression on their faces and tell me the same thing, and it’s not the business strategy: “Talent—I don’t know how I am going to get and keep the talent I need to build my business.” Yet there’s rarely a strategy or plan to address the cause of their insomnia.
Strategy Implementation Through People
Getting crews to run an on-time airline with good service became priority number one. Bethune’s management team did several things at once. It eliminated policies that got in the way of serving customers and teamwork and began communicating business plans and operating activities regularly to all levels of employees. It spent much of its time on the tarmacs and at ticket counters with employees to understand how to make things better.
It installed an incentive plan that paid $65 to each employee every month the airline ranked in the top five of the Department of Transportation (DOT) on-time performance rankings. By the end of 1995, Continental had paid the bonus nine times… and provided a total return to shareholders of 370 percent. In 1996, Continental reported record operating profits of $556 million and hit a “grand slam” by finishing in the top three on all four DOT customer service rankings.
It experienced the biggest upward movement of any company on Fortune’s most-admired list and was ranked the number-one airline in customer satisfaction for flights over 500 miles by J.D. Power and Associates. Meanwhile, in a very different industry, from 1989–1994 Whirlpool Corporation enjoyed an amazing run of success.
It became the world’s largest manufacturer and marketer of major appliances, posted record earnings several times, saw its stock price hit its highest levels ever and was called the best example of how to globalize in the business press. In 1995, things slowed down. Despite reporting its third-highest earnings ever, the company failed to hit its very aggressive stretch targets for financial performance and only made partial incentive payments to most of its employees.
The recession in Europe and high start-up costs in China and India affected operations and results. The company lost some of its momenta, and Whirlpoolers became concerned that they could not continue their mission of turning Whirlpool into a global growth company.
How can your company learn to take a strategic view of your workforce and follow a logical approach to implementing strategy through your people? There is a very straightforward and practical way to do this. I have developed it over the years working with companies like Amoco and Whirlpool and watching others go through similar processes.
It will enable you to deploy, develop, and retain your talent to increase your business results and deliver long-term value. You can tailor it to meet your specific situations. I am confident about this framework for two reasons. First, I have used it or seen it used with a large number of companies in different industries to improve results.
Whenever I present it to an audience, a significant number take it back to their companies and try it out themselves. When I hear back from people, they tell me this approach has increased their business results by making their workforce and management practices more connected to their strategies, and thus more effective.
Align to Business Results and Strategy
There is an old saying in real estate that “The three most important things are: Location, location, location.” Get that right and most everything else takes care of itself. Similarly, in managing talent, the three most important things are Alignment, alignment, alignment. Get it right, and most everything else will work. Alignment means pointing your people in the right direction to do the right things.
This makes it much easier to engage and measure. Alignment starts by telling employees what game you’re playing and how you plan to win. This helps them understand your strategic style and how you are executing it. Any of the three strategic styles gives you the opportunity to win. From there, how you execute makes you successful. It’s absolutely essential that your employees know who you are and what you intend to do to succeed. Then they can execute for you and your customers. This communication is incredibly meaningful to both you and your employees. They want to know just as much as you want them to—maybe more.
People want to excel and win. They associate winning with having a plan—knowing how you want to win. Putting things into alignment and communicating about it helps them understand that you have a plan, what you are asking them to do, and why. You also should understand that alignment is extremely difficult to do and maintain.
I can use a golf analogy again because, like golf, you are dealing with many variables at the same time. In golf, you have to pull everything together at the same time—your ball’s lie, target, club selection, posture, how hard to swing, distance, wind, and so forth—to produce one beautiful outcome. Likewise, aligning people means simultaneously paying attention to several different practices and variables—who you select, how you train them, how they are organized, what you tell them, how you reward them, as well as what they are doing and how they are feeling about it, their customers, you, and themselves. When you align your talent and practices to your strategy, you produce a terrific business result.
Just like a great golf shot, doing it once doesn’t mean you will be able to do it again. Still, the harder you work at it, the more accomplished you will become—and the more often you will align and win.
Build Capabilities to Deliver Results
Business capabilities are the structures, processes, and systems your company builds that enable you to implement your business strategy. Your goal in developing these capabilities is to build unique abilities that competitors have difficulty copying so you have the advantage. From another perspective, your capabilities are the tools and methods your employees will use to implement your strategy.
Business capabilities will be as individual as your company. ARCO, the West Coast oil giant, is renowned for its capability as a marketer. It has captured substantial market share up and down the West Coast by limiting its stations to that geographical area and being first to introduce customer-friendly retail innovations to the service station business, including convenience markets, fast foods, cash-only lower pricing, and debit cards. MBNA is one of the largest issuers and processors of credit cards. It markets exclusively to affinity groups (i.e., college alumni associations, the Audubon Society, Minnesota Twin fans, and so forth) and has grown rapidly because of its targeted group marketing and its speed in customer service. Its back door neighbor is W.L.
Gore is famous for its capability in developing new applications for its microfiber, Gore-Tex. Retail marketing, target marketing, customer service, product development, and line extension are just a few examples of business capabilities that can bring a strategic advantage.
As you move through the IBR model and look at aligning business results and strategies to business capabilities, you can see very quickly that different strategic styles demand different core capabilities. Your core capabilities are your company’s essential abilities, the ones that stand out above all the rest to create advantages and value. What do you do that is absolutely the best in the world? You had better have something, and it must enable you to win against your competition.
For example, within the set of capabilities labeled relationship building, USAA is great at segmenting its market, in this case, military personnel and families, targeting specific customers to pursue with particular services, delivering value-added services to those targets, treating customers extremely well on the telephone and in correspondence, and measuring market and customer share.
It also is very good at internal service capability—treating their own employees like customers because that’s a crucial way customers companies manage talent and get employees to serve customers well. An operations company like Whirlpool has a whole set of capabilities within its application core.
Whirlpool is world-class at applying manufacturing processes, logistics, distribution, inventory management, and parts and service support. It also measures and manages costs with extreme precision. All of these capabilities are necessary to implement its strategy fully. Individual companies will execute these capabilities very differently, even within the same style.
Among customers companies, Johnson Controls, the automotive seat manufacturer, does it by having its designers work hand-in-hand over the long-term with Chrysler designers to customize car seat design and manufacturing. Johnson Controls builds both the minivan bench that includes the infant car seat and the ergonomic racing cradle that holds the Dodge Viper driver.
On the other hand, a customer service representative at Hewitt’s Benefits Center will deal with hundreds of different people in a week. The representative can provide unique service to each caller thanks to the technology that accesses complete participant records instantly