Heidrick & Struggles consultants Colin Price and Sharon Toye spend most of their waking hours trying to understand why some companies succeed and others don't. When they set out on an extensive four-year study of that puzzle, they expected to find that strategy is critical. But that's not what they learned.
"We didn't find strategy doesn't matter," Mr. Price says in an interview. "But we found it matters less than in the past."
They looked at 22 industries, expecting that the top-four companies in each would be doing different things strategically from the bottom four. But the strategies of all the companies in an industry were usually similar, even if the differences in results could be huge. "Execution capabilities drive shareholder value these days," Mr. Price says.
It's often thought that some leaders succeed because they are in the right industries, while others are mired in lacklustre fields where success is unlikely. But again, the research suggests otherwise.
In their book, Accelerating Performance, they found the difference between being average in the most and least profitable industries was 19 percentage points, but the average variance between the best-performing and worst-performing companies within an industry is 34 percentage points, almost double. Again, execution is critical.
At the top of their execution recommendations: You need to value time even more than you realized. Mr. Price, in the interview, asks us to imagine a chief executive officer with 10 to 20 things on today's plate. "Assume 95 per cent are sensible. So success is not determined by the quality of the list, but whether you get it done quicker than the next guy or gal," he says. And that applies throughout the organization.
"Organizations with a high metabolic rate outperform others. Strategy will only get you so far. You need to accelerate the metabolic rate and outperform others," he says.
Metabolic rate? That's an unusual phrase for business. But it normally refers to energy and fits the 13 factors they found driving or dragging corporate performance, which they grouped into four categories under the rubric META, drawn from the first letter of each word: mobilize, execute, transform, agility.
For mobilize, what's critical is an internal focus, fatigue and confusion. For execute, the factors are complexity (too many layers in particular), unclear accountability and skills gaps. For transform, it's fear (leading to missed opportunities), complacency and competition (such as silos, distrust and information hoarding). Agility is about hindsight (always looking at the past for answers to current problems), immunity (inability to learn from mistakes and desire to avoid failure at any cost), inflexibility and fragility (unable to recover from setbacks).
That's a lot to keep in mind, and it expands when the consultants then list 39 differentiating actions drawn from those META factors that can determine your success. Here are some they highlight:
Put big people in big jobs: Know your people and know your jobs – and make sure the best people get the big jobs. Sounds obvious, but it's rare. If your profit was broken into 20 chunks, are the best 20 people heading those units? Usually the alignment is about 30 per cent to 40 per cent, with the big people wrapped up in today's operations rather than dealing with tomorrow's important activities. Do you have your firepower where it matters most?
List your priorities on one hand: Companies often have lots of priorities, with associated metrics. The important stuff can get lost in the murk. Help your team to see what are the most important actions. Usually, those will be priorities that, like dominoes, affect many other priorities.
Treat business units as guests, not family: Their research shows that companies lose 40 per cent of their possible value by staying in businesses, countries or products long after the competitive advantage has waned. Jettisoning wasted ventures will save costs and heighten focus as a smaller loss in revenue than you would expect.
They also urge you to halve the number of metrics you use and reduce layers, making "simple," "consistent" and "scalable" your watchwords. Indeed, the biggest mistake managers make is having too many layers. Worse, often they aren't even aware of how many they have. The leaders don't want to change, given the politics involved and the threat to their own power. Another intriguing recommendation: Keep your people healthy. The top companies were actively investing in the physical, emotional and spiritual health of their staff while the laggards weren't.
So don't get fixated on strategy. Remember that execution – accelerating performance – is vital.
Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online column, Power Points. E-mail Harvey Schachter