Execution, by Larry Bossidy & Ram Charan
My chapter-by-chapter notes on this unsung classic on how to grow your team's competitive advantage through high-quality execution.
Frank Slootman, in Amp It Up, acknowledges the need to focus on execution first, strategy second, because good execution will become a source of competitive advantage, That said, he also acknowledges “there are tons of articles and books on the topic of business strategy but relatively few on execution.”
Well, here is one of those books. And it’s fantastic.
Bossidy & Charan focus on the three interwoven dimensions of good execution:
Ensuring the right people are in the right roles (people process)
Ensuring the business is focused on the right things (strategy process as a component of good execution)
Ensuring operations are aligned to deliver on the business priorities and respond to changes in the market reality (operations process).
Beyond this, I also enjoyed their tangible approach to crafting company culture (chapter 4), and the emphasis on a good strategy process simply bringing new ideas to the table on a regular basis (chapter 8).
If you enjoy the notes below, I highly recommend buying the full book. It’s chock full of great examples to help you wrap your head around the ideas. Buy it from Amazon or Bookshop.
Resetting Execution for a Time of Crisis
[The second edition was written in 2009. The authors write about how aspects of the financial crisis makes execution more critical: a) slowed market growth; b) fierce competition given slower market growth; c) governments influencing markets, especially at the global level; and d) leaders waking up to the importance of risk management at every level of the business. The underlying dynamics behind the three processes of execution - people, strategy, and operations - stay the same, even if the methods adapt to the market reality.]
Introduction
[Larry's background: longtime operator & practitioner within GE, AlliedSignal, and Honeywell International.] Takeaways: a) core processes must be managed in depth to get results, otherwise they become empty rituals where a lot of work is wasted; b) an execution mindset is easy to lose; c) a team that is executing well can do things like crafting a new aerospace operating plan in ten days after the September 11 attacks.
[Ram's background: 35-year consultant and an adviser to business leaders and boards of directors.] Takeaways: a) avoid papering over poor execution by asking for more time or blaming it on the business environment; b) avoid the common failure mode for senior leadership of placing too much attention on high-level strategy and not enough on implementation.
Key idea: avoid only seeing execution as the tactical side of the business, to be delegated to operators while leaders focus on the higher-level issues. Execution “ is a discipline and a system. It has to be built into a company’s strategy, its goals, and its culture. And the leader of the organization must be deeply engaged in it." Executing well can be an asset to companies developing and maintaining competitive advantage, and it requires being fiercely honest about the realities of your organization.
PART I: WHY EXECUTION IS NEEDED
Chapter 1: The Gap Nobody Knows
Strategy is often blamed when a company fails to deliver on promises, but the usual culprit is lack of execution When "things that are supposed to happen don't happen," it’s either due to a lack of capability, poor understanding of challenges, or both. [Consider Compaq and Dell: both had promising strategies, but the latter was awesome at execution and was able to capitalize on a period of slow market growth to capture significant market share.] It’s often more practical to aim to bring your current operations to the next level rather than aim for (blindly optimistic) breakthrough change.
"Execution is a discipline, and integral to strategy." You must cultivate robust dialogue, accountability for results, and follow-through to systematically expose and act on the reality of your business. Failure mode: not facing reality.
"Execution is the most important job of the business leader." You must do more than inspire others to do the grunt work. You must dig in and stay close to the work to ensure execution actually happens. Your detailed understanding of how the business runs will help you make good tradeoffs. Go beyond paying lip service to the three core processes (hiring people, setting strategy, and running operations). What you do reveals what you value. Failure mode: delegating details away. Tips:
Larry's three expectations for a new manager: a) maintain integrity; b) be customer-first; and c) “manage the three core processes with intensity and focus."
Instead of presiding over your team, you lead by staying actively involved, probing and questioning, and "bringing weaknesses to light and rallying people to correct them."
Learn how to get to the heart of issues with persistent and constructive probing. Instead of accepting a particular target at face value, understand: where is that growth coming from?
A leader who executes well will naturally create an execution-oriented team because everyone will know what's expected and will share that down. Inspire through example.
"Execution must be a core element of an organization's culture." You must cultivate an environment of continuous improvement where you constantly identify and correct deviations between desired and actual outcomes across all aspects of the business. [Seek inspiration from Six Sigma processes of defining the desired tolerances and then systematically seeking reality and exploring improvements.] Failure mode: ceding responsibility for execution to part of your team (e.g. program management).
Most notably, execution is most obvious when it's lacking. Our favorite narratives of genius - like Einstein discovering the theory of relativity - have unsung backstories of diligent and tenacious work done to support the breakthrough insights.
Chapter 2: The Execution Difference
[Three stories of poor execution, including Richard C. Thoman’s tenure at Xerox starting in 1999, and Richard McGinn’s tenure at Lucent through the late 90s.] Patterns of poor execution from these:
Unrealistic targets (e.g. not involving the teams in shaping those commitments).
Failing to probe into why major initiatives hit delays.
Keeping poor executors in key leadership roles without clear accountability to root this out.
Magnifying chaos by failing to prioritize (e.g. pursuing more than one concurrent major initiative to overhaul a part of the company operations, rapidly acquiring and struggling to integrate several dozen acquisitions)
Failing to shape an entrenched nonperforming and/or bureaucratic internal culture
Lack of executive visibility into the fundamental business metrics which mattered most
Inability to respond to rapid changes in the market, despite internal staff voicing need to adapt
Being unwilling to acknowledge reality or generally dismissive of true challenges faced
[Contrasting story of good execution, following Dick Brown at EDS, which successfully transformed the fundamentals of the company in two years, despite facing similar challenges as Xerox.] Key strategies:
Going on a 3-month listening tour to meet with people of all levels, while sharing week-by-week learnings with the whole organization and inviting dialogue.
Improving quality & flow of information, e.g. having sales results reported daily instead of by quarter; increasing the pool of leaders receiving vital company information.
Introducing monthly "performance calls" with top leaders [similar to Amazon’s weekly business review] and digging into problems to understand root causes and planned actions.
Insisting team goals are not just budget items, but commitments "made for your team and each other," with success or failure depending on the team.
Cultivating dialogue based on intense candor, “balancing optimism, motivation, and realism.”
Exploring whether concerns (with aggressive changes or business targets) are fact-based or ignorance-based.
“Every great leader has had an instinct for execution. He has said, in effect, ‘Unless I can make this plan happen, it’s not going to matter.’”
The authors capture perfectly the risk of selecting high-level thinkers for leadership roles: these people “don’t necessarily understand how to execute. Many don’t realize what needs to be done to convert a vision into specific tasks, because their high-level thinking is too broad. They don’t follow through and get things done; the details bore them. They don’t crystallize thought or anticipate roadblocks. They don’t know how to pick people for their organizations who can execute. Their lack of engagement deprives them of the sound judgment about people that comes only through practice.”
PART II: THE BUILDING BLOCKS OF EXECUTION
Chapter 3: Building Block One: The Leader's Seven Essential Behaviors
To be successful as a leader, you must:
“Know your people and your business.” Failing to engage in the details of the business a) communicates to others their work doesn’t matter; and b) prevents you from your critical role of tying details together. Asking hard questions is a way of honoring the preparation your team has done and fosters constructive dialogue. Develop personal connections by including personal notes with feedback along with the action items; these relationships of trust will only help future big initiatives. This extends further to new industry trends (e.g. the value of achieving faster inventory turnover): invest time to be better informed in how to achieve these results prior to introducing new approaches to your team.
“Insist on realism.” People naturally "avoid or shade reality," sometimes to the point of utter denial. Failure to acknowledge weaknesses and avoidance of confrontation gets in the way of good execution. Instead, "make realism the goal of all dialogue in the organization," and probe the gap between internal and external perception, e.g. the percentage of orders reported as filled on time by your manufacturing team vs. customers. Ask: what are we doing right? What are we doing wrong?
“Set clear goals and priorities.” Pursuing too many priorities only leads to confusion. Find the things which, when given adequate focus, will create spillover benefits to other parts of the business. Clear priorities, articulated simply, will support the endless day-to-day decisions and tradeoffs your team will make.
“Follow through.” Failure here is the most common cause of poor execution. Make sure meetings end with clear and committed actions to be taken. This is particularly important when individuals show any explicit or implicit reluctance to follow the decision. Not only does the decision need to be explicit (with no room for misunderstanding), the follow-up must be set-up to ensure the decision is followed.
“Reward the doers.” Many companies fail to truly distinguish the compensation of people who achieve results versus those who don't. Per Larry: "When I see companies that don’t execute, the chances are that they don’t measure, don’t reward, and don’t promote people who know how to get things done."
“Expand people’s capabilities through coaching.” Treat every interaction with your team as an opportunity to coach. Observe them in action, use probing questions to uncover areas ripe for growth, and then provide the guidance and support needed to succeed. It’s okay for work to be incomplete, as long as you identify weaknesses or execution risks and find ways to make it work. With formal learning, avoid generic courses; make sure anything you offer will be valuable for everyone (and immediately transferred to their current work).
“Know yourself.” Develop the emotional fortitude to dwell in reality, give candid assessments, work constructively with diverse perspectives, hire people more skilled than you, and fire non-performers (even if they’re a loyal friend). You can hide emotional weakness for a time, but not forever. This requires: a) being authentic; b) being self-aware ("comfortable with your strengths and not crippled by your shortcomings"); c) mastering your emotions (not letting self-doubt block you from embracing new ideas, etc.); and d) staying humble (keeping your ego in check). Learn from your experience, and by watching the behavior of others. Focus on getting better over time.
Bossidy provides an excellent example of how to provide harsh coaching feedback: "Let’s say you’ve got a person making all the numbers, making all his commitments, but his behavior is terrible. You call him in and say, ‘I love you, Charlie, but the things you’re doing are going to preclude you from making numbers down the road. People aren’t going to put up with this nonsense anymore. You’ve got a couple of choices. I’m going to be your coach. I’m going to talk to you myself. And I want this behavior changed, or you’re not going to go any farther, or you’re going to have to leave.’"
Excellent quote regarding self-knowledge: "Psychologists know that some people are limited, even crippled, by emotional blockages that prevent them from doing things that leadership requires. Such blockages may lead them to avoid unpleasant situations by ducking conflicts, procrastinating on decisions, or delegating with no follow-through. On the darker side, they may drive the leader to humiliate others, draining energy and sowing distrust."
Chapter 4: Building Block Two: Creating the Framework for Cultural Change
The strategy and structure of an organization is inert without the beliefs and behaviors to support. Culture consists of: a) shared values (which rarely need to be changed, merely reinforced through emotional fortitude); b) shared beliefs (which are conditioned by training, experience, and carry inertia); and c) norms of behavior (expected ways of working together). Cultivate the beliefs and behaviors of execution, directly linked to observable business results. Remember” "We don’t think ourselves into a new way of acting, we act ourselves into a new way of thinking." Some tips:
Nothing is more motivating (and reinforcing of new behaviors) than seeing impact.
When pursuing change, make the juxtaposition more specific by asking, "from what to what?"
Be realistic about the underlying beliefs communicated by actions. Notice the behaviors which are happening, even if they imply concerning beliefs (e.g. "my peers are my competitors").
Maintain clear and transparent links between performance and rewards to reinforce the behaviors you want, including fuzzier ones like collaboration with colleagues. Poor performance must have tangible negative consequences.
Ranking systems for employees (e.g. Jack Welch's "vitality curve" identifying A, B, and C players) must be paired with honest feedback and coaching opportunities to help people improve.
Always evaluate performance in the broader context of the business environment.
Tailor the relative mix of options, bonuses, salary, and advancement opportunities to the underlying motivations and long-term potential of each individual.
When you “create disproportionate awards for high performers and high-potential people [... they] work harder at differentiating themselves."
Teams often lack clear social operating mechanisms to ensure dialogue is effective, information and insights flow across the organization, teams are decisive, and coaching consistently bridges the gap between where you are and where you want to be. The beliefs and behaviors making up these mechanisms must be "practiced consistently and relentlessly" and are a big driver of culture. Ultimately, the goal is to design a social operating system as a constant, reliable, and productive structure everyone can rely on as they innovate within their business. Some tips:
Sample mechanisms include annual planning processes, regular business review meetings, etc., but especially extend to how dialogue occurs within these meetings.
Most critical are to have mechanisms in place to ensure robust dialogue (candid, creative, informal, open) about the things that matter, which wraps up in closure. Most companies fail to engage in effective dialogue.
As a leader, you will "get the behavior you exhibit and tolerate." Say present, engaged, and model the mechanisms appropriately. Treat every discussion as a performance.
E.g. Jack Welch made GE’s people process "more intense, more penetrating, more action-oriented, more what-are-you-going-to-do-about-it-oriented." This drove long-term success.
On the power of dialogue: "Dialogue alters the psychology of a group. It can either expand a group’s capacity or shrink it. It can be energizing or energy-draining. It can create self-confidence and optimism, or it can produce pessimism. It can create unity, or it can create bitter factions."
The authors sum it up best: “First you tell people clearly what results you’re looking for. Then you discuss how to get those results, as a key element of the coaching process. Then you reward people for producing the results. If they come up short, you provide additional coaching, withdraw rewards, give them other jobs, or let them go. When you do these things, you create a culture of getting things done.”
Chapter 5: Building Block Three: The Job No Leader Should Delegate -- Having the Right People in the Right Place
The only thing a leader can actually control is the quality of their people. Many teams end up with the wrong people in roles because of either a) unclear job requirements (the non-negotiable & specific things someone in the role must do well to succeed; b) lack of courage to take decisive action to remove non-performers; or c) ineffective process for promoting or hiring people into roles. Senior leadership must commit significant time to being effective here, and success creates advantages that compound over time.
When recruiting or interviewing, seek out qualities that signal someone “will get things done come hell or high water." It's common that highly intellectual people will struggle to mobilize others to execute, so probe for good habits of execution. Focus on how someone achieved results, not just whether they achieved results. Example qualities of good executors, with example questions:
“They energize people.” How do they translate vision into "adrenaline-pumping goals that get scored on the way to winning the game"? Can they turn meetings into "forums for action and personal growth"? Do they get excited by doing things versus talking about them?
“They're decisive on tough issues.” Can they resolve difficult decisions quickly, effectively, and with follow-up action? Indecisiveness is a killer.
“They get things done through others.” Can they delegate without abandoning others? Do they stay actively engaged without micromanaging? Did they achieve results without burning themselves and others out? Did they leverage the strengths of their team? Especially important is whether they can “justifiably take credit for those good financial results” they claim.
“They follow through.” Have they seen initiatives through, from start to finish? Can they detail the obstacles that needed to be overcome?
Similarly, probe for relevant details during reference calls to understand someone’s true potential: “How does he set priorities? What qualities is he known for? Does he include people in decision making? What is his work ethic and his energy level?”
Internal assessments of people most often suffer from an unwillingness to share the unvarnished truth about someone's record and potential. Distinguish between whether or not they hit targets (mechanical evaluation) from how they actually achieved their outcomes. Reward people who "delivered consistently, were resourceful, enterprising, and creative in the face of adversity." Some tips:
Gather perspective from a leader's direct reports to fully understand how the work environment is perceived and how the leader behaves day-to-day.
Useful framing: “I can make this person a lot better if I tell them they've got a problem and they fix it.” Find those most relevant problems.
Assessments must be straightforward, specific, and use language that is easily understood.
Example assessment (quoted): “You’re ambitious, you’re enthusiastic, and you work well with people. You’re conceptual, you’re analytical, and you’re a team player. Now, what could you do better? One, you’re not aggressive enough. You’re indecisive. Your standards aren’t high enough. You don’t develop your organization the way we ask you to—you didn’t promote enough people last year.”
Bottom line: "There’s nothing sophisticated about the process of getting the right people in the right jobs. It’s a matter of being systematic and consistent in interviewing and appraising people and developing them through useful feedback."
PART III: THE THREE CORE PROCESSES OF EXECUTION
Chapter 6: The People Process: Making the Link with Strategy and Operations
Great execution requires great decisions about who will do what. A good people process will a) "evaluate individuals accurately and in depth"; b) identify (and develop) the talent needed to execute its strategies; and c) maintain a strong succession plan & full leadership pipeline for key roles. Consider who is best suited to "handle the jobs of tomorrow," which may require "replacing an excellent performer with a person who is better equipped to take the business to the next level." Key activities:
Aligning with strategic & operational needs: Identify the specific people and skills you need to execute your strategy over the near (0-2 years), medium (2-5 years) and long term (5+ years). Focus on the truly critical roles for execution of the strategy (most are merely important), so you can have your best people there. Avoid being generic when identifying needed skills.
Maintaining a robust and dynamic leadership pipeline: Gather accurate & insightful evaluations for each individual, with their growth areas and opportunities identified. Pay close attention to the strength of succession (all key roles must have successors identified in advance) and risk to the business if someone were to leave. Avoid organizational inertia (keeping people in the same roles for too long) or failing to develop peoples’ skills before promoting them into senior roles.
Dealing with non-performers: Correctly distinguish a) people who need to be moved into lesser jobs; versus b) people who need to be removed altogether. Address these issues quickly and fairly, otherwise you'll be stuck with people who "aren't performing at the level that is essential for the company's success." Avoid letting people leave with a sour taste in their mouth. Example statement: "We both made a mistake here. I apparently didn't explain the job to you as well as I should have. You haven't done it well. We need to make a change."
Linking HR to Business Results: Cultivate an HR team which has the business acumen and ability to engage and develop key skills in the staff to position the company to succeed. One framing: for each role, clarify whether someone is "a good fit, a stretch, or an action required." Action required may mean moving or removing them within a certain amount of time.
All strong people processes require a system built on candid dialogue, high integrity, and (reasonably) high frequency of discussion. Managers must be responsible for the performance, strength, and depth of their team, and must be ready to discuss their views and “argue their case if others disagree.” Tips:
Develop a culture of accountability for high performance, where anyone can challenge an assessment.
It's common to overestimate someone's abilities. This is why candid discussion of their proven skills is so important.
Useful artifacts of a good leadership pipeline: a) leadership assessment summary (for the team); b) continuous improvement summary (for the individual, essential a performance assessment with growth opportunities identified); c) retention risk analysis (how easily someone could find another role and the risk to the business if they leave); and d) succession depth analysis (your list of high-potential people to fill important roles should someone leave).
One goal: know the full chain of (high potential) people whose roles would need to be changed if someone key leaves.
Avoid not knowing when high-potential people are “blocked” by lack of promotion opportunities (which may lead to them leaving).
As summarize by the authors: "The right people are in the right jobs when information about individuals is collected constantly and leaders know the people, how they work together, and whether they deliver results—or fail to. It’s the consistency of practice that develops expertise in appraising and choosing the right people. The people process begins with one-on-one assessments, but when developed and practiced as a total process, it becomes incredibly effective as an execution tool."
Chapter 7: The Strategy Process: Making the Link with People and Operations
Great execution requires great decisions about which outcomes you will focus on accomplishing. At the core, we use strategy to a) win customer's preference; b) create sustainable advantage; and c) make money. Most strategies fail due to lack of attention on how the strategy will be executed. Some tips:
Identify the critical building blocks behind the strategy. The essence of any strategy should be able to be captured on a single page. Anything more is a "complex thought about the strategy."
Business-unit-level strategy is more self-contained. At the corporate level, seek out ways to amplify or add value to each business unit through strategic investment, etc.
A well run strategy process will also teach everyone involved about the business and details of execution.
Avoid failure by involving the people responsible for executing the strategy.
This process must be owned and run by the business leader; do not outsource or delegate it.
Market segmentation is only useful if it carries strategic implications.
These are the following critical dimensions or questions of a good strategic plan [the critical questions are bolded]:
"What is the assessment of the external environment?" -- Capture critical assumptions made about external factors, whether industry trends, demographic trends, etc. which matter.
"How well do you understand the existing customers and markets?" -- Take time to actually talk with your customers. Know the user/purchaser profiles and how they may differ.
"What is the best way to grow the business profitably, and what are the obstacles to growth?" -- Identify new ideas, whether for developing new products, new channels, launching productivity programs, etc.
"Who is the competition?" -- Don't ignore the emergence of a new competitor [or substitute.] Many teams underestimate their competitor responses - especially when pursuing price competition. It’s also common to overestimate the competition and act too timidly.
"Can the business execute the strategy?" -- Know the capabilities required to execute and whether you have the people and operations in place to do so. Be wary of strategies which rely on developing novel capabilities. (Leaders who stay involved have an advantage here.)
"Are the short term and long term balanced?" -- Encourage creative thinking with a strategic plan by making it clear you cannot just let the current business stay flat for several years while investing in the new plan. Any business must "both plant seeds and harvest" at the same time.
"What are the important milestones for executing the plan?" -- These bring a strong reality check and provide opportunities to reevaluate strategy (especially when missed).
"What are the critical issues facing the business?" -- All plans have a half-dozen or so critical issues which represent the bulk of risk in the plan. Focus the collective creativity of everyone on identifying and addressing these issues upfront. [High leverage activity.]
"How will the business make money on a sustainable basis?" Understand whether customers will actually "pay a premium for what you claim is a differentiation," your overall cost structure, the working capital required to run or ramp-up the business, competitor pricing reactions, etc.
Chapter 8: How to Conduct a Strategy Review
The strategy review is at the heart of ensuring a well-run strategy process. Run this as a creative exercise, where new ideas are discussed and evaluated in light of the business realities and goals. Avoid rehashing your prior plan. (It’s also a great opportunity to coach people.) Key questions:
"How well versed is each business unit team about the competition?" -- Aim to have "real-time reporting on what they're up to and likely to do next." Examine the quality of their sales force, how they are seeking to differentiate, what partnerships they've made; dimensions that matter.
"How strong is the organizational capability to execute the strategy?" -- Incorporate insights from the people process.
"Is the plan scattered or sharply focused?" -- Avoid overreaching such that you lose ground within your core business. Fragmentation of effort and focus can be deadly.
"Are we choosing the right ideas?" -- Select strategies that fit … with the market realities, the organization's capabilities, and a promising financial model. [E.g. developing a new technology doesn't mean you have the capabilities to bring it to market.] When you have four promising strategic plans, be realistic about whether you can support all four at the same time.
"Are the linkages with people and operations clear?" -- More linked means more realistic and powerful they will all be together. Ensure there is enough lead time for necessary actions to be taken (e.g. hiring the right people into the right roles).
After the strategy review, follow-through to "solidify and confirm the agreements you made so that later you can use them as a basis for reviewing progress."
Chapter 9: The Operations Process: Making the Link with Strategy and People
The authors open up with a fantastic analogy: "Your boss has asked you to drive from Chicago to Oskaloosa, Iowa, a journey of 317 miles. He’s prepared a budget for you with clear metrics. You can spend no more than $16 on gas, you must arrive in 5 hours and 37 minutes, and you can’t drive over 60 miles per hour. But no one has a map with a route to Oskaloosa, and you don’t know whether you’ll run into a snowstorm on the way. Ludicrous? No more so than the way many companies translate their strategic plans into operations."
Great execution requires a clear understanding of what activities you will complete to achieve the outcomes that matter. Activities can include "product launches; the marketing plan; a sales plan that takes advantage of market opportunities; a manufacturing plan that stipulates production outputs; and a productivity plan that improves efficiency" or more. This process is where the business leader translates strategy into effective operations. Key tips:
A truly great operational planning process will be like a flight simulator for your business, where your whole team will end up better prepared for whatever happens in the real world.
The operating plan must be debated by the key leaders responsible for execution (along with the senior executives & finance leaders). This builds a foundation of accountability.
Common failure modes: a) lack of robust dialogue on core assumptions; b) lack of specificity around how to make the top outcomes a reality; or c) failure to create a shared understanding of the business reality or common feeling of "being in it together;" or d) generating an inert document that prevents you from adapting to future realities.
Powerful approach to budgeting that also supports synchronization: a) bring together the teams who each represent the ~20 main budget lines responsible for 80% of the total; b) have each team present their plan & how they anticipate impacting other teams; c) break for 1 hour for each team to revise their plan based on the shared information; d) reconvene and discuss the new numbers and adjustments made; e) repeat until you have alignment.
Goal is synchronization across the myriad teams and activities of the organization. Ensure the operations process supports cross-functional coordination at scale.
Lean into normal conflicts of interest which balance out to benefit the company. (E.g. sales wants lots of inventory on hand, whereas finance wants to minimize inventory.)
When setting financial targets, pay particular attention to earnings per share and gross margins. "Too many people look for revenue gains without planning to build or protect gross margins at the same time. But gross margins are where the bottom line comes from—all operating expenses are deducted from the gross margin, not the revenues."
An effective Ops process a) helps people learn about the business; b) coaches people to ask incisive questions as part of robust dialogue; and c) builds confidence in the team to chase after their (realistic) targets, with knowledge of how to meet anticipated challenges
The Operating Review meeting is where: a) targets are set; b) action plans are developed (capturing trade-offs between short-term objectives and long-term goals; c) follow-through measures are captured. (Use quarterly reviews to “keep plans up-to-date and reinforce synchronization.”)
At the crux of building a good operating plan is identifying & debating the underlying assumptions so that the ultimate plan is based on a shared understanding of reality & motivations. Again, this is shaped by robust dialogue.
Engage in scenario planning for the future so you can be prepared to capture opportunities (if presented) or weather the storm if things get rough. Create contingency plans.
Aim for the Ops discussions and debates to be timely enough to be relevant (and reasonably likely). Start with the core ideas and then layer in the specific numbers as you get closer.
Key (tactical) questions will overlap with those relevant for strategy, e.g. knowing who the customer is, how competitors will react to you, whether your suppliers or distribution channels are healthy and reliable.
When someone shares, "I've missed my target in Q1 but I'll make up for it in Q2 ..." probe deeper with "Let's assume you don't. What can you start doing now to make up the gap?"
Stretch goals can be useful if it inspires you to find new ideas for things that have never been done before. "But really you should know how much of a stretch that is."
[Awesome way to re-center people in reality] “People, we’re talking about operating plans. This is not about hopes and dreams. This is about realities. Don’t tell me you hope it’s going to get better. Don’t tell me that you dream about doing it better. The reality is that in the first quarter it wasn’t better. That’s the database that we’re going to go from, and that’s the database we’re going to act upon.”
[What we’re seeking someone to say within an Operating Review meeting] “You know, I’m highly confident I can make ninety percent of this number in this way. I don’t know how I’m going to make the remaining ten percent—I can’t see it in the business. But I’ve got a couple thoughts, and I’ll accept your challenge. And I’ll come back at the end of the first quarter to tell you whether it’s in the cards or not, because if I don’t know by then, it’s not going to happen.”
[Summary quote on the role of a business leader within the operations process: "She has to set the goals, link the details of the operations process to the people and strategy processes, and lead the operating reviews that bring people together around the operating plan. She has to make timely, incisive judgments and tradeoffs in the face of myriad possibilities and uncertainties. She has to conduct robust dialogue that surfaces truth. And she must, all the while, be teaching her people how to do these things as well. At the same time, the leader is learning—about her people, and how they behave when the rubber meets the road, and about the pitfalls that beset elegant strategies."
Conclusion: Letter to a New Leader
[Mock letter to someone who just got a promotion, summarizing the core concepts of the book as a way to focus their efforts in the new role.]