Key to Growth: A License to Kill

One of the best ways to boost your company's capacity to execute new growth strategies is by killing legacy projects.
David McCannDecember 3, 2014
Key to Growth: A License to Kill

For better or worse, in today’s working world we’re often in do-more-with-less mode. It’s easy to see the “worse” side of the equation: ceaseless demands for growth butting up against cost-control pressures, leading to a burned-out, disengaged work force. But is there really a “better” story to be told?

James BondPerhaps so. One reason companies get stuck in that mode is that legacy projects (or even entire business lines) don’t necessarily give way easily to new growth strategies. Giving business and functional leaders a “license to kill projects” is a key step to unlocking the capacity to execute such strategies successfully, according to a new report from CEB, the big, member-based corporate research and advisory firm.

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The companies that are most successful at executing new growth strategies, CEB says, have a common characteristic: the ability to quickly mobilize leaders and managers in support of the new direction. That’s directly relevant to the license to kill. “Progressive organizations give their executives permission to decide what to stop doing, allowing them to focus their managerial bandwidth and business resources on strategic initiatives more quickly,” the report says.

Evidence suggests that execution is suffering because it has gotten harder to mobilize organizations in the current economic and work environments. CEB research shows that on average, executives believe they need a 27% improvement in employee performance, over and above existing levels, just to meet current business objectives. Yet according to CEB workforce surveys, 88% of corporate staffers say their workload has increased enough that they are able to expend far less discretionary effort than they did several years ago. And only 21% of the workforce is actively aligning their efforts with company goals, CEB finds.

Such issues are most likely the result of organizational inertia, the report says. Companies put in place infrastructure — procedures, policies, processes, incentive systems — to enable strategy execution. But these mechanisms typically must be repurposed and redirected when new growth initiatives are launched. When strategies shift and the company can’t break its inertia, it won’t be able to mobilize on new priorities.

“This is a paradox about strategy execution: building the infrastructure necessary to execute strategy today will undoubtedly make it harder to execute new strategies tomorrow as that infrastructure gets entrenched and employees become comfortable with it,” CEB says.

This is where the “license to kill” is crucial. “Perhaps the most significant step executives can take to unlock capacity is balancing the introduction of new priorities and activities with clear direction on what the business must stop doing,” the research firm writes.

Political Posturing

Importantly, telling leaders and their teams to stop doing something can trigger organizational politics, particularly when the owners of displaced projects lose resources. “Although completely removing politics from the resetting of priorities is unrealistic, the best business leaders use simple approaches to dramatically lower the political pressure on resource-allocation decisions,” CEB says.

One such approach is staying away from arbitrary decision guidelines. When targets, triggers or thresholds are used to make kill decisions, arguments can become focused on how the threshold gets set and measured, rather than whether the project supports the new growth strategy. Instead of setting specific thresholds, monitor the direction of a project’s performance, CEB advises. When the direction is down, a review is triggered, regardless of whether it’s a high-potential, star-performing project or a low-growth cash cow. This approach ensures equity.

An even more effective depoliticizing tactic is to avoid making relative comparisons. “The best way to avoid politics is not to justify prioritization decisions by comparing ‘keep’ vs. ‘cut’ projects,” the report says. “Make each decision based on a defined set of criteria. Decisions become more politically charged when Business A is flagged as underperforming Business B, so A is scaled back or cut.”

Lining Up

The report lists the license to kill as one of three things a company must do to fully unlock organizational capacity in the face of shifting strategy. The others are managing leadership alignment as a continuous process and eliminating legacy behaviors.

Gauging the degree of alignment can be tricky. For example, beware of misreading an executive’s “head nod.” In group settings where senior managers are evaluated by the decisiveness of their action, false enthusiasm for new ideas and initiatives is not uncommon, according to CEB. “Executives are often quick to walk back from initial commitments in the face of short-term business imperatives that threaten quarter-to-quarter results. If true executive commitment is assumed rather than demonstrated through high levels of personal engagement, the chances for downstream execution success are severely limited.”

Even when senior executives are truly aligned and establish explicit goals for the new strategy, in large, complex organizations decisions are easily overturned, or vetoed, by lower-level managers who simply fail to resource or staff the new effort as expected, CEB says.

The best leaders ask a very simple, direct question of the business and functional leaders who are entrusted to carry out the priority shift: Are you ready to execute this strategy? “The answer to this question in a one-on-one session prior to group meetings can be telling,” the research firm notes.

Companies should also look to eliminate risk as a reason for inaction. If the company is culturally and organizationally wired to avoid risks, it can be very difficult to generate alignment on new growth strategies that appear somewhat risky. “The alignment process must explicitly account for and eliminate misconceptions about acceptable risks,” CEB writes.

Another key is to foster a constructive debate about goals.That can help significantly break down executive resistance to new strategies, according to CEB. “Having leaders reveal their goals in a live ‘goal-posting’ session [helps create] a more direct, personal, and thoughtful discussion to ultimately foster greater cohesiveness and collective responsibility.”

After a strategy is set and executive alignment is achieved, many leadership teams jump immediately to selling the new strategy internally, CEB observes. They’d be better advised to take time to explain the context behind their decision, elaborating on what they decided not to do. “This step shortens debate, focuses discussion and removes resistance to a new strategy that comes from a belief that there might be a better option that the senior team did not consider.”

Behavioral Adjustment

“Achieving continuous alignment and killing projects that are sucking up resources are still not enough,” Marc Austin, CEB’s head of global research on strategy and innovation, tells CFO. “You’ve got to change legacy behaviors — those that are expended toward the old strategy and not the new strategy.”

He tells of one retail company that had been very operationally focused, expending great effort on display arrangement and streamlining the checkout process. But those efforts came at the expense of forging a deeper level of engagement with customers so as to stimulate repeat purchases. It proved challenging to mobilize them differently.

The report describes a transportation company that failed to balance activity planning and behavior change when it reconfigured rail routes and conducted detailed rework efforts. Much of the staff, out of habit, showed up at the wrong station for work.

CEB says companies should identify managers who are dealing with low employee engagement or high turnover, as these teams are at the highest risk of not being able to successfully execute a strategy. Companies also should challenge managers’ assumptions about how do get things done, develop a list of desired or optimal behaviors that align with strategic goals, and have managers create a “let it go” list of legacy behaviors to eliminate.

Overall, says Austin, senior leaders should take heart that they can play a huge role in shifting an organizational mindset to one better suited for a new growth strategy. “They should understand that overcoming the challenges to growth is well within their control, and at the highest level it’s about identifying ways to unlock existing capacity and capabilities in the organization,” he says.

Photo: Johan Oomen, CC BY-SA 2.0. The image is unaltered from the original.