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CEO’s continue to rate execution excellence as their top challenge. But what does “excellence in execution” actually mean? The CEO wants to turn the wheel and have the ship respond, but according to extensive research repeated year after year, only 10-15% of wheel turns get the ship moving in the intended direction. This means most ships are positioned poorly to weather a storm, and are also very likely to miss the trade winds of opportunity.

This disconnect between the captain, crew and ship is what I call the execution gap. Nobody argues there isn’t an execution gap in most companies. No one argues the execution gap isn’t costly – after all 85% of financial performance comes from execution. The big question is why? Why is there an execution gap? The basics of good business execution are thoroughly researched and described:

• Business alignment and
• People performance.

Excellence in execution requires an organization aligned around simple and clear business values. But the best practices on business alignment and people performance fly in the face of many of our deeply held but unexamined assumptions about leadership, teams and motivation.

There is a whole body of research around these deeply held but unexamined assumptions – social proof, fixed mindset, the liking effect, our oversimplified models of human behavior to name a few. Each of us has our own unique set of these assumptions, and companies are challenged to get complicated messages across such a diverse backdrop.

Excellence in execution is infrastructure, because processes and tools can incorporate and model best practices in execution to a degree and with a speed and flexibility not previously achievable for most organizations. And the results are clear. Companies that use processes and tools that incorporate execution best practices outperform their competitors.

Business execution software platforms like SuccessFactors propagate the company strategy to help the crew prioritize the one thing they need to do today from the 10,000 demands on their time. Crews who understand the priorities can apply their own wisdom and judgment – an execution best practice that increases company performance and individual motivation.

Together with social media software platforms like Spigit for internal innovation and Jive, SocialText, PBWorks, and Yammer for internal collaboration, these execution platforms create huge opportunities for companies to get their execution culture right and get it implemented. Internal collaboration and innovation tools create a dialogue within the company, allowing all crew members to inform the strategy and improve processes. Social networking communities, blogs, forums and Twitter let companies extend their culture and values beyond the organization and engage with their customers at a whole new level.

CEO’s no longer have to shout over the wind while crew members rush around trying to find and do their jobs, making their best guess as to what direction to set the sail. CEO’s can now steer an interconnected ship. The crew is connected to the CEO and to each other. The crew also has connections to the outside world that they can bring into discussions of the ship’s performance.

The execution gap is real, and is costing you money. The problem is not strategy, or analysis. “People know what to do but don’t do it”. Create a backbone for excellence in execution with tools and processes that model your values and incorporate best practices and you’ll fly across the seven seas.

I read the result from this survey from our friends at McKinsey & Co. where they found that there’s been a shift in how individual leaders lead during the past year. Respondents say that during the crisis, they have seen far more leaders focus on monitoring individual performance. This is a trail you have to walk carefully though. Leaders going micro managing and monitoring progress on activity are up for some problems.

As the respondents in this survey also notices it’s really about inspiring others and defining expectations and rewards. We talk about this as a manager’s duty to monitor and measure performance but really manage potential. Helping individuals on the right track to get all their inherit talent to propel the business forward. The more you use your talent potential the more output and the more it grows. No one really signed up for doing only part of what they can anyway. Anyway hopefully we got some good coming out of this current storm are the same ones they say will help their companies thrive in the future. The right people want to get it done so help them with that or get out of their way. If they don’t then yes you change that or you get them out of their way.

Note to managers: Employees need a lot more feedback about their performance. According to a new study by Leadership IQ, 51% of employees don’t know whether their performance is where it should be. That’s pretty shocking, so I’ll say it again: We asked 3,611 workers across 291 companies to respond to a series of survey questions, including the question “I know whether my job performance is where it should be.” The results? 51% Disagreed while only 21% Agreed (27% were in the middle).
How is it possible that half of employees don’t know whether their performance is where it should be? Well, the other questions in our study provide some clues.

We asked employees about the amount of interaction they have with their boss, and a whopping 66% of employees said that they have too little interaction with their boss. Only 18% said they have just the right amount and even fewer (16%) said they have too much interaction with their boss.

Alright, so you might be tempted to think that you should walk the hallways giving your employees pats on the back to make them feel better. But not so fast. This study revealed that employees don’t just want warm-and-fuzzy interactions. While 67% of employees say they get too little positive feedback, 51% also say they get too little constructive criticism from their boss. That’s right: Employees are desperate for information about their performance—good, bad or otherwise.

Employees want to know how to improve and grow; they want to perform their best. Ultimately, employees know that the economic stakes are high, competition is intensifying, and that jobs (and even companies) are at risk. Smart employees know that as their performance improves, so too does their future (including bonuses, job security, choice assignments, and more). And thus they want lots of information about how to optimize their performance.

While we’ve been talking about the Quantity of feedback that employees get, this study also revealed just how poor the Quality of feedback can be. Employees not only said that they’re not getting enough feedback, they also said that the feedback they do get isn’t terribly effective. In our study, 53% of employees said that when their boss does praise excellent performance, the feedback does not provide enough useful information to help them repeat it. And 65% of employees say that when their boss criticizes poor performance, they don’t provide enough useful information to help employees correct the issue.

As we outline in our upcoming book “Hundred Percenters: Challenge Your Employees to Give It Their All and They’ll Give You Even More,” employees need information about their performance that is Timely, Specific and Candid (i.e. they need a little TSC). This means employees need real-time feedback that catches issues before they balloon and opportunities before they get missed. They need feedback that tells them exactly what to do more and less of, and they need that information truthfully.

Too many leaders delay feedback because they’re trying to figure out how to spin it, sugarcoat it, or bury it. For example, may managers try to squeeze a negative performance critique or correction between layers of positive reinforcement. In our upcoming book, we call this the Compliment Sandwich, and it doesn’t work. It’s like trying to tell your kid to get off drugs while praising him or her for mowing the lawn last Saturday. It’s a crazy mixed message that gets zero results.

A professional athlete can get dozens of bits of feedback during a practice or game. A student gets constant feedback throughout the day. But it’s not uncommon for a typical employee to go months without any meaningful feedback about their performance. We say we need our employees to perform at higher levels than ever before to help turn the economy around, but how are they supposed to perform when they’re not getting nearly enough feedback about what they’re doing right (which needs to be repeated) and wrong (which needs to be eliminated)?

One final note: Not only do employees need lots of great feedback to improve their performance, they also need it to stay engaged in their jobs. According to our study, employees who said they didn’t get enough feedback were 43% less likely to recommend their company to others as a great organization to work for.

As a business leader your job right now is to make sure that as the economy recovers (though we hear and see different outlooks on how fast and how soon), you are making the most out of it. Sit on your butt and take for granted that you’ll just grab a good, and maybe disproportionate, share of the increased demand, and you’re in for a big surprise. In a recession the strong survive and come out stronger. Customers are even more demanding and competition is stiffer. Especially from those looking to grow at your expense.

Whatever your plan for incremental business accelerating your growth with the recovering economy, there’s one thing you really need to make sure happens within the organization. In lieu of the weather and the economy, you really can do something about how you execute on your strategy. Your job is to make sure that you drive commitment and targeted action to what matters most: the execution of your strategy in this recovering economy.

We invite you to share your stories and ideas for maximizing your recovery in this economy here on the business execution blog

Here are my 3 tips for an effective recovery:

1.  Strategic Agility does not equal Execution Agility

Many economists are predicting a U-Shaped (i.e., Slow) recovery as opposed to V-Shaped (where you crash and then immediately soar upwards).   U-Shaped recoveries require Companies to have tiered strategies  to take advantage of growth opportunities regardless of how slow/fast a rate they occur.    This means that your 1st Quarter strategy probably won’t apply in the 3rd Quarter.  Assuming that you have a plan (most companies do), then the next step is to make sure that your employee’s understand the plan, what they need to do to support the plan, and how to re-focus when the plan changes.  Put simply, it’s no good to have “Strategic Agility” if you don’t have “Execution Agility.”  If in Q3 of next year your employees are still executing against your Q1 plan, then you’re going to leave significant value on the table.   Companies with the best Business Alignment will win in the recovery.

2.   Let People Inform the Strategy

You should seriously consider taking a talent inventory of your current (often downsized) organization.  A lot has happened in the past 2 years:  Workforce Reductions,  slashed development budgets, and artificially high productivity (due to unemployment).   If your CFO and Head of Sales are the only two people attending strategic planning sessions, then you’re going to devise a plan with which you simply don’t have the resources to execute.  World-Class People Performance is still your best bet now and in the future.

3. It’s Time to Make Amends

If you’ve cut headcount, frozen pay, slashed benefits, decreased hours, etc… Then at some point in the near future you’re going to have to start to make amends.   People are grateful to just still have their jobs, but that simply won’t be enough over the long-term.  Your employees don’t just view work as a transactional relationship (a dollar’s pay for a dollar’s work) — According to David Rock, author of “Your Brain at Work,” what drives high performance is a person’s social and emotional connection to work.    The recession has in many cases forced a transactional relationship as people worry about their futures, their jobs, and their families.   According to Rock, Status and Fairness (equity) are two of the main drivers of performance.   I would argue that the economy has focused employees needs for status and equity outward (”Two of my neighbors lost their jobs, I’m just happy to have mine”), but at some point in the near future they’ll return their focus inside the four walls of your organization and you better be ready.  You’ll need to make sure you get ahead of the curve in terms of recognition and reward or you’ll likely lose many people as their employment options increase.   Put simply, you need to reengage the workforce.

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In case you haven’t heard (or aren’t obsessively following IT trends like we are), the great trend in software is the evolution from traditional “on-premises” software (e.g. client/server software installed at the office) to Software as a Service (SaaS) (i.e. web-based applications that are managed in the vendors’ data center and accessed “on-demand” through a web browser).

Given what’s at stake for software companies in either camp, debating the merits of each model has led to some fiery discourse. We thought we’d fan the flames by introducing another angle: which model is “greener;” that is, better for the environment. We used electronic medical record software as the comparison example.

We crunched the numbers for each type of software. Here are the quick stats on power consumption of each software delivery method:

On-premises

Total energy consumption by four physicians: 9,408 KW/yr

Individual energy consumption by each physician: 2,352 KW/yr

SaaS

Total energy consumption by four physicians: 611.4 KW/yr

Individual energy consumption by each physician:  152.85 KW/yr

For an even quicker summary, the SaaS software used 93% less energy than on-premise. That is a massive energy savings that if scaled to a large number, has world wide effects on energy consumption.

In business as a manager you do whatever you can to hire and develop your folks to grow into roles that you see a great fit for and have a real business need in. I think it’s safe to say that it would be a while before we figure out how to and allow ourselves to DNA test our colleagues and contractors to help assess their potential (pretty scary and far fetching thought right?!) to drive people performance.

But what is really at your hands as a manager though is to drive as much performance from your people as you possibly can no matter their genetic capability. No one wants to leave work feeling completely underwhelmed or go celebrate some work done if you don’t feel that you did your best. You are a coach and a manager that can and should set up for ultimate performance for your team members. Get your people to feel that they left all they had on the field that day. People want to perform and you as a manager no matter at what level – even when you manage and coach yourself – should set up for this.

A while ago I learned about some of the best research into how you actually drive real people performance. Learnings from high pressure organizations, sports, art and other high performance environments. Elkiem who has studied thousands of high performers and SF Research then recently partnered up to help accelerate their research findings into the hands of people that are accountable for driving people performance in their organizations – and who isn’t?

Look at this paper – Leaders Drive Productivity -  and get some insight on how you could drive better people performance from creating high performance environments  in your organization.

Lars, our founder and CEO, and I are working on our book Return on Execution©. You will find posts from the research and findings that we’ll share in the forthcoming book right here on the Business Execution blog. After all driving execution is what explains the financial performance of your company. Execution creates sustained competitive advantage. With an average of 70% of your operating expenditure comprised of labor (for not taking contractors into account) there is no bigger expense post to optimize if you want to drive better execution. It’s not a matter of what but rather who drives the execution of your strategy. To learn more about this exciting book visit this Return on Execution(c) link to read the short version of it.

You’ll see posts from the SF Research team as well as guest posts from our select thought leaders on the topic of driving execution. Keith will share insights from working with our customers around the world in how they increase their ability to execute both here and through Twitter so sign up for that too. We welcome your active input and feedback. Let’s go drive some better execution.

What do the greatest companies all have in common?  You got it — the ability to focus their organization on strategy execution by ensuring that each individual is working (i.e., executing) on goals that matter to the organization.  What type of goals “matter?”  Put simply, only the ones that have a direct line back to the Strategy sitting in a binder on the CEO’s bookshelf.

We’re just researching what impact we have on our customer’s ability to communicate strategy and execute new directions faster. The early results are very intriguing and positive – and we promise to share them when we finalize our research.   The timing is also significant as the economy has forced companies to be agile and demands that companies be able to shift their strategy (and subsequent execution) at a much more rapid pace than in a bull market.

The thing that struck me when doing some desktop research was that even though we know that 85% of performance is due to execution, the amount of content available is unbelievably skewed towards strategy — a simple web search on “Business Strategy” returns 3X more hits than “Business Execution”  (80M hits vs. 24M hits).   The term strategy execution returns only 3.5M hits.

The good news is that the “worm is turning.”   Execution is the topic du jour – maybe it’s the economy, maybe it’s just the natural evolution of business.   Regardless, you can put us squarely on the “Business Execution” team, and we’re looking forward to sharing our results soon.

After all, Execution is the name of the game to drive financial results

I have a job that most people would find either very interesting or very boring.  I’ll let you decide which, but essentially my job is to help people quantify the financial benefits of Optimizing their Investment in their people.   Which people?  Their employees, human capital, talent, etc…   It’s a hot topic at the moment, and certainly the economy has increased the importance of making “smart” people decisions.

For the most part, your average company invests the vast majority of their dollars in people, process, and technology.    Out of those three, People are (typically) by far the average company’s biggest expense.  Research has actually shown that 70% of most company’s operating cost is People related.     So I’m here to talk about optimizing your people investment right?  Not exactly.   Today, I’m writing about the “other P” – Process.  Or to be more exact, your “People Processes.”  Confused yet?  Keep reading…

First of all, people and process are linked.  The definition of Process in a business context is “a method or system for achieving a commercial result.”   Put simply, it’s a method or system that your people execute on to drive commerce  – i.e., goods, services, cash, revenues, margin, etc…   If you have inefficient processes, then you’re hindering your company’s (People) ability to execute and drive commerce.    When I’m speaking with executives about the business impact of “Workforce Optimization” many of their eyes start to glaze over when I discuss the value to the organization of creating more efficient people processes for their Front-Line Managers and HR staff to execute on.     The CFO or COO will tell me that those are “soft” benefits and they aren’t interested.    Technically, they’re right – if a process improvement doesn’t allow you to reduce or re-allocate resources, then it is indeed a “soft” benefit.  However, the line between “soft” and “hard” benefits is blurry at best and I would argue that you can’t optimize the commercial result (hard benefit) without first optimizing the method or system (soft benefit).

The fact of the matter is that if we were talking about this in a manufacturing environment then the same COO and CFO would likely have less of a problem with the line between hard and soft.  If I was telling them that if they improve these inputs (process), then they would increase production by 100 widgets per hour (Output or Commercial Result), then they’d likely get our their checkbook and want to know how soon it can be implemented.    Unfortunately, many times people aren’t as willing to make the direct connection with their “People Processes.”    People are variable – some work harder than others, some are smarter, they have bad days, their favorite teams lose the Super Bowl,  their Mother-In-Law just moved in, and the kid gets sick – it’s certainly not as cut and dry as “Input In” and “Widgets Out.”     The problem is that they make up the most significant portion of your Operating Cost so not fully optimizing that investment is just simply Bad Business.    If you’re an executive reading this here are a few ways to determine how optimized your people investment really is:

· What % of your company can tell you the Organizations Strategic Goals?   Go to the Water Cooler and ask a few people.   Just for fun, also ask them when is the next company holiday – they’ll probably all know the answer to that question.

· Are you measuring top to bottom performance based on those Strategic Goals?   By the way, that may be hard to do if the people in your organization don’t know the goals (see question #1).

· Do you know who your top performers are across the entire organization?    Do you reward them differently for their contribution?

I could go on and on, but the answers to those three questions are a good litmus test for understanding whether your company’s largest investment is being managed wisely.    If it’s not, then you might want to consider investing in a better method to drive commercial result.

In parting, I like to point your attention to the “mother of all processes” – the US Tax Code.   Based on our earlier discussion, the Tax Code in and of itself is merely a process, so improving it would only yield “soft” benefits right?   Forbes Magazine has a blurb discussing the complexity of the process.    In 2008, 500 changes were made to the US Tax code.  The “process” changes to the tune of nearly 1000 words/day being added.    Nowhere is the blurry line between hard and soft benefits more apparent.  The process now consumes 7.6 Billion hours of American’s time per year – the equivalent to 3.6 million jobs.     What’s the result, output, or commercial result?    Well, three of the President’s cabinet appointees have had “tax compliance” issues due to the complexity of the method/system/process.   (By the way, it’s not a political blog, so I’m just giving the benefit of the doubt).  If you’re a business, then you employ teams of people just to navigate through the complexity.   If you’re a regular Joe Q. Public, then you spends hours of your own time and money in order to achieve the optimal commercial result.  Sound familiar?

Maybe process does matter after all…