How to have an honest conversation about your business strategy

January 8, 2008

Despite widespread rhetoric about the need for organizational agility, an astonishing number of businesses stay stuck in neutral when they need to implement a new strategy.

Consider the situation that Lynne Camp faced in July 2000. Camp, the vice president and general manager of Agilent Technologies’ Systems Generation and Delivery Unit (SGDU), was charged with creating a single global company from a set of fragmented businesses in Asia, Europe, and the United States. To gain control over product decisions being made by the regional teams she had inherited, Camp and her senior team had originally adopted a functional organization structure. This enabled them to exit many marginal, local businesses and focus on the opportunities that were most promising from a global perspective. It also allowed them to introduce more efficient shared processes.

Despite these strengths of the new structure, problems began to emerge. The functional departments didn’t give the new businesses the attention they needed. The staffs of the regional field organizations were in a funk; they thought their customer perspective was being overlooked. Conflict between the functions, the businesses, and the field organizations was growing. The senior team was slow to make decisions, and no one took responsibility for the performance of the developing businesses.

Camp surveyed the problems and concluded that the best way to increase accountability and speed up decision making – and thus to support the strategy of focusing on a few promising businesses – was to switch to a matrix structure.Members of the senior team strongly disagreed. A matrix would not work, they thought, and besides, they were too overloaded to undertake another major reorganization. Camp could have imposed her solution unilaterally, but she knew that if she did, she’d undermine the senior team’s commitment, which was critical to making this complex global structure work. She needed to find a different way out of the impasse.

As Camp searched for an approach that would jumpstart change at SGDU, she began to suspect (correctly) that people throughout the unit were talking about its strategy – and she further suspected that plenty of managers a couple of layers down had insights that she needed to hear. But these conversations took place behind closed doors, for the most part. And private conversations, by their nature, can’t mobilize an organization to address the gaps between its business strategy and the structure, capabilities, and market realities it faces.

In our experience, the challenge Lynne Camp faced – SGDU’s collective inability to talk openly about its problems – is common.This lack of openness lies behind many failures to implement strategy.We’ve become convinced that the most powerful way for leaders to realign their organization is to publicly confront the unvarnished truth about the barriers blocking strategy implementation. Typically, this involves looking closely at the roles and decision rights of various parts of the business, as well as changing the behavior of people at all levels. Public, organizationwide conversations about such fundamental issues are difficult and likely to be painful. But pain contributes to a species’ survival by triggering learning and adaptation; it can have the same effect on organizations. Businesses and the people inside them don’t learn to change unless they have the courage to confront difficult truths.

Because most initiatives fail to uncover the truth, they lead to only superficial change. Employee surveys, 360- degree feedback, interviews by external consultants, and even relatively honest one-to-one conversations between a key manager and the CEO (remember the courageous discussion Sherron Watkins had with Kenneth Lay at Enron) typically do not move the organization forward. They do not convince employees that management wants to know the truth and is ready to act. Quite the reverse – all too often, these methods lead to cynicism, and cynicism is the enemy of commitment to change. In one highly regarded company we studied, a task force of respected managers rebelled when asked by senior management to conduct and analyze a worldwide employee survey. They refused to get involved in yet another hopeless exercise. Meanwhile, senior managers fully believed that they had acted on past feedback.

We believe that organizationwide conversations are essential, so about 15 years ago we launched a research program to develop a process that leaders could use to engage their people in an honest conversation. The “strategic fitness process” was designed in partnership with senior executives to enhance their capacity to implement strategy quickly and effectively. It does so by fitting the organization to the strategy and increasing fitness, the capacity of the organization to learn and change. Since then, this process has been used in more than 150 businesses in the retail, hospitality, high technology, banking, and pharmaceutical industries.

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