The Bottom Line: Better Business Performance

January 17, 2008

Senior teams that have engaged in this process have been able to make dramatic changes in how their businesses were organized and managed – and in their firms’bottomline performance.One Hewlett-Packard division improved profitability ninefold over a seven-year period; managers and employees engaged in a conversation each year using the strategic fitness process. Senior corporate executives reported that the division’s senior team had transformed the division from the worst to one of the best in the sector. Ten country organizations in Merck’s Latin American region were transformed when senior vice president Grey Warner, who headed the region, introduced this process at the country level. In just three years, these top-down organizations had developed customer-focused, more participative cultures in which employees at lower levels felt empowered to contribute. Substantial improvements in financial performance accompanied these changes. At Mattel Canada, the process uncovered conflicts between sales and operations and helped the company move from last to first in profitability among Mattel’s international subsidiaries.

Six weeks after Lynne Camp and her team tested their plan with the task force, SGDU was operating as a decentralized, business-focused, accountable organization. The speed of SGDU’s transformation is not uncommon; rapid transformations of this sort are possible because senior management teams are made to feel accountable to the organization.

Just as important, success that begins with honest conversations begets future conversations that further improve performance. The first time is, of course, the hardest. Once everyone has had a chance to see that real change does emerge out of initially painful truth telling, the organization gets better at having an honest collective conversation. The managers whose leadership actions were questioned the first time are typically seen as leading more effectively if they embraced the process and responded to feedback. Lynne Camp’s stock went up dramatically because she courageously acknowledged her role in the organization’s problems and responded by changing the organization and how she managed. By enabling a complicated organizational truth to emerge, senior managers reduce cynicism, increase trust, and develop selfless commitment.As a result, they create a mandate for change that even the most entrenched and resistant power centers cannot resist.

Surprisingly few corporate leaders make a serious attempt to engage their organizations in honest conversations about the strategic and organizational issues they face. As a consequence, they forfeit the benefits of transparency achieved by the leaders of the organizations discussed in this article. We believe that in the twenty-first century, organizations will have to institutionalize a means for having honest conversations if they want to endure. Adopting the principles we have outlined here is a critical first step in creating the kind of frank public dialogue needed to build the collective commitment that drives rapid change, improved performance, and organizational vitality.

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