by Frédéric SOS - July 15, 2019
"The problem here is that we have no real strategy!"
Sitting atop the list of arguments intended to excuse a disappointing performance, the above unequivocal statement offers the tremendous advantage of being easily employed at all levels of the company, including Board members. Same old story: responsibility lies at a level other than one's own.
Since our primary focus here lies squarely with ExCom failings, we're interested in those situations where such a diagnosis targets senior managers (i.e. the label we ascribe to executive team members).
When the Board issues such an assessment, the scenario seems to be well-oiled: justification is provided for Board decisions prioritizing a financial rationalization and short-term profitability, with an emphasis on the "earnings per share" so coveted by shareholders. No surprise then for the company's senior managers, who hail (even if it often appears contrived) a "demanding approach aimed at company consolidation". But does this approach actually strengthen the company's solidity and resilience? Our next post will delve into this question in greater depth.
Senior managers feel more directly challenged whenever the assessment of strategic impotence stems from their own teams: "They've got no idea where they're headed", or "So how does this pursuit of performance actually benefit us?". Once this kind of feedback reaches senior managers, they might react with stupefaction in referring to recent memos and launching a medium-term action plan.
"But everything has been made so crystal clear in the 2021 action plan" was the rebuttal I received this past January from the European managing director of a textile group. "We've planned to boost the Retail sector by December 31st 2021 in opening 30 new shops (and renovating just as many), with our sights set on doubling our e-commerce market share, optimizing our purchases and expanding our presence in certain countries to achieve a 10-point increase in profit margin! This plan has even given rise to a series of operational action plans in each country across each department that we're regularly tracking during our Business Meetings! Here, I'll show you…". A plan that is laid out in subplans… A subsequent post will be dedicated to the use of such plans.
So all was perfectly understood as regards the how. But the teams' main concern did not lie herein: what they were referring to as Strategy was instead focused on the company's Ambition, a vision of its future market position, its internal configuration, its value added and perhaps even its utility for society over the next few years. Elaborating a strategy is obviously necessary, but for what purpose? To achieve what exactly? To reach which standing?
It's easy to confuse strategy, methodology and this forward-looking dimension, all of which are deeply embedded in senior managers' responsibilities. Answers are sought through a panoply of questions, like "are we really motivated to succeed together with this company over the medium term?" or, with reference to our example herein: "What accomplishment will make you proud working with this company by December 31st 2021?". The strategy mentioned thus "merely" appears as a lever for achieving this ambition.
Renouncing attempts at explaining this Ambition often leaves an empty space, which as nature would have it gets filled instead by shareholder ambitions: the quest for dividend returns, favoring short-term profitability, over a one-year horizon or even a single quarter, with the well-known adverse consequences on capital investment, entrepreneurial risk-taking, employee dedication and ultimately ethics.
When Matthias Müller, who heads the Volkswagen Group, declared in an interview with the weekly Wirtschaftswoche "this obsession over the number of units rolling off the assembly line in always seeking new sales records, in my opinion, makes very little sense… whether we're number one, two or three in volume terms, it really doesn't matter to me", didn't that refute the strategy adopted by the previous Managing Director, Martin Winterkorn, who had sworn to overtake Toyota before the end of 2018? Mr. Winterkorn's drive to raise numbers and technical requirements have since been perceived as the root cause of the heightened pressure that led to the company's engine emissions scandal. In rallying behind the Ambition of enabling every motorist to drive an electric car and, along these lines, generating the capacity to sell 1 million electric vehicles a year beginning in 2025, the company has inspired its in-house teams and positively shaped its brand image in the marketplace.
As it turns out, this lowest common denominator among executive team members' desires has mobilized not just the team itself but all actors participating in the company.
Among the executive teams I've had the pleasure to work with, I'm reminded of a few of the highest achievers, the so-called Dream Teams, with an operational quality that truly set them apart. On each occasion, its members were motivated by an Ambition, a dream for their company, which in turn stimulated the level of commitment and instilled a sense of collective action.