Making Strategy Work: Leading Effective Execution and Change

Without effective execution, no business strategy can succeed. By now, most executives and managers realize that. Unfortunately, most organizations are still far better at developing strategy than at executing it. In Making Strategy Work, Second Edition , leading consultant and Wharton professor Lawrence Hrebiniak offers today’s most comprehensive, disciplined process model for making strategy work in the real world.

Now fully updated, this Second Edition reflects new research at Wharton and beyond, and extensive additional input from managers confronting and solving execution-related problems. In an expanded applications section, Hrebiniak shows how to apply his model to a wide range of challenging, real-world situations. This edition offers new chapters with deeper analysis of strategy execution in global environments, and of linking project management with strategy. Responding to many requests, Hrebiniak has also added an entirely new chapter on service organizations.

This book sheds powerful new light on why businesses fail to deliver on even their most promising strategies. Hrebiniak’s complete execution roadmap encompasses organizational structure, coordination, information sharing, incentives, controls, change management, culture, the role of power and influence, and much more.

• Strengthening the linkages between planning and execution

  Getting planners and “doers” involved in strategy execution

• Building the capabilities and culture you’ll need to execute

  Aligning organizational skills, resources, and culture around your strategies

• Getting structure right

  Balancing centralization and decentralization to optimize the benefits of each, while achieving effective coordination or integration

• Defining a logical flow of execution decisions and actions

  Making sure the right tasks get done at the right time

• Widening the scope of successful execution

  Overcoming unique obstacles to execution in M&A, global markets, and service organizations

Without effective execution, no business strategy can succeed. This second edition delivers a powerful framework every leader can use to overcome the obstacles to successfully deploying business strategy. In this book, leading consultant and Wharton professor Lawrence Hrebiniak offers a comprehensive, disciplined process model for making strategy work in the real world. Drawing on his unsurpassed experience, Hrebiniak shows why execution is even more important than many senior executives realize, and sheds powerful new light on why businesses fail to deliver on even their most promising strategies. He offers a systematic roadmap for execution that encompasses every key success factor: organizational structure, coordination, information sharing, incentives, controls, change management, culture, and the role of power and influence in your business. With three new chapters, expanded coverage, and new examples, the Second Edition of this highly successful book is the definitive guide for turning strategy into action.

Dr. Hrebiniak held managerial positions in the automobile industry prior to entering academia, which provided him with valuable real-world experience. He is a past President of the Organization Theory Division of the Academy of Management. For more than two years he was one of a handful of Wharton faculty members providing commentaries on the Wharton Management Report, a TV program on the Financial News Network.

Professor Hrebiniak’s most notable research of late has been in the area of strategy execution. He has consulted with or participated in executive development work with scores of companies, profit and not-for-profit alike, both inside and outside the U.S. He facilitated many of Jack Welch’s legendary “Work-Outs.” Based on his research and experience with strategy implementation, he developed integrated processes that help make strategy work in different organizations, across different industry settings. He is still active as a researcher and consultant.

Dr. Hrebiniak has authored seven books and numerous professional articles. This book, the second edition of the bestselling Making Strategy Work , reflects his experience as a manager, consultant, and educator in creating a culture of execution and facilitator of the execution process in complex organizations.

Acknowledgments     xxv

Introduction to the First Edition     xxvii

Learning from Experience     xxviii

What You Need to Lead     xxviii

The Big Picture     xxviii

Effective Change Management     xxix

Applying What You Learn     xxix

The Bottom Line     xxx

On a Final Note     xxx

A Few Thanks     xxx

PART I:  KEY FACTORS IN STRATEGY EXECUTION     1

Chapter 1  Strategy Execution Is the Key     3

Execution Is a Key to Success     5

   Making Strategy Work Is More Difficult Than the Task of Strategy Making     6

   A Focus on Making Strategy Work Pays Major Dividends     8

   Managers Are Trained to Plan, Not Execute     9

   Let the “Grunts” Handle Execution     10

   Planning and Execution Are Interdependent     11

   Execution Takes Longer Than Formulation     14

   Execution Is a Process, Not an Action or Step     17

   Execution Involves More People Than Strategy Formulation     18

Additional Challenges and Obstacles to Successful Execution     19

   Wharton-Gartner Survey and Executive Education Data Collection . . . .20

The Results: Obstacles to Successful Strategy Execution     22

   Execution Outcomes     26

   The Execution Challenge     28

   Having a Model or Guidelines for Execution     29

   Strategy Is the Primary Driver     29

   Choosing an Organizational Structure     29

   Coordination and Information Sharing     30

   Clear Responsibility and Accountability     30

   The Power Structure     30

   Incentives, Controls, Feedback, and Adaptation     31

   The Right Culture     31

   Leadership     31

   Managing Change     32

   Applications and Special Topics     33

   The Next Step: Developing a Logical Approach to Execution Decisions and Actions     33

Summary     35

Endnotes     36

Chapter 2  Overview and Model: Making Strategy Work     37

Common Versus Unique Execution Solutions     38

A Need for Action     40

   A Model of Strategy Execution     41

   Corporate Strategy     43

   Corporate Strategy and Structure     45

   Need for Integration     50

   Executing Business Strategy     53

   “Demands” of Business Strategy    55

   Integrating Strategy and Short-Term Operating Objectives     56

   Incentives and Controls     61

   Incentives     63

   Controls     64

Another View of the Model of Strategy Execution     65

Context of Execution Decisions      67

   The Execution Context     68

   Managing Change     69

   Culture     69

   The Organizational Power Structure     70

   The Leadership Climate     71

   Need for a Disciplined Approach     72

Summary     73

Endnotes     74

Chapter 3  The Path to Successful Execution: Good Strategy Comes First     77

Is the Impact of Strategy Overrated?     78

Issue #1: The Need for Sound Planning and a Clear, Focused Strategy     80

   Corporate-Level Planning     81

   Corporate Strategy: Some Corporate Examples, Good and Bad     82

   Business Strategy     86

The Service Business     93

Issue #2: The Importance of Integrating Corporate and Business Strategies     95

   The Role of the Business Is Unclear     97

   Inappropriate Performance Metrics     98

   Battles Over Resource Allocations     99

   Assessments of Business Performance Create Additional Problems     99

   The Strategy Review     100

Issue #3: Thinking Short Term—The Need to Define and Communicate the Operational Components of Strategy     103

   Integrating Strategic and Short-Term Objectives     105

   Need for Measurable Objectives     106

Issue #4: Understanding the “Demands” of Strategy and Successful Execution     108

   Low-Cost Producer     109

   Differentiation Strategies     111

   Developing the Right Capabilities     112

   The Demands of Global Strategy     115

   A Final Point     116

Summary    117

Endnotes     118

Chapter 4  Organizational Structure and Execution     119

The Challenge of Structural Choice     120

   Johnson & Johnson     120

   Citibank, ABB, and Other Large Global Players     122

   Service Organizations and Nonprofits     123

The Critical Structural Issues     124

   Structural Issue #1: Measuring Costs and Benefits of Structure     126

   Structural Issue #2: Centralization Versus Decentralization     131

   Structural Issue #3: The Strategy-Structure Relationship and Effective Execution     144

Summary     157

Endnotes     160

Chapter 5  Managing Integration: Effective Coordination and Information Sharing     163

The Importance of Integration    165

   Boeing     165

   Hewlett-Packard     165

   General Motors     166

   Royal Dutch/Shell Group     167

   Law Firms and Integration     168

Interdependence and Coordination Methods     169

   Types of Interdependence     169

   Coordination Processes and Methods     174

   The GE “Work Out”     178

Facilitating Information Sharing, Knowledge Transfer, and Communication     181

   Creating, Using, and Sharing Knowledge     181

   Methods, Tools, or Processes for Information Sharing     184

   Informal Forces and Information Sharing     187

   Additional Informal Factors Affecting Information Flow and Knowledge Transfer     190

Clarifying Responsibility and Accountability     197

Responsibility Plotting and Role Negotiation     198

Summary     202

Endnotes     204

Chapter 6  Incentives and Controls: Supporting and Reinforcing Execution     207

Role of Incentives and Controls     208

Incentives and Execution     209

   A Basic Rule: Don’t Demotivate People     209

   Good Incentives     210

   Reward the Right Things     214

Controls: Feedback, Learning, and Adaptation     216

   The Control Process     216

   Develop and Use Good Objectives     221

   Controls Require Timely and Valid Information     222

   Use and Act on the Information     223

   Face the Brutal Facts Honestly     225

   Reward the Doers, the Performers     226

   Reward Cooperation     227

   Clarify Responsibility and Accountability     228

   Leadership, Controls, and Execution     229

The Strategy Review: Integrating Planning, Execution, and Control     232

   Step 1: Strategy Formulation     234

   Step 2: The Execution Plan     238

   Step 3: Initiating the Control Process     239

   Step 4: Cause-Effect Analysis and Organizational Learning     240

   Step 5: Feedback and Change     241

   Step 6: Follow Up and Continue the Process     242

Summary     243

Endnotes     245

Chapter 7  Managing Change     247

Managing Change: A Continuing Challenge     247

Steps in Managing Change     251

A Model of Change and Execution      253

   Components of the Model     253

   Relating Change to Execution Problems     255

   Sequential Change     260

   Complex Change     266

   Other Factors Affecting Change     278

Summary     278

Endnotes     280

Chapter 8  Managing Culture and Culture Change     283

What Is Culture?     284

   Culture Is Important for Execution     285

   Culture Is Not Homogeneous     286

   Culture Affects Performance     286

   Organizational Performance Affects Culture     289

A Model of Culture and Cultural Change     291

   The Top Line: The Effects of Culture     291

   The Bottom Line: Changing Culture     295

Summary     309

   Rule 1: The Reasons for Change Must Be Clear, Compelling, and Agreed Upon by Key Players     309

   Rule 2: Focus on Changing Behavior—Not Directly on Changing Culture     310

   Rule 3: Effective Communication Is Vital to Culture Change     310

   Rule 4: Adequate Effort Must Be Expanded to Reduce Resistance to Change     310

   Rule 5: Beware of Excessive Speed     310

Endnotes     311

Chapter 9  Power, Influence, and Execution     313

A View of Power and Influence     315

   Strategy and Environment     316

   Problems or Dependencies     317

   Organizational Structure     318

   Uneven Resource Allocations     319

   Internal Dependencies and Power     320

   Using Power and Influence     322

   Coming Full Circle: Conclusions About Power     325

Power and Execution     325

   Define Power Bases and Relationships     326

   Form Coalitions or Develop Joint Ventures with Those in Power     328

   Focus on Value-Added, Measurable Results     329

   A Final Note on Power: The Downside     336

Summary     343

Endnotes     344

PART II:  APPLICATIONS     347

Chapter 10  Making Mergers and Acquisitions Work     349

Making Merger and Acquisition Strategies Work     350

   Why Focus on Mergers and Acquisitions?     350

   Why Do So Many Mergers and Acquisitions Fail or Founder?     355

Using the Present Model and Approach to Execution     360

   Corporate Strategy     360

   Corporate Structure     363

   Cultural Integration in M&A     367

   Business Strategy and Short-Term Objectives     373

   Business Structure/Integration     377

   Project Management     378

   Incentives and Controls     379

Managing Change     383

Managing Culture and Culture Change     387

The Critical Role of Leadership     391

Summary     392

Endnotes     394

Chapter 11  Making Global Strategy Work     397

Types of Global Growth and Execution Decisions     399

   Early or Basic International Presence     399

   The Multidomestic Global Organization     400

   The Coordinated Global Strategy     405

   Strategic Alliances     410

Summary     414

Endnotes     415

Chapter 12  Executing Strategy in Service Organizations     417

Similarities: Executing Strategy in Service Businesses     419

   Strategy     419

   Organizational Structure     422

   Talent, Capabilities, and Need for Training/Skill Development Programs     424

   Incentives and Controls     426

   The Logical Conclusion?     427

Service Businesses: Possible Differences Affecting Strategy Execution     428

   Production and Consumption of Services     428

   Are Services Personal?     429

   The Measurement Issue     430

Categories or Types of Service Organizations     432

   Definition of Goals and Strategies     434

   Professional Versus Administrative Controls     436

   Knowledge and Power     438

   Conclusion: A Difficult Setting for Strategy Execution     439

Strategy Execution in People-Based Professional Service Organizations     440

   The Setting for Action: A Case of Reciprocal Interdependence     440

   Deciding on Strategy and Goals     442

   Defining Measurement Metrics and Cause-Effect Clarity     444

   Structure and Coordination Processes     446

   Effective Incentives     448

   The Verdict: Execution in People-Based, Professional Service Organizations     449

Summary: Strategy Execution in Service Organizations     451

Endnotes     454

Chapter 13  Project Management and Strategy Execution     457

Possible Benefits of a Project Management Approach     458

An Example: Project Management and Making Strategy Work     460

   Defining the Projects and Key Objectives     461

Potential Pitfalls with Project Management     466

   Degree of Formality     466

   Tension Between Routine and Autonomy     468

   Managing Culture and Change     469

   Evidence of Value Added     469

Summary     471

Endnotes     472

Appendix     473

Index     479