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Diagnostic Resource Package

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Purpose

The following worksheets have been designed to help you assess the health of your organization.

The twelve items that follow cover strategy, change and leadership issues that are vital to building a high-performance organization.

Emphasis here is on “fast diagnosis” and being “roughly right” vs “smart talk” and high level McKinsey like analyses not grounded in “live issues”.

In sum, my assumption is that executive education programs should help managers identify levers for change and taking action.

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Table of ContentsThe Five Elements of Strategy P4

Execution IQ P7

Structuring Jobs For High Performance P11

Creating A High Performance Organization P17

Creating The Conditions For Sustainable Charge P20

Diagnosing the Depth of The Change Effort P23

Gravitas P27

4 E’s P30

Topgrading P33

Talent Management P36

Is Your Leadership Team Ready To Lead? P41

Your 100-Day Agenda P43

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The Five Elements Of StrategyThis elegant framework simplifies strategic thinking and implementation to five basic elements. The elements on the vertical axis concern strategic thinking and positioning, while those on the horizontal axis concern the execution of the strategy.

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The Five Elements Of Strategy

Arenas: Where will we be

active?

Vehicles: How will we get there?

Differentiators: How will we win in the

marketplace?

Staging: What will be our speed and sequence of moves?

Economic logic: How will we obtain our

returns?

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Worksheet: Strategy Development And Execution

Element Green?

Yellow?

Red?

How can you leverage the strengths in the areas designated as green lights?

What can you do to minimize constraints in areas that you have designated as yellow or red?

Where do you need more information and what are the key questions?

Arenas: Where will we be active and how much emphasis?

Vehicles: How will we get there?

Differentiators: How will we win?

Staging: What will be our speed and sequence of moves?

Economic Logic: How will we obtain our returns?

Green--

No problem

Yellow--

Modest problem

Red--

Major problem

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Clear Intent•Is the thinking behind the strategy clear and simple?

•Does the top team share this understanding and support it?

•Are there ways to make the strategy actionable to the entire organization?

Supporting Actions

•Are there initiatives and projects to advance the strategy?

•Do the plans include clear accountabilities, realistic timelines, adequate resources, and defined rewards and penalties for execution?

Disciplined Tracking•Does the organization have mechanisms for tracking progress on key project or strategy drivers? Are key strategy issues built into management meetings for problem definition and resolution?

Execution IQ

This framework looks at strategy execution in terms of three related areas to help executives focus on potential problem areas

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Diagnostic Indicators--Intent G Y R1-The top team collectively worked on the strategy and there is a consensus on the direction of the business.

2-The CEO and his reports could write a clear, concise 1-2 sentence summary of the strategy, as could the managers 1-2 levels down in the organization.

3-There is a bureaucratic focus to strategy. The planning function badgers people for inputs, rather than making sure the plan makes sense and will work.

4-There are major strategic items not included in the plan, and they are costly to ad, when discovered

5-The organization wastes time and effort on projects whose strategic purposes were never really clear.

6-It is difficult to assess the impact of external changes on existing plans. There is constant firefighting and insufficient attention to the long term.

Green--

No problem

Yellow--

Modest problem

Red--

Major problem

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Diagnostic Indicators--Action G Y R7-Strategy is just not ‘alive,’ not a factor for management and staff on a day to day basis.

8-Projects are more often funded based on who the sponsors are, rather than what is important to the business.

9-There are many projects and initiatives being worked on at the same time and there is confusion over which have priority.

10-Likewise, there are so many top priorities in support areas, such as marketing and IT, that revenue growth opportunities are not being addressed.

11-Key managers have little or no incentive to execute on projects and initiatives that advance the strategy.

12-There are few or no consequences to missing key targets, deadlines or other important metrics or milestones.

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Diagnostic Indicators--Tracking G Y R13-There is little or no potential problem analysis on key actions or projects and most glitches are by definition ‘surprises.’

14-The existing management meetings have limited focus on the ongoing status of key projects or initiatives.

15-Even further down in the organization, there is difficulty determining the status of projects and initiatives that are critical to strategy implementation.

16-There are relatively few written project plans for important efforts.

17-There are a limited number of people in the organization who know how to translate strategic objectives into performance plans.

18-The organization lacks broad, but incisive measures (like Southwest Air’s ‘Get the plane turned around in 20 minutes’) that provide daily feedback on strategy execution.

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Structuring Critical Jobs To Implement Strategy

Having the right strategy is a solid foundation for success, but if the most important jobs in a firm are not properly structured, the strategy is likely to fail. The following framework provides a way of looking at each key job and making adjustments to either narrow or widen the scope of the job, depending on the firm’s strategy. The framework uses four factors for fine-tuning each position to enhance execution of the strategy.

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What Every EmployeeNeeds To Know

• CONTROL: What resources do I control to accomplish my tasks?

• ACCOUNTABILITY: What measures will be used to evaluate my performance?

• INFLUENCE: Who do I need to interact with and influence to achieve my goals?

• SUPPORT: How much support can I expect when I reach out to others for help?

Executives must adjust the span of control for each key position and unit on the basis of how the company delivers value to customers

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Example: Wal-Mart’s Span Of Control For Two Key Positions

NarrowFew Resources

WideMany Resources

Store Manager Corporate Merchandisin

g Manager

The Strategic Logic• To ensure standardized operations, the store

manager’s control is limited• To promote the implementation of best practices, the

merchandising manager has a wider span of control

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The Four Spans--Tuning For Optimum Performance

The Span To Narrow Span To Widen Span

ControlReduce resources allocated to specific positions or units

Allocate more people, assets, and infrastructure

AccountabilityStandardize work by using measures that allow few tradeoffs-- e.g. line item budget expenses, head count

Use non-financial measures or broad financial measures that allow many tradeoffs-- e.g. customer satisfaction, profit

Influence

Require people to pay attention only to their jobs; don’t allocate costs across units; use single reporting lines; reward individual performance

Inject creative tension through structures, systems and goals--cross unit teams, dotted lines, matrix structures, stretch goals, cross-unit allocations

SupportUse leveraged, highly individualized rewards, and clearly single out winners and losers

Build shared responsibilities through purpose and mission, group identification, trust and equity-based incentive plans

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Getting The Spans Right For Each Individual Position

NarrowFew Resources

WideMany ResourcesSpan Of Control

Measures Allow Few Trade Offs Span Of Accountability

Measures Allow Many Trade Offs

Span Of InfluenceInteractions Within Unit

Interactions Across Units

Span Of SupportNo commitments of help from others

Strong commitments of help from others

These settings for a marketing and sales manager at a software firm show a narrow span of control and a wide span of accountability, showing the firm wants entrepreneurial behavior. A reasonable span of influence ensures collaboration with colleagues outside his unit to offset a low span of control. Company policy encourages a wide span of support to back entrepreneurial initiatives. The spans are paired as shown in the diagram to depict lines of available resources (control and support) and the demand for resources (accountability and influence). The intersection of the lines depicts a job that is roughly in balance between resources and demand for resources.

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Which jobs are the most critical for the execution of your strategy?

Is the structure of those jobs clear or unclear to you in light of the preceding model? If unclear, what is not known?

If you were to ‘audit’ key jobs to establish a fact base for possible changes, what would you look for that would be particular to your strategy?

Worksheet: Structuring Jobs For High Performance

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McKinsey’s Five ‘Must Do’ Levers For High Performance

This framework is based on research of more than 300 high performing organizations, all of which had in place strong performance relative to five factors that McKinsey has labeled as ‘Must Do’ elements for creating and sustaining high performance. While all are important, most firms use one or two levers more frequently than the others.

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Building The High Performance Organization

McKinsey’s 5

‘Must Dos’

Required Characteristics Effect

Mission/

Aspirations

•Very clear•High level and aspirational•Consistent over time

•Alignment around attractive end state•Rationale for aggressive targets

Targets/

Goals

•Highly aggressive•Both short/long term; measurable•Adjusted over time

•No misunderstandings•Always a new mountain to climb

Organization

•Few layers•Many P&L units (atomized)•Clear accountability/autonomy

•Sense of ownership deep down in organization•CEO/COO can interact with 50-100 units

Performance Feedback

•Transparent•Internal/external benchmarking•Rankings made public

•No place to hide•Induces peer pressure

Consequence Management

•Visible and quick•Severity can vary

•Reduces complacency•Reinforces peer pressure•Right people, right job

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Worksheet: Creating A High Performance Organization

Element Green?

Yellow?

Red?

How can you leverage the strengths in the areas designated as green lights?

What can you do to minimize constraints in areas that you have designated as yellow or red?

Where do you need more information and what are the key questions?

Mission/Aspirations

Targets

Organization

Performance Feedback

Consequence Management

Green--

No problem

Yellow--

Modest problem

Red--

Major problem

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Four Conditions For Sustainable Change

Achieving sustainable change is one of the toughest challenges executives undertake. The following model lays out four conditions that should be in place for change efforts to take hold and succeed. The model helps executives to plan and diagnose change efforts by characterizing the absence of any one of the conditions.

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Four Conditions For Sustainable Change

Capacity

forChange

Pressure

forChange

Actionable

FirstSteps

= A fast start that fizzles

+ + +

A ClearSharedVision

Pressure

forChange

Actionable

FirstSteps

= Ambitions frustrated

+ + +

A ClearSharedVision

Capacity

forChange

Actionable

FirstSteps

= Bottom of the “In” Box

+ + +

A ClearSharedVision

Capacity

forChange

Pressure

forChange

= Haphazard efforts, false starts

+ + +

A ClearSharedVision

Pressure

forChange

Actionable

FirstSteps

= Sustainable Change

+ + +

CapacityforChange

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Worksheet: Creating Conditions For Sustainable Change

Element Green?

Yellow?

Red?

How can you leverage the strengths in the areas designated as green lights?

What can you do to minimize constraints in areas that you have designated as yellow or red?

Where do you need more information and what are the key questions?

Vision For Change

Capacity For Change

Pressure For Change

Actionable First Steps

Green--

No problem

Yellow--

Modest problem

Red--

Major problem

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Understanding The Nature Of The Needed Change And The Proper Tools For

Achieving It

This model depicts change efforts on a continuum of difficulty. Operational tweaking is relatively simple to undertake, but business transformation in light of industry paradigm shifts is much more difficult. The model also helps executives to focus on the kinds of tools that are appropriate for the change being undertaken.

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If Change Is Needed,How Deep A Change?

Shallow

Deep

Deepest

Operational: Doing the right things, but need to do them better. No change to mission, values strategy

Strategic: Fundamentals are right. But need to refocus. Possible changes to objectives and strategies, possibly mission

Cultural: Need to change thinking and actions. Change, vision, values and leadership

Paradigm: Need to re-create the business, or face oblivion. Redefine the entire enterprise

Difficulty

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What Are The Right Tools?

• Operational– Restructure– Re-engineer– Downsize

• Strategic– Improve planning– Re-structure product portfolio– Realign facilities/processes

• Cultural– Change leadership– Change vision and values– Change performance drivers

• Paradigm– Redefine the business– Change definition of success

Focus On Efficiency

Focus On Effectiveness

Focus On Attitudes/Beliefs

Focus On Survival

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Worksheet: Diagnosing The Depth Of The Change Effort

Element

•Operational •Strategic•Cultural•Paradigm

•Which is your primary challenge?

What is your first impression of what is wrong and why?

Where do you need more information and what are the key questions?

Who are the key executives to further diagnosing and fixing the problem?

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Examining Leadership Capacities

With the following model, our focus shifts from the organization to the individual executive. In the first model of this section we look at three attributes that comprise top performing executives and give you an opportunity to grade yourself and develop a plan for maximizing strengths and/or improving.

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GravitasA shorthand list of critical skills necessary for an effective executive:

1. Hunger

Hunger is the marriage of imagination to ambition, the desire to accomplishgreatness, and the will to struggle to realize goals.

2. Speed

Speed is the capacity to learn quickly (especially from one’s mistakes), to master and retain relevant material, to reflect, to see the same set of factsin a different framework.

3. Weight

Weight concerns how someone carries his or her authority, accepts thedecisions of superiors, listens to the truth from subordinates without defensiveness, takes action that will command respect and follow through.

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Factors Importance 1,2,3,

Rate yourself 1,2,3

Your Improvement Plan

Hunger

Speed

Weight

For your current job, rate the relative importance of hunger speed and weight, and then rate yourself--which of the three factors is your strong suit, and which is your low point? Are your strengths matched to those of your job? What will you commit to doing to get better?

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General Electric’s 4E’s Of Leadership

Under Jack Welch, General Electric was renowned for selecting and developing strong business leaders. Welch looked for some simple criteria and used them to screen the people he wanted to keep and develop. Welch’s model has a heavy focus on execution.

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The 4E’s Of General Electric LeadersUnder Jack Welch

• ENERGY: Enormous personal energy--strong bias for action

• ENERGIZER: Ability to motivate and energize others. Infectious enthusiasm to maximize organization potential

• EDGE: Competitive spirit. Instinctive drive for speed/impact. Strong conviction and courageous advocacy

• EXECUTION: Deliver results

Values and performance critical to success

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Success Factors

How would you grade yourself in each area and why?

Are your mechanisms for measuring yourself or getting feedback on these factors sufficient? What could be improved?

Can you improve your flat side, or do you need to hire complementary people?

Energy

Energize Others

Edge

Execution

Worksheet: Grading Yourself On The 4E’s

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Topgrading

Jack Welch used the 4E’s and a rigorous talent evaluation system to constantly upgrade the executive talent in GE. This systematic review of talent, coupled with on-going development of high-potential talent (and the weeding out of poor performers) has been labeled as Topgrading. In the diagnostic that follows, you have the opportunity to evaluate how well you are doing at making sure your team and your business have the best people on board.

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Topgrading Diagnostic G Y RMy team consists of all A Players, or those with the potential to be A Players at the appropriate salary level

Instead of paying top dollar for talent, I get top talent for the dollars I pay

More than 90 percent of my external hires are successful

I have the bench strength to assure a team of all A Players three years from now

In relation to my competitors, I look harder to find talent, screen harder to select the right people, and act more quickly to confront nonperformance

I carefully determine competencies for any job I intend to fill

Topgrading WorksheetTopgrading is about identifying the key jobs in a firm, knowing the competencies that are need for success in the position, and assessing all of the people as either ‘A Players’--the best who should be rewarded and retained; B Players--those who meet job requirements and could be coached to a higher level, and ‘C Players’--those who should be moved to other jobs within the firm where they are more likely to become at least B Players, or, if not, released. Topgrading criteria are also a factor in hiring.

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Topgrading Diagnostic G Y RI realize I can create a C Player out of an A Player by overpaying, stifling a person’s talents, putting a square peg in a round hole, or failing to train someone

I provide ongoing coaching and training, to help help A Players remain A Players as their jobs become more complex and pay more

I have no chronic C players

My C and B Players have plans to become A Players, move into other jobs where they can become A Players, or leave the company

I do not waste time fixing problems that C Players should have prevented

I don’t use the excuse of ‘short-term results’ to avoid topgrading

I also don’t use ‘the competition hasn’t topgraded’ as an excuse not to topgrade

I retain even B Players only in unusual circumstances, such as when replacing them would be too disruptive

I retain my A players by asking them about job and career satisfaction and proactively meeting their needs

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Talent Management

Talent management is about putting the right people in the right places and keeping them over the long haul. To retain top talent the most important factor is to become a winning organization.Finding talented people from within the organization requires systematic and strategic searching, and thus a great deal of time.Weeding out non-performers should take absolutely no longer than 12 months.

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Example Of A People Evaluation Matrix

High Under-performer:

Give warning; provide targeted development

support

Major leaguer:

Plan next move, provide extra coaching

Superstar: Plan multiple fast moves; ensure compensation is sufficient

Medium

Solid pro: Consider development

Major leaguer:

Plan next development opportunity

Low Failure:

Manage Out

Solid pro: Keep in place

Low Medium High

Potential

•Can be simply ‘has ability to move 2 levels up’

•Can explicitly include traits such as leadership, intelligence, values

Performance•Based on performance evaluation rating, A/B/C rating or quintiles•Emphasizes actual results/achievements, since competencies are captured by the potential axis

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Favor Doers • The simplest thing a leader can do to build an

organization that executes is to favor ‘doers’--people who get things done

• Characteristics of doers:– They energize other people– They are decisive on tough issues– They get things done through others– They follow through and track what they delegate

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Consequence Management• A McKinsey study found that top performing firms manage

under-performers very differently from average and below average firms

• Top performing firms create an environment where under-performers are given fewer second chances

• Peer pressure is constructively and actively used to encourage marginal and under-performers to self-select out

• Clear and consistent under-performers are simply asked to leave

• As a result, complacency is reduced and the right people are matched to appropriate jobs

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Roadblocks To Driving Out Under-performers

• The leader has no first-hand knowledge of the situation because he is not involved

• He or she lacks the courage to deal with poor performance

• He or she is comfortable with, or loyal to, the person in question

• In sum: Poor performers can hang on due to a lack of personal commitment by the leader

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Diagnostic: Is The Leadership Team Ready To Lead?

I view change as an opportunity, not as a threat

I listen to a wide range of inputs

I can make the tough calls and hold an unpopular position

I generate enthusiasm and urgency as needed

I stand firm on items that should not be negotiated

I can change my leadership style to fit a situation

Each member of the senior team should answer the questions below and score them in the box to right of each question as follows:

5=strongly agree; 4=agree; 3=unsure; 2=disagree; 1=strongly disagree

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Diagnostic: Is The Leadership Team Ready To Lead?

I can abandon the familiar if it is no longer working

I challenge assumptions and conventional wisdom

I hold people accountable for results

I’m good at recognizing and rewarding desired behaviors

Each member of the senior team should answer the questions below and score them in the box to right of each question as follows:

5=strongly agree; 4=agree; 3=unsure; 2= disagree; 1=strongly disagree

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What I would work onNotes:

What I need to stop doingNotes:

Expected payoffNotes:

Actions I will take

Notes:

Your Task: In light of what you have learned over the past two days, what things could you work on to make yourself a better leader? Think in terms of the next 100 days as your window of opportunity.