In the competitive world of finance, being able to execute effectively is the key to staying ahead of the game. Unfortunately, many companies are not very good at it. According to a recent study, three out of every five companies rated their organization weak at execution. This means that important strategic and operational decisions are not quickly translated into action.
So what sets successful companies apart from the rest? In our work helping more than 250 companies learn to execute more effectively, we have identified four fundamental building blocks that executives can use to influence the actions of their employees.
The first building block is decision rights. Clarifying decision rights ensures that everyone in the organization understands which decisions are theirs to make, so that work can be done more efficiently.
The second building block is information. Designing information flows ensures that everyone in the organization has access to the information they need to make informed decisions.
The third building block is motivators. Aligning motivators ensures that everyone in the organization is working towards the same goals.
Finally, the fourth building block is structure. Making changes to structure can help improve performance, but it should be thought of as the capstone, not the cornerstone, of any organizational transformation.
Many organizations go right to structural measures because moving lines around the org chart seems like the most obvious solution. However, in most cases, this only addresses the symptoms of dysfunction and not the root causes. Actions that focus on decision rights and information are far more effective in improving execution than improvements made to motivators and structure.
For example, a global consumer packaged-goods company was disappointed with its performance and decided to restructure in the early 1990s. They eliminated some layers of management and broadened spans of control, which resulted in an 18% reduction in management-staffing costs. However, eight years later, the layers had crept back in, and spans of control had once again narrowed. This was because management had only attacked the visible symptoms of poor performance and not the underlying cause of how people made decisions and how they were held accountable.
To improve execution, the company designed a new management model that established who was accountable for what and made the connection between performance and reward. They also ensured that people stayed in their positions longer so that they could follow through on their own initiatives. As a result, forecasting became more accurate and reliable.
Takeaway
Based on extensive research and analysis, our findings suggest that companies seeking to achieve success must prioritize two essential building blocks: decision rights and information flows. These building blocks are the foundation upon which effective execution rests, and without them, even the most well-designed strategies and structures will fall short.
Improving decision rights involves ensuring that the right people have the authority to make critical decisions. When decision rights are clear and well-defined, employees can act quickly and confidently, without fear of overstepping their bounds or second-guessing themselves. This, in turn, improves overall efficiency and productivity.
Similarly, information flows must be optimized to ensure that the right people have access to the right information at the right time. This requires not only the implementation of modern information systems but also a culture that values the sharing of information and collaboration across departments.
While motivators and structure are undoubtedly important, they should only be considered after decision rights and information flows have been adequately addressed. Successful companies in the finance sector have recognized this and implemented strategies that prioritize these building blocks. By doing so, they have been able to achieve exceptional results and maintain their competitive edge.
In summary, companies seeking success must prioritize decision rights and information flows as the foundation for effective execution. By doing so, they can create a culture of efficiency and collaboration that fosters innovation and drives growth. With the right building blocks in place, motivators and structure can then be tailored to suit the unique needs of the organization, creating a truly powerful recipe for success.