World Monitor Magazine April 2017 - Page 112

additional content these individuals must follow a script and check off that they’ve said everything on the list — even at the risk of irritating potential customers. Better instead to get employees to fully internalize the company’s strategy and grade them on their prowess at solving customer problems. Danaher, a conglomerate of more than 25 companies specializing in environmental science, life sciences, dental technologies, and industrial manufacturing technologies, is intensely focused on creating value through operational excellence. Critical to this approach are metrics built into the Danaher Business System, the company’s intensive continuous improvement program. Only eight key metrics, called “core value drivers” to underline their strategic relevance, are tracked constantly in all Danaher enterprises. The financial metrics (core growth, operating margin expansion, working capital returns, and return on invested capital) are used not just by investors but also by managers to evaluate the value of their own activities. Danaher also tracks two customer-facing metrics (on-time delivery and quality as perceived by customers), and two metrics related to employees (retention rates and the percentage of managerial positions filled by internal candidates). Lengthy in-person operating reviews, conducted monthly, are very data driven, focusing on solving problems and improving current practices. The metrics are posted on the shop floor, where anyone can see the progress that’s being made — or not being made — toward clear targets. The meetings are constructive: People feel accountable and challenged, but also encouraged to rise to the challenges. Data analytics is evolving to the point where it can help revitalize metrics and incentives. A spreadsheet is no longer enough to capture and analyze this body of material; you can use large information management systems programmed to deliver carefully crafted performance 108 world monitor data. No matter how complex the input, the final incentives and metrics need to be simple enough to drive clear, consistent behavior. More generally, every structure in your organization should make your capabilities stronger, and focus them on delivering your strategic goals. 6. Transcend Functional Barriers Great capabilities always transcend functional barriers. Consider Starbucks’ understanding of how to create the right ambience, Haier’s ability to rapidly manufacture home appliances to order, and Amazon’s aptitude for launching products and services enabled by new technologies. These companies all bring people from different functions to work together informally and creatively. Most companies have some experience with this. For example, any effective TPE capability brings together marketing, sales, design, finance, and analytics professionals, all working closely together and learning from one another. The stronger the cross-functional interplay and the more it is supported by the company’s culture, the more effective the promotion. Unfortunately, many companies unintentionally diminish their capabilities by allowing functions to operate independently. It’s often easier for the functional leaders to focus on specialized excellence, on “doing my job better” rather than on “what we can accomplish together.” Pressed for time, executives delegate execution to IT, HR, or operational specialists, who are attuned to their areas of expertise but not necessarily to the company’s overall direction. Collaborative efforts bring together people who don’t understand each other or, worse, who pursue competing objectives and agendas. When their narrow priorities conflict, the teams end up stuck in cycles of internal competition. The bigger a company gets, the harder it becomes to resolve these problems. You can break this cycle by putting together cross-functional teams to blueprint, build, and roll out capabilities. Appoint a single executive for each capability team, accountable for fully developing the capability. Ensure this person has credibility at all levels of the organization. Tap high-quality people from each function for this team, and give the leader the authority to set incentives for performance. There’s always the risk that these cross-functional teams will be seen as skunkworks, separate from the rest of the enterprise. To guard against this risk, you need a strong dotted line from each team member back to the original function. Sooner or later, the capabilities orientation will probably become habitual, affecting the way people (including functional leaders) see their roles: not as gatekeepers of their expertise, but as contributors to a larger whole. 7. Become a Fully Digital Enterprise