Strategic Planning Analogy #396: Short Timer

THE STORY
I knew a man who spent his career in retail operations. To advance your career in that field, you have to move around a lot from city to city. First, you are an assistant manager in one store…then you move to be store manager in another city…then you move to become a district manager, then a regional manager, and so on. These people move more often than a career military person.

My friend said that for a large part of his career, he moved on average about every two years. When you move every two years, you become an expert in how to move. This is what he learned:

1) Always buy a “starter” (entry level) home. They are the quickest and easiest to resell when you have to move again.

2) Buy a home where everything is already fixed up to perfection (no “fixer-uppers”). Why? First, you won’t have time in two years to do all the necessary repairs. Second, a home in great shape now will probably still be in great shape two years later when you sell it. This way, my friend never had to bother with painting walls or repairing roofs and still had a great looking house that would be very easy to sell.

By following these rules, my friend made moving in and out as easy and effortless as possible.

THE ANALOGY
When you know you are only going to be somewhere for a short time, you act differently. Before going into the situation you already have a plan for getting out quickly and easily. You make choices that a long-timer would not make.

In the case of my friend, he didn’t get emotionally attached to his homes. He just wanted something easy to buy and easy to sell. He didn’t want the responsibility of investing a lot of time, money and energy in fixing them up. They were just a place to temporarily sleep until he moved to the next temporary location.

A similar situation can occur when people chose where and how they will work. If employees (or even leaders) expect to be with the company for only a short period of time, they will make different choices. They will choose different types of jobs and companies go in with. They will look for places with a relatively easy and effortless way to get out. They will not get emotionally attached. In other words, they will treat the company just like my friend treated his houses.

For example, why try to tackle a difficult strategic repositioning if you only expect to be in the job for a little while (especially if you are a leader)? After all, repositionings are difficult work. And all that effort usually reduces near-term earnings. By the time the new strategy kicks in and financials rebound, the short-time leader will have already planned to move on.
So a short-timers will ask themselves: why put up with the difficult work and get blamed for the temporary downturn, just so the successor can get credit for the rebound? No, short-timers would rather choose a situation where things are humming along just fine and nothing serious needs fixing. They will avoid fixer-uppers…just like my short-timer friend and his houses.

THE PRINCIPLE
The principle here is that long-range strategic plans are difficult to implement in a culture with a short-term orientation. The commitment needed to transform a business long-term just isn’t there when people plan to move on before the task is completed. Consider the fact that for many C-level positions, the average tenure is only three years or less (about the length of time my friend stayed in his home). That doesn’t provide much incentive for aggressiveness on implementing five-year plans.

In these cases, short-term people instead look for the easy, immediate return—something that will bear fruit while they are still around. Unfortunately, near term gains are usually fleeting. Often, they aren’t even true gains—they are merely borrowing from the future.

Remember all those government incentives during the great recession, like “cash for clunkers?” These incentives temporarily increased the sales of cars, appliances and houses, but when the incentives ended, the sales plummeted. As it turns out, that sales bump was not additional sales. It was merely future sales made earlier. A similar situation often occurs when businesses seek a short-term stimulus.

If you want large, transformational improvements which will last, you need to go beyond minor tweaks to the status quo. You need to implement transformational strategic initiatives. And that takes time.

Therefore, strategic planning cannot be satisfied with merely dreaming up a great vision of the future. The plans also need to address the barriers which can get in the way of implementation. And one of those barriers can be a short-term culture.

Here are some suggestions about how to overcome this barrier.

1) Hire Well
When hiring, look for people who not pre-planning their departure as a short-timer. Look for people with longer-term commitments, people who become more emotionally invested in the company. I know that lifetime commitments are a thing of the past, but at least you can weed out the worst short-term offenders.

I have seen this at high profile companies which look good on a resume. They are places people like to say they are from. They are a great step to somewhere else. If the only reason people want to be with you is so that they can use it on their resume to go somewhere else, then you shouldn’t want them on your team. They are merely mercenaries. Avoid them, as I have spoke about in earlier blogs (here and here).

2) Create Bridges to Larger Issues
If you want emotional commitment, give people a reason to get emotional. Create visions which transcend merely making money and embrace larger agendas and causes. Younger employees in particular are concerned about the impact the places they work for have on the greater society. If you link up to these causes, you can get greater commitment to achieve your long-term objectives. Even if they don’t have much emotional commitment to your firm, you can still tap into the emotion around causes that are meaningful to them, no matter where they work. Google has embraced “do no evil.” Wal-Mart has embraced “sustainability.” It can be done.

I spoke more about this topic in an earlier blog.

3) Change incentives
People tend to act based on the way they are rewarded. If you want to encourage long-term commitment, then create incentives which reward long-term gains. Bonuses can be stretched out over time. Rewards can be based on future stock prices. Payouts can be determined in part by outcomes which take place even after a person has moved on. Penalties can be placed on gains which are merely shifting sales forward. Perhaps long-term efforts can be diced up into a series of smaller steps, where achievement of smaller steps are rewarded.

I know these can be tricky to implement, but there are ways to at least put some rewards into a long-term pool which only pays out when long-term goals are achieved. That way, even if people aren’t there for the whole journey, they have a stake in helping make the journey occur.

SUMMARY
Truly transformational strategies take time to implement. In a world where many employees (and their leaders) don’t plan on being around very long, trying to get effort around implementing the transformation can be difficult. Therefore, a portion of the strategic plan needs to address these barriers and find ways to encourage commitment to longer-term efforts.

FINAL THOUGHTS
I worked with a CEO who was close to retiring and did not want to take on major transformational efforts in his final years. Fortunately, the internal person who succeeded him as CEO had been listening and he implemented the strategy once he took over. What I learned from this was that sometimes you have to shift your strategic appeal from the current leaders to the next generation of leaders. After all, the next generation has more at stake in the long-term. So when you are going through the strategic process, make sure you include the future leaders in the discussion. They can be some of your best allies.

Strategic Planning Analogy #239: Holy Fire

THE STORY
I suspect that at some time in your life you’ve heard the story of Moses and the burning bush. Moses was minding his business as a shepherd in the wilderness. He came across a bush that was on fire. Interestingly, although on fire, the bush was not being consumed by the fire. Even more amazing, the burning bush started talking to Moses—with the spiritual authority of God.

God’s voice from the bush told Moses to take of his sandals, because he was standing on holy ground. Then the voice from the bush told Moses about the holy mission he needed to undertake—the freeing of the Hebrew slaves in Egypt and getting them from the desert to the Holy Land.

THE ANALOGY
The job of freeing the Hebrews from the Egyptians and getting them to the Promised Land was a very difficult task. The powerful Egyptian Pharaoh did not want to let them go. The Hebrew people were not the most cooperative people to lead, either. The forty years of wandering in the desert prior to reaching the Promised Land was very discouraging. I doubt that Moses would have followed through on the plan if he did not believe that there was holy direction behind the task.

Your business has some difficult tasks in front of it as well. It may be easier to lead your business through the desert times if you can imbue some “holy purpose” to the task.

What do I mean by “holy purpose”? This is the elevation of mere work into a noble endeavor. It is taking a strategy from being merely a list of chores to being like a divine inspiration, something that sets you apart for accomplishing greatness.

This could be seen back in 1983, when Steve Jobs was trying to lure John Sculley from Pepsi to join Apple. Steve’s approach was to position working at Apple as a holy purpose, while working a Pepsi was just a job. To quote Jobs’ plea to Sculley, “Do you want to sell fizzy water for the rest of your life or do you want a chance to change the world?”

Can people see the holy purpose in your strategy, or does it just look like fizzy water?

THE PRINCIPLE
The principle here has to do with the active management of holy purpose as part of your strategy. The amazing thing about the burning bush was not that it was on fire, but that it was on fire, yet not consumed by it. Fire is a powerful thing. Inside a fireplace, it can be very useful in heating your house. Outside a fireplace, the fire can consume your house and destroy it. Similarly, we want to use holy purpose to “fire up” your employees to achieve greatness. However, if holy purpose is uncontrolled, it can consume your business and burn it up into nothing. Holy purpose cannot be allowed to run wild. It must be managed.

Active management of holy purpose means building up two characteristics and tearing down two activities. The two characteristics to be built up are the strengths of Purpose and Passion. The two activities to be torn down are Idol Worship and Pharisaism.

1. Build Strength of Purpose
One of the main roles of strategy is to provide direction to a company. The enemy of strategy is randomness. Pure randomness leads to nowhere. When holy purpose is given to a strategy, the power of that direction becomes stronger. The path is now a noble, holy path. People are less likely to deviate from a holy path, as this can be portrayed as akin to sin. As a result, you are more likely to get the strategy accomplished.

Petty bickering is also diminished, because “you are standing on holy ground.” The greater good of the strong purpose makes all that other stuff seem so trivial. Cooperation goes up…actions become more powerful.

The noble purpose at Wal-Mart is to help customers save money so that they can live better. Everyone within the entire Wal-Mart organization understands that this noble purpose requires Wal-Mart to be a low-cost organization. This universal strength in direction means that people instinctively act in conformance with this direction. Everyone is on the same page—do what it takes to keep costs low. It is burned into the fiber of the organization. In many ways, the strategy becomes self-regulating and self-reinforcing, taking care of itself.

People are drawn to companies with a strong sense of purpose, both as consumers and as employees. People want to work at Google because they believe in its purpose, “to organize the world's information and make it universally accessible and useful.” This is not just data crunching—this is revolutionizing the world by empowering the individual.

2. Build Strength of Passion
As I’ve mentioned in the past (here and here), dedicated, passionate advocates for the cause are far more productive than mercenaries, who are only in it for the money. Passion turns a war into a crusade and employees into missionaries looking for converts.

By giving holy purpose to your business cause, you can better tap into the emotional and other higher level motivators within a person. This seems to be especially true among Gen X-ers, who are more likely to choose what they buy, where they shop, and where they work based on higher level purpose. If your brand is not associated with a higher purpose, you are missing out on potential with this group.

In the race to the future, having passion on your side can be the difference between success and failure. Cultivate passion with a holy purpose.

3. Tear Down Idol Worship
As good as holy purpose can be, there is a down side if improperly managed. One of these downsides can be “idol worship.” When Walt Disney ran his company, people at Disney almost worshipped the man. When Walt died, the Disney company went into a downward slide for years. People were afraid to take a bold move because the guiding force was no longer there. They had been trained to do whatever Walt said, rather than trained to run a great company.

When the leader becomes idolized, creativity and innovation in the rest of the organization can wither. Everyone expects the great oracle at the top to lead the way. Employees can become mindless drones to carry out the will of the worshipped leader. Responsibility is abdicated and replaced with worship.

Some worry that Steve Jobs and Apple may be falling into this trap. That is why the Apple stock price plummets whenever rumors surface about the health problems of Steve Jobs, the worshipped leader. Some fear that Apple’s great innovation and sense of purpose will die with Steve.

The trick is to focus the holy purpose around ideals, rather than leaders. Then management needs to ensure that the entire organization feels responsible for maintaining the holy purpose.

Leaders come and go. They can make mistakes. That is why the holy purpose needs to transcend any one individual and belong to everyone.

4. Tear Down Pharisaism
Another potential downside is Pharisaism. In the Jewish faith during the time of Jesus was a group of religious leaders called the Pharisees. They took the simple laws handed down from Moses and turned them into complex legalism. The noble holy purpose was replaced with cold (almost blind) rigid obedience.

The same thing can happen to your business. Over time, the noble purpose can just become a bunch of rules to obey. Unfortunately, the marketplace changes over time, eventually making these rules obsolete. Blind following of obsolete rules leads to destruction.

Strategist Gary Hamel talks about this principle a lot. He refers to it as “orthodoxy.” Every industry has its set of orthodoxies—the generally accepted way to do things. Nearly all great innovations come about by changing the rules, i.e. ignoring the orthodoxies.

In a recent blog, we talked about Revol Wireless, who ignored the orthodoxies of their industry. The orthodoxy was to get an expensive new mobile phone into the hands of customers when they sign up for a wireless plan (the lure). The phone is sold at a discount and subsidized by higher usage rates tied to a contract (to ensure people stick around long enough to pay off the subsidy). Revol ignored the orthodoxies and did not subsidize the phone. This allowed Revol to charge lower usage rates (the new lure) and abandon the contract.

Harvard professor Clayton Christensen has written extensively on the idea of disruptive innovation. Christensen’s point is that true innovation traditionally comes from outside an industry rather than inside, because the insiders are too wedded to the old orthodoxies. The insiders don’t want to disrupt their rules because they have too much at stake in the old ways.

This is like those Pharisees who rejected Jesus because they had too much at stake in the legalism of the old ways. However, just as the Pharisees’ rejection could not stop the rise of Christianity, industry insiders cannot stop innovation through adherence to the old orthodoxies.

Every once in awhile, strategists need to sit back and question the orthodoxies around them. Is it time to change the rules? How should the rules be changed?

Adherence to principles, rather than rules, allows you to adapt and innovate. Wal-Mart was an early leader to get on the “green” bandwagon. Why? Their holy purpose was to lower prices so people could live better. As it turns out, the green movement eliminates a lot of costly waste. By going green, Wal-Mart can further its holy purpose and cut costs out of the system. Wal-Mart changed its rules/orthodoxies, but stayed true to its purpose.

SUMMARY
Providing a nobler purpose to a strategy can be a powerful tool to improve the likelihood of success. It strengthens the power of strategic direction and allows you to tap into the passion of people. However, there can also be downsides if this holy purpose degenerates in to idol worship (abdication of responsibility) or Pharisaism (blind legalism). As a result, holy purpose needs to be actively managed to cultivate the good without achieving the bad.

FINAL THOUGHTS
In the Bible book of Acts, the author Luke praised the citizens of Berea, because they did not blindly follow the teachings of St. Paul (Acts 17:10-12). Instead, they took their passion and carefully studied the doctrine against scripture—to make an informed decision. He referred to these Bereans as “noble.” Blind followers are never as good as those who continue to make informed decisions. Passion needs to be linked to knowledge. A good strategy taps into both.

Soulless Capitalism

THE STORY
Shortly after Enron started to implode on itself, I started receiving a lot of resumes from recently laid off Enron employees. I interviewed a few of them.

One of the questions I had for them concerned how Enron got into the mess it was in. How could a company so lose its moral compass that it ended up making so many unethical decisions?

The answer I got was this: On the first day of orientation, you were taught about Enron’s RICE guidelines. Rice was an acronym for the following four principles: Respect, Integrity, Communication, and Excellence. Supposedly, these were the guiding principles of Enron which were supposed to direct your decision making.

However, the people I talked to said that you never heard about RICE after orientation. After orientation, this is what you saw and heard:

“You will have very aggressive quarterly goals to meet. If you exceed those goals, you will be rewarded very well with Enron stock. If you did not meet those goals, your career at Enron might very well be over.”

Consequently, people soon figured out that Rice was a sham and that the true principle of Enron was “Do whatever it takes (perhaps even questionable behavior) to make your quarterly numbers.”

THE ANALOGY
One of the tasks of strategic planning is to develop a business mission statement. Many executives I have met place very little emphasis on this process. They do not see how it creates much relevance for the day to day business. And given some of horrible mission statements I have seen over the years, I can see why they would say that. Many mission statements are useless gobbledygook. They are just a bunch of fancy words which sound impressive, but provide no guidance to the organization. (For fun you can go to Dilbert’s web site and play a game to make up worthless mission statements.)

Other times, a company may have an “official” mission statement but ignore it, as was the case with Enron. Although they handed you a paper with the words respect, integrity, communication and excellence, it was obvious that the company marched to a different mission based more on greed, deception, and miscommunication.

Given that mission statements are often worthless or ignored, it is easy to see why they are often not a business priority. However, I contend that without a well thought out and well ingrained mission statement, you can end up creating another Enron-type situation in your own company. Therefore, they deserve serious attention.

THE PRINCIPLE
The principle here is that in war, mercenaries are never as effective as soldiers who believe in the cause and are fighting for that higher objective. Mercenaries fight merely for the money they earn. If the battle becomes too intense, a mercenary may decide that they money is not worth the risk and pull back. Or, when an area is conquered, they may personally help themselves to an excessive amount of the plunder and run away with the riches for themselves rather than for the country which hired them. Worse yet, if the opposing side decides to pay them more money, they may switch sides and use their knowledge about you against you.

By contrast, a soldier who believes in the cause is fighting for something they value more than money. As a result, they are willing to sacrifice more to reach the goal. They will fight harder for the cause and be more loyal to country they are fighting for. Many are willing to even die for the cause.

When a company eliminates, ignores, or writes a worthless mission statement, they are in essence treating their employees as mercenaries. There is no higher cause worth fighting for. The employees are only there for the money. As a result, you are opening yourself up to all the problems which come with a mercenary work force.

1) Without a strong, noble corporate mission, employees are more likely to act with selfish self-interest as their motivation. Personal power and greed begin to choke out cooperation for the greater good. (After all, without a mission, there isn’t much of any greater good to cooperate or make sacrifices for.)

2) When it comes time to hire people, the good soldiers who want to fight for a cause will not apply for jobs at your company, because they want to work for companies who provide more than just a paycheck. This is especially true with the younger generation just entering the workforce. So you will be stuck hiring people who are only in it for the money and also have a more difficult time tapping into the next generation.

3) When the times get tough, the mercenaries will jump ship and go work for a different company which offers easier prospects for growth, promotions and money. Their loyalty is only to themselves and the WIIFM (what’s in it for me) motivation takes over. The costs associated with higher turnover will come into play.

4) The cost of doing business probably goes up because mercenaries probably will demand more money to do the work than a dedicated soldier. In addition, because the mercenary is less devoted to the cause, they are probably less productive. As a result, you would need more mercenaries than dedicated soldiers to get the same amount of work done.

I saw a company make the conversion from being a place with a cause to being mostly just a place to make money. Prior to the conversion, a large number of people were willing to consistently work long hours (60+ hours per week) because they enjoyed being a part of the cause. After the conversion, many of these people said that it wasn’t worth the long hours just for the money, so they cut back to working only 40-50 hours per week. How’s that for a quick drop in productivity?

5) Because you do not have the positive motivation of the noble cause to incent people to work hard, one has to rely more on negative punishment to get the work done. That is why companies like Enron reviewed an employee’s performance every three months to see if they should be fired.

During the initial war in Iraq, the front-line Iraqi soldiers were mercenaries. They were told that if they refused to fight and wanted to turn back, the Iraqi soldiers behind them who were dedicated to the cause had orders to shoot them. Although businesses might not be that harsh, mercenary-type environments have a tendency to become more repressive and punishment-oriented. Fear is more prevalent. It was a combination of the fear of reprisal if numbers weren’t met and the promise of huge stock bonus if numbers were met which caused people at Enron to make bad choices. Cutting ethical corners was feared less than the punishment when numbers weren’t met.

By contrast, a company with a noble cause can create a healthier and more productive environment. The irony is that by focusing a little less on pure profit, one creates an environment which tends to be more profitable (and less likely to be the next Enron).

Business mission statements can help crystallize that noble cause and keep it its awareness high in the organization. However, that only happens if:

1) You can get top management to believe in the higher mission and live it out on a daily basis.

2) The business mission clearly articulates a noble cause which is:
.......Relevant to the business,
.......Meaningful to employees/customers,
.......Not just a bunch of platitudes about becoming bigger and better at making money.

3) Employees see that the mission statement is more than just words, but is a meaningful part of the way the business is run.

Nearly every business can come up with a noble cause:

Wal-Mart: Saving people money so that they can live better lives.
Walt Disney: To bring happiness and joy to people’s lives.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Cargill: To improve the standard of living around the world.

The Johnson & Johnson credo is a great mission statement. It can be seen at http://www.jnj.com/our_company/our_credo/index.htm. Not only is it a great statement, but it is a foundation for how the company is actually run.

SUMMARY
Although on the surface a business mission may seem like a minor thing, it can be an extremely useful tool if crafted properly and used as a guiding principle for how the business is run on a daily basis. The value in a business mission statement is that it can crystallize a noble cause for a company beyond just making money. This helps a company fill its ranks with dedicated soldiers who work harder because they believe in the cause. By contrast, without the noble cause in the mission statement, the ranks are filled with mercenaries who tend to be more selfish and can make your company more like what Enron became. And over the long run, the noble cause tends to create greater profits than just a myopic focus on money.

FINAL THOUGHTS
Before Enron imploded, I had a conversation with the President of US Operations for Enron. I told him that I had heard that Enron worked its employees very hard, forcing them to put in a lot of hard, grueling hours. His response was that they had hired a lot of people who came out of investment banking. These former investment bankers were used to these types of conditions, so they did not complain.

I saw the results of a survey which asked investment bankers if they would continue in that profession if it no longer provided the abnormally high wages. Over 80% said no. So Enron appeared to be hiring out of a pool teeming with mercenaries who though they might strike it richer at Enron. Is it no wonder that Enron imploded?