Wednesday, July 27, 2011

Strategy Mistakes - part 1 of.....

Just gave a talk this morning at a breakfast for strategy-makers, on "7 Costly Strategy Mistakes."  So for a while, I'll be doing "highlights of..." or "best ideas from..." in this blog on Strategy.

The first costly mistake is "the Secret Strategy" - where the owner / founder / president is the ONLY one who knows what the strategy is.

Is that crazy, or have you seen it, too?

In the case that led to naming this, a business owner actually told me "No, I don't tell my people what my strategy is.  We have high turnover in this industry, and if I tell them what it is, my competition will know it within a few months."

I had to bite my tongue to resist asking the "Dr Phil" question: "How's that workin' for ya?"

What I did instead was to ask more specific questions about the impact on several areas that are predictable problems with the "secret strategy" approach:

  • The owner has to make all the decisions, because he/she's the only one who knows the strategy and real priorities.
  • Because of that, the owner is always "fighting fires" and handling crises caused by the players not knowing the playbook.
  • Because of that, employees who are bright, have initiative, and prefer some autonomy start to feel stifled and "second-guessed."
  • Because of that, the best ones leave, creating a self-fulfilling prophecy about turnover, leaving the owner having to replace good talent and scramble to cover in the meantime.
  • Because of that, the customer experience suffers from mistakes, churning, and a succession of new customer-facing reps - not the way to inspire confidence or loyalty!
What does this cost?

Attrition costs at least 25% of annual salary - even for low-skill, minimum-wage folks.  For skilled customer-facing people, for those with high technical or good sales skills, the cost is a higher percentage of a higher salary.  For great salespeople or senior customer managers who have "a following" - the real cost of replacement can be more than their annual salary!

Even at the 25% level, if you replace 4 per year, you're paying the equivalent of a year's salary for a ghost - the "dearly departed" takes on a different meaning!  It's hard to get profitable when you're paying salaries for empty cubicles.

And what's the cost in customer confidence and loyalty, when they get a new person every time they call?

Customer loyalty is a predictable casualty of high turnover and the sort of mistakes caused by customer-facing staff clueless about the strategy.

That could be so costly it drives a company out of business.

In the best case, it creates a tough hole to dig out of -- and an unnecessary one.

Please comment!  Have you known companies with a "secret strategy?"  How do the consequences and costs reflect what you've seen?

Next week, the next costly strategy mistake - "Strategy without Contingencies"

Thursday, July 7, 2011

Strategy - Who cares? What's it worth?

Strategy has gone through ups and downs, ins and outs historically.  From the graduate school course I've taught on it, it has cycled through periods where companies spend massive resources gathering data, reporting up in endless detail, and creating strategy, all the way to periods where some companies rejected the idea of having one at all (we seem to be closer to that, now).


An article in Harvard Business Review said "It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else" (Collis & Ruskad, 2008, p. 83).

So what?  What's lost if most people in the organization couldn't say what the strategy is?

A couple of important things - coherent decision-making at the right levels, and alignment.

Coherent decision-making means that everyone who might have to make a decision knows the direction and priorities.  That reduces waste of precious resources (like the leader's time!), and costly errors.

Alignment is a subtler benefit.  When everyone knows where the organization's heading, and why, and that direction and strategy mean something to the people in the organization who have to make it happen, better engagement happens.  The work means something, so people stick around, give more of themselves, care about quality and customers, and work together to achieve more.

Employee engagement is at an all-time low.  Some estimate that most people would leave their current jobs if they could find another one tomorrow.  What sort of performance does that mean?

So, if an organization doesn't have a strategy, or its members could not say what it is, where do you start?

That's in next week's blog...

Tuesday, July 5, 2011

Sales Management - Career Path for Top Performers - Really?

In a conversation with a top-performing salesperson in factory automation software for several years, I mentioned the premise of my book on the transition to sales manager, and was surprised at his response.

Maybe he's onto something...

I shared the statistic that 85% of top salespeople who are made sales managers don't last a year and leave the company, and he said that he hadn't seen that happen much.  He agreed that top salespeople don't often make good sales managers, but said that top salespeople he's know don't accept the promotion, if offered.

When I asked what he saw instead, he said "The really good salespeople don't WANT to be sales managers - the ones who DO want to be sales managers are the ones who struggle with sales, who are burnt out, who want to escape the pressure of continually making the numbers."

So, in your experience, is this a stereotype?

Or do companies that promote a struggling salesperson to be the sales manager have the right idea - IF certain other traits and characteristics are there?

I've been interviewing successful sales managers who were top performers to identify what traits & characteristics they have in common, so that whether a company promotes the top performer or someone else, they'll stand a better chance of success...

More on those traits and characteristics next week...