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"

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...

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...

Nice article on bad strategy

McKenzie Quarterly's June issue has a good article on bad strategy that got me thinking about the "7 Strategy Mistakes" I'm presenting in late July. Some of what the article lists is also what's in the presentation.

The article lists the hallmarks of bad strategy are failure to face the problem, mistaking goals for strategy, bad objectives (fuzzy or "blue sky"), and fluff.

The article attributes the abundance of bad strategy to inability to decide, and to following a template-style strategy.

It's on the last point, his assertion that templating the vision, mission, values, and strategies always leads to empty rhetoric and fluff, that I believe the author is mistaken.

Of course, using a template poorly can go wrong .  If an organization found a strategy self-help website and approached it as if playing "buzzword Mad-Libs" they'll get meaningless fluff.  In the worst cases I've seen, they may work on it so hard and so long that they start to think it's beautiful -- often to the amusement of others.  What a waste when it goes astray like that!

But when leaders develop strategy well, they ...

• answer the hard questions in an honest SWOT,
• do the hard homework of figuring out who's the real competition and how to beat them, 
• do a cold-eyed, realistic assessment of the changing market
• make a coherent plan for using talent, finance, resources...

AND when they also really revisit the Why are we here? questions of vision, mission, and values (sometimes with help, when that's not a skill that the leaders start with) - then they can also engage the hearts, minds, and full talents of the organization.

Because the most brilliantly conceived competitive strategy won't make much difference if the organization isn't aware, aligned, accountable, and committed to it.

The article from McKenzie Quarter can be found at http://www.mckinseyquarterly.com/The_perils_of_bad_strategy_2826

Sales Manager Transition - What's the 1st year failure rate?

Attended a webinar from ES Research last week about the sales training industry. 

The founder, Dave Stein, dropped a statistic about the first year failure rate where companies promote their top-producing salesperson to be the sales manager.

It's 85%.

He's done a lot of research over the last several years, working with companies that provide or seek sales training, so I believe he's got it right.

My question is, why is it so very high? 

Why don't companies define the sales manager job to be one that a human can do, select the right talent, and support them toward success?

I'll be answering those questions in this blog in the near future, but I'd sure welcome any ideas or suggestions from any who read this blog!

A quirky sort of strategy research

For several years, I’ve been teaching courses on Strategy in a graduate business school.  Over a hundred learners have all done essentially the same project:  Based on the readings and research, evaluate your own organization’s strategy. What needs changing, and why? What are the consequences and opportunities?

The learners are all working leaders, often senior managers in some significantly large organizations; they roll their sleeves up and get it done every day. 

So over the years, I’ve started to see some of the same patterns again and again.  When things go badly wrong with strategy, they seem to follow one (or more) of a few specific patterns.

I’m also part of two different networks of consultancies, with Resource Associates (about 300 nationally) and with Association of Independent Business Consultants (over 1000 globally).  In “members only” discussions, I’ve floated these patterns of mistakes, asking if others have seen these – and they have.

In my consulting practice, addressing strategy with clients, some of these same patterns have to be overcome. 

When working for / with some well-known organizations over the last 15+ years, the same patterns were there, too.

So between direct, hands-on experience, polling other consultants, teaching, these patterns of costly mistakes keep popping up.

These patterns have predictable outcomes in how an organization operates, competes, and adapts.  Those outcomes can be very, very costly.   And some fairly simple (not easy, just simple) guidelines can keep organizations clear of these errors.  (These are forming into a "white paper" to be published this summer).

Next week – What is it about strategy that can go so badly? 

Sales Management Transition – How bad could it be?

Of all the mistakes companies can make, one of the most expensive can be a four-part train wreck that goes like this:

• Make a sales manager role that’s impossible
• Promote the top salesperson into it
• Give no coaching / training support
• Expect the new sales manager to “clone” him/herself among former peers

 What happens if this doesn’t work? Well, a lot, and none of it’s good.

•  The top-producing salesperson gets a job they can’t do and don’t like.
• Every motivator and source of satisfaction gets turned 180 degrees.
• The top producer’s clients may get ignored, and leave.
• Other good salespeople get frustrated, and quit (or stay, but just go through the motions – and may even complain to customers).

 

That’s a staggering cost! Many companies can't survive it.

 

I once asked a very senior executive in a major pharmaceutical company what a mistake in promoting a great rep to be a bad district sales manager might be. She had given it some thought, and answered quickly “At least $2 million – and that’s before the lawsuits!”

 

She explained “A bad DSM causes good reps to leave, and when they do, it can spoil the relationship they worked so hard to earn. Sometimes, a bad DSM creates so much stress that there’s a spike in health issues and absenteeism among the reps. And if the DSM puts too much pressure on reps to produce, they may start overstating what they say – and that’s where the potential lawsuits and major damage comes in. A really disgruntled, unhappy rep who sticks around for a few months can poison every relationship in their territory, and you just can’t easily come back from that.”

 

So why do companies promote a superstar into a job that’s set up for them to fail?

 

That’s next week’s blog.