Strategy execution problems: C for compatibility….really?
I recently read an article about the critical aspects of strategy execution. One critical aspect is “compatibility”. It is critical that the set of activities decided to execute the strategy take the company in a consistent direction. Easy! So it seems…., but when the Credit and Collections department has to do all their processes manually as the IT department has a cutting cost target (and this is a real experience), compatibility is clearly not so easy.
This article went on saying that, “many corporate scandals are catastrophic strategy execution failures that reflect compatibility problems”. I agree that when the senior executives have stretched profit targets compatibility problems appear in areas involving costs (e.g.: maintenance). If the company is one whose assets are key to deliver the activity (e.g.: airlines, car rental, lifts rental…) there will clearly be a compatibility problem between the senior executives targets on profits and the company’s activity via its assets. Fine with this, but…there is something else here, something that is missing. As a senior executive, as soon as I realise about any compatibility problem I highlight it immediately to start agreeing compatible ways of working. So, if I am smart enough to spot compatibility problems and look for ways to address them, how come that we have so many compatibility problems at the bottom of many corporate scandals? Are senior executives not smart enough? I already have addressed this point in a previous article:
So, considering that senior executives cannot be so stupid or ignorant and keep their high salaries and bonuses for being stupid or ignorant…it seems there is something else that keeps compatibility problems on going.
Let me give you a clue. What are the key measures for senior executive performance? Profit targets? I have never seen a performance measure that focuses on keeping the assets of the company accordingly maintained. So But…..(and I know it is grammatically incorrect to start a sentence with “but”,….but I dare to do so), is that all? Again, as a senior executive, it is within my competence and role to see the “bigger picture” and understand that value creation is key to keep the company growing and doing well, not just a short-term measure. I would immediately raise this as an issue. So, back to square one. Why senior executives keep on focusing on the short-term measures?
Only by understanding the final root cause of a problem can we resolve it. We are not far from it. Let’s continue with the clues. What are the short-term performance measures for? Apart from assessing performance…what else for? Remunerating the senior executive. Now we are talking. So, senior executives focus on short-term measures to get their bonuses. Hence, no focus on addressing compatibility problems, as addressing them will not revert in higher bonuses. It seems that the final root cause originating so many compatibility problems is the compensation system for senior executives. I agree it is flawed, as this article also reflects:
As a smart senior executive, when I see a flawed compensation system that rewards me in a way that may easily cause value reduction in the company, I just get on with it, right? Or is it something else still missing? What about the ethics of the senior executive? Is the senior executive only motivated by money?
If we go through the many corporate scandals: Olympus, WorldCom, international gold and silver markets prices manipulation, GSK ABAC issues in China, UBS AG, Astra Zeneca, USIS, HSBC, Ward Diesel Filter Systems, VW emissions scandal….and many more. What was the senior executive ultimate motivation?
Despite all these scandals, I do not see the learnings. Every time I have raised compatibility problems I have been told to shut up, in short. I was told that I was not strategic. I was told that my style of writing was the problem instead and a smear campaign was initiated to get me out of the company, as I was perceived as an enemy. The senior executives were not alone on this campaign; rather, they supported each other and were supported by HR and my so-called colleagues that might have seen an opportunity for them to take my position or get some benefits.
Complacency and lack of ethics are at the very bottom of many scandals and compatibility problems. What is shocking me most is that society does nothing to stop all this. Eventually, complacency and lack of ethics in the private sector impact us all, as we have seen in BHS and Sports Direct demise. I hope that Mrs May words (“get tough on irresponsible behaviour in big business” do end up in clear actions.