Playing To Win
The Role of Strategy in Achieving Managerial Effectiveness
Without Strategy, You Can’t Make Discerning Choices
I had a conversation on effectiveness with friend Zachary First, Executive Director of the Drucker Center and based on the discussion, I thought a Playing to Win/Practitioner Insights (PTW/PI) on The Role of Strategy in Achieving Managerial Effectiveness would be in order as PTW/PI #23. (Links for the rest of the PTW/PI series can be found here.)
Drucker on Effectiveness
Peter Drucker was, of course, the prophet of effectiveness. His 1966 classic, The Effective Executive, is still the best book ever written on managerial effectiveness. Three years earlier, he wrote what might be thought of as a teaser for the book in Harvard Business Review, an article entitled, Managing for Business Effectiveness, which provides a quick and enjoyable summary of his views on effectiveness if you don’t want to read the whole book.
To Drucker, the core of effectiveness was the direction of resources and efforts toward “economically significant results.” On that front, he wasn’t very sanguine about the existing state of play, estimating that “while 90% of the results are being produced by the first 10% of events, 90% of the costs are being increased by the remaining and result-less 90% of events.” Further, “I have yet to see an executive, regardless of rank or station, who could not consign something like a quarter of the demands on his time to the wastepaper basket without anybody’s noticing their disappearance.” He predicted that without dedicated attention to effectiveness, executive efforts will “drift into nothing-producing activities.”
I think Drucker was ahead of his time (as was typically the case with his work) in thinking about the true work of a manager. To him, their key work product was choices (and I concur which is why I refer to today’s office towers as decision factories):“The end products of the manager’s work are decisions and actions, rather than knowledge and insight.”
How to Make Effective Choices
If choice that drives toward economically significant results is the measure of managerial effectiveness, how can an executive be effective in focusing effort on and making such choices? The only way I have observed is through strategy. Now I know there will be those who will ask: “But Drucker said culture eats strategy for breakfast, so how can you quote Drucker on effectiveness and say strategy is key?” The quote’s fame notwithstanding, Drucker Center archivists have looked long and hard for evidence that Drucker either wrote or spoke those words and they found zero such evidence. I will proceed undaunted!
Strategy is critically important because without a strategy, you can’t discern the difference between a good choice, a mediocre choice, and a terrible choice. There are so many times, after a decision shows itself to have produced a dreadful outcome, that I hear the question: “what were those morons thinking?” But in all such cases, my assessment has been that the people making the choices weren’t morons. They were conscientious and intelligent. But they weren’t guided by a sound strategy which would have enabled them to discern between good, mediocre and terrible choice. Instead, they chose something that seemed sensible but was not.
Ford Motor Company’s relaunch of the Lincoln Continental in 2016 was an abysmal failure during its five-year run. But I don’t think the designers of the vehicle were morons, or the engineers, or the marketers. There simply was not a coherent strategy for the Lincoln business at Ford to guide the executives making the decisions on both the choice to relaunch and all the subsequent choices that shaped the vehicle and its positioning in the market. There was no theory as to why adding a third sedan to the Lincoln lineup at a time that buyers were shifting decisively to SUVs made sense, nor any reason to believe that a single new Lincoln sedan would compete successfully against luxury competitors such as BMW and Mercedes with over a dozen sedans in each of their stables.
In the context of this strategic vacuum, it seemed like a good idea at the time to bring back a venerable nameplate as the flagship sedan in the Lincoln line-up. However, only 7,500 American car buyers/year agreed, which made for a failure, placing all the Lincoln Continental efforts in Drucker’s result-less/nothing-producing category.
What can strategy do to reduce result-less/nothing-producing choices? One, a clear Winning Aspiration will tell you what winning looks like, so you will have a better chance of making choices that are consistent with that aspiration, as well as measure progress toward it. Two, a clear Where-to-Play tells you where should be playing and where not — helping you avoid making choices to spend resources outside your defined Where-to-Play. Three, a matched How-to-Win choice provides your theory of winning, which enables you to focus your efforts and make subsequent choices that are consistent with that theory of winning. Four, a clear definition of Capabilities helps focus investment choices on those capabilities that are essential to winning. Five, a clear enumeration of the Management Systems necessary to build and maintain the target Capabilities will similarly help focus investment choices in building the systems that really matter.
In these five ways, your strategy should narrow your focus onto the 10% of efforts that produce the 90% of results and help you avoid the 90% of efforts that produce 10% of the results, thus enhancing your managerial effectiveness. If a strategy doesn’t focus and help your daily choice making, then it simply isn’t a sufficiently useful strategy.
Two Strategy Drawbacks that Impede Managerial Effectiveness
I observe two drawbacks to strategy that make it unhelpful for managerial effectiveness: strategy that is abstract, and strategy that is implicit.
Many strategies are stated at an unhelpfully high level of abstraction. “Our strategy is to be customer centric.” “Our strategy is to be the innovation leader.” Those are such general statements of strategy that they provide little guidance to the choices an executive might make to further that strategy. Almost any decision or expenditure of resources could be made to fit at that level of generality. If your strategy doesn’t help you say ‘no’ at least occasionally, you will be in the result-less/nothing-producing territory in no time.
The other challenge arises when strategy is implicit. As I have argued before in this series, everybody has a strategy because strategy is what you do, not what you say. However, an implicit strategy creates two difficulties. First, it is hard for those around you to figure out your strategy if you leave it implicit and their confusion will lead them to engage in result-less/nothing-producing activities as they attempt to guess at the specifics of the strategy in your head. Second, while you might be in a better position than those around you because at least the strategy is floating around in your head, it is much easier for you to rationalize any choice as fitting with your strategy when you haven’t taken the time to make it explicit by writing it down. Writing is thinking and your strategy will be fuzzier and more abstract if you fail to commit it to paper. A classic reason for a strategy to only exist in your head is that you never invested as much thinking in it as you should have.
As with most of his assertions, Drucker is right in arguing that achieving effectiveness is an enduring management challenge. Eternal vigilance is required to avoid the trap of wasting your time on result-less/nothing-producing activities. To avoid the trap, ask yourself whether each choice you make is guided by a principle in your strategy? Reflect on whether you have said ‘no’ to activities or choices based on your strategy. If it is hard to link choices to your strategy or to say ‘no’ based on your strategy, take that as a signal that you need to make your strategy more concrete. Only if it helps you be more effective on a daily basis, to be more discerning in your choices, is your strategy sufficiently concrete for you to be an effective executive.