Line-of-SightSM helps companies execute better by measuring and managing five critical capabilities necessary for successful execution (or KSEs): strategic understanding, leadership, balanced metrics, activities & structure, and human capital; it also assesses market discipline - the ability to execute in a way that remains true to the strategic intent. These factors are aggregated to form an overall Organizational Health index measured on a scale from 0 to 100.
Line-of-Sight led a survey of more than 100 CEOs to measure how they evaluated the execution capabilities of their organization. This survey took place in Q1 2021 when most businesses were transitioning to the post-pandemic era.
Among the five KSEs, the one with the broadest variation between CEOs is “activities and structure”, defined as the ability for an organization to focus employees on the tasks that matter the most to execute the strategy. CEOs who rate their execution capabilities the highest in this area lead organizations experiencing moderate growth (between +5 and +50%); on average they rate their capabilities on activities and structure at 78 points; compare that to CEOs of organizations that contracted (by 5% or more), at 59 points, and those of high-growth companies (growing 50% or more) at 63 points.
Clearly, there are best practices when it comes to activities and structure, and there is an obvious correlation between growth and a deliberately designed structure.
These practices come into focus when we also consider the type of strategy that companies pursue: CEOs pursuing operational excellence strategies focused on efficiency have the highest rating for activities and structure, at 80 points, because efficiencies and scale require tightly controlling well-defined processes. On the other hand, CEOs pursuing customer intimacy strategies have lower ratings - 71% on average - because meeting customer expectations and needs by essence requires some flexibility and freedom from tightly scripted procedures.
How to balance control with freedom in organizational structure, then?
An HBR article, “Structure That’s Not Stifling”, hints at an answer. The author, Ranjay Gulati, highlights that “leaders often cling to the notion that freedom and control are zero-sum, often oscillating between the extremes”. However, he reviewed organizations across a range of industries and found that guidelines are not the death of freedom if they’re well designed and well implemented. They feed autonomy by giving people a clear and positive sense of where the organization is going, and how they can contribute to it.
Gulati called this model “freedom within a framework”, framing the organization’s purpose, priorities, and principles in a set of guidelines. Leaders who have embraced “freedom within a framework” describe how they use it to think about employee decision-making (the same approach applies to business units or individual brands in relation to the central management structure). As Gulati states, “Freedom” can mean many things, but in this case, it means trusting employees to think and act independently on behalf of the organization”.
Research on organizational behavior shows that most people want some form of choice and voice in what they do at work and that this can spark greater commitment and improve performance. Freedom also means more possibilities to express themselves: compared to the expansive social media platforms for self-expression, the workplace can feel stifling. “The freedom of the outside world is banging at the corporate door, demanding to come inside,” Gulati says. Yet most leaders are still afraid to open it because they continue to view freedom and frameworks as antagonists in an intense tug-of-war.
Gulati used the example of Netflix leaders wanting to give their people “oxygen to make mistakes.” “They assume that people do their best work when they don’t have to ask for approval at every turn. The company describes its culture as a blend of “freedom and responsibility.” Which means employees are at liberty to use their own judgment within the strategic priorities articulated in “foundational” documents. According to Gulati, employees are also encouraged to communicate openly and to argue their points of view.
Employees are also responsible for this model: it is their job to read, understand, and debate the ideas in the foundational documents that determine their span of control.
To balance guidelines and freedom, a company needs to:
● Articulate its purpose—a shared goal that sums up the “why” of the organization
● Establish priorities—behavioral rules that reflect the organization’s goals and help employees determine what matters
● Develop a simple set of principles to help employees make decisions in their day-to-day work.
Depending on their strategy, CEOs can determine how much autonomy the principles should give to employees; principles can and should be adjusted regularly to reflect the reality of the operational environment. This is why the CEOs surveyed by the Line-of-Sight rate their capabilities in activities and structure on such a wide scale: the “freedom within a framework” approach is a living model that provides the flexibility companies need to continue to adapt to constantly changing circumstances in the post-pandemic.
How well is your business executing? To find out, please reach out and we will initiate an assessment of your execution capabilities.