Five Priorities Is Probably Too Many

Willie Pietersen, retired CEO of businesses Lever Foods, Seagram USA, and Tropicana has written a column for Fortune in which he argues that many leaders proclaim too many priorities.  The article is titled, "You can’t have 5 priorities—even Steve Jobs and Bob Iger couldn’t."  He writes:

During my 20 years as the CEO of various enterprises, I developed an ingrained habit. Recognizing that the core responsibility of a leader is to unify an organization behind a clear strategic direction, I followed conventional wisdom and developed five key priorities for the business, and asked each function and business unit to follow suit.  However, at progress review meetings I saw that executives were often trudging through these priorities mechanically like a project checklist, without connecting them to a central strategic thrust or inspiring story.

Pietersen cites research by Don Sull and his co-authors, in which they find that many middle managers can't recall the priorities established by the senior leadership team.  Sull and his co-authors write,

The CEO of a large technology company (let’s call it Generex) recently reviewed the results of her company’s annual employee engagement survey and was delighted that strategic alignment emerged as an area of strength.  Among the senior leaders surveyed, 97% said they had a clear understanding of the company’s priorities and how their work contributed to corporate objectives. Based on these scores, the CEO was confident that the company’s five strategic priorities — which had not changed over the past two years and which she communicated regularly — were well understood by the leaders responsible for executing them.

We then asked those same managers to list the company’s strategic priorities. Using a machine-learning algorithm and human coders, we classified their answers to assess how well their responses aligned with the official strategic priorities. The CEO was shocked at the results. Only one-quarter of the managers surveyed could list three of the company’s five strategic priorities. Even worse, one-third of the leaders charged with implementing the company’s strategy could not list even one.

These results are typical not just in the technology industry, but across a range of companies we have studied. Most organizations fall far short when it comes to strategic alignment: Our analysis of 124 organizations revealed that only 28% of executives and middle managers responsible for executing strategy could list three of their company’s strategic priorities.  

In short, creating a list of five priorities or more often leads to confusion, misunderstanding, and a lack of organizational alignment.  For me, the lesson is clear.  Leaders need to have a coherent strategic story.  What's the overall direction?  What is the firm's desired competitive position, and how is that distinct from the competition?  Then, with that coherent story established and communicated, leaders need to make clear what matters most.  Perhaps there are five important goals, but are they truly equally important? Which ones are more critical than others?  It is very difficult to answer that final question, but it must be done.  Moreover, leaders need to communicate that overall strategic perspective over and over, through multiple channels and using multiple forums and media.  Then, most importantly, leaders need to take the pulse of the organization.  They have to test whether the message got through to lower levels of the organization.  Leaders have to do that through direct conversation with those at lower levels, through both formal and informal opportunities for communication and conversation.  

Successfully Onboarding New Employees

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Fast Company's Julia Phelan has written a good article titled "The ultimate guide to onboarding an employee successfully."  As I read the article, several key points resonated with me, and led me to think about what else I might consider as suggestions about the onboarding process.  Here is a synthesis of Phelan's recommendations and my own:  

1.  Put yourself in the new employee's shoes.  Think about a time when you were brand new to an institution, whether it was a company, a school, or a volunteer organization.  Empathize with the new team member.  Recognize how and why they might be stressed, confused, or anxious.  If you have been at your firm for a long time, putting yourself in their shoes will be more difficult.  Therefore, companies should think about having recently hired employees be part of the onboarding process, and not just rely on seasoned managers. 

2.  Set them up for a small, early win.  Don't give them a huge project right off the bat.  Give them something manageable so that they can get some experience working within the organization and delivering desired results.  

3.  Make sure they know where to go for help. Beyond their direct supervisor, who else can be a resource to them?   What other sources of information and training are available to them?  Who are the key people they need to get to know as soon as possible, including key employees in other departments?

4. Establish a clear schedule for the initial set of one-on-one meetings with their supervisor.  Make sure that these meetings can put on the calendar right away.   

5. Introduce them to other new or relatively new hires.  Help them build a cohort of new members of the organization who can help each other navigate the onboarding process.  

6.  Make sure they understand the big picture.  It's important that they understand their personal goals.  However, it is also very important that they understand the broader organizational goals and priorities.  How does their work fit into the bigger picture?  Providing that clear viewpoint will help them discover purpose and meaning in their work. 

7.  Be clear about what technical skills and capabilities they will need to learn as soon as possible to succeed in their role.  Take a quick inventory.  Make sure you know what they can do and what they can't do.  Is Tableau required for the job?  If so, make sure they know how to get up to speed on that software?  What if they know Tableau, but it is not currently used in their department?  Could it be useful?  Could they teach others, or introduce the software to make key activities more effective and efficient?   

Thinking about these key questions can take onboarding to the next level.  It is about far more than insuring new hires know the company policies and procedures.  Onboarding should be about setting people up to succeed and thrive in the organization. 

Careful about Romanticizing Failure

Source: Vistage

Have we come to romanticize failure at times in business and in the society at large?  Perhaps we have.  Is that detrimental to us at times?  New research suggests that we should be careful about romanticizing failure.  Lauren Eskreis-Winkler, Kaitlin Woolley, Eda Erensoy, and Minhee Kim have published a paper titled "The Exaggerated Benefits of Failure" in the Journal of Experimental Psychology: General.   They conducted a series of studies that demonstrate that we often overestimate the likelihood that people will rebound from failure and achieve success.  They write,

Across 11 studies, people in the lab and professionals in the field overestimated the rate at which health failures, professional failures, educational failures, and failures in a real-time task were followed by success. People thought that tens of thousands of professionals who fail standardized tests would go on to pass (who do not), that tens of thousands of people with addiction would get sober (who do not), and that tens of thousands of heart failure patients would improve their health (in fact, they do not).

The scholars argue that people consistently tend to overestimate how much we will learn from our failures.  In reality, we often are not effective at reflecting upon our failures, identifying the root causes of poor performance, and implementing corrective courses of action.  

I would argue that we need to stop repeating overused and inaccurate cliches about failure.  One that often bothers me: We learn more from failure than from success.  Actually, research suggests that we learn most effectively when we can compare and contrast failure and successful outcomes.  Reflecting on both success and failure leads to more improvement than only conducting lessons learned exercises after we fail.   

For those interested in practical guidance for how failure can lead to learning, I highly recommend Amy Edmondson's book, The Right Kind of Wrong: The Science of Failing Well.  Edmondson does not romanticize failure. Instead, she offers a clear-eyed view of different types of failure, some that are more preventable than others, and some which can lead to a great deal of learning if we approach them the right way.  

Why Might CVS Be Breaking Up?

News reports indicate that CVS Health may be splitting up in the months ahead.   Company leaders apparently are mulling their strategic options while under pressure from Glenview Capital and other investors.  CVS Health has diversified through acquisition over the past two decades.  In 2006, CVS acquired Caremark, a pharmacy benefit manager.  Then in 2017, CVS acquired Aetna, making a major move into the health insurance business.  More recently, they have made other moves to expand in the healthcare delivery space, such as by acquiring Oak Street Health - a primary care provider.   Unfortunately, the company's stock has underperformed the S&P 500 by a wide margin over the past two years, leading to increasing pressure from investors. 

Why might CVS Health be considering a break-up after moving so aggressively to transform themselves from a pharmacy retail chain to an integrated healthcare company?  Several factors may explain the potential strategy reversal.   

1.  Diversification works best when the different business units within a corporation operate by the same "dominant logic."  C.K. Prahalad and Richard Bettis coined this term in a very famous academic paper published in the 1980s.  They defined dominant logic as "the way in which managers conceptualize the business and make critical resource allocation decisions..."   In short, what is the mental model that leaders use to think about the business and make choices?  Do the businesses make money in a similar manner, or are the value propositions and business models fundamentally different?  They argued that strategic variety and complexity means that multiple "logics" exist across the portfolio of businesses, making it very difficult for the top management team to lead them all effectively.  They cannot apply the same criteria, rules, and principles when making decisions across the businesses.   One could easily argue that the dominant logics at CVS vary considerably from pharmacy retail to health insurance to primary care provision.  Can one CEO and her leadership team manage all these businesses effectively?  

2.  Scale and scope do not always yield economies.  We often hear about the benefits of bringing multiple units together.  In short, what are the economies of scale and scope?  I would argue that managers often focus on these potential economies when justifying acquisitions, yet they underestimate the potential diseconomies of scale and scope.  How might the increased complexity of the business make it more difficult to manage effectively?  What conflicts might emerge among business units?  What costs and disruption might occur as a company tries to secure key synergies?  Do the costs outweigh the benefits of collaboration and integration?  CVS Health has become a behemoth, and at some point, that sprawling conglomerate becomes very hard to manage.  

3.  The existence of potential synergies alone does not justify mergers.  One has to ask whether one could achieve some of these benefits through some other sort of organizational arrangement (stretching from contracts and partnerships through strategic alliances and joint ventures).  Firms don't always have to merge to coordinate and collaborate in pursuit of certain economies of scale and scope.  Consider Target's decision about its own pharmacy business.  The company wanted to continue to have pharmacies within each of its stores.  However, it came to the conclusion that it was best not to try to manage and operate these pharmacies themselves. Instead, they sold the business to CVS, letting the pharmacy experts run the "stores within a store" at each Target location.  Target shed a business, but it retained some of the benefits of having a pharmacy within each of its stores (the pharmacies are good traffic drivers and lead to other incremental sales for Target).  

4.  Vertical integration has many potential benefits, but it does not come without substantial risks. One risk is that you find yourself competing with your own customers at times.  That brings challenges for many companies, including in the healthcare space.  CVS Health has embarked on quite a bit of vertical integration over the years, creating these potential conflicts of interest that can be challenging to manage. 

Women Rise to Executive Ranks More Often in Decentralized Organizations

Does organizational structure affect the likelihood that women will climb to C-suite positions?  Indeed, it seems that structure has a substantial impact.  Women tend to do better in decentralized organizations.  That finding emerges from new research by Tingyu Du and Ulya Tsolmon.   They assembled a dataset of over 15,200 companies with nearly 600,000 managers.  The scholars state that, "Our findings suggest that decentralized organizational structure seems more conducive to reducing the gender gap than centralized structures." 

The scholars explain their finding by focusing on the skills that are needed in centralized vs. decentralized organizations, as well as the differences in the way that performance is measured and evaluated. The scholars argue that decentralized firms with leaders of separate units, each with their own P&L, tend to have clearer performance metrics than managers in highly centralized firms. The scholars conclude, "“In decentralized organizations, managers often have clearer accountability for their units’ performance, making their achievements more recognizable both internally and externally." Women achieve promotions in those firms based on their abilities without confronting as much bias.  In the firms with a high degree of power centralization, performance is often harder to measure, and social networks, political capital, and relationships play a much larger role in the promotion process. Bias may be more prevalent in that setting, thereby limiting the likelihood that women will rise to the C-suite.

I'm struck by this finding because it makes sense intuitively, and I'm also intrigued because I don't think people have considered this relationship between structure and female advancement in the past. It seems that these scholars have discovered one more very important reason for reducing power centralization in organizations.

Communication Breakdowns During Leadership Transitions

Stephen Michael Impink, Andrea Prat, and Raffaella Sadun have published a thought-provoking paper titled "Communication within Firms: Evidence from CEO Turnovers." Impink and his co-authors studied internal communication data for more than 100 companies in the period around a CEO transition.  They found an interesting pattern.  First, during the three months following the appointment of a new CEO, email traffic and the number of meetings declined by approximately 20%.  Roughly five months after new CEOs began their tenure, communication increased to slightly more than the amount prior to the leadership transition.   Six months after the transition, meetings and email volume returned to approximately the level prior to the appointment of the new CEO.  

Why does communication dip immediately following the leadership transition? The authors suggest that employees are uncertain about the future strategy and direction of the organization.  Perhaps they are a bit confused.  People are waiting and watching, trying to interpret signals and analyze statements emerging from the C-suite.  A great deal of speculation about the future probably occurs, though likely amidst informal communication at the water cooler rather than through formal meetings.  

You can see the risk associated with this communication pattern.  The new leader may not want to pronounce their strategy in those first few weeks, as they learn about organization and diagnose the situation. Still, they have to be careful about just how much confusion and uncertainty might affect the organization.  If you leave people a vacuum, they will fill it... but with speculation and gossip, which might do more harm than good. 

Leaders would be well-served to keep employees in the loop as they proceed with their diagnostic and learning process.  Providing regular updates on the transition and meeting with people to collect feedback can help reduce stress and tamper down speculation. Giving people a rough timeline of how the transition will proceed can be helpful.  You don't want people paralyzed during a transition.  You want them to stay focused on executing, while the strategy reset is unfolding.  Finally, leaders need to ask themselves: what will most certainly NOT change?  Will the organization's foundational purpose remain the same? Will its values stay unchanged?  If so, let people know - loudly and clearly.  Reassure them regarding the things that will stay the same.  That will help alleviate much of the stress and confusion surrounding a transition. 

Keeping Secrets at Work: When Transparency Isn't Valued

We often hear discussion of the value of transparency in organizations.  Nevertheless, many employees become frustrated about the lack of openness in their organizations.  They wish that more information was shared about key initiatives so that they could understand future plans, as well as the rationale for pursuing certain courses of action.

In a new study, Michael Slepian, Eric Anicich, and Nir Halevy examine the issue of organizational secrecy.  They find that people who keep information from others in organizations experience personal benefits as well as costs.  On the negative side, the scholars report that individuals who maintain secrets tend to express more stress and social isolation.   However, withholding vital information from others also comes with certain benefits.   It boosts perceptions of status and privilege for those holding the secrets. They feel more valued in the organization and perceive their work to be more meaningful.   These findings should not surprise us.   Just think for a moment about how people with privileged access to information tend to behave in your own organization.  

While this study highlights certain key benefits and costs associated with secrecy, it leaves open the question of just how much withholding of information is necessary in organizations.  My sense is that, in many organizations, people are more secretive than they need to be.  They withhold information because these personal benefits (status, meaning) outweigh the personal costs.  That does not mean the lack of transparency is good for the organization as a whole.  People come up with all sorts of justifications for that secrecy, but often, these arguments don't hold water.  They are flimsy rationales for not being transparent.  Leaders should test these arguments and probe the rationale being used to justify secrecy.  The costs of disclosure need to be weighed against the substantial value that derives from being transparent.