Execution Book by Larry Bossidy and Ram Charan Summary

EXECUTION
LARRY BOSSIDY AND RAM CHARAN
With Charles Burck

EXECUTION
• Ex-e-cu-tion (ek si kyoo shun), n.
• 1. The missing link.
• 2. The main reason companies fall short of their
promises.
• 3. The gap between what a company’s leaders want to
achieve and the ability of their organizations to deliver it.
• 4. Not simply tactics, but a system of getting things done
through questioning, analysis, and follow-through. A
discipline for meshing strategy with reality, aligning
people with goals, and achieving the results promised.

EXECUTION
• 5. A central part of a company’s strategy and its goal and
the major job of any leader in business.
• 6. A discipline requiring a comprehensive understanding
of a business, its people, and its environment.
• 7. The way to link the three core processes of any
business the people process, the strategy, and the
operating plan-together to get things done on time.

INTRODUCTION
• The business environment is always tough. Most
often today the difference between a company and
its competitor is the ability to execute.
• Execution is the great unaddressed issue in the
business world today.
• Its absence is the single biggest obstacle to success
and the cause of most of the disappointments that
are mistakenly attributed to other causes.
• Execution is not just tactics-it is a discipline and a
system.

INTRODUCTION
• Many business leaders spend vast amounts of
time learning and promulgating the latest
management techniques.
• But their failure to understand and practice
execution negates.
• A problem with accountability-people aren’t
doing the things they’re supposed to do to
implement a plan.
• Do they need to change?

INTRODUCTION
• Execution is not just something that does or
doesn’t get done.
• Execution is a specific set of behaviors and
techniques that companies need to master in
order to have competitive advantage.
• It is a discipline of its own.
• That way they can respond quickly when the
unexpected happens.

INTRODUCTION
• Execution paces everything. It enables you to see
what’s going on in your industry better than
culture, better than philosophy.
• They are closer to the situation.
• A leader have to be deeply and passionately
engaged in your organization and honest about
its realities with others and yourself.
• The leadership and its capabilities may be
mismatched.
• No strategy delivers results unless it’s converted
into specific actions.

Why Execution is needed
• THE GAP NOBODY KNOWS
• The gap between promises and results is widespread and
clear.
• The gap nobody knows is the gap between what a
company’s leaders want to achieve and the ability of
their organization to achieve it.
• Everybody talks about change.
• Without execution, the breakthrough thinking breaks
down, learning adds no value, people don’t meet their
stretch goals, and the revolution stops dead in its tracks.

THE GAP NOBODY KNOWS
• Repeated failure destroys it.
• It is the missing link between aspiration and
results.
• Execution is a discipline, and integral to
strategy.
• Execution is the major job of the business
leader.
• Execution must be a core element of an
organization’s culture.

EXECUTION IS A DISCIPLINE
• Execution is a systematic process of rigorously
discussing hows and whats, questioning,
tenaciously following through, and ensuring
accountability.
• It includes making assumptions about the
business environment, assessing the
organization’s capabilities, linking strategy to
operations and the people who are going to
implement the strategy, synchronizing those
people and their various disciplines, and linking
rewards to outcomes.

EXECUTION IS A DISCIPLINE
• It also includes mechanisms for changing
assumptions as the environment changes of
an ambitious strategy.
• Execution is a systematic way of exposing
reality and acting on it.
• Everybody agrees about their responsibilities
for getting things done, and everybody
commits to those responsibilities.

EXECUTION IS THE JOB OF THE BUSINESS
LETTER
• Execution requires a comprehensive
understanding of a business, its people, and
its environment.
• Three core processes-picking other leaders,
setting the strategic direction, and conducting
operations.
• These actions are the substance of execution,
and leaders cannot degree them regardless of
the size of the organization.

LETTER
• Dialogue is the core of culture and the basis unit
of work.
• How people talk to each other absolutely
determines how well the organization will
function.
• Execution is not about micromanaging.
• Doing the things leaders should be doing in the
first place.
• They use their knowledge of the business to
constantly probe and question.

LETTER
• They bring weaknesses to light and rally their
people to correct them.
• The leader who executes often does not even
have to tell people what to do; she asks
questions so they can figure out what they
need to do.
• “Management by walking around.”
• If the leader doing the walking knows what to
say and what to listen for.

WHY PEOPLE DON’T GET IT
• Organizations don’t execute unless the right
people, individually and collectively, focus on
the right details at the right time.
• Such decision making requires knowledge of
the business and the external environment.
• It requires the ability to make fine judgments
about people-their abilities, their reliability,
their strengths, and their weakness.

WHY PEOPLE DON’T GET IT
• It requires intense focus and incisive thinking.
• It requires superb skills in conducting candid,
realistic dialogue.

THE EXECUTION DIFFERENCE
• OUT OF TOUCH AT LUCENT
• A leader with a more comprehensive
understanding of the organization would not
have set such unrealistic goals.
• But one part of execution is knowing your own
capability.

• EXECUTION AT EDS
• Confederation of fiefdoms.
• Meeting people at all levels formally and
informally to talk and listen.
• “Intense candor” a balance of optimism and
motivation with realism.
• I can’t believe that their worry is fact-based.

• I believe their worry is ignorance-based.
• Know each other so when we collaborate and
work together.
• What we did before doesn’t always have to be
the way we do it in the future, and you just have
to be open to it.
• The discipline of execution is based on a set of
building blocks that every leader must use to
design, install, and operate effectively the three
core processes rigorously and consistently.

THE BUILDING BLOCKS OF EXECUTION
• There are seven essential behaviors that form the
first building block of execution:
• Know your people and your business.
• Insist on realism.
• Set clear goals and priorities.
• Follow through.
• Reward the doers.
• Expand people’s capabilities.
• Know yourself.

KNOW YOUR PEOPLE AND YOUR
BUSINESS
• The point is that when you probe, you learn
things and your people learn things.
• Everybody gains from the dialogue.

SET CLEAR GOALS AND PRIORITIES
• Leaders who execute focus on a very few clear
priorities that everyone can grasp.
• You should strive for simplicity in general. One
thing you’ll notice about leaders who execute is
that they speak simply and directly.
• They talk plainly and forthrightly about what’s on
their minds.
• How to simplify things.
• Evaluate them, and act on them, they say
becomes common sense.

SET CLEAR GOALS AND PRIORITIES
• The failure to follow through is widespread in
business, and a major cause of poor execution.
• Nobody was named accountable for results.
• What did the CEO do here?
• He surfaced a conflict that stood in the way of
achieving results.
• By creating a follow-through mechanism, he
ensured that everyone would indeed do what
they were supposed to.

BUILDING BLOCK ONE
• REWARD THE DOERS
• They don’t distinguish between those who
achieve results and those who don’t, either in
base pay or in bonuses and stock options.
• LARRY:
• Don’t execute, the chances are that they don’t
measure, don’t reward, and don’t promote
people who know how to get things done.

BUILDING BLOCK ONE
• Leaders need the confidence to explain to a
direct report why he got a lower than expected
reward.
• A good leader ensures that the organization
makes these distinctions and that they become a
way of life, down throughout the organization.
• You have to make it clear to everybody that
rewards and respect are based on performance.

EXPAND PEOPLE’S CAPABILITIES
THROUGH COACHING
• How you expand the capabilities of everyone
else in your organization, individually and
collectively.
• Coaching is the single most important part of
expanding others’ capabilities.
• It’s the difference between giving orders and
teaching people how to get things done.

EXPAND PEOPLE’S CAPABILITIES
THROUGH COACHING
• The same principles apply to coaching an
individual privately.
• Whatever your style-whether it’s gentle or blunt-
your aim is to ask the questions that bring out the
realities and give people the help they need to
correct problems.
• Education is an important part of expanding
people’s capabilities.
• 80 percent of learning takes place outside the
calssroom.

KNOW YOURSELF
• Without what we call emotional fortitude, you
can’t be honest with yourself, deal honestly
with business and organizational realities or
right assessments.
• Emotional fortitude gives you the courage to
accept points of view that are the opposite of
yours and deal with conflict, and the
confidence to encourage and accept
challenges in group settings.

KNOW YOURSELF
• It enables you to accept and deal with your own
weakness, be firm with people who aren’t
performing, and to handle the ambiguity inherent
in a fast-moving, complex organization.
• Emotional fortitude comes from self-discovery
and self-mastery.
• It is the foundation of people skills.
• Good leaders learn their specific personal
strengths and weakness, especially in dealing
with other people, then build on the strengths
and correct the weakness.

KNOW YOURSELF
• They earn their leadership when the followers
see their inner strength, inner confidence, and
ability to help, while at the same time
expanding their own capabilities.
• They face challenges to their emotional
strength all the time.
• Getting things done depends ultimately on
performing a specific set of behaviors.

KNOW YOURSELF
• Without emotional fortitude, it’s tough to
develop these behaviors, either in ourselves or
in others.
• Putting the right people in the right jobs
requires emotional fortitude.
• Four core qualities that make up emotional
fortitude:

BUILDING BLOCK ONE
• 1. AUTHENTICITY:
• Your outer person is the same as your inner
person, who you are is the same as what you do
and say.
• Only authenticity builds trust.
• 2. SELF-AWARNESS:
• Know thyself-it’s the core of authenticity.
• Self-awareness gives you the capacity to learn
from your mistakes as well as your successes.

BUILDING BLOCK ONE
• 3. SELF-MASTERY:
• Self-mastery is the key to true self-confidence.
• 4. HUMILITY:
• Humility allows you to acknowledge your mistakes.
• He was wrong, he’d say, “It’s my fault.” He’d ask
himself.
• He’d listen to other people, he’d get more data, and
he’d figure it out.
• The time to coach them, encourage them, and help
them regain their self-confidence.

BUILDING BLOCK ONE
• 5. How do you develop these qualities in yourself?
• But the ultimate learning comes from paying attention
to experience.
• Sometimes the ahas also come from watching other’s
behavior: your observational capabilities make you
realize that you too have a blockage that you need to
correct.
• Either way, as you gain experience in self-assessment,
your insights get converted into improvements that
expand your personal capacity.

BUILDING BLOCK ONE
• Such learning is not an intellectual exercise.
• It requires tenacity, persistence, and daily
engagement.
• It requires reflection and modifying personal
behavior.
• But my experience is that once an individual
gets on this track, his or her capacity for
growth is almost unlimited.

BUILDING BLOCK ONE
• The behavior of a business’s leaders is,
ultimately, the behavior of the organization.
• As such, it’s the foundation of the culture.
• In the next chapter, we present a new
framework for changing the culture of an
organization.

BUILDING BLOCK TWO
• In an organization the hardware is inert without
the software.
• Cultural change gets real when your aim is
execution.
• You need to change people’s behavior so that
they produce results.
• First you tell people clearly what results you’re
looking for.
• Then you discuss how to get those results, as a
key element of the coaching process.

BUILDING BLOCK TWO
• You reward people for producing the results.
• If they come up short, you provide additional
coaching, with draw rewards, give them other
jobs, or let them go.
• When you do these things, you create a culture of
getting things done.
• Nothing in the survey showed how the division
could work differently in terms of its beliefs and
behaviors so that it would achieve outstanding
business results.

BUILDING BLOCK TWO
• If we want to change the culture, what should
be our next question?
• OPERATIONALIZING CULTURE
• We don’t think ourselves into a new way of
acting, we act ourselves into a new way of
thinking.

BUILDING BLOCK TWO
• New EDS Beliefs
• We can increase productivity year in and year
out.
• We are committed to our clients’ success.
• We will achieve service excellence.
• Collaboration is the key to our success.
• We are going to be accountable and committed.
• We will be better listeners to our clients.
• Behaviors are beliefs turned into action.
• Behaviors deliver the results.

BUILDING BLOCK TWO
• LINKING REWARDS TO PERFORMANCE
• The foundation of changing behavior is linking rewards to
performance and making the linkages transparent.
• A business’s culture defines what gets appreciated and
respected and, ultimately, rewarded.
• It was always somebody else’s problem.
• The process has to have integrity: the right information
must be collected and used, based on behavior and
performance criteria.
• You should reward not just strong achievements on
numbers but also the desirable behaviors that people
actually adopt.

BUILDING BLOCK TWO
• You should increase the population of A-players,
defined as those who are tops in both behavior
and performance.
• You should remove the non performers.
• The first component is the financial goals.
• The second component would be other goals,
focused on what we’re doing both this year and
in the long term.
• Linking rewards to performance is necessary to
creating an execution culture, but it’s not enough
by itself.

BUILDING BLOCK TWO
• All too commonly a tough new leader, striving for
a performance culture, will set rigorous
performance standards and then stand back to
watch the play unfold.
• “Sink or swim” is the message.
• Lots of people proceed to sink, and the
organization may sink too, as Sunbeam did with
Al Dunlap.
• Other leaders design rewards for new behaviors
of execution but implement them brutally.

BUILDING BLOCK TWO
• They don’t take the important step of helping
people to master the new required behaviors.
• They don’t coach.
• They don’t teach people to break a major
concept down into smaller critical tasks that can
be executed in the short term, which is difficult
for some people.
• They don’t conduct the dialogues that surface
realities, teach people how to think, or bring
issues to closure.

BUILDING BLOCK TWO
• THE SOCIAL SOFTWARE OF EXECUTION
• The key word here is “seems,” because, in fact,
leaders create a culture of indecisiveness, and
leaders can break it.
• A corporation has both hardware and software.
• We call the software of the corporation “social
software” because any organization of two or more
human beings is a social system.
• The hardware includes such things as organizational
structure, design of rewards, compensation and
sanctions, design of financial reports and their flow.

BUILDING BLOCK TWO
• Communication systems are part of the
hardware.
• So is a hierarchical distribution of power, where
such things as assignment of tasks and budget-
level approvals are visible, hardwired, and formal.
• The social software includes the values, beliefs,
and norms of behavior, along with everything
else that isn’t hardware.
• Like the computer’s software, it’s what brings the
corporate hardware to life as a functioning
system.

BUILDING BLOCK TWO
• Two things make them operating mechanisms,
not just meetings.
• First, they’re integrative, cutting across the
organization and breaking barriers among
units, functions, disciplines, work processes,
and hierarchies and between the organization
and the external environment as well.

BUILDING BLOCK TWO
• Social Operating Mechanisms create new
information flows and new working
relationships.
• They let people who normally don’t have
much contact with one another exchange
views, share information and ideas, and learn
to understand their company as a whole.
• They achieve transparency and simultaneous
action.

BUILDING BLOCK TWO
• Second, Social Operating Mechanisms are where
the beliefs and behaviors of the social software
are practiced consistently and relentlessly.
• They spread the leaders’ beliefs, behaviors, and
mode of dialogue throughout the organization.
• Other leaders learn to bring these beliefs and
behaviors to the lower-level formal and informal
meetings and interactions they conduct, including
coaching and feedback.
• They become their Social Operating Mechanisms.
And so on down the line.

BUILDING BLOCK TWO
• It provides the consistent framework that’s
needed to create common ways of thinking,
behaving, and doing.
• Over time it transcends even deeply rooted local
cultures.
• One of the most important things people take
with them from the processes is the
understanding of how to work together in
constructive debate.
• No one person has all the ideas or all the
answers.

BUILDING BLOCK TWO
• If we have a problem in one place, people will
respond by getting together and finding a
solution, not by sitting or deciding to engage a
consultant.
• We don’t expect people to know everything, but
we do expect people to get the best answers they
can get, and they get them by working with other
people.
• Practicing such constructive debates over time
builds confidence in people to tackle unfamiliar
issues as they arise.

BUILDING BLOCK TWO
• THE IMPORTANCE OF ROBUST DIALOGUE
• You cannot have an execution culture without robust
dialogue one that brings reality to the surface
through openness, candor, and informality.
• Robust dialogue makes an organization effective in
gathering information, understanding the
information, and reshaping it to produce decisions.
• If fosters creativity most innovations and inventions
are incubated through robust dialogue.
• Ultimately, it creates more competitive advantage
and shareholder value.

BUILDING BLOCK TWO
• Formal
• Robust dialogue starts when people go in with open
minds.
• They’re not trapped by preconceptions or armed with
a private agenda.
• They want to hear new information and choose the
best alternatives, so they listen to all sides of the
debate and make their own contributions.
• When people speak candidly, they express their real
opinions, not those that will please the power players
or maintain harmony.

BUILDING BLOCK TWO
• Indeed, harmony sought by many leaders who wish to
offend no one can be the enemy of truth.
• It can squelch critical thinking and drive decision making
underground.
• When harmony prevails, here’s how things often get
settled: after the key players have the session, they quietly
veto decisions they didn’t like but didn’t debate on the
spot.
• A good motto to observe is “Truth over harmony.” Candor
helps wipe out the silent lies and pocket vetoes, and it
prevents the stalled initiatives and rework that drain
energy.

BUILDING BLOCK TWO
• Informal
• Informality is critical to candor. It was one of Jack
welch’s bywords.
• Formality suppresses dialogue; informality
encourages it.
• Formal conversations and presentations leave
little room for debate.
• They suggest that everything is scripted and
predetermined. Informal dialogue is open. It
invites questions, encouraging spontaneity and
critical thinking.

BUILDING BLOCK TWO
• At a meeting in a formal, hierarchical setting, a powerful
player can get away with killing a good idea.
• But informality encourages people to test their thinking, to
experiment, and to cross-check.
• It enables them to take risks among colleagues, bosses, and
subordinates. Informality gets the truth out.
• It surfaces out-of-the-box ideas- the ideas that may seem
absurd at first hearing but that create breakthroughs.
• Finally, robust dialogue ends with closure.
• At the end of the meeting, people agree about what each
person has to do and when.
• They’ve committed to it in an open forum; they are
accountable for the outcomes.

BUILDING BLOCK TWO
• What was the difference?
• The difference was in the quality of the dialogue.
• Dialogue becomes a combat sport for the killers
and a humiliation or bore the passives.
• How do you get people to practice robust
dialogue when they’re used to the games and
evasions of classical corporate dialogue?
• No one person has all the ideas.
• Let’s listen to everybody and then make our
choice you’ll get much better responses.

BUILDING BLOCK TWO
• LEADERS GET THE BEHAVIOR THE EXHIBIT AND
TOLERATE
• The culture of a company is the behavior of its
leaders.
• Leaders get the behavior they exhibit and tolerate.
• You change the culture of a company by changing the
behavior of its leaders.
• You measure the change in culture by measuring the
change in the personal behavior of its leaders and
performance of the business.

BUILDING BLOCK TWO
• The leader’s own behavior, including her
communications with people at all levels,
modeled and reinforced the beliefs and behavior
her people needed to learn.
• The more you get involved and the better you
hash the issues out on the table, the better the
decisions you will make in terms of their
resolution.
• What is the growth potential of this person?
• Success in executing a cultural change depends
first and foremost on having the right people.

BUILDING BLOCK THREE
• The Job No Leader Should Delegate-Having the
Right People in the Right Place
• An organization’s human beings are its most reliable
resource for generating excellent results year after
year.
• Their judgments, experiences, and capabilities make
the difference between success and failure.
• The quality of their people is the best competitive
differentiator.
• The results probably won’t show up as quickly as,
say, a big acquisition.

• If you look at any business that’s consistently
successful, you’ll find that its leaders focus
intensely and relentlessly on people selection.
• You cannot delegate the process for selecting
and developing leaders.
• It’s a job you have to love doing.
• You hire a talented person, and they will hire a
talented person.

• WHY THE RIGHT PEOPLE AREN’T IN THE RIGHT
JOBS
• The leaders may not know enough about the
people they’re appointing.
• They may pick people with whom they’re
comfortable, rather than others who have better
skills for the job.
• They may not have the courage to discriminate
between strong and weak performers and take
the necessary actions.

• Lack of Knowledge
• He hasn’t defined the job in terms of its three or four
nonnegotiable criteria things the person must be able
to do in order to succeed.
• What the three nonnegotiable criteria for the job were.
• To consistently improve its leadership gene pool, every
business needs a discipline that is embedded in the
people process, with candid dialogues about the
matches between people and jobs, and follow-through
that ensures people take the appropriate actions.

• Lack of Courage
• If the nonperformer is high enough in the
organization, he can destroy it.
• He failed to make the leader of his most
important operation face the reality of the
industry’s situation, and failed to hold him
accountable for his poor performance.
• The Psychological Comfort Factor
• Many jobs are filled with the wrong people
because the leaders who promote them are
comfortable with them.

• Bottom Line: Lack of Personal Commitment
• When the right people are not in the right jobs, the
problem is visible and transparent.
• Leaders know intuitively that they have a problem and
will often readily acknowledge it.
• Leaders need to commit as much as 40 percent of their
time and emotional energy, in one form or another, to
selecting, appraising, and developing people.
• This immense personal commitment is time-consuming
with emotional wear and tear in giving feedback to
others.

• Bottom Line: Lack of Personal Commitment
• But the foundation of a great company is the way it
develops people - providing the right experiences,
such as learning in different jobs, learning from other
people, giving candid feedback, and providing
coaching, education, and training.
• If you spend the same amount of time and energy
developing people as you do on budgeting, strategic
planning, and financial monitoring, the payoff will
come in sustainable competitive advantage.

• WHAT KIND OF PEOPLE ARE YOU LOOKING FOR?
• In most companies people regard a good leader
as one with vision, strategy, and the ability to
inspire others.
• How good is this person at getting things done?
• The person who is a little less conceptual but is
absolutely determined to succeed will usually
find the right people and get them together to
achieve objectives.

• They’re Decisive on Tough Issues
• Decisiveness is the ability to make difficult decisions swiftly and
well, and act on them.
• Few tough issues are more challenging for indecisive leaders
than dealing with people they’ve promoted who are not
performing.
• They Get Things Done Through Others
• Leader’s who can’t work through others often end up putting in
untold hours, and pushing everyone else to do the same.
• People who can’t work with other reduce the capacities of their
organizations.
• They don’t get the full benefit of their people’s talents, and they
waste everybody’s time, including their own.

• They Follow Through
• Follow-through is the cornerstone of execution.
• Ensures that people are doing the things they
committed to do, according to the agreed
timetable.
• It exposes any lack of discipline and connection.
• If people can’t execute the plan because of
changed circumstances and creatively with the
new conditions.

• They Follow Through
• Never finish a meeting without clarifying what
the follow-through will be, who will do it, when
and how they will do it, what resources they will
use, and how and when the next review will take
place and with whom.
• And never launch an initiative unless you’re
personally committed to it and prepared to see it
through until it’s embedded in the DNA of an
organization.

• HOW TO GET THE RIGHT PEOPLE IN THE RIGHT JOBS
• The first things I look for are energy and enthusiasm for
execution.
• Does the candidate get excited by doing things, as
opposed to talking about them?
• Has she brought that energy to everything she’s done,
starting with school?
• I don’t care if she went to Princeton or to Podunk
State; how well did she do there?
• Is her life full of achievement and accomplishment?

• What does this person want to talk about?
• Does she talk about the thrill of getting things
done, or does she keep wandering back to
strategy or philosophy?
• Does she detail the obstacles that she had to
overcome?
• Does she explain the roles played by the
people assigned to her?

• THE UNVARNISHED TRUTH
• What the evaluator should have been thinking is, I can
make this person a lot better if I tell her she’s got a
problem, and she fixes it.
• If you sit down with your boss and your boss hasn’t
said something to you about your weakness, go back!
• Because otherwise you’re not going to learn anything.
• What could you do better?
• One, you’re not aggressive enough.
• You’re indecisive.
• Your standards aren’t high enough.

• You don’t develop your organization the way we
ask you to promote enough people last year.
• Problems may be in your DNA, and you may not
necessarily be able to change them.
• But you can modify them, improve them.
• The process of getting the right people in the
right jobs.
• It’s a matter of being systematic and consistent in
interviewing and appraising people and
developing them through useful feedback.

The People Process
• Making the Link with Strategy and Operations
• A robust people process does three things.
• 1. It evaluates individuals accurately and in depth.
• 2. It provides a frame work for identifying and
developing the leadership talent at all levels and of
all kinds.
• 3. The organization will need to execute its strategies
down the road.
• And it fills the leadership pipeline that’s the basis of a
strong succession plan.

The People Process
• Very few companies accomplish all of these
objectives well.
• One of the biggest shortcomings of the
traditional people process is that it’s
backward-looking, focused on evaluating the
jobs people are doing today.
• Far more important is whether the individuals
can handle the jobs of tomorrow.

The People Process
• Linkage to the strategic plan and its near,
medium, and long-term milestones and the
operating plan target, including specific financial
targets.
• Developing the leadership pipeline through
continuous improvement, succession depth, and
reducing retention risk.
• Deciding what to do about nonperformers.
• Transforming the mission and operations of HR.

The People Process
• Preserving the dignity of people who leave jobs is
an important part of reinforcing the positive
nature of the performance culture.
• To accomplish this we have to great people and
train them better and faster than everybody else.
• How to teach people, develop them, make them
interested in staying with us, and know what’s
important for building momentum and morale in
an organization.

The People Process
• Business acumen, the ability to understand how a
company makes money, the ability to think
critically, a passion for results, and the ability to
link strategy and execution.
• Critical jobs aren’t necessarily high-level ones.
• Whether a person is right for their job, in one of
three categories: a good fit, a stretch, or an
action required.

The People Process
• He can deliver, but we might need to shore
him up: may be he’s not strong on finances, so
let’s make sure we get a good controller for
him.
• If the person is an action required, it means
that the person needs to come out of that
position and leave that she can handle.

The People Process
• CANDID DIALOGUE: THE “LIVE AMMO”
• Integrity, honesty, a common approach,
common dialogue, and frequency.
• All candid dialogue is critical.
• Functional skills, business skills, management
skills, and leadership skills.
• A common language, a common way of talking
about people.

The People Process
• Who works here?
• Adding very little value to the company, you’d be a low
risk of turnover.
• Attractive to other companies, you’d be assessed as a
high risk of turnover.
• ‘What good looks like.’
• 1. A culture of accountability for high performance.
• 2. A leader who is not only willing.
• 3. A collegial culture among the top executives of the
enterprise.

The People Process
• 4. Giving me, as the head of HR, the right to
push too.
• It’s not about rank. It’s about the credibility
and the perspective of the individual.

THE STRATEGY PROCESS
• Utmost attention of the hows of executing the strategy.
• Must be an action plan that business leaders can rely.
• How your organization can do the things.
• Identifying and defining the critical issues behind the
strategy.
• How good are the assumptions upon which the plan
hinges?
• What are the pluses and minuses of the alternatives?
• Do you have the organizational capability to execute
the plan?

• What do you need to do?
• Can you adapt the plan to rapid changes is the
business environment?
• Do you have the right people in place to
execute the strateg?
• You’ve got to link your strategic plan’s.

• THE IMPORTANCE OF THE HOWS
• But all turned out to be based on faulty
assumptions.
• It had no alternative plan for what to do if one
or more.
• Its culture, which was not much changed form
the old monopoly days, could not execute well
enough or fast enough to make the plan work
soon enough.

THE BUILDING BLOCKS OF A STRATEGY
• The substance of any strategy is summed up by
its building blocks: the half-dozen or fewer key
concepts and actions that define it.
• Pinpointing the building blocks forces leaders to
be clear as they debate and discuss the strategy.
• It helps them judge whether the strategy is good
or bad and why.
• It provides a basis for exploring alternatives if
needed.

• Throughout the process, the unit’s leaders kept in
touch with reality.
• Reviewing the plan three times a year and refining it as
conditions changed.
• Important to understand the distinction between
strategy at the business unit level and strategy at the
corporate level.
• Corporate-level strategy
• The boundarylessness that Jack Welch introduced
assures a constant exchange of ideas and best practices
among diverse business managers, significantly
multiplying.

• Defines the walls of a company-the business it wants to
be in and the general arena of play.
• Analyzes the mix of business and makes about whether
the mix should change in order to earn the best
sustainable return.
• Strategic value is also added by initiatives to improve
performance throughout the company.
• “Diamonds in the rough.”
• Struggling in their current jobs because of
circumstances they cannot control.
• Move these people to better environments where they
can grow.

BUILDING THE STRATEGIC PLAN
• It clearly lays out in specific terms the
direction of the unit: where it is now, where it
will be going in the future, and how it will get
there.
• Cost of the strategic results.
• Capital resources it needs, analyzes the risks
that are involved and instills flexibility in case
new opportunities arise or the plan fails.

BUILDING THE STRATEGIC PLAN
• Analyzes the strengths and weaknesses of
competitors.
• If you can’t describe your strategy in twenty
minutes, simply and in plain language, you
haven’t got a plan.
• It’s a complex thought about the strategy.

• LARRY:
• A good strategic plan is a set of directions you
want to take.
• It’s a roadmap, lightly filled in, so that it gives
you plenty of room to maneuver.
• You get specific when you’re deciding the
action part of the plan, where you link it with
people and operations.

• Who Builds the Plan?
• To be effective, a strategy has to be constructed and
owned by those who will execute it.
• A good strategy process is one of the best devices to
teach people about execution.
• People learn about the business and the external
environment.
• They discover insights, and develop their judgments
and intuition.
• Discussing these things creates excitement and
alignment.

• LARRY:
• Once everyone agrees with the strategy-he takes
responsibility for developing action plans.
• QUESTION FOR A STRATEGIC PLAN
• LARRY:
• Give special attention to environment,
competition.
• Market share is the ultimate scorecard, and
obviously it will influence the strategy.

• What separates the successful companies
from the other companies in the same
industry?
• “What do we want to get done?
• What are the critical issues we need to
understand better?
• Why at the end is it going to be helpful to us?”

• A strong strategic plan must address the following
questions:
• What is the assessment of the external
environment?
• How well do you understand the existing
customers and markets?
• What is the best way to grow the business
profitably, and what are the obstacles to growth?
• Who is the competition?

• Can the business execute the strategy?
• Are the short term and long term balanced?
• What are the important milestones for
executing the plan?
• What are the critical issues facing the
business?
• How will the business make money on a
sustainable basis?

• What Is the Assessment of the External Environment?
• Every business operates within a shifting political,
social, and macroeconomic context.
• Explicitly state the external assumptions that
management is making.
• The general environment is the same for every player.
• What differentiates the successful ones are their
insights, perceptions, and abilities to detect patterns of
change and relate them to their landscape, industries,
competition, and business.

• How Well Do You Understand the Existing
Customers and Markets?
• The buying decision is more complex.
• Who specifies that this product should be
purchased?
• They lose awareness of the needs and buying
behaviors of their customers.
• The issue is simply understanding the specific
people who make the purchasing decisions and
their buying behavior.

• What Is the Best Way to Grow the Business
Profitably, and What Are the Obstacles to
Growth?
• Does your business need to develop new
products?
• Does it need to take existing ones into new
channels and to new customers?
• Does it need to acquire other business?
• How are its costs compared with those of its
competitors-and what productivity programs do
you have in place to improve your cost position?

• The first is the individual who wants to buy
such a pen for herself.
• The second is the person who buys one as a
gift for another individual.
• The third is the corporation that buys
thousands, with its logo on them.
• The product is essentially the same, but
demand is different and so is the strategy.

• Who Is the Competition?
• Miss the emergence of new competitors who
have more attractive value propositions.
• Sometimes people have the opposite
problem-they overestimate the competition
because they haven’t asked the right
questions, and they miss opportunities they
should be grasping.

• Can the Business Execute the Strategy?
• Strategies fail because leaders don’t make a realistic
assessment of whether the organization can execute
the plan.
• The top two layers of the leadership ranks did not have
enough people who met their commitments.
• But have an idea of your capabilities.
• But don’t stop there.
• Listen to your customers and your suppliers.
• Look at you sharply from the outside.

• LARRY:
• You measure your organizational capability by
asking the right questions.
• But what distill and gain from the process is an
understanding of what needs to be done.

• What Are the Important Milestones for
Executing the Plan?
• Milestones bring reality to a strategic plan.
• A good strategic plan is adaptable.
• Periodic interim reviews can help you to
understand.

• Are the Short Term and the Long Term
Balanced?
• To be conducted in real time, connected to shifts
in the competitive environment and the
business’s own changing strengths and weakness.
• Defining the mission in the short to medium term
as well as in the long term.
• Adapt to an economy of constant change.
• Most plans don’t address what a company has to
do between the time the plan is drawn up and
the time it is supposed to yield peak results.

• RAM:
• Achieving this balance requires creativity and
idea generation, finding resources outside the
corporation if necessary for the long term.
• Colgate now has a global group working on
ideas for growth and productivity.

• What Are the Critical Issues Facing the
Business?
• Dressing these usually requires research and
thought.
• Delineating the critical issues in the strategic
plan helps focus the preparation and dialogue
when it comes time to review the strategy.

• LARRY:
• I’ll ask them what they think the critical issues
are.
• I want to review the whole plan and then hold a
separate session to resolve those big issues.
• Many strategies fall apart because the right
critical issues aren’t raised.
• At the level of business unit, the issues are
smaller in scope but are no less critical to the
organization’s future.

• How Will the Business Make Money on a
Sustainable Basis?
• Clearly the specifics of the anatomy of the
business, how it will make money now and in the
future.
• The mix of which is unique for every business: the
drivers of cash, margin, velocity, revenue growth,
market share, and competitive advantage.
• You can see that a strategic plan contains ideas
that are specific and clear.

HOW TO CONDUCT A STRATEGY REVIEW
• There’s been little or no constructive discussion,
and almost no decisions about which actions will
advance the business.
• The critical issues don’t stand out amid all the
mind-numbing detail.
• And get everybody thinking and talking about
reality.
• Far too many reviews are dominated by dry
discussions of numbers and by people
maneuvering for power and ducking tough
questions.

• The business unit strategy review is the prime Social
Operating Mechanism of the strategy process.
• The penultimate ground for testing and validating the
strategy-the last chance to get things right before the
plan faces the ultimate test of the real world.
• As such, it has to be inclusive and interactive it must
feature a solid debate, conducted in the robust
dialogue of the execution culture, with all of the key
players present and speaking their minds.

• The review should be a creative exercise, not a
drill where people regurgitate data.
• If creativity is absent from the conversation, the
participants might as well stay in their offices.
• People have to leave with closure to the
discussion and clear accountability for their parts
in the plan, and the leader must follow through
to be sure that every one is clear about the
outcome of the review.

• LARRY:
• They’re looking for new ideas.
• Make your idea the best idea you can, and
don’t worry if someone says it’s a bad idea.
• A creative process where some new thinking
happens that wouldn’t otherwise have
happened.
• That’s an element of a good planning process.

• You should spend some time discussing how
well it was executed.
• How close did you come to achieving its
goals?
• Did people do what they said they’d do.
• Search for ways to link as many of these
events as possible as a basis for establishing
credibility.

• The strategy review is also a good place for a
leader to learn about and develop people.
• You’ll find out about their strategic-thinking
capabilities, both as individuals and as a group.
• At the end of the review, you’ll have a good
perspective on the people involved and an
assessment about their potential for promotion.
• And you’ll have had opportunities to coach
people.

• Is the plan plausible and realistic?
• Is it internally consistent? Does it match the critical
issues and the assumptions?
• Are people committed to it?
• How well versed is each business unit team about the
competition?
• How strong is the organizational capability to execute
the strategy?
• Is the plan scattered or sharply focused?
• Are we choosing the right ideas?
• Are the linkages with people and operations clear?

• How Well Versed Is Each Business Unit Team
About the Competition?
• Real-time reporting on what they’re up to and
likely to do next.
• Are they yesterday’s people?
• Do we know the technology and have a
roadmap of how it will change over time?
• Do we have a cost structure that will allow us
to compete profitably?

• Are We Choosing the Right Ideas?
• Many people strategize themselves into the
wrong business.
• No matter how well you execute, the risk of
failure increases markedly when the ideas you
develop don’t fit with your existing
capabilities, or force you to acquire those
capabilities at too high a cost.

• You can get a good idea from how specific,
clear, and robust the ideas are.
• Even the ideas that sound good make sense.
• Good ideas aren’t the same for everybody.
• It provides the basis for allocating capital to
things that have an attractive future and
reducing capital to things that are less
attractive.

• Are the Linkages with People and Operations Clear?
• Linking the strategy process to the people and
operations processes well.
• Strategy and operations becomes totally transparent.
• Go to the next level by moving into an adjacent
segment?
• It meets their specifications and needs?
• Do you have the right kinds and numbers of people to
do these things?
• Have you allotted enough lead time for the required
actions?

• LARRY:
• A good strategic plan has to be translatable
into the operating plan.
• Not all in one year, but it has to have an action
quotient to it.
• Sometimes you go into these two processes,
and they make you think you’re in two
different companies.
• You review the strategic plan.

• Strategic plan to see that link has been
established.
• Do your strategic assumptions mesh with your
internal yardsticks?
• You have to define what you do and don’t want
to invest in, and the strategy compilations have to
agree with those judgments.
• Internal indicators would include business you
want to be in, businesses you want to invest in,
and businesses you want to harvest.

• Business decides on a new strategy, it needs
to have a dialogue about the quality and
aptitude of the people involved.
• But we never had to demonstrate that we had
the right capabilities.
• Throughout the processes outlined above,
asking questions constantly keeps the critical
issues in mind.

• Do you have the right leaders in the right
jobs?
• How well do they work together?
• Do you have enough of the kind of people you
need?
• Do you have the production, financial, and
technological resources to execute the
strategy?

• Write a letter to each of the leaders to solidify and
confirm the agreements you made so that later you
can use them as the basis for reviewing progress.
• It should establish the link between strategy and
people and operations.
• We must identify the goals and vision of our
customers.
• This will make it easier for us to plan for the future and
will improve our ability to anticipate and meet
customers’ needs.
• There commitment and involvement will drive your
success.

The Operation Process
• No more so than the way many companies
translate their strategic plans into operations.
• The process doesn’t deal with how-or even you
can get the results, so it is disconnected from
reality.
• The strategy process defines where a business
wants to go, and the people process defines.
• The operating plan provides the path for those
people.
• It breaks long-term output into short-term
targets.

• Meeting those here-and-now targets forces
decisions to be made and integrated across
the organization, both initially and in response
to changes in business conditions.
• The operating plan is not budgeting for “We
did better than last year.”
• An operating plan looks forward to the hows.
• The operating plan specifies how the various
moving parts of unexpected opportunities.

• LARRY:
• The operating plan to be owned by everybody.
• The more people who are aware of the expectations
for them-the more you achieve.
• 1. The process doesn’t provide for robust dialogue on
the plan’s assumptions.
• 2. The budget is built around the results that top
management wants.
• 3. The process doesn’t provide coaching opportunities
for people to learn the totality of the business.

• The budget should be the financial expression of
the operating plan.
• Their interests instead of focusing on the
business’s critical issues.
• No one necessarily knows how and why those
numbers are reached.
• RAM:
• The environment has probably changed.
• The stock price has been static for the past five
years.

• To flesh out his strategic plan, he’s gotten his
top hundred people together for two days to
elicit ideas and get them fired up.
• His business units to think about new ways to
create growth: new value propositions, new
channels, new customers.
• He is changing beliefs, behaviors, people, and
resource allocation.

• HOW TO BUILT A BUDGET IN THREE DAYS
• The starting point is a robust dialogue among
all the relevant business leaders, who sit down
together to understand the whole corporate
picture, including all of the relationships
among its parts.
• We call this the principle of simultaneity.
• They’ve all previously been given the initial
cut at the broad assumptions.

• He questions the assumptions to test their
validity and asks how each action plan will affect
the other businesses.
• The group breaks up for an hour.
• They can see in real time what makes sense and
what doesn’t, and how well all of the
components synchronize.
• Then they’ll go through the process again,
questioning, reshaping, and refining.
• Usually they’re finished after four cycles.

• People will be able to move faster and will be
more willing to experiment with good ideas,
knowing they aren’t trapped in a rigid and
probably obsolete budget structure.
• THE IMPORTANCE OF SYNCHRONIZATION
• Synchronization means that all the moving parts
of the organization have common assumptions
about the external environment.
• Synchronization includes matching the goals of
the interdependent parts and linking their
priorities with other parts of the organization.

The Operations Process
• When conditions change, synchronization
realigns the multiple priorities and reallocates
resources.
• But change how? What becomes more
important and less important?
• Debate on assumptions is one of the most
critical parts of any operating review.
• You cannot set realistic goals until you’ve
debated the assumptions behind them.

• Debate assumptions is one of the most critical
parts of any operating review.
• You cannot set realistic goals until you’ve
debated the assumptions behind them.
• People bring assumptions and their positions.
• What you really want to do is get all of the
assumptions out in the open, with everyone
present and a leader who asks penetrating
questions.

• Debating the assumptions and making trade-offs
openly in a group is an important part of the
social software.
• It builds the business leadership capacities of all
the people involved.
• As they construct and share a common
comprehensive picture of what’s happening on
the outside and the inside, they hone their ability
to synchronize efforts for execution.
• And they publicly make their commitments to
execute.

• LARRY:
• You are not saying in the back of your mind.
• “I told you so.”
• It’s important to make an operating plan as
timely as you can.
• They cover the lot-anything that can affect
your business requires some kind of
assumption.

• BUILDING THE OPERATING PLAN
• It’s three-part process that begins with setting
the targets.
• In the second part, you develop the action plans,
between short-term objectives and long-term
goals.
• Finally, you get agreement and closure from all
the participants, establishing follow-through
measures to make sure people are meeting their
commitments or to work up corrective steps if
they aren’t.

• Outside in means these numbers have to
reflect both the economic and competitive
environment.
• Top down means that the targets are also set
from the whole to the part.
• They automatically increase some number
over last year without discussing the
challenges of meeting.

• Most important, the discussions must include
close attention to gross margins.
• Gross margins are where the bottom line
comes from-all operating expenses are
deducted from the gross margins, not the
revenues.
• We paid special attention to key initiatives.

• THE ART OF MAKING TRADE-OFFS
• Some strategies contain very specific and clear
ideas that will grow the business profitably but
that require investment in the current operating
period.
• In such cases the leadership has to make trade-
offs.
• Where the business makes this investment is
deduced from and directly linked to the strategy
dialogue.

• In operations, the leader then ensures as follow-
through that strategy direction is specific and
clear and still relevant;
• That it is translated into action by allocating
resources;
• And that the sources of those resources are
explicit.
• She also ensures that accountability is assigned
and followed through in subsequent reviews.

• If the capital market values that particular unit
at a lower sustainable price/earnings ratio-say,
because it’s in a mediocre industry and is
earning those returns now only because you
were the first to cut costs-you’ll want to favor
the unit that has more value for the long run.

• OUTCOMES OF THE OPERATIONS PROCESS
• One outcome of the operations process is
identifying targets that clearly and specifically
reflect not only what a business wants to
achieve but what it is likely to achieve-because
they are based on the most realistic
assumptions and on the hows of achieving
them.

• They’re clear and specific.
• The sources of change in revenue and their
relative proportion.
• The operation process yields a lot of learning.
• Thinking about and debating the very guts of the
business.
• They learn how to allocate and reassign resources
when the environment changes.
• Operating reviews are superb coaching sessions.

• People acquire the knowhow of asking incisive
questions.
• Their skills in encouraging inquiry and getting all
the viewpoints out.
• The leaders can then bring the same skills to their
own reviews, energizing their people and
expanding their capacities.
• Process builds confidence.
• Adapt to changes.
• Most drastically altered circumstances.

• AFTER THE MEETING FOLLOW-THROUGH AND
CONTINGENCIES
• A good review ends with closure and follow-
through.
• Each person has carried away the right
information and taken accountability for what
he or she agreed to do.
• To send each person a memo outlining the
details of the agreements.

• Contingency Plans:
• On the turn of a dime.
• LARRY:
• The better the people, I find, the more they
like these reviews.
• Later I hold a public forum.
• This is not about hopes and dreams.
• This is about realities.

• GOALS TO LIVE BY
• That targets disconnected from reality.
• The people themselves help set realistic targets.
• This is the bedrock of accountability.
• LARRY:
• There’s still a gap between what you think you
can make in the ten operating businesses and
what we think we have to make.

• We’ve got to talk about how we fill the gap.
• What ideas do we have that begin to close this
gap?
• You want to have that debate because the worst
thing is someone who says he can make it but
then doesn’t.
• I am going to challenge your plan.
• I’m going to try to get as much stretch as I can,
but if it’s not achievable, nothing’s been
accomplished here that’s good.

• I can’t just walk away from my commitments.
• RAM:
• There can be a lot of hot air in stretch goals.
• A stretch goal has basically two purposes.
• 1. It can force you to think about doing things in a
radically different way.
• 2. It can help you to execute exceptionally well.
• I will continue to reduce prices as long as I live.

• The key is to evaluate the plausibility of the
stretch goal.
• There are fewer than half a dozen factors or
assumptions that have to go right, some of them
involving luck.
• Identify those at the time of the debate.
• Talk about them, and then say, if all the stars get
lined up, we won’t miss it.
• If they don’t get lined up, we have a chance to
miss it.

• LARRY:
• Really you should know how much of a stretch
that is.
• You can’t go in and say, “Look, I’m just going to
give you a number.”
• 1. I need to see that you have a handle on it.
• 2. I know you have a chance to get it done.
• 3. I learn a lot.

• A business is how the three processes of
people, strategy, and operations link together.
• The foundation for the discipline of execution,
at the center of conceiving and executing a
strategy.
• The new theory of leadership and organization

CONCLUSION
• LETTER TO A NEW LEADER
• If you’re short on experience in one area, be sure
you’ve got someone who’s strong in it.
• You’ll establish the personal connection that is a
hallmark of a great leader.
• 1. Understanding customers is the base of
business success.
• 2. Always look for ways to improve your results.
• 3. See things as they are, not the way you want
them to be.

CONCLUSION
• A confidant, someone outside the business to
help her keep her head straight.
• An individual who will be candid with you and
help you to keep asking yourself whether
you’re growing, learning, and making the
tough choices.
• Don’t let yourself get too low or too high.

CONCLUSION
• Remember that you’ve earned your leadership
by your commitment.
• Keep that intensity of involvement and
deepen it.
• Busy being big honchos to pay attention to the
important details and stay close to their
people.

Execution Book by Larry Bossidy and Ram Charan Summary

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