Reinvent M
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This document discusses the need for organizations to reinvent their management models for the 2020s and beyond. It argues that while business models have changed due to new technologies and customer demands, organizational models have not fundamentally changed since the 1990s. The COVID-19 crisis both exposed weaknesses in current models but also showed that organizations can overcome bureaucracy with urgency. The document proposes 10 "ground rules" for reinventing management, such as aligning around a clear purpose and definition of winning, focusing resources on top priorities, eliminating matrix structures, and making customer value the core operating principle.
Reinvent M
- 1. Reinvent the way you manage for the 2020s and beyond REINVENT M©
- 2. 2 Despite all the talk about organizational agility of recent years, what we observe in practice is that most large organizations remain complex/multi-layered matrices, bureaucratic, slow in decision-making and execution, insufficiently consumer-centric, sluggish in bringing innovative products and solutions to the market with diluted accountabilities. Corporate culture and company values are often a vague articulation of platitudes and rarely match what people experience day-to-day. In short, while business models have been transformed through fast-evolving consumer requirements and technological advancements, organizational models and governance structures have not fundamentally changed since the 1990s, despite numerous well-intentioned “organizational transformation” projects. The COVID-19 crisis both exposed these inherent weaknesses but also demonstrated that the ‘red tape’ can be overcome with the right sense of urgency. A question that many CEOs are asking is how to maintain the good practices that have emerged after the crisis. Organizational models & governance structures are to a large extent still stuck in the 1990s. It is time to do things radically differently
- 3. 3 As advisers to CEOs and executive teams, we know that traditional, long-winding transformational approaches which take multiple years to implement mostly fail. The way companies transform must change, the mindset needs to become an ‘always on’ transformation and organizational models must be reinvented. Based on our experience, we are proposing a radical yet simple set of ground rules , which, if fully committed and executed, will truly make a huge difference in company performance & long-term success.
- 4. 4 CEOs ...while none of the individual ground rules will surprise you, it begs the question of why practically no company gets them all right. Where are your biggest gaps?
- 5. 5 Align around simple and ambitious Purpose and Definition of Winning. 01. Focus on the 5 to 10 priorities that really move the needle. 03. ‘Kill’ the matrix organization. 05. Choose your leadership and Non-Exec Board as if you’re striving for Olympic gold. 07. Create a company environment consisting of outstanding people. 09. Fundamentally re-think the way you manage performance. 02. Allocate your most valuable resources like a venture capitalist. 04. Make maximizing consumer/ customer value your core operating mantra, instead of just optimizing costs. 06. Future-proof your capability agenda. 08. Stop cultural indulgence: there IS such thing as a right or wrong culture. 10. Ground rules for making a big difference
- 6. 01. 6 (How) is your senior leadership aligned around ambition and key priorities? Be crystal clear and inspiring on your purpose with regards to shareholders AND stakeholders (mix of greater purpose, performance and people) Agree on a Definition of Winning (DOW) as an unambiguous, ambitious, measurable overriding performance objective, relative to the relevant peer‑set (you are not competing with yourself!) Be sharp in defining what constitutes your ‘right to win’ (source of relative competitive advantage)- it is never many different things! Make sure that senior leaders’ personal objectives are aligned with the overall corporate Definition of Winning “You have never arrived” even if your performance relative to the market is top quartile. Be specific regarding your objectives on the 6 dimensions of your Total Societal Impact: Economic value, consumer/ customer well-being, ethical values and practices, environmental sustainability, social enablement and governance Articulate differentiated roles & contributions for each part of the business and individual leaders as a contribution to the corporate Definition of Winning Communicate an inspiring and consistent equity story to the capital markets and to your teams internally Align the Leadership team and the entire organization around a clear stretch ambition Align around simple and ambitious Purpose and Definition of Winning.
- 7. 7 Set high standards of performance, even unreasonably high, never be satisfied - there is no shame in pushing for top performance – this is how individuals excel! Focus on the KPIs which truly correlate to the long-term viability of the business (e.g. customer sentiment, profitable growth, EP, ROIC, cash flow, sustainability) Rethink the way you evaluate and reward. Top priorities are not evaluated against budget or other traditional individuals’ KPIs but vs. achievements of milestones. Give exceptional individuals trust and freedom to execute. Eliminate traditional yearly performance management: individuals and teams should be incentivized based on achievements on delivering the prioritized agenda, at all levels. Introduce new KPIs that reflect the specific objectives and the way you choose to manage the ‘5 tensions’ Promote on performance (achievement of milestones) and adherence to purpose, culture and superior behaviours Replace time-consuming and politically motivated budgets and reforecasts with real time simulations of financial and operational performance that enable you to decide, reallocate resources and deliver quicker than competition Fundamentally re-think the way you manage performance 02. Is your mission to be the best or are you happy to just compete? Establish a high-performance culture at all levels
- 8. 8 Frame and constantly refresh a dynamic Decision and Delivery Agenda. These priorities represent the highest ‘value-at-stake’ issues and opportunities on your agenda Your top priorities must always include People, Performance and Planet Spend 80% of senior leadership time on these priorities that represent 80% of ‘value potential’ and delegate all the rest Be clear, balanced and aligned with your senior leadership on how you will manage the ‘five tensions’ Alignment is not trivial! • Short-term vs. long-term • Profitability vs. growth • Sum of parts vs. whole company • Balance sheet vs. P&L • Shareholder vs. stakeholder value (societal impact vs. economic value) Cascade this management approach down to the entire organization (each ‘unit’ should have their own priorities but with a clear link to their objective function- contribution to corporate DOW) Stop wasting valuable management time- relentlessly focus on what really makes the difference for the business Focus on the 5 to 10 priorities that really move the needle How can you manage effectively if you are chasing 100 ‘priorities’? 03.
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- 10. 10 Are you allocating resources strategically ...and dynamically? Recognize that one of the most important responsibilities of a CEO and the Senior Leadership team is strategic resource allocation Redirect Capex, Opex, management time and talent towards the top 10 priorities – and yes, this means that other areas of the organization will be more constrained! Recognize that in today’s business you should be investing disproportionately in intangible assets (digital, R&D) Manage your top priorities and corresponding resource allocation like a venture capitalist (VC), i.e., using ‘performance contracts’ with clear objectives, milestones, mutual commitments towards priorities owners Allocate resources dynamically (distinguish between allocation-release-reallocation) both top-down (corporate priorities) and bottom-up (unit priorities) but always clearly linked to the DOW Be very clear on what not to pursue and be rigorous and act fast to stop activities (and their allocated resources) which do not move the needle on your DOW Measure and report what you are stopping, reward and recognise those who stop Focus your most valuable resources for maximum impact 04. Allocate your most valuable resources like a venture capitalist
- 11. 11 05. Is your matrix organization diluting accountabilities? Traditional matrix set-ups only make sense if the whole is greater than the sum-of-the-parts but often lead to dilution of accountability. Assemble your teams through 3 main groupings derived from the top 10 priorities and Definition of Winning: • ‘Decision cells’: Small cross-functional teams with best-in-class capabilities focusing on the top 10 Decision Agenda priorities, and related key initiatives to drive decisions at all levels of the organization • ‘Delivery teams’: Fully accountable teams to drive and support execution of prioritized Delivery Agenda at each level of the organization • ‘Functional backbones/digital enablement platforms’ setting high standards for functional excellence and uncompromising SLA relationships to the other two groups • Cascade this kind of focus down to each level of the organization; less is always more in terms of priorities • Align expertise and decision rights, accountability and authority • Centralize strategic capabilities but never centralize where you need insights from the front line Stop therefore: • Repetitively changing the key steering dimension of your structure between products, categories, customers & channels, functions and geographies • Trying to solve the eternal hierarchical vs. functional relationship tensions for each individual Accept that in this priority-driven world, successfully managing the Decision and Delivery agenda, means that some parts of the organization might by consequence emerge as superfluous ‘Kill’ the matrix organization! Stop the paralysis of diluted accountabilities!
- 12. 12 06. How is ‘extreme’ customer-centricity driving your decisions? Reinvent the way you connect and co-create with customers/consumers to create truly superior value propositions Leverage AI/digital marketing to sharpen your understanding of consumer needs and preferences Deliver ‘end-to-end’ maximum customer benefit in the most efficient way, instead of splitting objectives (e.g., innovation vs. cost efficiency) Set superior customer value creation as the new guiding light for how you decide, design and segment your operational assets, and how you operate the business and therefore apply design thinking to all your processes (even in the functional backbones) Based on this customer obsession, redefine operational excellence, judged by NPS-like metrics Do not waste ANY money on activities that do not improve customer value and drive your Definition of Winning –be lean from the get- go, do not invest in optimizing activities which do not add any value Make maximizing consumer/customer value your core operating mantra, instead of just optimizing costs Set superior customer value creation in the most efficient way as your guiding light
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- 14. 14 Is your senior leadership a true A-Team? Be ruthless, diverse and uncompromising in the selection of diverse and senior leadership (top individuals & outstanding team players only) New CEOs should make tough choices as early as possible in their tenure! Prepare the (next) CEO and the executive team ahead of time on the comprehensive skills they will require and the accountabilities they will face (formal training/coaching of short-listed candidates 2-3 years ahead of time) Consider rotating the executive team according to the Decision and Delivery agenda and renew your team as often as required based on their achievements and impersonation of the desired culture Select and evaluate your team based on the ‘never arrived’ principle; there is no such thing as achieving a performance milestone and resting on your laurels Expect and push for top individual performance, but make sure that the team is more than the sum of its parts and in relentless pursuit of the company’s best interest above personal agenda Create double-hatting roles in your senior team to encourage true teaming and shared incentives Pick a Non-Executive Board that is informed, challenging and engaged: you will not get any value out of Board members who always agree with you! Constantly ask the question: why would people want to be led by you? Accept that if top athletes need personal coaching, so do you! 07. Choose your leadership and Non-Exec Board as if you are striving for Olympic gold If you must change the team, change the team!
- 15. 15 08. Do you have a strategic capability agenda for the next 5-10 years? Ensure that your CHRO and your other functional leaders are top caliber strategists! Your talent and capability strategy are a cornerstone of your success Translate 21st century business requirements (‘future-back’) into a strategic & dynamic capability & talent agenda: today’s capabilities will not suffice for the next 5-10 years in the age of rapid advancements of digital technology Move from ‘job strategy’ to ‘skills and capabilities strategy’ Focus on what you are best at and partner with the best-in-class for everything else, meaning that you also need to become excellent in managing ecosystems or orchestrating platforms Define and execute a lifelong learning approach at all levels Future-proof your capability agenda Develop a future proof talent and capability strategy!
- 16. 16 Never compromise on key people, mediocrity breeds mediocrity. If competitors have better talent, address the issue! The market is truly efficient: don’t allow HR bureaucracy to stop you from paying top of the market rates for top talent Have a long-term strategic vision and investment plan for developing your top- talent, not just in-year assessment Do not delegate your talent strategy - it should always be one of your top business priorities! Never hesitate to let go of people who do not match your high expectations in terms of their values, behaviours and performance Keep challenging yourself on why anyone would want to work here vs. anywhere else Probably your most important role as a leader is to ‘create a top talent environment’ by hiring and developing people who: • Are smarter and more knowledgeable than you are • Are obsessed with serving your customers better than competitors and add value to your products and services • Get things done • Are enthusiastic, self-motivated and passionate • Will grow (with) your team and with the company • Are well-rounded with unique capabilities and talents • Are uncompromisingly ethical, communicate openly and are non-political Make sure that you run your business with truly diverse teams, reflecting your customers and society! Create a company environment consisting of outstanding people When you hire and develop truly outstanding people, magical things happen and management becomes a lot simpler! How does your talent really measure against competitors? 09.
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- 18. Is your culture truly a source of competitive advantage or an excuse? 10. 18 Uncompromisingly believe and live by your own slogans Adopt a 21-st century leadership style: authentic, honest, purpose-led, connecting. Ask yourself why people would want to be led by you Be consumer/customer-obsessed at all times – always ask how what you do adds superior value to your customer Think big at all times! Mediocre ideas and solutions will never help you achieve your ambitions Create negative incentives for internal politics Always have a bias for action and speed: act fast,with conviction,allow creative experimentation,accept failure & prepare to iterate Act as an owner. Never say “it’s not my job” Set very high bars for approvals and establish a culture of YES Reflect on how you can make your company a ‘best company to work for’- the benefit of happy employees is almost always superior to the cost Default to open communication, full transparency, make it safe to tell the truth, ‘fail well’ Challenge with empathy, even when it’s uncomfortable to disagree, encourage candor – but then commit and execute Describe the future on the new culture you envision and take specific and consistent steps towards it Stop cultural indulgence: there IS such thing as a right or wrong culture You are the embodiment of the company’s desired culture. Never fail to lead by example!
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- 20. 20 How do you think you score against each of the 10 ground rules? very poor very good 02 1 2 3 4 5 6 Fundamentally re-think the way you manage performance. very poor very good 04 1 2 3 4 5 6 Allocate your most valuable resources like a venture capitalist. very poor very good 06 1 2 3 4 5 6 Make maximizing consumer/ customer value your core operating mantra, instead of just optimizing costs very poor very good 01 1 2 3 4 5 6 Align around simple and ambitious Purpose and Definition of Winning very poor very good 03 1 2 3 4 5 6 Focus on the 5 to 10 priorities that really move the needle. very poor very good 05 1 2 3 4 5 6 ‘Kill’ the matrix organization.
- 21. 21 very poor very good 08 1 2 3 4 5 6 Future-proof your capability agenda. very poor very good 10 1 2 3 4 5 6 Stop cultural indulgence: there IS such thing as a right or wrong culture. very poor very good 07 1 2 3 4 5 6 Choose your leadership and Non-Exec Board as if you’re striving for Olympic gold. very poor very good 09 1 2 3 4 5 6 Create a company environment consisting of outstanding people.
- 22. 22 Make this agenda your–CEO–top priority. Do not delegate Start by selecting and training a top leadership team and have an open discussion about how you want to manage together (‘own’ the ground rules) Apply a “we discuss, we decide” philosophy to define the DOW and top 10 priorities Agree also on a “we align, we commit, we deliver” philosophy with clear leadership accountabilities on each of the top priorities Each of the ground rules represent – for most organizations – fundamental changes in the way they manage the company. While it is challenging to successfully implement these changes, it is a much more focused transformation effort and is doable but requires the uncompromising commitment of the CEO and the leadership team As CEO you can drive all these changes quickly, however you may not want to transform the whole organization at once. You can – for example – start on one priority and implement Decision Cells and Delivery Teams to learn. You can then proceed with other priorities and Functional Backbones We invite you to a dialogue on how to get started on closing your most important gaps. How determined are you to make a difference in the way you manage? Getting Started
- 23. 23 To start the conversation, reach out to: Konstantinos Apostolatos Managing Director and Senior Partner +32 493 49 78 05 Apostolatos.Konstantinos@bcg.com Martin Danoesastro Managing Director and Senior Partner +31 6 2053 8828 Danoesastro.Martin@bcg.com Stuart Quickenden Managing Director and Senior Partner +44 7930 442857 Quickenden.Stuart@bcg.com Jessica Frame Managing Director and Partner +44 7534 120943 Frame.Jessica@bcg.com
- 24. 24 Related BCG reads Winning in the ‘20s: Optimize for Both Social and Environmental Impact How to Harness the Power of Purpose Beyond Great. How to Build Sustainable Business Advantage in a World Where Great Is No Longer Good Enough Building a Resilient Business Based by Biology Squaring the Circle: Leading Companies in a Contradictory World The Art of Capital Allocation The Company of the Future Achieving Agile at Scale Demystifying Global Consumer Choice Leadership Matters: When, How much, and How? Is Leadership Your Agile Blindspot? Organizing for the Future with Tech, Talent, and Purpose A Strategic Approach to On-Demand Talent When the Ground Shifts, It Pays to Be Agile Diversity Is Just the First Step. Inclusion Comes Next.