In an excerpt from their new book, Marcia Blenko, Michael Mankins, and Paul Rogers present a process to help organizations identify their most critical and strategic decisions in order to fuel growth and performance
It had been an interesting weekend. Alan Mulally, then CEO of Boeing's Commercial Airplanes division, had spent it with Bill Ford and Ford's family outside Detroit. Mulally mostly listened. Ford told how his family's once great auto company had come to the brink of collapse. He proposed that Mulally replace him as CEO. Mulally hadn't ever thought of working anywhere but Boeing—after all, he had been there since 1969, and it was now 2006. But Ford Motor Company really needed help. And Mulally began to think that he might be able to offer some.
Not much later, Mulally arrived at Ford's headquarters to begin his new job. Things were every bit as bad as Bill Ford had described. The company's finances were shaky, and its future uncertain. Ford had lost about a point of market share every year for the past ten years. Mulally himself wasn't exactly welcomed with open arms. Only a "car guy," the traditionalists felt, could turn Ford around—and Mulally was hardly that. He had never set foot in a Detroit assembly plant. He even drove a Japanese car.
But Mulally had a different approach. Like everybody else, he could see that Ford had too many unrelated brands, too little commonality across its car models, too many financially troubled suppliers and dealers, and too much reliance on big SUVs and trucks. Indeed, the company had decades of internal analyses and consulting studies documenting these difficulties. But Mulally also saw that no one at Ford was addressing those issues. People were stuck in a rut. They weren't making and executing the important decisions. They had to start doing so now—before time ran out.
Your own organization may not be in quite such dire straits as Ford was in 2006—at least we hope it isn't. But when you assess decision making and execution, you're likely to find both big challenges and big opportunities. You may find, as many leaders do, that decision making and execution need a step-change improvement. You may find that your organization is suffering from two or three ailments. If that's the case, then you have an opportunity to register big performance gains by fixing the problems—by building an organization that can truly decide and deliver.
Step two in our five step process is to identify your most important decisions, those that will have the greatest impact on results when you get them right. Knowing your organization's most important decisions is like finding a key that opens a lot of different locks. It allows you to concentrate your efforts on what's essential. It helps people who work in different units or functions cut through the complexity they face every day. It helps them understand with whom they should collaborate and why. If you get the most important decisions working right, moreover, you'll see a spillover effect to other decisions. Your organization's "decision muscles" will get stronger.
A focus on critical decisions may have been the single most important change that Mulally brought to Ford. As he himself told us, "I think the Ford story is about making the decisions that needed to be made and then getting them to stick."
Beginning his first week at Ford, Mulally instituted a weekly meeting of the executive team. Called the Business Plan Review meeting, or BPR, it was a half-day session held at Ford's Dearborn headquarters. The first few BPRs were rough. Ford's senior leadership team couldn't agree on the company's problems, let alone its priorities. But Mulally kept at it. He pushed people to identify the most important decisions in their areas. He hammered on the idea that Ford had to confront its challenges now. Soon the meetings began to work. In just four short weeks, the team dissected the company's operations—everything from Ford's approach to new technology and the stability of the company's supply base to the strength of its brands and the performance of its dealers. Mulally summarized Ford's critical decisions for the company's board, spelling out on just one page the essentials for fixing Ford's business, including improvements to the quality and fuel efficiency of the company's cars, a reduction in the number of suppliers, rationalization of the dealer network, international expansion, and a strengthening of the balance sheet. While most of these critical decisions were not new, the crisp identification of the most important items helped everyone at Ford concentrate on what had to be done.
So the team debated the decisions and then began to make and execute them. Over a period of months, Ford reorganized its operations, moving from a regional business unit structure to a global matrix. It divested the Aston Martin, Jaguar, Land Rover, and (later) Volvo brands. It accelerated the development of new models, thereby strengthening its position in small, fuel-efficient cars. It took steps to reduce the number of vehicle platforms from more than forty to fewer than ten worldwide. It increased the proportion of common parts from less than 10 percent to more than 50 percent. And it cut the number of options configurations, reducing manufacturing complexity and improving the odds of getting the right vehicles on the dealers' lots. Mulally and his team also refinanced the company (raising more than $23 billion in secured financing), reached a breakthrough agreement with the United Auto Workers union, and began consolidating both suppliers and dealers. As this book went to press, Ford Motor Company still faced many challenges, and its future was far from certain. We have no crystal ball. Still, the company had already returned to solvency without the help of a bailout from the American taxpayer. It was gaining market share, and employee morale was higher than it had been in decades.
However the Ford saga turns out, it holds a powerful lesson. Like Ford, your organization can identify its critical decisions. We've outlined a two-step process to help you identify your own critical decisions.
Create a decision architecture
A decision architecture lays out a list of decisions for every major business process of a given company or unit. It shows the value creation steps that the business or unit is responsible for. It identifies the key decisions, both one-off and ongoing, in each one. Depending upon the business, a decision architecture may contain dozens of decisions. Done right, it gives you a holistic view, enabling you to home in on the decisions that are central to success. It ensures that you have thought through all the possibilities and that you don't miss any important decisions.
Winnow the list
The next step is to shorten the list of decisions to those you most need to focus on. Companies typically employ two distinct screens as they narrow down their lists.
Screen number one is value at stake. Critical decisions, by definition, carry a high value. Knowing your company's strategy, you can determine which decisions will be most important to delivering value in the coming few years. To make sure you don't miss the everyday decisions that add up over time, you can keep in mind a handy formula: value multiplied by frequency. A national wireless phone operator, for instance, had decided on a strategy of growth outside its home market, where the company already held a substantial market share. So every decision about major international acquisitions would be key to implementing the strategy.
Screen number two is the degree of management attention required. Some decisions need more management attention than others if they are to work well. Why so? There are several possible reasons:
Complexity. Decisions involving many stakeholders or complex processes with multiple handoffs may require a lot of attention and effort to get right.
Degree of change. If a decision is likely to be affected by a proposed change, such as a new organizational structure, those involved will need to know how it is supposed to work in the future.
Scope for improvement. A decision that's not working probably needs more attention than one that's going well.
Utility as a pilot. Some decisions may be particularly useful as pilots for improving decision effectiveness.
The output from these two screens is a list of critical decisions. These are the top twenty or thirty, or whatever it may be— the most important decisions for a given company or area of the business. These critical, strategic decisions must work well if the organization is to better its performance.
Reprinted by permission of Harvard Business Review Press. Excerpt from Decide & Deliver: 5 Steps to Breakthrough Performance in Your Organization. Copyright 2010 Bain & Company. All rights reserved.