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Steve Sherretta January 14, 2008 Performance Management: Enhancing Execution Through a Culture of Dialogue Peter is Chief Executive Officer for a medical supply multinational that recently crafted a new strategy to counter competitive threats. The plan stressed the need to cut cycle time, concentrate sales on higher-margin products and develop new markets. Four months after circulating the plan, Peter did a “walkaround” to see how things were going. He was appalled. Everywhere Peter turned people, departments—whole business units—simply didn’t “get it.” First surprise: Engineering. The group had cut product design time 30%, meeting its goal to increase speed-to-market. Good. Then Peter asked how manufacturing would be affected. It turned out the new design would take much more time to make. Total cycle time actually increased. “Our strategic plan message is not really getting through,” Peter thought. Second surprise: Sales. The new strategy called for a shift—emphasize high margin sales rather that pushing product down the pipeline as fast as possible. But just about every salesperson Peter spoke to was making transactional sales to high-volume customers; hardly anyone was building relationships with the most profitable prospects. Sales is doing just what it’s always done, Peter thought. Worst surprise: Even his top team, the people who’d helped him craft the strategy, was not sticking to plan. Peter asked a team member: “Why are you spending all your time making sure the new machinery is working instead of developing new markets?” “Because my unit’s chief goal was to improve on-time delivery,” he answered. “But what about company goals?” said Peter. “We came up with a good plan and communicated it very clearly. But nowhere it isn’t being carried out. Why?” Many organizations create good strategies, but only the best execute them effectively. Fortune magazine estimates that when CEOs fail, 70% of the time it’s because of bad execution. Weak execu