Capture How Your Employees Are Feeling

Acknowledging emotions and understanding how individual factors influence change aversion may be as important as factors inherent to the initiative itself. Yet we find that leaders often miss this critical component. Identify ways to capture how people are feeling and coping before, during, and after a change program. Building the institutional muscle to gain real-time insight into employees’ emotions through pulse checks and manager check-ins … [ Read more ]

Encourage Bad-News Sharing to Foster Open Dialogue

Sharing bad news—top-down, bottom-up, and across the organization—has a number of salutary effects beyond the obvious benefits of transparency. It can elicit empathy and support, break down barriers, and expand the pool of contributors to problem solving. Energy otherwise spent saving face can be channeled into more constructive use. The net result is not just top-down, bottom-up alignment, but stronger horizontal alignment. As with the … [ Read more ]

Apply Relevant Investment Criteria

Depending on the structure of a company’s investment portfolio, decision makers may need to apply different criteria in order to highlight differences in the value drivers of various investment types. For example, a strict focus on internal rate of return and payback time may systematically favor incremental improvement investments at the expense of larger breakthrough investments that tend to have longer-term and uncertain payoffs.

The process … [ Read more ]

Go Beyond Internal Rate of Return

In theory, there is a simple rule for choosing among competing investment projects: sort the list of projects based on their expected internal rate of return and select those with the highest IRRs until the budget is fully committed. In practice, however, the effectiveness of this approach is constrained by the quality of the assumptions that go into the valuations and by the influence of … [ Read more ]

Translate Portfolio Roles Into Capital Allocation Guidelines

One of our clients, an international energy company, which classifies business units as development, growth, anchor, or harvesting businesses, depending on their position in the market life cycle. Each portfolio role has its own performance requirements, and businesses are managed based on specific sets of financial indicators. More important, the role of each business determines its guidelines for capital allocation. For example, coal power generation … [ Read more ]

Role Charters Are a Key Tool in Organization Design

Organization design can and should provide an effective and practical resolution to many stubborn strategy and business-execution issues. If a redesign is to work, senior executives need to recognize that all three elements of design—structure, individual capabilities, and roles and collaboration—are essential in making a change.

If an organization’s structure is its skeleton, then individual capabilities are its muscular system, providing energy and vitality, … [ Read more ]

Think Counter-cyclically with Customer Accounts

Keep competitors off guard by avoiding the obvious. For instance, the usual reaction in a downturn is to tighten customer payment terms and increase collection efforts in order to boost cash flow. Instead, consider giving your most profitable customers or target accounts more lenient payment terms in order to capture more of their business. Make terms stricter for less attractive accounts. You’ll likely find that … [ Read more ]