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Engagement

Strategy

Interview

Management

Hit the right note?

Boom or bust

A safe bet

In the badger’s den

The CEO of UKFast spent £70,000 on a festival for his employees. But does the soft approach pay off? | Page 5

Thinking of a business restructure? Follow our ten golden rules to ensure it thrives, not dives | Page 6

CIO of Betfair, Tony McAlister, shares his success story | Page 12

Ruth Badger, Apprentice favouriteturned advice guru talks top management theories | Page 16

STRATEGY EXECUTION

October 2012 | business-reporter.co.uk

“Get involved Go deep. Use numbers to demystify. There is no golden bullet” He was the first to offer 4G. He’s secured exclusivity on the iPhone 5. He’s turned an ailing company on its head and left his rivals standing. Everything Everywhere CEO Olaf Swantee says the secret’s in the execution. Page 8

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Getting down to business. We help business leaders execute strategy

by bringing together the organisational, cultural and human dimensions of business performance. With Hay Group you can truly drive change.

www.haygroup.co.uk | solutions@haygroup.com

Business Reporter · October 2012

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Strategy execution

Publisher Bradley Scheffer info@lyonsdown.co.uk

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In brief

Production Assistant Fleur Hollett production@lyonsdown.co.uk

Lightbulb moment “The impression that I had of RIM as of day two of being a CEO is now pretty different,” said Thorston Heins after just a few months in the top job at Research in Motion, the company behind Blackberries. On taking the job in January, Heins said there was no need for a “radical rethink” of the failing company’s strategy. Ten weeks in, after a “comprehensive internal review”, he’d changed his mind.

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Strategy execution

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What’s inside? Facebook

Tesco

Not so long ago, Facebook was the darling of the business world, but since its botched flotation, $50bn has been wiped off the company’s value , leaving founder Mark Zuckerburg with a lot of questions to answer.

The supermarket giant’s many critics say it has lost its way in 2012, with its first profit warning in 20 years, a plummeting share price, and too much focus on overseas expansion at the expense of its home market.

As the economy changes, businesses must adapt to survive Page 6 It takes the best talent to turn strategy into reality. Recruit them on the milkround Page 11

Strategy verdict Dyson

Aviva

While UK PLC flounders, Dyson continues to thrive. The business, which saw record financial results last year, focuses on what it does well, looks after its employees, and invests hefty sums in research and development.

The insurer has had an abrupt shift in strategy following the departure of chief executive Andrew Moss in a row over executive pay, with new boss John McFarlane announcing a management overhaul, raft of redundancies, and the sale of the US business.

How technology drives business strategy at Befair Page 12

Quiz: How engaged is your workforce? coming in late or leaving early? C. Start and finish on time?

Do members of your team: A. Regularly co-operate with one another on tasks that fall outside their areas of direct responsibility, without being asked to do so by managers? B. Rarely or never co-operate with co-workers, and seem to resent being asked to do so? C. Co-operate effectively if directed to do so by management?

Who comes up with the ideas and solutions in your workforce? Is it: A. Often your employees, who openly contribute ideas without being asked to do so? B. Always management? C. Usually management, but occasionally employees, particularly when formally encouraged to do so?

When it comes to working hours, do your employees: A. Sometimes start early, and stay late? B. Clock-watch, working their paid hours but not a minute more – or even

How much team spirit do your workers show? Do they: A. Acknowledge the accomplishments

Words from the wise

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Never interrupt your enemy when he is making a mistake. Napoleon Bonaparte

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I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance. Steve Jobs

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Back in the office: reading list

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However beautiful the strategy, you should occasionally look at the results Sir Winston Churchill

If you answered mostly As, your team is fully engaged – congratulations. If you answered mostly Bs, your team is not engaged – drastic action may be called for. If you answered mostly Cs – your team is partially engaged. Read on for advice on how to achieve their buy-in.

With thanks to the following organisation:

Making Strategy Work, by Lawrence Hrebiniak, Pearson Prentice Hall, £16.99 from Amazon

All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved Sun Tzu

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Business celebrity Ruth Badger rates management theories Page 16

of others and take pride in their success? B. Resent praise and encouragement of peers, or even try to take the credit for others’ achievements? C. Accept that others will be praised for their successes, but occasionally act out their own insecurities?

Execution: The Discipline of Getting Things Done, by Larry Bossidy and Ram Charan, Random House Business, £12.59 from Amazon Strategy Execution: Translating Strategy into Actions in Complex in Organizations, by Andrew MacLennan, Routledge, £28.49 from Amazon

• Tyler Mangan works with organisations in transition • We collaborate with senior executives and leadership teams • We help to build the infrastructure and capabilities required to be focused, capable, supportive and influential Tyler Mangan + 44 (0)207 492 1969 info@tylermangan.com www.tylermangan.com

• We guarantee client satisfaction unconditionally

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Mind the gap No matter how well planned, CEOs need more than just strategy to drive change – they need to be able to execute it INDUSTRY VIEW

n today’s demanding business environment, the need to execute strategic change is an essential factor in improving a company’s performance. As a result, substantial sums of money are spent each year on hiring external consultants to formulate comprehensive business strategies that promise to deliver tangible results. Once this exercise is complete, CEOs and their executive teams are normally presented with a comprehensive, beautifully laid-out report, all tied up in a bow – which is exactly where most change strategies grind to a halt. “There is a quote that I really like, from Sir Winston Churchill, where he says: ‘However beautiful the strategy, you should occasionally look at the results’. I don’t think I can make the argument for effective strategy execution any clearer than that,” says Matthew Gunbie, CEO at pmX – ProgramExecution. “It’s very nice to receive a package wrapped up in a bow, but the contents will always be useless unless you know

how to unwrap it.” Even if change plans are strategically sound, CEOs often struggle to execute them for one simple reason: fear. Most CEOs worry that they don’t have the resources or experience within their organisation to execute change effectively. Plus, unless they are able to measure and monitor constantly, it can be very difficult for them to gauge progress, and to define the desired outcomes – the real end value – with any real clarity. The paralysis that results is a phenomenon known as the ‘Execution Gap’ – and many CEOs fall into it. “No matter how well thought out and well-presented it is, CEOs need more than just strategy to drive change – they also need to have the ability to execute change on a day-to-day basis

throughout the organisation,” Gunbie explains. “The ‘Execution Gap’ occurs when CEOs know what they want to achieve – and have a sound strategy – yet are unsure whether they have the resources and capabilities to get there.” Research shows that companies typically realise only about 60% of a strategy’s potential value, and so perhaps it’s no surprise that executives are worried. As a result, many CEOs find themselves reaching for the chequebook to buy an expensive ‘insurance policy’ from a big consulting firm, but this does not transfer the know-how that is desperately needed to sustain change. Companies like pmX – ProgramExecution are addressing

this issue. The company combines the capabilities needed to supplement the CEO’s own resources in order to execute an effective change strategy, thereby transferring knowledge. This combined approach relies on three important strands. First the people involved in the project need to be highly skilled and experienced; ‘the kids’ just won’t cut it when it comes to projects like these. Effective and timely measurement will also be vital in order to provide an up-todate analysis of the project at any given moment. The third essential component of this approach is what Matthew Gunbie describes as a ‘value focus’, which puts a strong emphasis on the business benefits to be gained

from the change process the whole way through. “Most traditional consultants focus purely on inputs and outputs when executing a change strategy, but these don’t tell the whole story,” Gunbie explains. “We help businesses translate their business strategy into measurable results through a combination of expert support, cloud-based technology and proven methodologies that deliver tangible benefits. At every step of the way, we’re asking: ‘what will the customer get out of this change?’ We have lived through organisational change many times, over many years, so we know how to untie the bow, open up the strategy, and deliver the results that CEOs want and need to achieve.” www.programexecution.com

When less is more There are times when words speak louder than actions. Focusing on what really matters instead of what doesn’t can be the secret of success strategy, challenging project teams to manage from where the two cable companies had only to outcomes instead of simply managing just emerged. budgets or timelines, and taking difficult Tough decisions about what to stop, or exit, decisions to stop projects that no longer fit dominated management time. Berkett and his the strategy, or that fail to deliver the team knew that freeing up resources from expected outcomes. activities that were just distractions Aligning projects against a would enable them to integrate the strategy requires the strategy itself to networks, fix the billing and Rise in be sufficiently well articulated to installation issues, and start to customer enable us to understand how a develop products that would really advocacy project will contribute to successful show their customers the value of execution. superfast broadband. We often see tools such as the Balanced The team persisted despite market Scorecard, and strategy maps in particular, skepticism, and their conviction has being used to guide successful prioritisation. rewarded shareholders and customers As the creator of the Balanced Scorecard, handsomely, with the share price rising from Professor Robert Kaplan has said:“ a low of less than $5 (£3) in mid-2009 to Strategy maps and scorecards teach people around $30 (£18) today, and customer where to fish.” advocacy increasing over 30 per cent. Once priorities are set, and the So, on Monday, don’t just initiate a new management team has the confidence to be strategy execution process, but instead stop a able to stick to them, the results are dramatic. project that you know you should not be doing. Virgin Media, formed by the merger of NTL, Telewest and Virgin Mobile, and led by CEO Jonathan Chocqueel-Mangan is Neil Berkett, had a to-do list that was, at best, managing director at leadership daunting and, at worst, enough to risk sending consultancy Tyler Mangan the new organisation back into bankruptcy, www.tylermangan.com

30%

Waste of breath: actions can often speak louder than words

INDUSTRY VIEW

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Strategy is about deciding what not to do.” These are the words of Harvard professor Michael Porter and they ring out across business schools and boardrooms all over the world. Yet most organisations set about executing strategy by drawing up a list of actions that everyone agrees will create value, and then they fail to deliver them. The list is too long and there are not enough resources to do everything properly. It seems that in reality we just can’t prioritise. Most executives find prioritising difficult. When we review the list of “key” investments, we think that everything is critical. We know

that we don’t have enough resources to get everything done, be that capital, capabilities or management time. So we try and spread what resources we have across too many projects, we make do with what we know is not ideal, and then we wonder why progress is slow and behind plan. Many organisations set out on the path of strategy execution. The success stories all feature ruthless prioritisation and robust management dialogue about what does - and more crucially what does not - need to be done.

Managing outcomes In successful companies, management teams spend valuable time together making sure that investments are aligned to a clear

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Time to get touchyfeely with workers? To turn vision into reality, strategy and culture must be led from the front. Business Reporter does a 360 analysis on IT solution firm UKFast to see how employee engagement gets results For me, engagement means being part of what’s happening, not just a number who clocks in at 9 and leaves at 6

Stephen Westgarth Senior account handler Joined in 2003; it was a different company back then. But within a few months of joining, Lawrence Jones had decided he wanted to concentrate on one part of the business, and he moved me into that area. From there I have grown into different roles, learning the trade and the product. I didn’t have a clue about the internet when I started, but rather than go out and hire a lot of guys who knew everything about everything, Lawrence said: “Right, I’m going to train these guys from the ground up.” There’s a story that the IT director at the time said: “look, they’re great guys, but you’re never going to teach them how to sell servers.” But that was how it went – we went into different roles, and I started managing people. For me, engagement means being part of what’s happening, not just a number who clocks in at 9am and leaves at 6pm. UK Fast is a mental company – you could start here and within six months be a manager. If you’re got the drive and the passion, then you’re in. Lawrence doesn’t care about qualifications or backgrounds – he’s all about what you do here and how you achieve things. He doesn’t want people to stay until 10 o’clock at night and come in at 6 in the morning, that’s not what it’s about. It’s about the passion for the company – you’ve either got it or you haven’t. I’ve got it; I love UK Fast – I love everything about it. UK Fast gets people involved. Everyone who joins the company has to climb Mount Snowdon at least once. It’s good because you get to see people out of their comfort zone. You pick up what people really are like outside work environments, and that informs what they do inside work. Lawrence is a big believer in upside-down management. He knows it’s not his company; he knows he can’t run it on his own, so he empowers people at the coalface to run it.

The best thing about working for this company, the one thing I have tried to explain over and again, is the relentless opportunity

Tyson Dye

Enterprise solutions architect I work in the enterprise division; it’s a very technical role. I’ve been with the company for over five years and had a handful of jobs, all on the tech side. For me, employee engagement means what employees are doing with the work in hand. There are different ways of creating that – on the tech side, we’re all very self-driven. That’s infectious. There are a lot of open doors here; a lot of opportunity to grow your technical skills and within the company, as well as personally. I’ve got various certificates over the years because of those open doors. The company pays for your exams, and for the material you need to study, as well as giving you a financial incentive upon completion. There’s a lot of social events, which is great. We just had a festival over the weekend – I was able to invite my best mate and his family to come along free of charge. They were blown away by it. There was an enormous buzz and loads of excitement – that kind of energy just naturally pours out into a productive output. The best thing about working for this company, the one thing I have tried to explain over and again, is the relentless opportunity. Every day there’s something new that I can get involved in – that’s something that far outweighs a salary, the opportunity to grow professionally and technically. There are so many opportunities that you have to say “no” to some of them, whereas in other jobs you’re just scrounging around for the scraps.

If someone is prepared to wear our brand and recommend friends and family to come to our event, or to come and work here, that means a lot to me

Lawrence Jones UK Fast chief executive One guy said: “Can I work for you for the rest of my life?” That’s a very poignant thing; that’s not normal. We have other people who insist we make UKFast baby-grows because they want their children to wear the brand. We’ve just had a festival in Wales, UK Fest. If someone is prepared to wear our brand and recommend friends and family to come to our event, or to work here, that means a lot to me. I don’t think you gain anything by being tough with people; that’s an old-school management style and I don’t think it works. People want to be loved and cared for and, yes, that’s touchy-feely – but look at Richard Branson, he’s done OK by it. People wither under criticism and thrive under praise – he taught me that. I’ve done a bit of running with him and got to know the guy. People thrive in a challenging environment, where you give them goals so they can develop faster, and give them someone to compete with. Every Monday I’ll stand up in front of the business and do a talk at 9am to kick the week off, and you can see it makes a difference. It’s important to lead from the front, but engagement needs to be led through the entire business. If someone doesn’t get your culture and doesn’t understand what you’re trying to do, they really shouldn’t be in your business. You can’t pull somebody up for something if you wouldn’t do that job yourself. Every one of my directors and managers has grown from within the business. I have tried to go out and recruit a big hitter externally, but I’ve always found we fall flat on our face. If I said we are collectively happier, more friendly, more engaged and more fun, all of those things would be impossible to measure. But if I said we’re 12 years old, and we’re worth £11m EBITDA, and we’ve never had any venture capital, never diluted shares, never had to borrow any money, everyone understands that. The world misses a trick. I know business people with really tough accountants, and they’re worried about how much they’re going to spend on the Christmas party. But they should be worrying about a quarterly party. I’ve just spent £70,000 on a festival. Yes it’s a massive investment, but it must be paying off. You don’t have to spend money to get employee engagement, you have to show you care, and that’s about spending time and wanting to listen.

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The 10 golden rules

7 7. Call for reinforcements If the company has no senior management with restructuring experience, bring some in, whether by adding to the board or appointing a restructuring consultant. Richard Fleming, head of restructuring at KPMG, cites Connaught: “They had senior people whose experience was on the boards of profitable companies and when the crisis hit there was a level of denial among them. Often management teams are used to being the architects of their own solutions but in these cases they may need extra advice.” In contrast, Marks & Spencer drafted in Stuart Rose, who had overseen restructuring at retail group Arcadia, as chief executive in 2004 to overhaul the business and stave off a cut-price takeover by entrepreneur Sir Philip Green. Despite a sometimes rocky relationship with shareholders in the CEO post, which he stepped down from in May 2010, Rose did fend off that takeover and earned a knighthood for services to the retail industry.

of restructuring

Even the biggest names aren’t infallible – remember Woolworths? Follow these simple steps to ensure your business goes boom, not bust... By Roxane McMeeken BUSINESS RESTRUCTURING HAS become a necessity for swathes of companies in the current economic climate. Yet thousands continue to slip beneath the waves: according to the government’s Insolvency Service, in the first half of this year 8,385 companies in the UK went bust. Restructuring then, whether changing debt arrangements, operations, personnel or all three, does not always work. To ensure yours does work, we analyse restructures that succeeded and failed to bring you the 10 golden rules of restructuring.

1 Love your stakeholders Rule one is to maintain a good relationship with shareholders and lenders, including keeping them in the loop about the restructuring. Bob Ward, executive director and restructuring expert at Ernst & Young, says: “If shareholders feel they have been consulted at the eleventh hour, this can lead to conflict and challenges in reaching an outcome.” The £551.4m-turnover public infrastructure firm Mouchel discovered this on August 24 this year when it entered administration after shareholders rejected its restructuring plan. Mouchel’s main lenders – Barclays, Lloyds and RBS – saved the company by writing off £87m of its debt but in return they have taken 95 per cent of the company.

2 Sweet-talk your suppliers Suppliers can be equally powerful friends or foes, so stay on good terms with them too. Karen Dukes, partner and restructuring adviser at PricewaterhouseCoopers, says: “If you can do deals with your suppliers you can buy yourself

time to pay debts or potentially increase sales.” Clinton Cards recently paid the ultimate price at the hands of its largest supplier, American Greetings. On May 9, Clinton’s banks sold its £35m debt to American Greetings, which immediately enforced the loan, pushing the retailer, which employs almost 8,000 people in the UK, into administration.

3 Set tangible goals… Any restructuring must have clear, measurable aims, in order to focus the plan and keep investors onside. Eamonn Flanagan, analyst at Shore Capital, says: “If you say something like the target is to be ‘in a better position in the current market’ that is just gobbledygook. We want companies to discuss with us what they are doing in detail.” Aviva, he says, is handling the current restructuring of its global business, announced in June, in line with this rule. The UK’s second largest insurer has set out specific details including plans to sell 16 business units and earmarking 27 for improvements, which it says will entail £7bn of capital and generate £750m operating profit after tax, and an 11 per cent return on capital.

4 …and deadlines Flanagan says it is just as important to set out when the targets of the restructure will be hit, and for listed companies, to keep the market informed of progress. He says: “Restructuring can’t go on forever and deadlines are part of how you measure the project. Listed companies are legally obliged to report every six months but if the restructuring is short, we in the market appreciate more regular progress updates.” He says the £818.8m-revenue advisory firm Jardine Lloyd Thompson, which embarked on restructuring in March 2010, got it right. “They reported on the restructure regularly and they finished it early.”

8 “If shareholders feel they have been consulted at the eleventh hour, this can lead to conflict and challenges in reaching a consensual outcome”

5 Control cash flow “The phrase ‘cash is king’ may be hackneyed but it’s still true”, says E&Y’s Ward. “You need to identify where you are making money and how quickly it converts to cash, and understand where cash is being absorbed in the business.” This is critical in restructuring because the bank will always want a 13-week cash flow forecast, which shows peaks and troughs in levels of cash. Kevin Cammack, analyst at Cenkos Securities, says cash flow was a major cause of the collapse in September 2010 of Connaught, the £600m-turnover, 10,000-employee, listed social housing contractor: “For many years Connaught was making higher profits than its rivals but they never got to grips with their cash flow.” When the firm’s suppliers and contractors became jittery, Connaught did not have the means to meet their demands for payment upfront.

6 Cut cleverly If reducing headcount, “don’t adopt a blunt knife approach”, says Ward. “Analyse where you are clearly not making money and cut deeper in those areas. If you cut indiscriminately, short term financial benefits might accrue but you might find that you loose something valuable along the way.” Witness Apple firing co-founder Steve Jobs amid restructuring back in 1985, although the company had the sense to later re-hire the computer genius.

Question your reason to exist Ward advises looking at whether the company has “a reason to exist”. If the answer is no, it must be reinvented to survive. The entertainment retailer HMV, where sales in its core market of CDs and DVDs have been on the slide for almost seven years because of changes in how people consume music, films and video games, is taking the right approach, says Ward. In a restructuring that cost £11.1bn between April 2011 to April 2012, HMV is attempting to re-focus the business on digital music and lucrative live events. It forecasts a return to profit next year. Meanwhile, Woolworths collapsed in November 2008 after struggling for years and becoming increasingly irrelevant to consumers.

9 Become flexible The more agile you make the business, the better its chance of survival. Dukes of PwC says: “Separate fixed and variable costs, and set up the variable costs so they can flex in line with turnover.” For example, a retailer should buy only as much stock as it is going to sell. Dukes cites British Airways’ attempts to make its workforce more flexible to match flights.

10 Act decisively After you have deliberated on the restructuring measures required, carry them out firmly. Cammack says: “The worst thing is to revisit a restructuring plan within 12 months. This shows you did not deal with the problem properly in the first place.” For example Rok, the £1bn-turnover listed builder, collapsed in November 2010 when the banks refused it further loans: they had lost confidence in Rok after it conducted three restructures in 18 months.

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Nobody knows them better Think of executing strategy like bringing up a child - never mind the parent trap, it’s often the case that father, or mother, does, indeed, know best INDUSTRY VIEW

What is effective strategy execution all about then? I love my daughter Matilda more than anything, but if I want to make any trip out enjoyable for both of us, love alone isn’t enough. I have to do more than embody a Victorian dad saying: “Do as you’re told, I’m your father”, and more than make sure that we’re going somewhere she’ll enjoy and is relevant to her world. It’s got to be something that just ‘feels right’. Equally, strategy is easier to execute when it just feels right.

Are you saying it’s child’s play? No, though they both have their frustrations. Getting strategy executed isn’t the same thing as handling a toddler but there are similarities. For example, no amount of time and effort will convince my daughter that she’d like to spend an afternoon at the Tate Modern. She’s never going to enjoy it; she’s incapable of doing so as she’s two years old. Yet plenty of managers embark on strategies that they are simply incapable of delivering. While they have a comprehensive and often expensively put-together picture of how and where their capital is deployed, the return it generates, what their market looks like today and might look like in the future, they often have a sketchy, incomplete and unmeasured view of their company and people. Yet these are the very things that enable them to shift that capital to those markets and those customers thereby generating value. Let’s be frank – just as learning lessons from the best books on bringing up kids is no substitute for investing the time getting to know them, managers who don’t understand and measure how their company works can’t possibly expect their strategy to get executed. To do this properly mangers need to understand the “slippery stuff”.

What’s the “slippery stuff”? It’s those difficult “culture”, “engagement” and “work-climate type” buzzwords you hear HR talking about. It’s the stuff that makes it difficult to answer

questions such as “how can we get Bob, Claire, John doing x, y or z when they don’t want to?”, “why can’t they just understand these things, surely they’re obvious?” and “what on earth are all these people actually doing all day?” These are the very questions that, left unaddressed, make strategy execution so difficult. For some managers I know, simply making some of this intangible, slippery stuff, tangible and measurable has got execution going again, with less of the “cascading-thestrategic-imperativesinto-divisionalactivities-supported-byan-ongoing-programmeof-communication-alongsidethe-alignment-of-formalcorporate-processes-to-corporategoals” stuff, more about addressing how you want managers to react when things go wrong. For example, one high-street retailer simply shifted the focus of execution from the “top” of the company to the “bottom” (in itself a telling way of looking at things given where their customers are), and instead gave store managers the means to recognise that no-one gives their best if their boss is a bit of a, well, a tantrum-throwing toddler. As a result, staff did a better job, sales went up and overhead costs went down. Pretty much the definition of what you seek to gain from a strategy, if you think about it.

How do you get a grip on the slippery stuff? For the retailer

I just described, the decision to focus investment on store managers rather than the managers at HQ wasn’t instinctive. Instinctive in the way that you just “know” what is or isn’t good for your daughter because you’ve known her all her life. Gaining this for your organisation requires investment, though not perhaps as much as you might think given the

scale of the challenge. It’s easy to forget that it is your employees’ instinctive knowledge of how your company works which tells them what they should do. It’s this shared instinct and knowledge, this culture, which means that the latest “our strategy and what it means for you” document from the CEO and his team doesn’t appear to be working (especially if that CEO or the members of their senior team are somewhat new). For example, with about 80 years’ collective experience of a particular company, the average FTSE 100 executive team has just 0.04 per cent of the experience of “how things get done round here” of their employees. Just as the best managers understand the cost of their capital, their financial situation and their customers and competition, and react accordingly, the very best managers invest more in understanding their organisation. In a world where new technologies shake things up, customer demands shift rapidly and new emerging markets require an organisation to be considerably more complicated than a child (who can, after all, be

bribed with ice cream), the best managers don’t assume that their understanding is up to date. Instead they are fanatical about ensuring that it really is.

Dymond: Plenty of managers embark on strategies that they are simply incapable of delivering

You can tell which ones have that rich picture; they’re the ones getting strategy executed faster and more smoothly.

How are the very best different? The very best companies are different because their managers’ picture of the capability of their organisation is so rich that they, unlike any biased individual or bunch of individuals, they really do understand how the organisation works, its culture, its very instincts even. Because they also know what to do to refine those instincts, they find strategy execution easier. Because management are actively managing, influencing and honing those instincts so that they reflect the strategy; people at all levels of the organisation instinctively know, at least to some degree, what they should be doing and how they should react.

So does this make executing strategy feel better? It feels good. Because the business instinctively knows what to do for the best, management find strategy execution easier, meaning they have more time and money

The very best managers invest more in understanding their organisation available to keep up to date with how customers, markets and competitors are changing and planning what to do about it. Some even find they also have more time for their two-, 12- and 22-year old kids. And tantrums aside, who wouldn’t want more of that? Jon Dymond is a director at the Hay Group management consultancy 0207 856 7000 www.haygroup.com/uk

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Implementing strategy successfully Implementing a strategy without specialised software is not an option in today’s highly competitive economic climate INDUSTRY VIEW

ou’ve had your annual executive off-site meeting and spent a couple of days plastering the walls with flipchart brainstorms and yellow stickies. The team building exercises in the bar were a great success. Finally, you have all agreed on the company vision and set out the strategy. The whole team is bought in and has made promises to deliver. Yet after a month back in the office, the department is functioning as normal. Fire-fights are in full swing and you are wondering how to start implementing the strategy. Three months pass and any initiatives that you started have begun to fizzle out and you realise the same thing happened last year. The day job has got in the way. It is one thing to define a strategy; it is another to ensure a strategy is implemented. The leadership needs to spend time thinking about what they are measuring and monitoring, and how this relates to business objectives and the company goals. This process can be optimised by selecting the right software to record, manage and maintain the links between strategy, objectives, metrics and initiatives. “Nowadays this is not optional,” says Clive Keyte, director at Intrafocus. “Using business scorecard software to efficiently manage these links can quickly tell us whether or not we are achieving our goals and ultimately our strategy.” Previously, this activity was managed using spreadsheets and PowerPoint presentations. Anyone doing that in the current environment will find themselves listening to the voice inside their head saying: “Didn’t we do this last year? What’s changed? Has anything got better?” 01962 855655 www.intrafocus.com

Dutch courage and strong vision set to conquer the mobile world How would you transform two phone firms into one successful, united and innovative giant? It’s all in a week’s work for EE’s chief executive, Olaf Swantee

Performance management software By Ellen Bennett

SPECIAL PM SOFTWARE EXCEL ERP SYSTEM NO SOFTWARE

38%

41%

19% 2%

PLANNING, BUDGETING AND FORECASTING

37%

31%

27%

LEGAL/FINANCIAL CONSOLIDATION AND FINANCIAL REPORTING

42%

40%

14%

OTHER REPORTING

24%

14% 20%

42%

COMPLIANCE AND RISK MANGEMENT

26% STRATEGY MANAGEMENT

38%

31%

Source: Advanced Performance Institute

WHEN OLAF SWANTEE’S appointment as chief executive of Everything Everywhere was announced last July, staff at the beleaguered company, the result of a mega-merger between Orange and T-Mobile, begged him to bring some clarity to the business’s structure and strategy. He agreed. “Then they asked, when do you think you will have done that?” he says, leaning forward across his desk in his large, glass office in West London. “I clearly said, within the first week – and no-one believed me. So then I spent my vacation The digital infrastructure in this country is not as good as in some of the other markets, where customers are paying similar amounts

preparing, so that not only could I fix it in the first week, but I could actually announce it on the first day. It was symbolic; it was important.” It may have cost Swantee his holiday, but for this Dutch whirlwind, it was time well spent. He immediately overhauled his management team, slashing it from 25 to 10, cleared various legal and administrative hurdles, and began work on a new strategy. Then he stopped for lunch. A little over a year later, the business is beginning to reap the benefits. The financial results are still in the doldrums, with a £110m loss in the first half, but the future looks bright. Everything Everywhere is the first UK mobile operator to rollout a 4G network, and is currently the exclusive partner on the iPhone 5. It’s also on track to deliver £3.5bn in merger savings by 2014. So what’s the secret of success that has left rival telecoms providers gnashing their teeth? Strategy execution, Swantee tells Business Reporter. The charismatic chief executive, whose previous role was as Orange’s vice president of Euroepan operations, inherited a tough task. He took over from Tom Alexander a year after the merger was completed. Morale was low, and the strategy was unclear. “It still felt like two companies. Financially, we were the number

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Strategy execution

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Everywhere – Swantee himself has admitted the name was “silly” when announcing the rebrand to EE in the summer.

GEMENT STRUCTURE OLAF SWANTEE’S IDEAL MANA THE SWANTEE WAY

Streamlined team Swantee led from the front with his rapid TRADITIONAL Shop floor management overhaul, before settling down Management with his streamlined team to plan the company’s next steps. “The advantage of my being a foreigner and having worked in other countries, was that I could be a bit of an outsider and make some comparisons,” he says, his Dutch tones accentuating the point. “What I identified is that the digital infrastructure in this country – Shop floor including our own – is not as good as in some of Management the other markets, where customers are paying similar amounts. And so fairly quickly after that, we, as a management team, saw the first thing we had to do was get back to our core capabilities and what we are really supposed to do in society, what they did, if the marketing team didn’t do first operator to offer 4G. O2 and Vodafone have and this is building a great network.” the branding stuff, if the IT team hadn’t touched even threatened legal action. Swantee is scathing This shaped the company’s strategy, which and integrated 140 system applications, it in his response, showing a rare glimpse of focused on building networks and improving couldn’t have happened. Every one delivered; irritation: “It was quite hard to hear that, but it’s service. Swantee took a small team on fact- every single one.” actually factually incorrect,” he says. “I’m a very finding missions to the US, Korea and China: How did Swantee achieve this degree of ethical person, and I find the whole industry “We looked at what they could do and figured buy-in? He leaps up from his seat and bounds here in the UK to be very litigious. There were out quite quickly that we could do this. over to a whiteboard, where he quickly points in time that the competition could have Not only could we get our network draws two triangles, one right side taken the decision to develop a 4G ecosystem.” back on track, while doing that we up, one upside down. “I always say Despite his elevated status, Swantee is downcould start investing and building that the traditional organisation to-earth and approachable – there’s nothing of a new network. looks like this,” he says, the starry pseudo-celebrity chief exec about on track to deliver “That was the turning point gesturing to the him. He puts this down to his native culture: “In £3.5bn in in our vision and our plan. It triangle the right Holland or Scandinavia, if you are the boss you merger savings became clear: we’re going to get way up. “Mine looks really have to be like everyone else. It’s just by 2014 the UK back in line, we’re going to like this,” he says, another job.” bring 4G to the market, and the rest is pointing to the other. That’s fine in theory, but Swantee is in all details. “In my world, all these layers of management danger of underselling himself here. What he “Then the real work started; it was have to add value to this group of people who does is not just another job. And it has not horrendously complicated.” are sitting in shops, who are sitting in call happened by accident – a shelf in his office is centres.” filled with books focusing on strategy and Everyone delivering Swantee achieves this in part by spending execution. “I have been in American companies It sounds it. As Swantee runs through the science time with front-line employees. “I try to make for a long time, so I subscribe to the American stuff, the scale of the task becomes clear. But sure I answer their questions. If they give me management model of get involved, go deep, even more important, he says, was getting the feedback through email, I try to react very use numbers to demystify things. There is no team onside and getting everyone to deliver. quickly. I do breakfast sessions; I’m on the road golden bullet.” “The whole company had to deliver to make this all the time.” Aspirational business leaders would do happen,” he says, referring to the rebrand and EE has drawn criticism from rivals, who claim well to heed Swantee’s advice: it’s certainly 4G rollout. “If the network team hadn’t done it has gained an unfair advantage by being the worked for him.

£3.5bn

one company, but that wasn’t the perception internally or externally. A lot of things weren’t integrated – my CFO used to say it was like Noah’s Ark, with two of everything.” Because of these structural problems, the company struggled to get things done: “Execution was not ideal – the speed of getting things to market and doing things was not where it should be.” There was also a doubt about the name Everything

Waging war on waste One change consultancy firm can help even well-run businesses reduce the waste that lurks in all organisations INDUSTRY VIEW

ADLY-RUN ORGANISATIONS can be carrying up to 80 per cent waste. “In our experience even well-run ones typically carry waste of up to 20 per cent, all of it eating away at competitiveness and growth prospects,” says Genevieve Ford, managing director of business change consultancy Ithaca Business. The typical business reacts to a problem by hiring new staff or buying new systems. The result is more complication, increased replication of effort, and higher costs – in other words, waste. “Even in a big organisation it can take us just a day to spot a huge quantity of replicated efforts and disconnects,” says Ford. “In one £30 million company, three Ithaca consultants spotted 27 per cent of replicated efforts in one day.” Problems can include IT systems that cannot talk to each other, or different definitions of the same word. “In one international company, the

word vial meant a single vial to the German arm, but in the US it referred to ten vials. You can imagine the problems,” says Ford. Ithaca consultants identify the waste, explain the reasons for it, and help the company decide a course of action. Then, instead of just preparing a report, its consultants will help execute a change. Ithaca implants change ideas through “catalysts”. Ford explains: “Catalysts are employees whose eyes light up at the prospects of change. Catalysts spread the word about the changes, and help ensure they stick.” And Ithaca is prepared to put its money where its mouth is. Ford says: “We do not take commissions for selling anything other than our services. We do not charge by the hour but by results, with invoices presented at agreed milestones, and we put up to 25 per cent of our fees at risk against not meeting agreed objectives on time and budget.” 07913 464430 gen@ithacabusiness.biz

90%

£30m DISTRIBUTOR OPPORTUNITY ANALYSIS - RESOURCES ONLY

80% 70% 60% 50% 40% 30% 20% 10%

Business Planning

Sales

Purchasing Customer Support Fleet & Warehouse Installations Lease Desk ■ Manual/Repetitive labour (£497k per annum) ■ Value Adding (£1.5m per annum)

Accounts

Commissions

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Leading the way on change Execution, not strategy, delivers real results in today’s fast-moving world - and what really makes a difference is effective ‘Change Leadership’ INDUSTRY VIEW

lobalisation, market competition, increased regulation and technological innovation are just some of the forces that are driving the pace and complexity of change in business. How can companies respond, reap the rewards from their investment in change and enhance their reputation? It is the companies that actively lead change and make this part of their culture that are most likely to prosper. At Project One Consulting, this is known as “Change Leadership”.

accountability for achieving business results is a key reason why strategies fail - and that is costly in terms of time, money and reputation. To stand the best chance of success, leading the implementation of strategy belongs in the boardroom, not the engine room.

Bridging the gap

Turning strategic intent into business results requires a Change Leadership culture and capability that spans four key elements. First is business leadership, which creates, communicates and instils a compelling vision of the future and then directs the organisation throughout the journey, ensuring the right The challenge conditions for success with the culture and The challenges of responding to the forces for behaviours which drive the desired change are felt in different ways. The strategy performance. for market leaders across most industries Next is strategy implementation, which includes investment in new technology, defines how this vision will be achieved mobile and multi-media communications, and establishes the overall plan with the acquisitions, simplification of the supply resources, activities and governance required chain and cost reduction. For some to achieve the outcomes. sectors, past failures mean businesses Solution delivery drives the design, Leading are forced to change their construction and implementation of strategy operations to meet new regulatory the new business capabilities implementation belongs in the or market needs. demanded by the strategy. It does boardroom not The issue is how to ensure these this with a relentless focus on the engine strategies are implemented at the business outcomes over and above room right pace - and in a way that delivers the completion of tasks. demonstrable business results and The final key element is business improves business performance. ownership, which energises employees, In reality there is often a disconnect suppliers and customers to embrace change, between formulating business strategy and adopting, contributing to and deploying the actually carrying it out, particularly when it new capabilities to achieve the results. involves change. Of course, business leaders The problems companies often encounter need to delegate the implementation of in achieving intended business results can be strategy to their operational, IT and change traced back to insufficient focus on one or managers. However, delegating leadership and more of these elements. For example, jumping

into solution delivery without a clear view of the real business need leads to plenty of activity but little progress, demotivated staff, frustrated executives and escalating costs. Equally, a clearly defined strategy and a well-constructed solution will flounder if the business areas are ill-prepared or antagonistic towards the change.

The business impact Change Leadership is relevant to all business strategies involving transformational change. A large UK utility company applied a Change Leadership approach to translate the CEO’s business vision into fundamental change to the business operation, enhancing customer service and significantly improving operational efficiency. The changes are being implemented through a well-structured programme of initiatives with a clear roadmap showing the key step-changes in business capability, the investment required and the uplift in business performance. Crucially, progress is measured by business results rather than completion of tasks. In another example, a leading telecommunications company was seeking to strengthen its brand image and drive customer satisfaction through radical improvement to its service. The leadership ensured the right conditions for successful change so the team could really understand the business intent and translate this into the changes needed to the business operation. The team implemented these changes with full

business oversight, ownership and control. This engendered a remarkable level of employee engagement which proved vital in achieving business results that exceeded expectations - including a 48 per cent improvement in customer service score, 15 per cent increase in productivity, employee engagement of 97 per cent and 12 per cent reduction in operating costs. In both these instances, the business leaders established a Change Leadership culture and capability to direct and accelerate the execution of their business strategy. This led to a greater certainty of outcome, faster pace of delivery and tighter control of costs.

Facing the future Change Leadership is vital in connecting the intent of the business strategy to the results achieved. Going forwards, businesses will face even greater pressure, driven by market, environmental, technological, political and social change. To respond effectively, companies must invest in Change Leadership, as this will differentiate the winners from the losers. Project One Consulting works with FTSE 100 and similar companies to lead change from strategy formulation, through execution, to business results. Neil Finnie is business development director at Project One Consulting neil.finnie@projectone.com www.projectone.com

The wealth creator’s approach to strategy INDUSTRY VIEW

ur work with companies has shown that to develop the best strategy, a company needs a mix of wealth creators working as a team to produce a group of strategies, each of which takes a different approach to achieving the corporate objectives. While coaching a CEO, I was intrigued by his statement that a company can have only one strategy. If you look at a Fortune 500 or FTSE 250 company’s annual report, it is obvious that many companies have multiple strategies.

Over the past 20 years, we at hfi have developed an understanding of the nature of the people who create wealth for companies. We can identify these wealth creators through assessing their personality, intellectual ability, thinking skills and attitude to risk. In any company, generally there is only one wealth creator to about every 50 senior managers, but they are essential if the company is to survive, let alone achieve outstanding performance. They are the yeast in the bread of business. Our research indicates that there are four distinct types of wealth

creators: Each of these types take a different approach strategy. Our personal enterprise profile identifies the attitudes typical to of each of the four types of wealth creators. The types are: l Expert wealth creators, such as James Dyson l Corporate wealth creators, such as Jack Welch l Enterprisers, such as James Caan l Entrepreneurs, such as Duncan Bannatyne The graph shows our assessment of 2,700 senior managers and the strategy statements of 107 FTSE 250 companies, classified in terms of our

70 PERCENTAGE OF SAMPLE

Companies that follow one single strategy are limiting their abilty to grow and prosper. Having multiple wealth creators will offer different ways to achieve sustainable success

COMPARISON OF MANAGEMENT WEALTH CREATOR TYPES

60 50 40

FTSE 250

WEALTH CREATOR TYPES

20 10 0

Expert

Corporate

Enterprising

Entrepreneurial

WEALTH CREATOR TYPES

four-fold classification. The data suggests that the characteristics of the CEO and other senior managers significantly affect a company’s approach to developing the very best strategy. The CEO mentioned at the beginning of this article was an expert wealth creator. His strategy

Source: hfi 2012

was spelt out in in terms of ‘driving the technical expertise of the company’. His company grew dramatically when we introduced an enterpriser to his strategy team. Dr Adrian Atkinson is Chairman of hfi www.hfi.com

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Strategy execution

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All aboard the milk float Money spent on recruiting graduates is more precious than ever - so make it count by beating your rivals to the top talent By Roxanne McMeeken FOR BRITAIN’S BIG businesses, getting the right people is key to keeping strategy on track. Autumn heralds the traditional whistle-stop tour of universities to attract graduates, and this year the “milkround” recruitment drive has never been so important – or competitive – for employers. While there are fewer vacancies for graduates than in the boom years of 2007 and 2008, some 16,389 graduates will still be hired in 2012, according to Highfliers Research. What graduates want A glance at the numbers recruited via the milkround shows that students do take notice of the companies that visit their university. Microsoft, for example, hires 140 graduates a year and took part in 45 on-campus events in 2011. Theresa McHenry, human resources director, says: “More than half of the graduates we recruited in the past 12 months cited our on-campus presence as the top factor that attracted them to us.” Neither has the milkround been replaced by the growing array of online recruitment tactics. Jen Veevers, graduate recruitment manager at BP, which recruits 250 UK graduates a year and saw 11,000 apply in 2011, says: “You cannot beat building a rapport with a person face to face. It is the chance for the student to ask, ‘is that BP employee like me?’” So what do graduates want to hear from employers on campus? Investment banks, seemingly fearing they have an image problem in the eyes of students, have upped starting salaries by between 5 per cent and 20 per cent this year. Highfliers Research has found that the average investment bank’s starting salary is now £45,000, with three banks offering £50,000. However, a survey in 2011 of 4,364 graduates in 75 countries by Opinium Research for

40%

The rules H of the game Changing a company’s culture isn’t a game of chance – it needs to be grounded in operational reality to ensure you’re on the winning side

Top recruitment tactics

PricewaterhouseCoopers (PwC) found that on spend more time on email and corporate ‘share the list of factors that most influenced respondents point sites’.” He recommends giving graduates when accepting their current role, salary was only the chance to bring their own technology into fourth. Instead, the top criterion was the work: “If you can get these messages across during opportunity for personal development. Jon the milkround you will have an advantage.” Jane Robinson, head of recruitment marketing Andrews, partner at PwC, says: “British graduates are in the unusual position of knowing they will at Ernst & Young, which hires 1,400 annually, not necessarily be better off than the generations says that being “honest” about the firm during above them and that is driving their ambitions. the milkround will result in recruits who stay for This means long term career progression is more the long term. She says: “It’s about being authentic, we’re looking to attract people who will be happy important than starting salary.” To stand out at the milkround, employers working with us.” should be specific about how graduate recruits can move up the chain of command. HSBC’s UK Milkround methods consumer banking arm, which hires 200 graduates Few firms have abandoned the traditional a year, promises them a “management grade” presentations and appearances at recruitment role, which it defines as a post three tiers up the fairs organised by universities. But to grab the management scale, five to seven years after joining. spotlight, these approaches should be improved Second on the list of priorities of the graduates and supported with an array of additional tactics. A key step is to make presentations more was the employer’s reputation. Zara Bhogal, relevant and interactive. At graduate recruitment co-ordinator at Unilever, which is taking on GlaxoSmithKline (GSK), which will take 57 graduates in 2012, Orla Meade, on 60 graduates in the UK this year, says: graduate attraction specialist UK and “Getting your brand out there is one of Ireland, says: “We have started using the main reasons for taking part in the milkround – you cannot afford not to of students feel that the alumni to make presentations – for organisations they are example our chairman Amanda Story be visible.” For corporate brands or sectors looking to join do not recently went to Cambridge, where she whose reputations are suffering, the understand the way they herself studied - because they can talk use technology about their time at the university as milkround offers a chance to change perceptions. HSBC counters any negative views well as their career at Unilever.” For students put off by presentations, of the banking sector, says Simon Pollard, introduce informal ways for students to speak emerging talent manager, “by emphasising our with staff, such as ‘pizza and beer evenings’. industry leadership and values.” The latest thinking on mikround strategy, The chance to work overseas is worth advertising during the milkround. PwC’s research found that 71 per cent of graduates expect and want to do an overseas assignment during their career. Technology is important too. PwC found that 40 per cent of students feel that the companies they are looking to join do not understand the way they use technology. Andrews says: “The survey found graduates were far less likely to have face-to-face meetings and would

INDUSTRY VIEW

ow many culture-change programmes have started with a huge burst at an internal conference? Or launched on an intranet site set to a dazzling download outlining the new sets of behaviours and sentiments we should feel towards the organisation we work for? And how many have raised a wry smile? But more importantly how many have created a lasting impact on the organisation’s performance? As Lou Gernstner, writing about his time at IBM, said: “Culture isn’t just one aspect of the game – it is the game.” To win, it requires establishing the right processes and capabilities to generate effective organisational performance. This needs to be led by a senior team that understands the proposition and is prepared to show the firm what culture really means. The role of HR needs to extend beyond the norms of defining the new core values or focusing on structural changes by filling

senior management roles. It needs to embrace all aspects of management processes that are involved in behavioural change. This includes areas such as governance, budgeting and operational planning, largely deemed beyond the realms of traditional HR. Ironically, these are precisely the areas where behavioural changes take hold and organisational performance is enhanced to the extent that culture impacts financial results. A global financial services client recognised this early on in a move to become more client-centric. HR adopted a central role in an environment where measurement of contribution was paramount to drive individual performance and also where the market was, and is, demanding a more customer-focussed approach. HR also needs to advise senior leaders that possessing the required technical skills alone will not enable them to drive organisational performance. They need to have the leadership capabilities required to promote the new values

Tempt with a life-changing experience

BP’s Ultimate Field Trip competition, now in its fourth year, invites students to solve a real-life technical problem. This year the challenge is to design the first zero-carbon oil refinery. Students receive mentoring from BP staff and the prize is a six- to eight-week internship involving a trip to a deepwater oil field called Thunder Horse in the Gulf of Mexico, along with some tempting time relaxing on Caribbean beaches. Last year 1,696 students took part.

“Friend” them on Facebook

Unilever is using an online approach to promote parts of the business that struggle to attract graduates. After finding that supply chain management was seeing fewer applicants because graduates did not understand what was involved, Unilever recorded a series of videos of graduate recruits working in the area, which are available online. More than 91,000 have clicked to indicate that they “like” the Unilever Careers Facebook page.

Lure them with technology

During the Milkround Microsoft arrives on campus with a giant inflatable cube containing a variety of the firm’s technology, including the latest Xbox. The idea is to let students to have a go with the technology and become enthused.

though, is to hold workshops and competitions that benefit students – essentially free training and experience. Ernst & Young, for example, offers “skills sessions”, where students carry out exercises to help them identify their strengths and weaknesses or learn about business. Robinson says: “We have recognised that students are time-poor and many employers are targeting them, so we have to stand out by offering something of value to them.”

and behaviours and link them to performance targets. This advice, together with the concept of culture change, must be taken seriously and embedded into the core operational aspects of the organisation so it doesn’t leave you looking for more as the music fades. Hilary McGuire is a director at leadership consultancy Tyler Mangan www.tyler mangan.com

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Strategy execution

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‘Be a servant of the business’ Business Reporter talks to Betfair CIO, Tony McAlister, on which strategy gambles to take, and ask if his have paid off You’ve been in your role for three years. What changes have you made? When I arrived in 2009, the systems were a bit long in the tooth – they had been around for 19 years and needed a refurbishment. The architecture was designed as a UK product for a UK customer, betting on a UK event. We needed to meet the demands of a global product for a global customer betting on a global event. We had to be jurisdictionally aware. At the same time as we were running the business, we started modif y ing all the technolog y underneath it, and that spun off into several big projects. As well as the software, we had six data centres – we needed to consolidate that down to two, in Ireland. For most companies, that in itself would be the big IT project, but we did it at the same time as rearchitecturing the business – and hardly anyone in the business even noticed it was happening, which is a testament to how well my team performed. We changed everything but the kitchen sink. In fact, we just had the office refurbished, so by now we probably need to change that, too.

What challenges did you encounter along the way? A lot of European countries started to regulate our industry – they put rules and regulations in place and I had to adjust our software to deal with that. When you’ve got everything that’s broken open, it’s incredibly difficult to start playing around with it. It’s like a construction job – to keep things running while you’re building the road, you put in place bridges that you know you’re going to have to come back and tear down. Do you believe technology should drive the business strategy, or vice versa? I have been doing this for more than 30 years, and I have learned that we have to be the servant of the business. The business has thoughts, ideas and ambitions that it wants to achieve, and it is our job to find a simple and costeffective way to do that. On the flip side, in an e-commerce business, I do think technology has a responsibility to help lead the charge. For example, when I was rebuilding our website I introduced an API and

mobile technology that went way out in front of the business, and said, ‘let’s go this way’. A good relationship between CEO and CIO is key to success – what’s the best way to achieve this? It has to be a partnership, and in some businesses it’s not always been that way. The tech people are often perceived as a bunch of nerds in the back office. But a lot of that is down to us – we have got to understand the business and the market, and business and markets generally. I’m a business person first and a technology person second. How important is it that the rest of the company understands what’s happening in the technolog y department? It’s important in any company, even high street banking. All businesses run on technology, it’s the backbone of the business. We spend time telling the rest of the business what we’re doing – I do regular video blogs, and so do my direct reports.

Betfair in figures

Betfair processes more than seven million transactions every day, more than all European stock exchanges combined

Betfair employs more than 2,000 people worldwide

Betfair has more than four million registered customers

When strategy meets reality With marginal differences between strategies, implementation provides a true competitive advantage INDUSTRY VIEW

day-to-day pressure on results and poorly aligned resources. “Throw competitors and oday’s business environment is complex organisational structures into the mix complex, competitive and fastand it’s no surprise that plans don’t always changing. Developing robust strategy achieve the results people expect,” says Spacie. that stands the test of time is tough, but when A lack of focus wastes effort and causes strategy meets reality things inevitably get friction, which in turn adds to organisational tougher. Many plans fail to realise their inertia. “Changing the trajectory of a large potential value, wasting resources and time. business requires more than effective “The fundamental problem is not the communication”, adds managing director strategy,” according to Dan Spacie of Mark Bouch. “The challenge is to create consultancy Leading Change. “Business momentum; in other words, focus an needs to adapt its approach to strategy organisation on clear strategic intent, align the execution to fit a more dynamic mass of the business with it and overcome environment.” resistance to change. That’s difficult when an New strategy is inherently flawed: it’s organisation lacks coherence.” impossible to know everything necessary to Lack of clarity in communicating strategy create the perfect plan. Business strategies are and missed opportunities in deployment, often unclear and over-detailed; when including weak employee cascaded through organisations they are engagement, misalignment and Bouch: frequently misunderstood. Implementation Better direction ambiguous freedom to operate, usually relies on people and and less control are among the reasons strategy is the key to teams several tiers away from can fall short of its aims, success the strategic architects. Even according to the team from well-intentioned leaders Leading Change. find it challenging and Many of these factors can be de-motivating to manage addressed by execution models designed to in a confusing fog of work in dynamic environments – the assumptions, multiple military’s ‘mission command’ doctrine or conflicting objectives, what Leading Change calls ‘effects-based

leadership’ are proven examples. Both these disciplines emphasise the need for highly developed leadership skills. Spacie says that effective execution starts at the top: “We need leaders to be more comfortable with uncertainty and be really clear about what their strategy is designed to achieve.” It is key that everyone understands the real purpose behind what they are doing. “In a dynamic environment, traditional responses like additional management intervention, reporting and calls for more accountability do have their limitations. In fact, what’s required is better direction and less control; it’s a more sophisticated style of leadership that balances alignment with empowered behaviour,” says Bouch.

Focusing people “Leaders have to create meaningful connections between strategy, operations and people. They need to be really clear about what’s important, focus people on missioncritical outcomes, then, create sufficient space and support for people to make decisions and adapt their actions to realise the intent”. This requires high levels of trust and a strong focus on execution. In the worst case he has seen, an individual client outlined almost 60 objectives, several of

“

We need leaders to be more comfortable with uncertainty and be really clear about what their strategy is designed to achieve – Dan Spacie

”

which were mutually exclusive. “At that point I really understood why it was so hard to get traction on anything,” Bouch says. Leading Change specialises in helping market-leading companies develop execution capabilities that create competitive advantage. Leading Change have a track record in helping clarify strategic intent, align organisations and supporting leaders to develop the tools, skills and behavior necessary to engage people and drive successful implementation. They do this using a clear set of principles, but tailor implementation to reflect unique cultural and organisational differences. Bouch says: “When you notice your competitors changing direction and accelerating, their agility may result from leadership that has committed to a more radical approach to strategy execution better suited to their business environment.” Mark Bouch is Managing Director of Leading Change Limited 0203 170 8026 www.leadingchangeuk.com

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Strategy execution

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Into the battlefield Ensure your vision is clear and your business mission is well prepared, says execution specialist Damian McKinney GREAT STRATEGIES ARE not dry documents – they are exciting undertakings that guide the actions of your people so that an exciting v ision is successf ully implemented. From working with many industry-leading organisations around the world, making sure your strategy can be executed starts at the beginning of the process, not once it is decided. Here are some of the steps these businesses take to ensure their strategies successfully galvanise their employees. Start strategy with a vision Your vision is where you are heading, so strategy must start with the vision and ultimately end with it. How does the vision connect to the strategy at many businesses? Usually only vaguely! The longest vision I have seen was 198 words long and meant everything to everyone. This contrasts with one of the most powerful vision statements ever, JFK’s “this nation should commit itself to achieving the goal, before the decade is out, of landing a man on the moon and returning him safely to the

Fixing the G disconnect

earth”. Clarity and simplicity is crucial. Get to really understand your competitors Competitors will respond to your actions, yet many businesses ignore this. You need to know their potential response and plan for it. To achieve this you can’t watch from afar, you need to really get inside their head. Your strategy not only needs to build this in, but also allow monitoring and flexibility should the unexpected happen. It is not about rummaging through bins and espionage: there is more than enough intelligence readily from your customers and online! Making strategy – get everyone involved Strategies that are badly implemented fail, no matter how great the idea behind them, so ensure they are implementable. In fact, splitting “creating the strategy” from “executing the strategy” is where many businesses go wrong: you need clear alignment between the two. Having a small isolated strategy team ensures that senior leaders responsible for its implementation don’t know the ins and outs, and also feel little personal ownership. You need your leadership team to understand the intent so they can respond confidently when the unpredicted happens.

INDUSTRY VIEW

The link from strategy to the performance it produces is a mystery to many. Some simple reasoning makes the connection clear

THE QUESTIONS YOUR STRATEGY EFFORTS MUST ANSWER PROFIT Now

? hy

? How

Where?

TIME

iven a promising strategy, management simply wants to know what to do to make it happen, what profit and cash flow to expect, and how to adapt to changing circumstances. Unfortunately, strategy reference books, courses and articles have little or nothing to say on the topic. Former strategy director and now a teacher and writer, Kim Warren says: “It is no wonder that executives are frustrated with ‘strategy’ and see little value in the business planning process. And it’s no wonder, either, that we see so many big failures of strategy. “But no-one ever talks about the majority of companies who continually under-perform because of poorly executed strategy. Missed opportunities for successful growth should be the real concern of managers and investors, not occasional disasters, however spectacular.” Some have tried to fix the links from strategy to action plans to cash flow. Balanced scorecards and strategy maps aim to lay out how a strategy should work, and deliver financial success. Others advise on how to define a business model – which customers to serve, with what products and services, and how to make it happen in a way that creates value. But with little rigorous science behind them, and important issues left out of the picture altogether (such as competitors!), the value of these methods is limited.

Give heresy permission Generally people don’t readily challenge the CEO’s pet initiatives. But as a senior leader you need to hear heresy – there must be no sacred cows! At one session with a leading retailer, they were considering their problems in a particular country. One team was charged with thinking the unthinkable and proposed shutting half the outlets. Even they thought this was a ridiculously extreme idea, but after much analysis the firm did exactly this and has not regretted the decision once. Don’t hope the strategy will work, test it Strategy presentations invariably assume things will go to plan, but the real world isn’t like that. The military spends lots of time war gaming and rehearsing – they don’t go into battles unprepared. Business is a battleground too and wise companies take a leaf out of the military’s book. Certainly product trials and market research are a part of it, but learn from the military and use a war gaming approach too – have teams trying to out-think each other and respond to unexpected events. You will be amazed at the shortcomings it often reveals. Damian McKinney is CEO of business execution specialists McKinney Rogers. His new book, The Commando Way – extraordinary business execution, is published in October.

“Neither these nor any other strategy and scale effects, and so on.” methods explain the time path of past This process delivers a rigorous, profits, where those profits might go dynamic business model that actually in future, or how a better future plays out strategy and might be built.” performance over time. “The Warren recommends method is not complicated or Y G E AT starting with the simple logic technical.” says Warren. “But R ST that profit and cash flow come when necessary, we can easily from customers (who drive sales), simulate these models. We use and staff and operating capacity simulation in other important fields, (which drive costs). and we can do so in strategy. Shockingly, “But clearly there’s more. the professional tool to do this, Customers are won and retained, system dynamics, has been staff hired and promoted, known for over 50 years, so it is TIME-PHA SED products developed, and high time we used it!” ACTION PL AN capacity expanded – all of which Business dynamics models are the actions-over-time that bring to life, with numbers, the execute strategy and turn it into links between all parts of the performance. organisation at all times. They “Complications are, first, that lead automatically connect with past times from actions to impact can financial results and generate be long – many years in the case estimates for the future. W of hiring or capacity changes They surface time-phased O HFL CAS ECAST – and second, that these action plans for every part of FOR resources depend on each other the business, can test for risks to develop and to be sustained,” and alternative scenarios, and he says. they can – and must – be “This is the system at the heart of continually updated and adapted. every organisation which drives its Kim Warren was formerly a strategy performance from period to period. A director with Whitbread and designed its healthy system grows and sustains those transformation from a threatened beer resources, strongly and in balance, and is company to restaurant and hotel powerresilient to competition and other house. He taught strategy at London external forces. Business School for 15 years, and now “To this core, you can add any writes, consults and advises on strategy complexity you need; competition and business dynamics. of course, the exploitation of new markets, intangible factors such as 07802 485869 skills or brand reputation, learning www.kimwarren.com

Business Reporter · October 2012

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Is your workplace working? Human capital is central in a business strategy. But ignore the relationship between workforce and workplace at your peril INDUSTRY VIEW

he strategy for providing office space is complex. It involves valuable capital assets that must be managed, protected and maintained. But workplace strategy is not just about buildings - it is about the relationship between the employees and the space provided for them to do their jobs. Few organisations truly understand the relationship between employees and their work space. Business heads often define an office by cost, location, architecture, size and the number of employees it houses. Yet ask employees about their office and they focus on the components that make up the space itself – tea and coffee, draughty airconditioning, office chair, break-out areas or meeting rooms. These are the things that employees need to fulfil their obligation to their employer. However, as economic conditions continue to push up the price of operating and maintaining a workplace (the capital cost), corporate boards are pressurising those who run estates to consider new strategies to save

Recognised index The Leesman Index comparative database Europe’s largest collection of contemporary workplace effectiveness data - is fast becoming the standard by which the performance of the corporate workplace is measured. An e-questionnaire details employees’ feedback about how well workplace environments support their productive work activities. It focuses first on understanding which activities the workplace needs to support and then on what physical features are required to support them. The results provide businesses with a critical insight into how their buildings are performing.

Is your workplace supporting your work? Take the Leesman test. www.isyourworkplaceworking.com

48%

of employees do not agree that the design of their workplace enables them to work productively

49%

of employees agree that they are proud to bring visitors to their workplace

money. And this pressure may be causing organisations to overlook the needs and performance potential of their employees – the human capital. Data from Leesman, Europe’s leader in measuring workplace effectiveness, paints a worrying picture. Just 52 per cent of 12,000 employees quizzed say their workplace enables them to work productively. Perhaps more worryingly, the Leesman statistic suggests that employers are unaware of how workplace strategy is fundamental to business competitiveness. Faced with pressure to sweat assets, strategy debates in the boardroom still focus on cost of occupancy – the costs associated with occupying and maintaining the built asset – rather than on the value of the human capital inside. Global real estate adviser DTZ predicts UK cost of occupancy to grow at around 1.8 per cent per annum over the next five years, reaching an average £6,356 a year per workstation by 2017. London remains the most expensive location, with costs expected to hit £10,000 in the City and £17,000 in the West End. It’s no wonder that executive boards continually juggle strategies to chip away at those costs, yet about 80 per cent of that cost is contractually bound in rents, rates and service charges, leaving management with just one option – reducing the operating costs. But these services represent just 20 per cent of the total occupancy cost. As John Symes of AOS Studley International comments: “Staff cost an organisation six or eight times as much as their workplace, but the productivity of those staff is innately affected by the environment in which they work.” The Office for National Statistics reports average UK private sector salaries running at near £24,000 per person, with the average inner London salaries at £53,000. The principal corporate cost is not the built asset – it is the workforce. What’s more, there is real scope for saving money if the focus shifts away from the

82%

of employees rank natural light as an important part of an effective workplace, 9% more than office lighting

81%

building stock to employee productivity. A five per cent nibble at the cost of occupancy per desk might save employers £500 per desk per annum, but with service sector employees typically factored at incoming five or six times their cost, a mere one per cent enhancement in their personal productivity could add £2,500 additional annual revenue. Increasing the number of employees working productively has greater potential to boost fiscal performance than reductions in spend on occupancy, therefore. The highest performing workplace in Leesman’s database had 83.3 per cent of employees reporting that the design of their workplace enables them to work productively. Surely that 30 per cent difference would interest the executive board? It should do because Stephen Bevan, director of the Centre for Workforce Effectiveness at the Work Foundation, says the current dilemma around workplace strategy goes far deeper. “UK businesses seem ambivalent about the importance of managing people well,” he says. “For some, enlightened management practices and real investment in ‘human capital’ is intrinsic to their competitiveness. “For others, the biggest contribution employees can make to a business is to cost less and do as they are told. The co-existence of these different philosophies in one economy is a hindrance to UK business success in the long term.” The quickest and easiest way to cut the cost of occupancy is to reduce the space they use. With the utilisation of corporate workplaces averaging between 50 per cent and 60 per cent

Bolder strategies deliver savings, but only work if the needs of those employees are understood

of employees cite telephone conversations as an important workplace activity

31% of employees rank video conferencing as an important activity but just 44% are satisfied the activity is supported

this is not difficult. But it does require a bold shift to a more shared workplace, where fewer employees are allocated a permanent desk that they can call their own. Bolder strategies deliver savings, but only work if the needs of those employees are understood. According to Monica Parker, strategist at Morgan Lovell: “Workplaces must now evolve to embrace the whole person and support a deeper sense of engagement, emotive attachment and well-being among their users. This is the next evolution – an holistic evolution.” Research has shown that the single thing that most motivates employees is the sense they are making progress. So the biggest contribution employers can make is to remove the obstacles to that - a small change in the workplace can have a massive effect on effectiveness, it seems. “The data we collect shows organisations exactly where and how well their workplaces are supporting the efforts of their employees,” says Tim Oldman, managing director of Leesman. “In the hands of informed clients and experienced strategists, this is proven to change the relationship between employee and their workplace and thus employee and employer.” As scientific and economic researchers continue to explore the link between a thriving workforce and better business performance, the worlds of design, corporate real estate and facilities management should be doing the same. The Leesman data not only defines what makes a supportive workplace, it makes explicit the link between that supportiveness and an enhanced personal sense of productivity. What’s needed next is a new human capital strategy for the economics of workplace. 020 3239 5980 info@leesmanindex.com

91%

of employees cite tea, coffee and refreshment facilities as important, with 21% dissatisfied with their provision

58%

of employees with a non-allocated desk agree this enables them to work productively

Business Reporter · October 2012

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The theory of success Many ambitious businesses could accelerate their performances by adopting the Theory of Constraints approach INDUSTRY VIEW

n many organisations, the desire to create a sustainable breakthrough in bottom-line performance can lead to a proliferation of improvement projects. Yet one widely established management theory argues that there are only ever a few underlying constraints to business performance. And if this is so it should be possible for far fewer improvement projects to deliver greater impact much more quickly.

Dr Eliyahu M Goldratt, a celebrated pioneer in management thinking, began applying his Theory of Constraints (TOC) over three decades ago, demonstrating how, in industry after industry, his scientific approach could lead to unprecedented advances in an organisation’s performance.

Factors and constraints He was able to show how identifying the few factors - or constraints - that determine an organisation’s ability to achieve its full potential can improve

performance surprisingly quickly, and form the basis of a true market breakthrough with irrefutable bottom-line impact. Goldratt’s theory is now studied on some of the most respected MBA courses, and is the subject of several gripping business novels, which have sold millions of copies throughout the world. Crucially, it is also credited with helping hundreds of organisations improve their working practices and accelerate their financial and operational performance. In the last 10 years, QFI Consulting - a firm set up by three of Goldratt’s close professional companions and protégés – has continued his work by rigorously testing and proving the Theory of

Constraints in practice. The firm is now recognised as a global leader, with clients in industries as diverse as manufacturing, financial services and healthcare. Following a TOC-based effectcause-effect analysis of a client’s system, QFI identifies the few underlying constraints, examples of which might be a straightforward bottleneck, a market constraint or a policy constraint. They then design a programme of activity to rapidly improve performance, which

Delivering results for a change People are key to delivering strategy

technology, new processes or a new design for the organisation. The people aspects are often ignored, even though research repeatedly shows that between 60 per cent and 90 per cent of strategic change projects INDUSTRY VIEW fail to fully deliver on the promised benefits. n today’s business world, it has never been Inspired Partners recommends that more important to deliver results for organisations take an integrated approach to shareholders and ensure the the execution of business strategy, continued success of an including all the people aspects. This organisation. What is perplexing is means having a clearly articulated, why so many leaders have not compelling vision that everyone in realised that if their people are not the business understands, prepared to change, their communications planning and organisation can’t. delivery so that the individuals and Most business-critical change teams are engaged, and Sally Palethorpe reinforcement activities that prevent programmes focus on the tangible aspects, whether that is new individuals reverting to a previous way

Benefits for all Private equity firms are leading the way in funding the revival and strategy implementation of great British businesses

01442 875734 enquiries@qficonsulting.com

Between 60 per cent and 90 per cent of strategic change projects fail to deliver on their promised benefits of working. This holistic approach will ensure that sustained results are delivered in line with the business case. The first consideration is the organisational impact that a strategic change may have across the different departments and/or different elements of the business, to include leadership style, relationships, roles and responsibilities, the working processes, business measures and personal objectives. Understanding the organisational impact allows planning to ensure the right areas are given the right amount of attention and support throughout the life of the project.

INDUSTRY VIEW

is implemented with the full involvement of the organisation’s staff. QFI has successfully applied Goldratt’s approach in parts of the UK health system where TOC has helped mainstream NHS hospitals and mental health providers make significant and sustained service improvements within weeks, including 20 per cent reductions in length of patient stays.

rivate equity has taken one heck of a beating from the press and politicians recently - greedy, tax-dodging mavericks who borrow too much from banks and add nothing to the economy. Harsh if you ask me, but then again I work for a turnaround fund. So who provides the money in this secretive world? If you have a pension or any form of long-term savings plan, it’s you. Pension funds and insurance companies are some of the biggest investors in private equity and for several years they have increasingly been allocating money to turnaround funds such as the one I work for, Endless. Every time a turnaround fund invests in a company we create a huge number of winners who gain long before we generate our own investment return. Our win is dependent upon transforming a loss-making,

cash-absorbent business and fulfilling its strategy to make it into a profitable, growing concern again. Private-equity solutions such as those provided by Endless can provide a lifeline for businesses in need of support for transformational activity. This matters to the biggest of companies as well as the smallest, as larger businesses’ issues can be far more complex and difficult to solve without outside involvement.

Helping hand Crown Paints, which Endless bought and turned around, represents a great example of the role that private equity can have in supporting large UK businesses to meet their strategy and business vision. Endless was prepared to invest in a heavily loss-making UK manufacturer at the peak of the financial crisis in 2008. The three years following Crown’s acquisition by

Inspired Partners works with many different clients in both the public and private sector. Their involvement ranges from small-scale interventions of a couple of days through to programme management and delivery of significant culture change programmes. Putting the theory into practice enables Inspired Partners to deliver sustainable change, preventing our clients from becoming yet another statistic. Sally Palethorpe is managing partner of Inspired Partners sallyp@inspired-partners.com 07812 990545

Endless saw a turnaround in profitability of £35m, securing 1,450 jobs in Blackburn, Hull and elsewhere across the UK. All this was achieved through investment in a new management team, capital expenditure on the shop floor and a marketing campaign, along with an awesome effort from the entire team at Crown. In a period of low UK growth and continuing risk within the eurozone area, turnaround funds will continue to be a source of support for those businesses aiming to revive their fortunes. Remember, next time you hear about a turnaround fund such as Endless saving a business and rescuing jobs, your monthly savings may well have played a part. Garry Wilson is managing partner at Endless LLP www.endlessllp.com

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Strategy execution

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Which style will work for you? Ruth Badger, Apprentice star turned consultant, cuts through the spiel to reveal the best management theories Situational leadership

Management by objectives

Stages of group development

The change equation

The theory: Developed by Paul Hersey and Ken Blanchard in the 1970s, situational leadership theory posits that there is no single best style of leadership. This theory suggests that the most successful leaders are those who adapt their style to the maturity, or capability, of the group or individual they are attempting to manage. There are four leadership styles: telling, selling, participating and delegating. There are four levels of maturity which characterise the teams or individuals being managed: ery capable and confident; capable but unwilling; unable and willing; unable but insecure. They say: A good leader develops “the competence and commitment of their people so they’re self-motivated, rather than dependent on others for direction.” Ruth says: I completely agree with this theory as I believe it encompasses leadership in its entirety. There are definitely common traits to a successful leader but their style has to adapt towards different teams and individuals in order to get the best from them. Where to find out more: The One Minute Manager, by Ken Blanchard.

The theory: Management by objectives is a goal-oriented theory that depends on managers and employees agreeing the objectives of the business together, and then deciding on what needs to be done to achieve those objectives. The employees’ participation in setting the goals and choosing the course of action is crucial – when employees have been involved in making the decisions, they are more likely to meet the goals. The four steps in this process are: setting objectives; developing action plans; monitoring progress; and performance appraisal. They say: “What gets measured gets done.” Ruth says: This theory only covers one element of management which, if done alone, will not lead to success as it doesn’t take into account other aspects of motivation. The positive aspects are that it obtains the employees’ ‘buy in’ since they believe they are in control of their career as they are part of the decision-making process.

The theory: The “forming-stormingnorming-performing” model of group development outlines four stages of development any team goes through. Bruce Tuckman first proposed the theory in 1965. In the forming stage, individuals are keen to be accepted by the group – routine drives behaviour and serious conflicts are avoided. During the storming phase, individuals open up and different ideas compete. The norming team manages to have one goal and agree upon one plan. Finally, the performing team functions as a unit to get the job done well with minimum supervision. They say: Groups go through stages before they perform well; conflict is part of the group formation process. Ruth says: Most businesses are feeling the pressures of the current climate and don’t have the time to let this structure to come to fruition. A high turnover of staff and a change in the way we communicate (for example by email) threatens the practicality of this theory. Where to find out more: Forming, Storming, Norming, Performing: Successful Communications in Groups and Team, by Donald Egolf.

The theory: The change equation, also known as the formula for change, provides a model to assess the likely success of an organisational change programme. The formula says three factors must be present for meaningful organisational change: dissatisfaction with the status quo; vision of what is possible; and concrete steps that can be taken towards the vision. If the product of these three factors is greater than a fourth factor – resistance – then meaningful change is possible. They say: “Collaboration and movement are more likely to happen if the vision is shared and congruent with the organisation’s existing cultural and political forces.” Ruth says: The reasoning behind this theory makes sense if the need for change has been identified from within a team. This theory is outdated as there is no opportunity for the management to get staff buying in. Where to find out more: Organization Development: Strategies and Models, by Richard Beckhard.

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Where to find out more: The Practice of Management, by Peter Drucker. Star rating: 

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Hierarchy of needs The theory: This is a common theory of motivation, usually expressed as a pyramid, with the largest and most fundamental needs at the bottom, and higher-level needs at the top. The theory suggests that the more basic needs must be met before an individual will desire or be motivated by the higher- level needs. The fundamental and basic needs are: esteem, friendship and love, security, and physical needs. The highest need is self-actualisation – a person reaching their full potential. They say: “If the only tool you have is a hammer, you tend to see every problem as a nail.” Ruth says: This is an effective theory as it’s based around the principle of understanding what motivates people. Where Maslow’s theory can be challenged is if a manager doesn’t acknowledge whether a change in the early stages has a direct impact on the later stages. Where to find out more: Hierarchy of Needs: A theory of Human Motivation, by Abraham Maslow. Star rating: 