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The invisible threat to CEOs

by Freddie McMahon
November 18th, 2003

Most senior executives of large organizations, with support from their stakeholders, believe they have the right strategy. Typically, executives are more concerned about their organization's ability to delivery successfully — which is not surprising as up to 80% of CEO failures are caused by poor execution, rather than a flawed strategy.

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There is a huge gulf between how work is expected to be done and how it is actually performed; and this has become so pronounced in large organizations that it is the single biggest threat to executives.

Freddie McMahon is CEO and co-founder of Decisionality, which provides software tools to convert know-how into customizable web-services software. This article is based on one of a series of white papers downloadable from the Decisionality web site.

Glossary terms: business process, lookup tool

The common excuses used to explain such failure often relate to poor management, inadequate skills or cultural resistance to change. But as the average tenure for a CEO continues to drop — now it's around 17 months — perhaps it's time to identify the root cause of these symptoms.

There is a huge gulf between how work is expected to be done and how it is actually performed in-practice; and this has become so pronounced in large organizations that it is the single biggest threat to executives. At best executives may create some tactical wins, but seeds will continue to be sown for long-term liabilities unless they reduce this gap between expectation and practical reality.

Executive understanding of best practices is now very low because, for the last fifteen years, they have been focused in delivering highly expensive transformation change through the deployment of enterprise and process-based solutions. This has created a critical competency blind spot, as most executives mistakenly believe practice is simply a low-level process. More disturbingly, the last two generations of executives have either no or very little first-hand experience of how work is applied in-practice. No wonder CEO fatality is so high.

Applying best practice
Best practices are the rules for how work is applied in-process. A diverse range of know-how is needed within an organization to cover all the practice dimensions of regulatory rules, policy rules, product rules and service rules. These need to be collated and contextualised for each type of task performed.

Most information-based work involves a document that drives a series of tasks. Each task involves a customer or information worker rapidly making a set of small decisions, or nano-decisions. Best practices need to be task-specific to guide this level of contextual decisioning to derive the desired outcome. It is at this level of granularity that errors or exceptions trigger exponential growth of human interactions, increasing costs, risks and elapsed time. The accumulative impact of this micro-level productivity eventually dictates the macro-economic performance of the organization and, ultimately, the fate of the CEO.

As best practices are task-specific and singly have the greatest impact upon the success or failure of strategic execution, then who are the people with the know-how that define these rules and the way they are applied in-practice? Typically, the answer cannot be found on a hierarchical organization chart. The end-to-end decision flows within a task-specific practice are not constrained by functional or hierarchical boundaries. No set of procedural rules is an island. Everything is interlinked. Thus, each task ought to be supported by best practices that span a set of interlinked procedural components that are provided by a range of different expertise.

This raises two issues. First, who has the responsibility to orchestrate the collection of procedural instructions for each task so that they can be applied in-practice? Secondly, who are the decision rights owners that set the rules that determine the instructions for practices applied in-process within the context of each task? In large organizations, these orchestrators and decision rights owners are an invisible network, which has no clear accountabilities and performance measures.

Wasteful decisions
The situation is actually far worse than anything imaginable by executives today. Every 10,000 information-workers are making in excess of one billion nano-decisions every year. Emerging evidence is showing that up to 70% of these nano-decisions are non-productive, add no value or are sub-optimal. Unless something changes, these non-productive interactions will increase as complexity and time pressures become worse. This means the fully allocated people costs of service organizations mostly funds human interactions that do not contribute value towards the strategic goals.

Effort now needs to be spent simplifying and streamlining best practices to significantly reduce the non-productive interactions.

Simplification is about masking the complexity of rules from the information workers. This can only be done by dynamically linking the contextual rules for each task within every document that needs decisioning and to provide fast interactive navigation. Documents morph into micro-applications with access to all the data, information and rules needed to support superior information-worker productivity.

These intelligent documents can be developed rapidly by business people in a matter of days. Decision-flow audit trails and decision-point metrics provide the compliance and monitoring that enable executives to have 360-degree visibility of how work is being applied in-practice.

Optimal decisioning
Streamlining ensures that the practice-based rules are designed for optimal decisioning applied in-practice. Reusability of procedural components provides significant productivity capabilities as it enables the organization to be agile and adaptive. In this way, the organization can cope effectively and efficiently with increasing levels of complexity, velocity and volatility.

Once intelligent documents with embedded rules for best practices emerge, they can also be used by customers, suppliers and partners, thus gaining higher levels of economic and social value creation. Simplification and streamlining of practices provides the means to evolve and execute strategy whilst delivering the following benefits:

  • Decimates costs by reducing non-productive human interactions
  • Transforms service from functional to end-to-end support
  • Increases income with lower risks by being adaptive, agile and compliant
  • Best practices are uniform and transparent with short improvement loops
  • Efficiently cope with complexity, velocity and volatility

This way forward is truly transformative. Execution risks are significantly lower compared to other transformation programmes as it consists of many small projects, each one converting a document type into an intelligent document.

The choices are clear. Either executives continue to run the same strategic execution risks or they proactively simplify and streamline best practices throughout their organization.

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