Is Your Company Fit for Growth?

Illustration by Paul Wearing

Is your company fit for growth? Many companies today are not. The way they manage costs and deploy their most strategic resources is preventing the expansion they need. But they don’t realize it — at least not yet.

To be sure, many of those companies are in better financial shape today than they’ve been in for a long time. Having implemented cost-cutting and austerity programs during the recession, they have relatively healthy balance sheets and sizable reserves of working capital. They have strengthened their ability to weather downturns and improved their productivity in ways that could potentially last for years. All these restructuring actions were required for survival between 2008 and 2011.

But as they shift their focus from the cost side of the ledger to the revenue side, searching for ways to move beyond cost cutting — entering new markets, commercializing innovative products and services, offering more compelling customer value propositions — these companies are strategically and financially out of shape. They have not made the hard choices involved in channeling investments to the capabilities that are needed most, and deemphasizing or eliminating their other expenses.

How can you tell if your company is fit for growth? Here is a simple, three-question diagnostic:

• Do you have clear priorities, focused on strategic growth, that drive your investments?
• Do your costs line up with those priorities? In other words, do you deploy your resources toward them efficiently and effectively?
• Is your organization set up to enable you to achieve those priorities?

The easiest way to answer these questions is to imagine the opposite.

If you do not have clear growth priorities, there are several warning signs. You have so many initiatives that you can’t remember them all. Your executives go to multiple meetings on unrelated topics every day. Asked to name the most important capabilities your company has (the things it does well) or how they relate to your strategic objectives, different leaders give different answers. Your best people are working on so many programs and projects, they are burning out. Meanwhile, you are underinvesting in some areas — which might include parts of R&D, market development, and customer experience — where you could potentially build a distinctive edge against your competitors.

If your costs are not deployed appropriately, that’s also painfully apparent — especially in the amount you spend on nonessentials. Staffing levels in different parts of the organization are out of sync; for instance, you might have twice as many finance people counting the money as salespeople bringing it in. Your highest-priority initiatives falter because their investments do not get sufficient attention, while legacy programs with very little impact continue to be funded. Every function pursues an agenda of professional excellence, striving to be “best in class,” no matter what the cost. Each department’s annual budget is calculated as “last year’s, plus 3 percent.” Every once in a while, in moments of high pressure, you institute across-the-board cost-cutting programs that force the businesses to temporarily reduce overhead, but everyone knows that it won’t make any long-term difference.

If you don’t have a well-designed organization, that is evident as well. You are not nimble enough to move quickly, or aligned enough to work in harmony. It takes a week to get a sales quote approved, while your competition wins the business. Information is not readily available to the people who need it. Managers oversee fewer than four employees, on average, and get far too involved in their subordinates’ work. Incentives (such as bonuses and rankings) motivate people in ways that actually undermine the behaviors needed to achieve the company’s stated growth priorities — for instance, people put internal reports ahead of customer responsiveness. You have “shadow” HR, finance, and IT staffs popping up in places outside your shared-services organization. Since most suggestions are rejected, people become afraid to take calculated risks — and that derails the most innovative growth- or savings-oriented ideas. via strategy-business.com

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Meetings, Do You Need To Show Up?: Mrinalini Reddy

Virtual tools such as email and instant messaging and Skype can be just as effective as face-to-face meetings. It all depends on orientation and mindsets.

Partly it’s a practical question - is it worth the time and expense to travel around the world to attend a meeting? But more importantly, it raises the question of whether communication channels - the ability to see and hear others, and directly respond to them - will affect the quality of negotiations and group decision making.

That choice essentially comes down to the nature of existing (or non-existing) relationships, according to new research from INSEAD and the Kellogg School of Management at Northwestern University. “The success or failure of negotiations and group decision making all depends on people’s attitudes and their history,” says Roderick Swaab, principal researcher and an assistant professor of organisational behaviour at INSEAD. ‘Face time’ may well be one of the best ways to improve trust in relationships and develop camaraderie between colleagues, but it’s not always required in negotiations and group decision situations — in fact, it can even be detrimental, Swaab’s research uncovered.

What’s preferred when?

When unacquainted individuals entered into a negotiation or group decision making situation, they found that the use of richer communication channels—face-to-face and video conferencing—that allowed people to see and hear each other, helped establish rapport and increased the likelihood of achieving high quality outcomes. Nonverbal cues such as tone of voice, facial expression and gestures allowed these communicators to learn more about the other side and potentially trust them enough to share and integrate information. The researchers also found that richer channels contributed to higher quality outcomes in larger groups and more complex tasks.

When team members already share healthy working relationships from prior interactions and meetings, seeing and hearing each other - whether it’s face-to-face or via video conference, or Skype - becomes less important and virtual interactions over email and instant messaging are just as likely to yield similar high-quality outcomes, explains Swaab. In negotiations, high quality outcomes are likely to occur when parties engage in making tradeoffs and reach mutually beneficial agreements, or when teams surface all the necessary information to make the best decisions. “When there is a pre-existing relationship that fosters a cooperative attitude, people think the best of their partners and communication is interpreted with the best of intentions and inherent levels of trust” he adds. As a result, face-to-face interaction becomes less important for trading off concessions and sharing information, Swaab explains.

However, when partners have experienced disagreements and conflict or seeking personal gain only, richer communication channels actually decreased the likelihood of high quality outcomes, the study showed. As communication channels do “not only transmit factual information but can also intensify feelings, the ability to see, hear, or directly respond to others’ claims has the potential to escalate already existing non-cooperative predispositions,” the researchers report. When entering tense discussions, they suggest restricting communication (face-to-face or electronically) and introducing a third party to resolve the conflict.

The genesis for Swaab’s research stems from contradictory findings in existing - and extensive - literature on the subject, where some studies found face-to-face contact to be vital for mutually satisfactory outcomes while others found no effect in being able to see and hear each other. To explore and synthesise the discrepancies, Swaab and his team developed a theoretical model and conducted two meta-analyses on every relevant study that compared the impact of communication channels on negotiation and group decision making outcomes, separately for negotiations and group decision making. “Our mission was to resolve these contradictions and put forward a model that parsimoniously explains the full range of findings,” explains Swaab.

Culture matters  

As virtual teams increasingly operate across geographies and cultures, the professors examined the impact of peoples’ cultural backgrounds. They found that when people were unacquainted the positive impact of rich communication channels was more pronounced in Western cultures than in Eastern cultures. “Communicators within an interdependent (Eastern) cultural context, approach the average conversation with a more cooperative orientation,” explains Swaab, and as a result, “may be less strongly affected by the presence or absence of rich communication channels both in negotiations and when making group decisions.” However, for independent cultures such as those in the West, where negotiators and decision makers likely have neutral orientations, communication channels were necessary to achieve high quality outcomes, he says.  

The paper was co-authored with Adam Galinksy, Morris and Alice Kaplan Professor of Ethics and Decision in Management, Adeline Barry Davee Professor of Management & Organizations Victoria Medvec and IBM Professor of Regulation and Competitive Practice Daniel Diermeier, all of the Kellogg School of Management at Northwestern University.

The study, “The Communication Orientation Model: Explaining the Diverse Effects of Sight, Sound, and Synchronicity on Negotiation and Group Decision Making Outcomes,” will appear in a forthcoming issue of Personality and Social Psychology Review.

 

First published: September 22, 2011

Last updated: September 26, 2011

JC/MR 09/11

via knowledge.insead.edu

Hire Jim Woods to Speak to Your Organization

Innovation, Growth, & Hypercompetition Consultant/Speaker/Business Coach

 Website: InnoThink Group

Request a consultation: Office: +1 719.649.4118 or complete our form.  

 

Innothink Group is a strategic management, innovation and business coaching consultancy. 

Our Guarantee. Where many consulting firms are reluctant to bear risks or tie their rewards to project outcomes, we decided to build a better model. We align our success with yours. We’re outcome obsessed, outcome paid, putting nearly two thirds of our fees at risk subject to hitting predetermined milestones. More than a guarantee we wanted from the outset to create true partnerships with shared responsibility. See a few of our clients.   

We provide broad ranging advice covering innovation, commoditization, competitive advantage, business policy and strategy, as well as global strategy and implementation.