Inside player: top management’s new role; when pursuing short-term strategies for long-term gains, it is more important than ever to keep communication lines open inside the organization. Here’s how three company leaders make it work

Inside player: top management’s new role; when pursuing short-term strategies for long-term gains, it is more important than ever to keep communication lines open inside the organization. Here’s how three company leaders make it work – Strategy

Chuck Martin

When managing for the short term, it is essential that an organization’s strategy and direction and all of its implications be understood from the top down and from the bottom up. The most effective way to do this is to increase interactive communication inside an organization, which can be more difficult than it sounds.

For senior executives, this means spending considerable time inside the organization. For managers, it means taking the initiative to understand the organization’s goals and objectives and to provide input back up the chain of command. It is not about more memos or meetings, but about creating a culture in which managers and executives truly communicate, both the good and the bad, and then collectively move on.

KRAFT FOOD SERVICE

Taking the inside view

To foster this type of communication, executives and managers must constantly shift between external (such as shareholders and customers) and internal (such as supervisors, peers, and employees) forces. “There’s a balance needed, depending on the size and complexity of an organization,” says Steven Rudnitsky, president of Kraft Food Service and executive vice president of Kraft Foods. Rudnitsky, who was president of Nabisco Food Service and took over the combined food service operations after Kraft acquired Nabisco in 2000, is responsible for all Kraft and Nabisco food products that go to restaurants, hotels, hospitals, and schools throughout the U.S.

“Our organization is large and the business dynamics are complex. The nature of my job requires that I spend a fair amount of time, perhaps a disproportionate amount, on the inside,” says Rudnitsky, who echoed the views of many executives we interviewed. Says Rudnitsky:

“When managing internally, you have to start with a clear understanding of your strategic direction and it has to cascade through the entire organization. In fact, you’re doomed unless everyone — from top to bottom — shares the organization’s vision and strategic direction. That requires a fair degree of ‘managing up,’ if you will, so that people at the very top of the organization understand the business dynamics. This, in turn, helps set proper expectations for the division and leads to support for the strategies for attaining what should be clearly defined business objectives.

“Internal management also requires managing across functions. At Kraft, it’s a true collaborative effort. At my level, I need to ensure that every discipline — R&D, manufacturing, marketing, information technology, and so forth — and every division employee is working off the same page. We won’t succeed unless everyone in the organization understands the business objectives, embraces them and conceptually understands their role in achieving them.”

Rudnitsky created an open and interactive environment to facilitate clear direction down and feedback back up. He started conducting quarterly town hall meetings that include a large portion of his staff. Says Rudnitsky:

“I open every town ball meeting personally. Most recently, in an attempt to provide greater focus for the division, I told everyone there, ‘If you’re doing something that is not consistent with these five strategies, then do not do them and tell your boss.’ Once you set the strategy, it’s incumbent on employees to determine if what they’re doing is a fir. I strive to have very little ambiguity about what I want and expect. Directness works best for me. If people disagree, I want to understand why. I have confidence in my managers that the people working for me are as open and as honest with me as I am with them. It’s part of a culture. People can be extremely guarded and it’s easiest to continue down a path because ‘that’s the way it’s always been done.’ I want people to challenge the status quo and focus on our clearly defined business objectives. Two-way communication is essential, and you have to demonstrate by example.

“The key to managing for the short term is to try to make work fun for your team. It’s important. Encourage them to look at their assignments and be able to fix, change, or finesse them and, hopefully, have fun doing it. At the end of the day, we are a company with high expectations; however, we all need to find ways of having fun as we pursue our goals.”

DOW CHEMICAL

Bringing the outside in

Not every executive has the luxury of leading only during the best of times. During the great prosperity of the mid-’90s many executives found their companies faced with non-stop growth and increasing market size or share. Under the circumstances, concern for costs often seemed relatively unimportant. Dramatic increases in revenue and stock price kept most stakeholders happy. However, during economic downturns, corporations tighten their belts and executives feel more pressure to deliver positive results — by any measurement. The economic fallout of the World Trade Center attack on September 11 accelerated the challenges of coping with an impending recession, and in 2001 there were few companies that were not in some way affected.

Despite annual sales nearing $30 billion, The Dow Chemical Company was among those that were not immune. Headquartered in Midland, Michigan, Dow Chemical is the largest chemical company in the United States, and is the world leader in the production of chemicals, plastics, and agricultural chemicals. Leading the global entity, with its approximately 50,000 employees, is Michael D. Parker, who became president and CEO in November 2000, just as the overall economy began to deteriorate.

“This is the toughest environment the chemical industry has faced in more than 30 years,” says Parker. “Dow is 104 years old and very strong in a mature industry that is very big.”

The chemical industry, including pharmaceuticals, represents approximately $1.7 trillion in sales annually. During the previous decade, Dow had transformed itself from a geographically organized company to a business whose strategies and operations were totally global. Parker fully understands how key understanding and serving all of the stakeholders in the company is to leadership when managing for the short term.

Parker knows how critical information-sharing and knowledge of the corporate mission, values, strategy, and direction is to the company’s future. That understanding is the basis of his goal to enhance high performance teamwork and leadership at all levels. Something, he concludes, must be modeled from the very top. That is why he created the Corporate Operating Board, a 16-person team comprising his direct reports.

So, for one week each month, Parker’s Corporate Operating Board, which includes eight business group presidents, six corporate functional heads, and one geographic head, all work with Parker, meeting as the most senior leadership ream in the company. Says Parker:

“We run the company during that week. We work together setting the strategy and direction. As an example, we’ve just finished creating a comprehensive People Strategy, to ensure we are consistently developing our most sustainable source of competitive advantage — our people. Key to the Corporate Operating Board’s success is the opportunity it provides Dow’s senior leaders to elevate to the big picture level one week a month and to focus on their particular area of responsibility for the other three weeks of the month. It provides transparency and clarity as well as alignment.

“The key is to rake the noise out of a big system — through transparency and by creating a common level of knowledge and understanding. Doing this over time, a lot of the noise goes away. It also creates great teamwork. People want to be good team players, but if they don’t see the whole picture, they can’t be. Business is about people.”

By bringing together his top executives one out of every four weeks, Parker ensures that knowledge gets back to the divisions, increasing the odds that leaders within those divisions also are closer to seeing how their actions fit within the greater context of Dow as a whole.

DELTA AIR LINES

Bridging the gap between inside and outside

Sometimes events create dramatic changes both inside and outside an organization — changes that the top executives are forced to deal with, in one way or another. Such was the case at Delta Air Lines when the events of September 11 left the airline industry in dire financial straits. “You have to live in the short-term while you’re seeking the long,” says Leo Mullin, chairman and CEO of Delta Air Lines. “At Delta, we were in an immediate term crisis beginning September 11. After that date, it was nor clear from a financial standpoint how the industry would get through this.

“How fast would traffic come back? In October, we were scheduled for a board update on strategy, but we spent the time on liquidity analysis. We are highly oriented toward cash flow, but at the same time, we had to be looking at what kinds of environmental and competitive pressures were developing. Our goal was to have Delta come out stronger than when it went in. The crucial ingredient was to keep both the shortterm crisis and the long-term strategy front of mind. To succeed, you can never lose sight of your compass and sense of where you want to go, and you must also keep in mind what the competition is doing and how the market is changing. We realized this could be the biggest strategic opportunity to achieve our marker objectives. When you encounter a crisis like September 11, you don’t turn to the textbooks. You either have it, or you don’t.

Before September 11, we concluded there would be no major airline mergers for four or five years. After September 11, we found that the government’s policy regarding government loan guarantees might actually be aimed at aiding industry consolidation.”

Internally, Mullin quickly created a significant internal communication effort so that all managers and employees understood the company’s plans for the short term. “We took a massive approach toward internal communication, including daily status reports as to how and what we were doing,” says Mullin. “You have to be prepared to put yourself out into the forum so the organization understands what the company is doing to advance the cause.”

Mullin also found himself involved in external aspects of the airline industry, including trips to Washington and battles on behalf of all the airlines. As a result, Delta employees were able to watch their CEO on television, arguing for help for the airline industry and for Delta. “The employees had the sense that the CEO entered the battle in the external arena on their behalf.” Delta will receive a total of $654 million from the government, winning Mullin additional support from many Delta employees.

The senior executive who focuses only on externals out of a desire for self-preservation should be aware that those same self-preservation instincts should be directed internally, as well. This does not mean a top executive should be paranoid. It does mean that a senior executive who doesn’t focus internally and encourage two-way communication risks missing important information that can ultimately affect the externals — i.e., the company’s performance — and help align the organization in a united direction.

RELATED ARTICLE: THE NEED FOR CLARITY

Most business managers, when asked, would say that they are good communicators. That doesn’t always turn out to be the case. NFI Research recently surveyed both senior executives and mid-level managers about the quality of communication up and down the enterprise.

The results were enlightening. Mid-level managers believe they are doing a good job of communicating to their superiors, and the top execs agree. Asked about reporting the progress of projects and tasks in relation to the organization’s strategy, 60 percent of managers said they did so “well” or “very well.” The senior executives supported that belief, with 67 percent saying their subordinates communicated “well” or “very well.”

However, their subordinates take a very different view of their bosses’ communication skills. When asked how well they communicated the roles of subordinates’ projects and tasks in the context of the organization’s long-term strategy and direction, 73 percent of senior executives said they do so “well” or “very well.” Managers disagree, with only 34 percent giving their bosses high marks.

This communications gap can lead managers within an organization to draw their own conclusions about aspects of company direction and strategy. Such managers tend to behave according to their own understanding of how to act tactically. That action, even if well-intentioned, can be influenced by many things other than the announced corporate strategy.

Based on these results, the responsibility for the disconnect between managers and executives would seem to lie in the executive suite. Granted, the farther down the corporate hierarchy the message must travel, the greater the potential for distortion. However, meeting that challenge is clearly one of the major tasks top executives must address if an organization is to successfully manage for the short term.

NFI RESEARCH FINDINGS

How well does executive management communicate to subordinates the

subordinates’ role in the context of long-term strategy and direction?

SUBORDINATES EXECUTIVES

VERY WELL 12.8% 20.2%

WELL 21.6% 53.2%

ADEQUATELY WELL 31.3% 22.3%

NOT VERY WELL 28.1% 4.3%

NOT AT ALL 3.4% 0.0%

[C]NetFuture Institute

Note: Table made from bar graph

Chuck Martin, a highly regarded lecturer and author, is chairman and CEO of NFI Research. a U.S.-based firm that identifies and analyzes trends and attitudes in business/organizational management and information technology. A former vice president of IBM, he advises some of the best-known companies in the world. He can be reached at cm@leighadvisory.com.

Adapted from Managing for the Short Term (Doubleday, June 2002). Copyright @2002 by Chuck Martin.

COPYRIGHT 2002 Chief Executive Publishing

COPYRIGHT 2002 Gale Group