Building Alignment
In an executive management role like CPO, COO, or CEO, you spend a lot of time aligning people you work with. How much time you spend aligning depends on the organizational structure, organization size, complexity of the product, growth rate of the company, and, above all, the culture of the organization.
Let's take an example of a dysfunctional organization, i.e. everyone is doing their own thing and there is no clarity on what the organization is trying to achieve in the short term. To a new person, the situation might seem like chaos. How do you bring order to the chaos?
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| From chaos to order |
With the breadth of my experience over the last two decades, I have developed and practiced an alignment methodology with five steps:
1. Understand why the dysfunction exists
2. Build trust
3. Create a shared vision
4. Execute on the shared vision
5. Establish an operating rhythm
The methodology assumes that you are aligned with the board. Implementation of the methodology varies depending on the culture and momentum of the organization.
Let's look at these steps one-by-one:
1. Understand why the dysfunction exists
There could be various reasons, but the following three are the most common:
(i) Lack of management: Nobody is guiding employees on what they should work on, what they are supposed to accomplish in what time frame and how their performance would be measured (this is more common in startups and R&D labs). Everyone thinks that they are doing the "right thing". There is no clear strategy and no single source of truth.
(ii) Personalities: People don't like each other and they can’t communicate effectively or they like each other too much and nobody says anything when they see something stupid.
(iii) Incentives: Incentives of the key players are not aligned to achieve the same objectives, or there is artificial harmony in the team and disturbing that harmony is a disincentive.
An organization can have all three of these and many more.
2. Build trust
If you are new to the organization, your co-workers have to trust you before they are open with you about the dysfunction and their views. Following three approaches are generally helpful:
(i) Making people feel heard: If your teammates think you are not listening to them, they won't trust you. However ridiculous someone sounds, you have to let people share what they want to say in its entirety and then repeat what you heard so that you get what the other person is trying to communicate. Understanding your co-workers' communication styles and their intrinsic motivations makes it easier to hear people.
(ii) Visible results: Show some results on what you were hired to do. Your co-workers and the board have to see that you can deliver on what you say. A commonly used term for this tactic is called "quick wins". A reorg is not a quick win although is common for the new executives to do.
(iii) Transparency: Share your thinking, in writing, on what you are trying to achieve which has to excite people about the future. Also, transparency should make your co-workers feel safe i.e. you are not trying to take over their jobs. Show how you understand multiple perspectives from multiple people and bring cohesion to diverse views.
Spending time in one on one meetings, preferably in casual settings, helps with building trust.
3. Create a shared vision
Now you understand why the dysfunction exists and built trust with people. How do you align all organizational efforts in the same direction? It is very easy to align on a very high-level vision (let's ignore all the academic mumbo jumbo around vision vs mission) , e.g. we want to make the world better or we want to reduce CO2E from the environment. Nobody is going to disagree with that. Generally, a high-level vision exists in organizations but something more concrete is needed. A good example of a shared vision is what Microsoft was trying to achieve in 1980: "A computer on every desk and in every home". This singular focus made the company very successful. Of course, it is not applicable to Microsoft today. In technology businesses, the visions have to be updated periodically.
You have to start with something that nobody disagrees with and then drill down to what the company is capable of achieving. If nobody believes in the vision then it is useless. Shared vision means that everyone in the organization has same believe about why the organization exists. A good shared vision has an associated metric that helps you measure progress towards the vision over time. This metric is sometimes called the north star metric. It is possible that few people don't agree with the final iteration of the vision but they don't have a better idea. You have to let them go so that they can find other companies where they can build their idea of the future.
The challenge now is how to achieve the shared vision. You come with a criteria that narrows down the options to pursue i.e. strategy. In other words, you make choices on what to do and what not to do (let's ignore all the academic mumbo jumbo around strategy vs tactics). For example, you might decide that you will only sell your product to market segment A without hiring sales people. After that, the next step is to come up with clear, actionable, and measurable time-based goals.
4. Execute on the shared vision
This is where the craft of management kicks into high gear. You know which direction to take i.e. strategy. How do you start moving? Following steps are helpful:
(i) Assumptions: Businesses plan the future based on some assumptions which need to be validated. It helps to write them down and look for disconfirming data over time. In addition, key terms used in the company have to be clearly defined. You will be surprised to know how many different definitions exist for something as basic as a product.
Assumptions are risks are two sides of a coin. By writing down assumptions, you are making yourself aware of the riks. You have to see the future as an experiment. If you get disconfirming data on your assumptions, you change the strategy.
(ii) Yearly goals: Without having a lot of history that can be extrapolated into the future, you have to figure out what is possible to achieve in a year in service of the shared vision with the chosen strategy. There is no science to what the precise yearly goals should be. You can set them easy-to-achieve or hard-to-achieve. Organizations make more progress if they have hard-to-achieve goals. However, you have to make everyone believe that the goals are achievable. Let’s say a hypothetical goal of achieving 70 is easy and a hypothetical goal of achieving 100 is hard. If you set the goal at 70, you might get to 80. If you set the goal to 100, you might get to 90. Hard-to-achieve goals make people try harder.
It is better not to have revenue as an annual goal because you have to regularly review and report revenue anyway. Furthermore, revenue is an outcome and not a cause. And, the revenue target discussions are better held in private with the Head of Sales as their compensation is tied to the targets.
Anytime you get disconfirming data on assumptions, the yearly goals have to be revisited.
(iii) Metrics: How are we going to measure the progress towards the goals? You need a metric for every goal and you might have to establish a single source of truth for all metrics. It is surprising that with all the information technology systems the companies have, it is hard to find the true status of key metrics. Furthermore, the metrics have to make you think and not take away thinking. Generally, business driver metrics, like conversion rates, are much better than input metrics, like number of sales calls made, because they keep you focused on the levers you can pull to fuel growth (let's ignore all the mumbo jumbo around OKR vs KPI).
The metrics you pick should show progress or lack thereof on weekly basis.
(iv) Quarterly goals: The yearly goals need to be converted to department/function (sales, marketing, engineering, etc) specific quarterly goals in collaboration with each department/function heads so that the heads can focus on their specific jobs and show progress in a quarter. This requires systems thinking. It is good practice for startups to get ready for being public and the public companies have to report progress every three months anyway.
The department heads then convert the department quarterly goals to quarterly goals for every individual, in their department, in collaboration with the individual. A simple tactic I have observed that helps tremendously with alignment is to make quarterly goals for all employees transparent to everyone. This way, everyone knows everyone else's agendas and that automatically makes alignment easier. The reviews of the goals (not employee performance review) and the subsequent quarter goals should also be transparent. The employee becomes responsible for meeting their quarterly goals and the manager's job is to help the employees meet their goals. This creates accountability.
It is good practice to visit assumptions and yearly goals at the end of every quarter to see if any changes are needed.
(v) Incentives: All employee incentives have to be aligned with the quarterly goals and/or yearly goals. In addition to compensation, incentives include giving credit for accomplishments, and giving more responsibility for meeting the goals.
5. Establish an operating rhythm
All well-functioning organizations have an operating rhythm. You can observe it and feel it. The challenge is creating one. Following initiatives help:
(i) Operating principles: For the organization to scale, you need to empower employees and that comes with setting behavioral expectations. Operating principles provide those expectations. For example, one behavior you might desire from employees is to "do what you say". Sometimes these principles are called company values. A lot of companies have them but they can be misused or not used at all. Management has to set examples to show seriousness and meaningfulness of expectations.
(ii) Weekly updates: As the business manager, you need reflection and thinking time to analyze and synthesize information and share what you are learning with the rest of the organization. Share all metrics, what’s working and what’s not while keeping the excitement about the vision. Anybody who reads this weekly update note should get a good idea of what the organization achieved and learned last week.
(iii) Weekly all-hands meeting: Give all employees an opportunity to ask management anything they want and answer candidly. Some employees won't read the weekly note so this meeting becomes the synchronization of the entire org. A simple scorecard for each metric with green (working), yellow (needs attention), red (not working) indicator makes the updates easier to digest in large meetings.
This meeting is a good opportunity to remind everyone of quarterly goals.
(iv). Monthly learning sessions: Any employee can share what they are excited about with the rest of the org and/or something new they learned last month. The session is also an opportunity to reinforce operating principles and show how progress is being made towards quarterly goals. Furthermore, these sessions foster a culture of learning and helps interested employees improve their communication skills.
(v) Quarterly on-site: It is important to get together and share meeting the outcomes of quarterly goals and learnings from the quarter. This builds relationships and people are kinder to each other if they have spent time together. The meeting is an opportunity for the management to show how this quarter-over-quarter progress is helping us materialize the shared vision.
This meeting is a good opportunity to remind everyone of yearly goals.
(vi) Annual letter: Follow Warren Buffett and his style. Write the letter for the investors and make it available to employees. Admit your mistakes in the letter and show intellectual honesty while keeping enthusiasm for the future.
By methodically addressing these areas with a competent team, you can transform a chaotic environment into a well-aligned, high-functioning organization, driving towards a unified vision.
