Are Your Executives Sabotaging Your Strategy

By Gershon Leibner

Mar. 7, 2007

Many chief executives have learned that they must win the heads and hearts of employees to achieve their strategies. This is particularly true in companies battling unprecedented competition—onshore or offshore companies that have forced management to pursue a whole new strategy and make dramatic improvements in operating performance.

    As General Electric’s legendary ex-CEO Jack Welch puts it: “We live in a global economy. To have a fighting chance, companies need to get every employee, with every idea in their heads and every morsel of energy in their bodies, into the game.”

    But CEOs face tremendous obstacles in generating strong internal commitment to their plans. Numerous “employee engagement” polls have documented morale problems in a growing number of organizations. Yet most CEOs we know are barely surprised—and barely worried—when the middle and lower ranks of their firm aren’t fully on board. The thinking of these CEOs is that as long as their top management team is behind the plan, the next layer of management and the layer below them (and on and on) will eventually fall in line.

    This thinking is both wrong and risky. The reason: Surprisingly, even the senior management team is often not truly committed to the CEO’s strategy either. During the past five years, we have seen this situation in over a dozen large companies whose leaders asked us to help them define and implement their strategy.

    For sure, executive team members did what the CEO asked them to do. They were dutifully attempting to perform their tasks in executing the strategy. But they weren’t getting fully behind it and pulling out all the stops to make it happen. When the strategy appeared to be flawed even in the smallest of ways, executive team members either pointed them out, blamed others for not doing their share, or stayed silent and let the flaws unfold rather than go out of their way to correct them and make the strategy work.

    Many organizational strategies, even some of the most ingenious ones, fail or fall short because of weak commitment at the top. Rarely is such apathy verbalized. When it’s not, it becomes silent sabotage. In fact, it is an unspoken form of resistance of the deadliest type because the CEO typically doesn’t realize it until it’s too late. But it’s also a problem that HR executives can help the CEO to recognize and overcome.

    As we’ll explain later in this article, senior HR managers who do so can greatly boost their impact on company performance and become the CEO’s confidant.

    We’ve seen such resistance form at the top of companies numerous times. We worked with the CEO of a large manufacturing company who had launched an aggressive growth strategy targeting double-digit annual revenue and profit growth. His initiative had come after several tough years with minimal bottom-line improvement.

    The CEO told his senior executive team how committed he was to the strategy. In turn, the team members expressed their commitment to it as well. However, after several months of little progress, the CEO felt he had no choice but to intervene. He held town hall-style meetings with managers and workers to find out what was going on and communicate the strategy.

    In those meetings he learned that sales, marketing, manufacturing and other business functions were not collaborating with one another at all to make the strategy work. Managers in each function distrusted and barely talked to the managers of other functions. Each function was focused on its own success. Despite his executive team’s insistence that they were fully behind his strategy, the CEO saw that their behaviors (and the actions of the people under them) said otherwise.

    This scenario is the rule, not the exception. It helps explain the high failure rate of corporate change initiatives—60 percent by some estimates. But it doesn’t have to be this way. In the companies we know, once CEOs understood what they had to do to gain the commitment of their direct reports, in almost every case they created a senior management team whose level of commitment enabled them to overcome the inevitable flaws in the strategy. The result: In most cases they exceeded the goals they set in financial and operating improvements.

    But generating strong total commitment is something CEOs can’t do by themselves. The reason: Executives’ commitment to their CEO’s strategy is largely based on how they view their CEO, a sensitive topic they typically won’t talk about openly to the CEO or other team members.

    The HR executive can be the perfect go-between, someone who can help the CEO create an environment of honesty and openness at the top of the organization. In fact, it’s a role that HR executives are uniquely positioned to play – if they know how to do so and are willing to take the risk. The risk comes from telling a CEO about issues he may not want to hear. But the risk can have outsized returns: becoming the CEO’s closest internal confidant, coach and partner in getting the organization squarely behind his strategy.

    The momentum required to transform a company starts at the top. When a firm embarks on a major shift in, or acceleration of, a strategy, the CEO must first get the senior management team to embrace the change. If they don’t, their direct reports will pick up on their cues that the strategy isn’t right and that they, too, don’t have to take it seriously. That attitude will then cascade down through the organization, level by level, no matter how many consultants the CEO brings in, how many town hall meetings he convenes, or how many internal e-mails and videos he produces imploring everyone to get behind the strategy.

    So why aren’t many top executives in sync with what the CEO wants them to do? In our previous Workforce Management magazine column, we explained that CEOs pay too much attention to the “content issues” of their strategy – creating a viable strategy and clearly explaining it internally. We then discussed why they often failed to generate the internal commitment: by ignoring the “context issues.” This refers to addressing employees’ perceptions about the CEO’s courage, competence and sincerity, as well as the concern that he holds about employees. Failing to address context issues undermines employee commitment.

    To many, lack of commitment to a CEO’s strategy is far more understandable at the lower levels of an organization than it is at the top. Following wave after wave of downsizings the past 20 years, many frontline employees have come to believe that the CEO sees them as expendable. But why are top executives—the employees who are usually paid the most and the closest to influencing the CEO’s strategy—often not on board? Many times it’s because the CEO believes money buys commitment. That is, if he pays his executives well enough, he ought to be buying their allegiance.

    But in companies that haven’t addressed and solved the context issues at the top, no amount of money will persuade the CEO’s direct reports to get fully behind him. If they feel the CEO doesn’t care for them (which includes not being concerned about the executive team climate and working dynamics) or won’t include them in shaping the strategy, they are likely to go through the motions and do only what’s necessary to collect their paycheck (before they find another employer).

    The CEOs of two of our clients were stunned after we told them that their management team members were dissatisfied with the climate and strategy of the firm.

    “I made all these guys millionaires and they’re still unhappy,” said one CEO. “I don’t get it.”

    What he didn’t get is that compensation is only a temporary motivator. Once the immediate gratification from the raise wears off, the initial boost in commitment will begin to waver. In fact, if managers believe they’ve become hostages to their fortunes, their morale may weaken even further. All to say that commitment to a strategy can’t be bought. Too many CEOs are constantly trying to buy it.

    So how can HR executives help the CEO defuse the silent saboteurs and turn them into passionate and effective executors of a new strategy? By helping the CEO detect, address and resolve the context issues.

    That is, by helping the CEO understand how he is perceived by his executive team (and the rest of the organization), no punches pulled, and coaching him on what he must do to change those perceptions. It also requires the HR executive to continually track such perceptions and report them back to the CEO in a way that won’t result in retribution. (In this way, the HR executive must also become the confidant of his peers, the executive team members.) This, of course, requires that the HR executive have courage and take risk. Yet we believe the reward will far outstrip the risk of allowing what many HR executives who yearned to do since they entered the field: to make a fundamental difference in the spirit and energy of a company.

    A big caveat here: While we wholeheartedly believe that HR executives can and must play this vaunted role, they must be careful not to overstep the bounds of the role. That is, the HR executive can’t become the organizational front man for a CEO who prefers to delegate the job of communicating the content and addressing the context issues for a new strategy.

    This happened to an HR executive in a large financial institution who headed a major cultural change initiative. He and his HR team invested significant resources in rolling out a series of mandatory meetings for managers and workers across the organization. In the meetings, the HR head explained the values and strategy of the organization. But other executive team members quickly resented the HR executive for appearing to grab power that didn’t belong to him. More important, the cultural change initiative was greatly resisted by managers who expressed resentment about the CEO’s absence in the process. Only after the CEO got the message and took ownership of the initiative did the program succeed.

    We have seen similar dynamics in other companies.

    HR executives who take on this role have made a big difference in the level of commitment in their companies. Corey Heller, the top HR executive at the USA division of CHEP, a $3 billion pallet and container leasing company, has been increasingly instrumental in getting his CEO to understand his commitment “blockers” and address them effectively. He’s become accustomed to the risk in his job from addressing tough context issues. In fact, he says his job satisfaction today is correlated with his confidence in assuming risk.

    “The best part of my job is when I directly impact and influence the leadership of this company. My ability to do so is directly related to how much risk I am willing to take,” he says.

    In contrast, another HR executive whom we know gave up trying to coach his CEO in this manner. The company’s performance has been flat, and the majority of the executive team (other than the CEO) is dispirited.

    “The minute I realized I couldn’t make a difference, I knew it was over,” he told us. He toils in misery at the company, ready to jump to another firm after he collects his bonus.

    Smart CEOs realize they need such coaches to meet or exceed their goals. As the treadmill of competition accelerates in industry after industry and CEO tenures become shorter and shorter, HR executives who can play the role will become highly coveted advisors that no CEO can do without.

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