#1 NEW YORK TIMES BESTSELLER • More than two million copies in print! The premier resource for how to deliver results in an uncertain world, whether you’re running an entire company or in your first management job.
“A must-read for anyone who cares about business.”—The New York Times
Execution was first published, it changed the way we did our jobs by focusing on the critical importance of “the discipline of execution”: the ability to make the final leap to success by actually getting things done. Larry Bossidy and Ram Charan now reframe their empowering message for a world in which the old rules have been shattered, radical change is becoming routine, and the ability to execute is more important than ever. Now and for the foreseeable future:
Growth will be slower. But the company that executes well will have the confidence, speed, and resources to move fast as new opportunities emerge.
Competition will be fiercer, with companies searching for any possible advantage in every area from products and technologies to location and management.
Governments will take on new roles in their national economies, some as partners to business, others imposing constraints. Companies that execute well will be more attractive to government entities as partners and suppliers and better prepared to adapt to a new wave of regulation.
• Risk management will become a top priority for every leader.
Execution gives you an edge in detecting new internal and external threats and in weathering crises that can never be fully predicted.
Execution shows how to link together people, strategy, and operations, the three core processes of every business. Leading these processes is the real job of running a business, not formulating a “vision” and leaving the work of carrying it out to others. Bossidy and Charan show the importance of being deeply and passionately engaged in an organization and why robust dialogues about people, strategy, and operations result in a business based on intellectual honesty and realism.
With paradigmatic case histories from the real world—including examples like the diverging paths taken by Jamie Dimon at JPMorgan Chase and Charles Prince at Citigroup—
Execution provides the realistic and hard-nosed approach to business success that could come only from authors as accomplished and insightful as Bossidy and Charan.
Disciplines like strategy, leadership development, and innovation are the sexier aspects of being at the helm of a successful business; actually getting things done never seems quite as glamorous. But as Larry Bossidy and Ram Charan demonstrate in
Execution, the ultimate difference between a company and its competitor is, in fact, the ability to execute.
Execution is "the missing link between aspirations and results," and as such, making it happen is the business leader''s most important job. While failure in today''s business environment is often attributed to other causes, Bossidy and Charan argue that the biggest obstacle to success is the absence of execution. They point out that without execution, breakthrough thinking on managing change breaks down, and they emphasize the fact that execution is a discipline to learn, not merely the tactical side of business. Supporting this with stories of the "execution difference" being won (EDS) and lost (Xerox and Lucent), the authors describe the building blocks--leaders with the right behaviors, a culture that rewards execution, and a reliable system for having the right people in the right jobs--that need to be in place to manage the three core business processes of people, strategy, and operations. Both Bossidy, CEO of Honeywell International, Inc., and Charan, advisor to corporate executives and author of such books as What the CEO Wants You to Know and Boards That Work, present experience-tested insight into how the smooth linking of these three processes can differentiate one company from the rest. Developing the discipline of execution isn''t made out to be simple, nor is this book a quick, easy read. Bossidy and Charan do, however, offer good advice on a neglected topic, making Execution a smart business leader''s guide to enacting success rather than permitting demise. --S. Ketchum
Bossidy, an award-winning executive at General Electric and Allied Signal, came out of retirement to tend to Honeywell (and bring it back to prominence) after it failed to merge with General Electric. Charan has taught at Harvard and Kellogg Business Schools. Collaborating with editor and writer Burck, they present the viewpoint that execution (that is, linking a company''s people, strategy, and operations) is what will determine success in today''s business world. Bossidy and Charan aver that execution is a discipline integral to strategy, that it is the major job of any business leader hoping not just to be a success but to dominate a market, and that it is a core element of corporate culture. Details of both successful and unsuccessful executions at corporations such as Dell, Johnson & Johnson, and Xerox, to name a few, support not only their how-to method for bringing execution to the forefront but also the need for it. Each author addresses specific topics in paragraphs that begin with either "Larry" or "Ram," and this easy style adds to the appeal of a very readable book. Recommended for academic and public libraries.
Steven J. Mayover, Philadelphia
Copyright 2002 Reed Business Information, Inc.
“If you want to be a CEO—or if you are a CEO and want to keep your job—read
Execution and put its principles to work.”
—Michael Dell, chairman and CEO, Dell Computer Corp.
“Good practical insight and advice on managing for results at firms of any size.
Execution is key, and this book clearly explains what it means and how it brings together the critical elements of any organization—its people, strategies, and operations.”
—L. R. Raymond, chairman and CEO, Exxon Mobil
“The best-thought-out plans in the world aren’t worth the paper they’re written on if you can’t pull them off. And that’s what this book is all about.
Execution: The Discipline of Getting Things Done is well written and gives sound, practical advice about how to make things happen. It is well worth the reading.”
—Ralph S. Larsen, chairman and CEO, Johnson & Johnson
“Larry Bossidy recognizes how execution in a business defines the true greatness of a company. He captures a lifetime of building winning formulas and puts them in a simple and practical context for executives at any level. Read it!”
—Ivan Seidenberg, president and co–chief executive officer, Verizon
“For those managers who have struggled to make it happen, fix a problem, get it done—or otherwise transform winning strategies into genuine results—here’s the missing medicine from two who know from long experience what works and what doesn’t. Larry Bossidy and Ram Charan offer a compelling leadership prescription, and it comes down to realism, discipline, and above all, great execution.”
—Michael Useem, professor of management and director of the Center for Leadership and Change, Wharton School, University of Pennsylvania
“Larry Bossidy and Ram Charan define the true meaning of leadership from an implementation point of view. Larry is the expert on productivity in the world of business, and this book demonstrates how leadership is the key to achieving ongoing financial success.”
—Richard Schroeder, cofounder of Six Sigma Academy
The book that shows how to get the job done and deliver results . . . whether you?re running an entire company or in your first management job
Larry Bossidy is one of the world?s most acclaimed CEOs, a man with few peers who has a track record for delivering results. Ram Charan is a legendary advisor to senior executives and boards of directors, a man with unparalleled insight into why some companies are successful and others are not. Together they?ve pooled their knowledge and experience into the one book on how to close the gap between results promised and results delivered that people in business need today.
After a long, stellar career with General Electric, Larry Bossidy transformed AlliedSignal into one of the world?s most admired companies and was named CEO of the year in 1998 by
Chief Executive magazine. Accomplishments such as 31 consecutive quarters of earnings-per-share growth of 13 percent or more didn?t just happen; they resulted from the consistent practice of the discipline of execution: understanding how to link together people, strategy, and operations, the three core processes of every business.
Leading these processes is the real job of running a business, not formulating a ?vision? and leaving the work of carrying it out to others. Bossidy and Charan show the importance of being deeply and passionately engaged in an organization and why robust dialogues about people, strategy, and operations result in a business based on intellectual honesty and realism.
The leader?s most important job?selecting and appraising people?is one that should never be delegated. As a CEO, Larry Bossidy personally makes the calls to check references for key hires. Why? With the right people in the right jobs, there?s a leadership gene pool that conceives and selects strategies that can be executed. People then work together to create a strategy building block by building block, a strategy in sync with the realities of the marketplace, the economy, and the competition. Once the right people and strategy are in place, they are then linked to an operating process that results in the implementation of specific programs and actions and that assigns accountability. This kind of effective operating process goes way beyond the typical budget exercise that looks into a rearview mirror to set its goals. It puts reality behind the numbers and is where the rubber meets the road.
Putting an execution culture in place is hard, but losing it is easy. In July 2001 Larry Bossidy was asked by the board of directors of Honeywell International (it had merged with AlliedSignal) to return and get the company back on track. He?s been putting the ideas he writes about in
Execution to work in real time.
The book that shows how to get the job done and deliver results . . . whether you''re running an entire company or in your first management job
Larry Bossidy is one of the world''s most acclaimed CEOs, a man with few peers who has a track record for delivering results. Ram Charan is a legendary advisor to senior executives and boards of directors, a man with unparalleled insight into why some companies are successful and others are not. Together they''ve pooled their knowledge and experience into the one book on how to close the gap between results promised and results delivered that people in business need today.
After a long, stellar career with General Electric, Larry Bossidy transformed AlliedSignal into one of the world''s most admired companies and was named CEO of the year in 1998 by "Chief Executive magazine. Accomplishments such as 31 consecutive quarters of earnings-per-share growth of 13 percent or more didn''t just happen; they resulted from the consistent practice of the discipline of execution: understanding how to link together people, strategy, and operations, the three core processes of every business.
Leading these processes is the real job of running a business, not formulating a "vision" and leaving the work of carrying it out to others. Bossidy and Charan show the importance of being deeply and passionately engaged in an organization and why robust dialogues about people, strategy, and operations result in a business based on intellectual honesty and realism.
The leader''s most important job--selecting and appraising people--is one that should never be delegated. As a CEO, Larry Bossidy personally makes the calls to check references for key hires. Why?With the right people in the right jobs, there''s a leadership gene pool that conceives and selects strategies that can be executed. People then work together to create a strategy building block by building block, a strategy in sync with the realities of the marketplace, the economy, and the competition. Once the right people and strategy are in place, they are then linked to an operating process that results in the implementation of specific programs and actions and that assigns accountability. This kind of effective operating process goes way beyond the typical budget exercise that looks into a rearview mirror to set its goals. It puts reality behind the numbers and is where the rubber meets the road.
Putting an execution culture in place is hard, but losing it is easy. In July 2001 Larry Bossidy was asked by the board of directors of Honeywell International (it had merged with AlliedSignal) to return and get the company back on track. He''s been putting the ideas he writes about in Execution to work in real time.
Larry Bossidy is chairman and former CEO of Honeywell International, a Fortune 100 diversified technology and manufacturing leader. Earlier in his career he was chairman and CEO of AlliedSignal, chief operating officer of General Electric Credit (now GE Capital Corporation), executive vice president and president of GE’s Services and Materials Sector, and vice chairman of GE.
Ram Charan is a highly sought advisor to CEOs and senior executives in companies ranging from start-ups to the Fortune 500, including GE, DuPont, EDS, and Colgate-Palmolive. He is the author of
What the CEO Wants You to Know and
Boards That Work and the coauthor of
Every Business Is a Growth Business. Dr. Charan has taught at both the Harvard Business School and the Kellogg School of Northwestern University.
Charles Burck is a writer and editor who collaborated with Larry Bossidy and Ram Charan. Earlier in his career he was an editor at
The Gap Nobody Knows
The CEO was sitting in his office late one evening, looking tired and drained. He was trying to explain to a visitor why his great strategic initiative had failed, but he couldn''t figure out what had gone wrong.
"I''m so frustrated," he said. "I got the group together a year ago, people from all the divisions. We had two off-site meetings, did benchmarking, got the metrics. McKinsey helped us. Everybody agreed with the plan. It was a good one, and the market was good.
"This was the brightest team in the industry, no question about it. I assigned stretch goals. I empowered them-gave them the freedom to do what they needed to do. Everybody knew what had to be done. Our incentive system is clear, so they knew what the rewards and penalties would be. We worked together with high energy. How could we fail?
"Yet the year has come to an end, and we missed the goals. They let me down; they didn''t deliver the results. I have lowered earnings estimates four times in the past nine months. We''ve lost our credibility with the Street. I have probably lost my credibility with the board. I don''t know what to do, and I don''t know where the bottom is. Frankly, I think the board may fire me."
Several weeks later the board did indeed fire him.
This story-it''s a true one-is the archetypal story of the gap that nobody knows. It''s symptomatic of the biggest problem facing corporations today. We hear lots of similar stories when we talk to business leaders. They''re played out almost daily in the press, when it reports on companies that should be succeeding but aren''t: Aetna, AT&T, British Airways, Campbell Soup, Compaq, Gillette, Hewlett-Packard, Kodak, Lucent Technologies, Motorola, Procter & Gamble, Xerox, and many others.
These are good companies. They have smart CEOs and talented people, they have inspiring visions, and they bring in the best consultants. Yet they, and many other companies as well, regularly fail to produce promised results. Then when they announce the shortfall, investors dump their stocks and enormous market value is obliterated. Managers and employees are demoralized. And increasingly, boards are forced to dump the CEOs.
The leaders of all the companies listed above were highly regarded when they were appointed-they seemed to have all of the right qualifications. But they all lost their jobs because they didn''t deliver what they said they would. In the year 2000 alone, forty CEOs of the top two hundred companies on Fortune''s 500 list were removed-not retired but fired or made to resign. When 20 percent of the most powerful business leaders in America lose their jobs, something is clearly wrong. This trend continued in 2001 and will clearly be in evidence in 2002.
In such cases it''s not just the CEO who suffers-so do the employees, alliance partners, shareholders, and even customers. And it''s not just the CEO whose shortcomings create the problem, though of course he or she is ultimately responsible.
What is the problem? Is it a rough business environment? Yes. Whether the economy is strong or weak, competition is fiercer than ever. Change comes faster than ever. Investors-who were passive when today''s senior leaders started their careers-have turned unforgiving. But this factor by itself doesn''t explain the near-epidemic of shortfalls and failures. Despite this, there are companies that deliver on their commitments year in and year out-companies such as GE, Wal-Mart, Emerson, Southwest Airlines, and Colgate-Palmolive.
When companies fail to deliver on their promises, the most frequent explanation is that the CEO''s strategy was wrong. But the strategy by itself is not often the cause. Strategies most often fail because they aren''t executed well. Things that are supposed to happen don''t happen. Either the organizations aren''t capable of making them happen, or the leaders of the business misjudge the challenges their companies face in the business environment, or both.
Former Compaq CEO Eckhard Pfeiffer had an ambitious strategy, and he almost pulled it off. Before any of his competitors, he saw that the so-called Wintel architecture-the combination of the Windows operating system and Intel''s constant innovation-would serve for everything from a palm-held to a linked network of servers capable of competing with mainframes.
Mirroring IBM, Pfeiffer broadened his base to serve all the computing needs of enterprise customers. He bought Tandem, the high-speed, failsafe mainframe manufacturer, and Digital Equipment Company (DEC) to give Compaq serious entry into the services segment. Pfeiffer moved at breakneck speed on his bold strategic vision, transforming Compaq from a failing niche builder of high-priced office PCs to the second-biggest computer company (after IBM) in just six years. By 1998 it was poised to dominate the industry.
But the strategy looks like a pipe dream today. Integrating the acquisitions and delivering on the promises required better execution than Compaq was able to achieve. More fundamentally, neither Pfeiffer nor his successor, Michael Capellas, pursued the kind of execution necessary to make money as PCs became more and more of a commodity business.
Michael Dell understood that kind of execution. His direct-sales and build-to-order approach was not just a marketing tactic to bypass retailers; it was the core of his business strategy. Execution is the reason Dell passed Compaq in market value years ago, despite Compaq''s vastly greater size and scope, and it''s the reason Dell passed Compaq in 2001 as the world''s biggest maker of PCs. As of November 2001, Dell was shooting to double its market share, from approximately 20 to 40 percent.
Any company that sells direct has certain advantages: control over pricing, no retail markups, and a sales force dedicated to its own products. But that wasn''t Dell''s secret. After all, Gateway sells direct too, but lately it has fared no better than Dell''s other rivals. Dell''s insight was that building to order, executing superbly, and keeping a sharp eye on costs would give him an unbeatable advantage.
In conventional batch production manufacturing, a business sets its production volume based on the demand that is forecast for the coming months. If it has outsourced component manufacturing and just does the assembling, like a computer maker, it tells the component suppliers what volumes to expect and negotiates the prices. If sales fall short of projections, everybody gets stuck with unsold inventory. If sales are higher, they scramble inefficiently to meet demand.
Building to order, by contrast, means producing a unit after the customer''s order is transmitted to the factory. Component suppliers, who also build to order, get the information when Dell''s customers place their orders. They deliver the parts to Dell, which immediately places them into production, and shippers cart away the machines within hours after they''re boxed. The system squeezes time out of the entire cycle from order to delivery-Dell can deliver a computer within a week or less of the time an order is placed. This system minimizes inventories at both ends of the pipeline, incoming and outgoing. It also allows Dell customers to get the latest technological improvements more often than rivals'' customers.
Build-to-order improves inventory turnover, which increases asset velocity, one of the most underappreciated components of making money. Velocity is the ratio of sales dollars to net assets deployed in the business,
which in the most common definition includes plant and equipment, inventories, and accounts receivable minus accounts payable. Higher velocity improves productivity and reduces working capital. It also improves cash flow, the life blood of any business, and can help improve margins as well as revenue and market share.
Inventory turns are especially important for makers of PCs, since inventories account for the largest portion of their net assets. When sales fall below forecast, companies with traditional batch manufacturing, like Compaq, are stuck with unsold inventory. What''s more, computer components such as microprocessors are particularly prone to obsolescence because performance advances so rapidly, often accompanied by falling prices. When these PC makers have to write off the excess or obsolete inventory, their profit margins can shrink to the vanishing point.
Dell turns its inventory over eighty times a year, compared with about ten to twenty times for its rivals, and its working capital is negative. As a result, it generates an enormous amount of cash. In the fourth quarter of fiscal 2002, with revenues of $8.1 billion and an operating margin of 7.4 percent, Dell had cash flow of $1 billion from operations. Its return on invested capital for Fiscal 2001 was 355 percent-an incredible rate for a company with its sales volume. Its high velocity also allows it to give customers the latest technological improvements ahead of other makers, and to take advantage of falling component costs-either to improve margins or to cut prices.
These are the reasons Dell''s strategy became deadly for its competitors once PC growth slowed. Dell capitalized on their misery and cut prices in a bid for market share, increasing the distance between it and the rest of the industry. Because of its high velocity, Dell could show high return on capital and positive cash flow, even with margins depressed. Its competition couldn''t.
The system works only because Dell executes meticulously at every stage. The electronic linkages among suppliers and manufacturing create a seamless extended enterprise. A manufacturing executive we know who worked at Dell for a time calls its system "the best manufacturing operation I''ve ever seen."
As this book goes to press, the merger between Compaq and Hewlett-Packard, proposed in mid-2001, is still up in the air. No matter: Alone or in combination, nothing they do will make them competitive with Dell unless they come up with an equal or better build-to-order production model.
The chronic underperformers we''ve mentioned so far have lots of company. Countless others are less than they could be because of poor execution. The gap between promises and results is widespread and clear. The gap nobody knows is the gap between what a company''s leaders want to achieve and the ability of their organization to achieve it.
Everybody talks about change. In recent years, a small industry of changemeisters has preached revolution, reinvention, quantum change, breakthrough thinking, audacious goals, learning organizations, and the like. We''re not necessarily debunking this stuff. But unless you translate big thoughts into concrete steps for action, they''re pointless. Without execution, the breakthrough thinking breaks down, learning adds no value, people don''t meet their stretch goals, and the revolution stops dead in its tracks. What you get is change is for the worse, because failure drains the energy from your organization. Repeated failure destroys it.
These days we''re hearing a more practical phrase on the lips of business leaders. They''re talking about taking their organizations to the "next level," which brings the rhetoric down to earth. GE CEO Jeff Immelt, for example, is asking his people how they can use technology to differentiate their way to the next level and command better prices, margins, and revenue growth.
This is an execution approach to change. It''s reality-based-people can envision and discuss specific things they need to do. It recognizes that meaningful change comes only with execution.
No company can deliver on its commitments or adapt well to change unless all leaders practice the discipline of execution at all levels. Execution has to be a part of a company''s strategy and its goals. It is the missing link between aspirations and results. As such, it is a major-indeed, the major-job of a business leader. If you don''t know how to execute, the whole of your effort as a leader will always be less than the sum of its parts.