Ideas for Leaders #314

Ideas, Implementation and the Learning Organization

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Key Concept

Employee deviation from official strategy can result in discoveries and innovations that increase profits. It’s not always to be actively encouraged, though. Employees who try to implement the ideas of management — and provide feedback on what works and what doesn’t — can better serve the interests of the organization in the long term.

Idea Summary

Giving people the freedom to work on their own ideas is commonly associated with progressive leadership and company creativity. (Google’s policy of allowing employees to spend 20 per cent of their time on ‘pet’, company-related, projects, has led to profitable innovations such as AdSense and Gmail.) But is this ‘bottom-up exploration’ consistent with the idea of ‘holistic’ organizational learning and continuous improvement?

A recent research paper by Eucman Lee, a PhD student at London Business School, and Phanish Puranam, a professor of strategy at INSEAD, suggests that improving the ability of employees to implement top-down strategy might be better for the long-term health of an organization.

The researchers focused on the ‘separation of beliefs and actions’ in the implementation of strategy, i.e. the gap between those who usually come up with the ideas (managers) and those who usually try to make them ‘happen’ (subordinates), common in all but the smallest of organizations. To study the consequences of this separation, they used a ‘computational agent-based model’, essentially a computer program that replicates interactions between individuals in a variety of circumstances.

The model involved a manager (M) and a subordinate (S), programmed to look for the biggest possible profit by choosing from a range of options by trial and error. The manager would pick a strategy, ‘tell’ the subordinate what to do, the subordinate would implement the strategy as they understood it, there would be a performance outcome, and the manager would adapt their ‘beliefs’ according to whether the outcome was good or bad. Over time, different features were built in, corresponding to real-world communication errors and top-down and bottom-up exploration of ideas.

The results prove the merits of ‘relentless pursuit of effective implementation’, challenging the assumption that, since no strategy can ever be perfect, efforts to improve the execution of strategy are futile. Lee and Puranam found that, across the range of conditions, it was generally a good idea to improve the effectiveness of S — even when the strategy chosen by M was not necessarily a good one to begin with.

Says the paper: “When there is a separation of belief and action, as is frequent in organizations because of delegation, effective implementation has benefits beyond the well-known effect of enabling exploitation of good strategies. It also enables the discovery of better strategies by allowing more effective learning from feedback on the value of current strategies.”

One of the key advantages of effective implementation is that it helps solve the ‘attribution problem’. Put very simply, if you know that every effort has been made to implement the strategy effectively, you’ll have a clearer idea of where the problem lies if it goes wrong — and will therefore be in a stronger position to ‘get it right next time’.

So is employee deviation from management strategy generally a bad thing? Must subordinates always toe the line? The paper does not argue that or warn against employee autonomy and ‘empowerment’. It does, however, point to the need for co-operation between managers and subordinates and for upward and downward communication. Its central message, perhaps, is this: learning from failure is a success — and, in organizations, collaborative learning, rather than learning ‘in a vacuum’, is usually best.

Business Application

The research has two main implications for organizations. It suggests that leaders should:

  • Continue to invest in improving the way strategy is implemented.
  • Make sure the way strategy is implemented is effectively measured.

There is, in other words, both an implementation imperative and a measurement imperative. The efforts of employees have to be matched by the efforts of project leaders to ‘read’ results — and take remedial action where necessary. “A manager who looks and listens and accurately interprets implementation effectiveness can be a greater asset than a silver-tongued boardroom orator who knows how to communicate the strategy effectively,” writes Puranam in an article for INSEAD Knowledge.

The rationale is not only that measurement and monitoring keep employees on track but also that they uncover flaws and help discover ‘fixes’. Puranam continues: “The potential breakthroughs that occasionally come about when employees (wittingly or unwittingly) deviate from company strategy are unlikely to be replaced, let alone propagated as best practice, without management intervention.” 

Trying to make a strategy work, ‘relentless pursuit of effective implementation’, is, then, not necessarily conservative. On the contrary, it can lead to innovations that change the organization — for the better.

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Authors

Institutions

Source

Idea conceived

  • July 2013

Idea posted

  • January 2014

DOI number

10.13007/314

Subject

Real Time Analytics