Understanding the entire company
— Sales Development Rep
In the last post, we talked about communicating your strategy to employees and letting them know how they can contribute. I thought the best way to communicate strategy was to have one in the first place. I don’t mean to be a jerk, but we all know that having a coherent business strategy is not a given. It’s more of an exception to the rule.
The proof, as management consultants love to point out, are all the merger and acquisition deals gone bad. Why make a costly acquisition if you have no strategy to back it up? Alan Lewis and Dan McKone put it this way:
“We have all seen or heard of high-profile cases where M&A deals didn’t work out. AOL-Time Warner, HP-Compaq, Quaker-Snapple — these are just some of the big ones. An analysis of 2,500 such deals by our firm shows that more than 60% of them destroy shareholder value… And yet even in light of such daunting data, many corporate leaders feel compelled to pursue growth through M&A, figuring the risks of inaction are just as high. After all, if acquisitions pay off they can provide a transformational antidote to a slowing core market and declining margins.” 1
Lewis and McKone warn that poorly thought-through acquisitions “can result in serious damage to your corporate health, up to and including death.” For one thing, bad deals confuse the daylights out of your employees, including those you count on the most to make the deal work: your salespeople.
Although I don’t know this for a fact, today’s biggest challenge at work has likely come from a sales rep who has been through a couple of these acquisitions. He no longer understands who handles what. He has no idea what the company stands for. And he looks dumb in front of customers who ask these sorts of questions.
A case in point is a national insurance carrier that acquired ten regional property and casualty insurers. Before it went on an acquisition spree, the parent company sold property and casualty insurance through in-house reps. The acquired companies, however, sold through independent agents. The parent company’s strategy was to lower new customer acquisition costs by realizing economies of scale. But the savings never materialized.
Dumbfounded, the company asked one of the independent agencies why they weren’t getting more business. The agent said: “Look, last week I quoted a policy for one of my customers. That customer received three quotes. One from me. One from the agent across the street. And one from your company directly. All three quotes were by the same carrier: you. If you keep competing against yourself, you are never going to win.”
A calculated integration process is a good sign that a strategy exists. Here’s another one: does your company spin anything off? When you gobble up companies that are themselves products of mergers and acquisitions, is it possible that every unit of the resulting organization fits your strategy and serves your goals? If you are not separating your sheep from your goats, you probably don’t see the difference between the two. And if you don’t get it, you can’t explain it to your sales reps either.
The problem of missing the big picture is not limited to bad M&A deals. According to a 2015 study by Zeno Group, one-third of the executives and a majority of the workforce are not satisfied with the current state of affairs:
“… among more than 300 executives at firms with revenues of $1 billion or more, a full one-third (33%) of executives were not confident that their employees could accurately communicate the company’s business strategy to others. Only 19 percent of executives reported being very confident that their employees could do so. At the same time, in Zeno’s related survey of 1,000 Americans, a majority (57%) reported they ‘would perform better at their jobs if they better understood the company’s direction.’” 2
The larger the company, the more confusing it is to employees:
“Notably, as a firm grows, all of these statistics worsen… Executives of large firms posted the lowest confidence in employees’ ability to communicate the business strategy to others (59% whose companies have 10,000+ employees vs. 78% whose companies have less than 10,000 employees)…” 2
But let’s say your company has a bulletproof strategy, which it regularly broadcasts to employees and other stakeholders. What are the odds your employees know it?
A 2013 Australian study says that companies who get strategy right need to work harder at communicating it to employees. 3
Professor Devinney of the University of Technology in Sydney led a study of twenty major corporations in five industries. All the companies were market leaders. All had won awards for environmentally and socially conscious practices. All publicize their business, environmental and social responsibility strategies and provide annual reports detailing their contributions.
In the study, employees had to choose one out of six strategy statements that matched their firm. Only 29.3 percent correctly identified the company’s business strategy, while only 15.8 percent (less than chance!) chose the correct environmental strategy.
Most employees in the study were oblivious to the fact that these strategies even existed. Only 36.5 percent had seen their company’s annual report. Only 29.2 percent knew their company pursued an environmental sustainability strategy. And only 16.6 percent realized their company had a social responsibility strategy.
Given the disappointing results of his study, Dr. Devinney questions the conventional wisdom that high-level vision does anything to engage employees:
“It may be delusional to believe that staff or line workers need to be cognizant about higher-level strategic issues to be effective, although this runs counter to those believing strongly in the value of ‘engagement.’”
He points out that middle managers are better attuned to the company strategy than are lower-level employees. And that it is up to them to distill high-level strategy into precise routines for their teams:
“What matters most is documentation that outlines clearly how more vaguely articulated strategies are to be implemented—note that these are not mission statements, statements of value or codes of conduct but actual ‘how to’ manuals.”
If your company believes in a triple bottom line, should it compensate employees accordingly?
“When we asked individuals about what determines their pay and their performance appraisal, items such as ‘meeting the organization’s sustainability goals’ and ‘meeting the company’s social responsibility goals’ came out dead last. No wonder that employees spend no time worrying about whether or not they know the company’s sustainability strategy.”
The language plays a role as well. If you want employees to remember what the company stands for, make the words meaningful and memorable:
“The reality is that employees seem to be more cognizant of the firm’s corporate strategy than its environmental strategy, with a random employee being clueless about both. This may imply that most firms’ environmental strategies are so loaded with general motherhood statements that there is not much that distinguishes them from the ‘feelgood’ reports of their competitors.”
If you can’t get all of your employees on board, prioritize the ones whose job performance depends on it. I would put any customer-facing employee, and sales especially, in that category. To see how understanding the company and believing in its mission gives sales and customer-service an edge, check out “How to Use Employee Engagement Secrets to Skyrocket Sales”.
____
If you want your employees to feel good about your company, you might like my book, because it gives them 23 reasons to do so.
____
[1] Alan Lewis, Dan McKone, So Many M&A Deals Fail Because Companies Overlook This Simple Strategy, Harvard Business Review, May 10, 2016
[2] Zeno Group Study Explores Reasons Why Employees Are So Disengaged, June 10, 2015, from Zeno Group
[3] Timothy Devinney, All talk, no action: why company strategy often falls on deaf ears, theconversation.com, March 25, 2013)
