What Got You Here Won’t Get You There - Think. Do. . · PDF fileWhat Got You Here Won’t Get You There Structure for Success Colloquium Filene’s Center for Organizational Entrepreneurship

What Got You Here Won’t Get You There

Structure for Success ColloquiumFilene’s Center for Organizational Entrepreneurship

Tatiana SandinoAssociate Professor

Harvard Business School

China Lodging GroupFounding Years

5

26

67

167

020406080

100120140160180

2005 2006 2007 2008

Num

ber o

f hotels

Qi Ji founds HantingHotels

Qi JiHotelManagers

BermudaTriangle

China Lodging Group

Qi Ji founds Hanting Hotels

New CEO takes over & implements mgmt systems

Qi Ji HotelManagers Bermuda

Triangle

5 2667

167

236

438

639

0

100

200

300

400

500

600

700

2005 2006 2007 2008 2009 2010 2011

Num

ber o

f hotels

Founding Years Professional Management Years

Company Adoption of Operating Budgets & ValuationEarly adopters: adopted a budget by year 2

Late adopters: adopted a budget between years 2 and 4Non‐adopters: had not adopted budget by year 4

Davila,Antonio,GeorgeFosterandNingJia.2010.BuildingSustainableHigh‐GrowthStartUpCompanies:ManagementSystemsasanAccelerator.CaliforniaManagementReview52(3):79‐105.

Sandino,Tatiana.2007.IntroducingtheFirstManagementControlSystems:EvidencefromtheRetailSector.TheAccountingReview82(1):265‐293

Entrepreneurial Management Systems Research

Sales Growth and Perceived Usefulness of Management Systems are Higher for Companies Linking their Systems to their Strategies

China Lodging GroupNew Problems Arose Around 2011…

Ji reinstated as CEO

• Unintendedconsequencesofprocessesandnon‐financialmetrics

• Lostfocusonfinancialresults• Silo‐mentality

2011SignsofTrouble• Newopportunitiesinthemarketwere

ignored• Lowergrowththancompetition• Decreaseinnetincomeof47%

RegionalManagerMid‐Atlantic

Regional ManagerNortheast

Regional ManagerSoutheast

Regional ManagerNorth Central

RegionalManagerSouthwest

Head of HealthcareDelivery

General ManagerNortheast

General Manager

Mid‐Atlantic

General ManagerSoutheast

General ManagerNorth Central

General ManagerSouthwest

Head of Select Accounts

General ManagerNortheast

General Manager

Mid‐Atlantic

General ManagerSoutheast

General Manager

North Central

General ManagerSouthwest

Head of Key

Marketing

Director ofSales Support

Director ofComp Programs

Director ofCommuni‐cations

Head of SalesNortheast

Head of Sales& Strategy

UnderwritingHead

Northeast

Underwriting Head

Mid‐Atlantic

Underwriting HeadSoutheast

Underwriting HeadNorth Central

UnderwritingHeadSouthwest

Head of Underwriting

Case Installation

Director

Plan SponsorServices

Site LeadBuffalo

Site LeadSan Francisco

Site LeadMiami

Head of ServiceOperations

RegionalActuaryNortheast

RegionalActuaryMid‐Atlantic

RegionalActuarySoutheast

RegionalActuaryNorth Centr

RegionalActuarySouthwest

Head of Actuarial

Executive VP of Healthcare Delivery

CommonPurpose?

CompetitorPressures?

Synergieswith Peers?

Customer Needs?

Why do Growing Organizations so Often Lose Their Entrepreneurial Spirit?

Common Purpose is Lost as People Focus on Their Silos

Experimentation Across Units Replaced with Top

Down DirectivesManagement Accountability

Processmeasures –(allow few tradeoffs)

Results measures –(allow many tradeoffs)

Focus on Results is Replaced With Focus on Process

8

Can the Trade‐off Between Growing and Retaining an Entrepreneurial Spirit be Avoided?

Large

Small Start‐UpCompany

?

Systems That Support Growth and an Entrepreneurial Culture

Systems Promoting Innovation

Systems Supporting Strategy

STARSystems

Promoting a Common Purpose

STAR Systems Promoting a Common Purpose…

Systems for Strategy

…communicate and reinforce:– mission

– core values

Systems for Innovation

Systems forPurpose

Does your Mission Communicate an Inspirational Purpose?

– Starbucks: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

– Google: “to organize the world's information and make it universally accessible and useful.”

– Walmart: “to help people save money and live better”

A mission clearly states what the company is trying to accomplish (an inspirational “north star”, not a strategy)



Systems forPurpose

Do Your Core Values Communicate Clear Priorities ?

Customers #1 Suppliers #1

Focused on creating opportunities for

disadvantaged artisans around the world

Ten Thousand Villages

Employees #1

Aspiration to be the Earth’s most customer‐centric company…

Amazon

If you take better care of your employee, your

employee will take better care of your customer,

and this will lead to great results that will make shareholder ecstatic.

The Container Store

Core values help managers and employees decide how to set priorities when faced with challenging situations



Systems forPurpose

Selection Systems (Hiring, Firing, Promotions)

Accountability for Values(Performance Evaluations, Surveys)

Training Systems(Induction, Coaching,Communications)

Reinforcement Systems(Ritual, Traditions,

Routines)

Common Purpose and Values

STAR Systems Can Help Permeate Mission & Values Throughout a Growing Company



Systems forPurpose

Systems That Support Growth and an Entrepreneurial Culture



STARSystems


The Goals: Consistent implementation of the strategy, coordination, simplification of (routine) work

The Risks: Bureaucracy, focus on means rather than ends, silo mentality

To achieve these goals without imposing these measures and standards should be…

1. Carefully picked2. Focused on results3. Flexible

Systems Supporting Strategy Systems for Strategy


Systems forPurpose

Based on the Essential Drivers of the Company’s Strategy

Measures and Standards Should be Carefully Picked

1



Systems forPurpose

On Ground Time

Pick few measures to assess performance

against critical objectives

Example: Essential measures to implement a strategy in a low‐price airline like

Strategic Theme: Operating Efficiency

Profits andreturn-on-capitalFinancial

Learning

Align ground crew to the strategy

Offer lowest prices

Operate with fewer planes

Customer

InternalProcess Achieve fast

ground turnaround

Arrive on-time

GrowRevenues

On Ground Time(target=30 min)



Systems forPurpose

Attract & Retain More Customers

How Do You Prevent Too Much Focus on Process

Rather Than Company Results?



Systems forPurpose

Measures and Standards Focused On Results

QuikTrip in the USA

2Systems for Strategy


Systems forPurpose

Measures and Standards That are Flexible

QuikTrip in the USA

3Systems for Strategy


Systems forPurpose

Systems That Support Growth andan Entrepreneurial Culture



STARSystems


CEO

Upper Management

Support Services and Distribution Center

40 Regional Managers

1,000 Store Supervisors

10,000 Store Managers

20,000 Store Shift Managers

10,000 Clerk Managers

60,000 Clerks

•Mechanisms to surface problems &

suggestions



Systems forPurpose

Mechanisms to Surface Problems and Suggestions

Chain to Surface Disagreements



Systems forPurpose

V

Complaint > escalatesthrough multiple levelsuntil it achieves resolution

Fishbowl Structure Enabling Truth to Speak to Power

CEO

Upper Management







60,000 Clerks


suggestions•Vertical/horizontal creative interactions



Systems forPurpose

Vertical/horizontal interactions



Systems forPurpose

Explicit Systems Implicit Systems(QuikTrip‐ cross‐functional meetings, (Siebel‐made all employees Affinity Plus‐information sharing accountable for customer satisfaction, systems) Handlesbanken‐ allocates corporate

costs to branches)

CEO

Upper Management







60,000 Clerks


suggestions•Vertical/horizontal creative interactions•Experimentation



Systems forPurpose

• Traditional management systems help & hurt growing companieso They help consistently implement the company’s strategy but can hurt

exploration of new opportunities and markets

• Build systems enabling implementation and adaptation of existing strategies

Systems, Fast Growth and Entrepreneurship



STARSystems

Common Purpose• Guide present/future initiatives• Reinforce mission & values

• Carefully picked measures & standards

• Focused on results• Flexible

• Promote disagreement• Promote creative interactions

• Enable experimentation

Thanks!

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What Got You Here Won’t Get You There - Think. Do. . · PDF fileWhat Got You Here Won’t Get You There Structure for Success Colloquium Filene’s Center for Organizational Entrepreneurship