The Vagabond VibesWinning Now, Winning later is written by David M Cote, who became the CEO of Honeywell in 2012, is a masterpiece on leadership and foresight in planning. It focusses on the importance of the balance between planning and execution.
The Problem Statement:1. A McKinsey study found that firms that followed long term strategies amassed $7bn more in M-cap between 2001 and 2014, generated 47% more revenue growth and 36% more earning on average than companies that focused on the short term. Nevertheless, when coming to allocating scarce resources, short-termism overpowers the long term strategy. A lot of leaders feel that short term must be sacrificed for the long term, like they are mutually exclusive. But you must pursue both at the same time to reach max potential!
2. Three principles of Short and Long term performance
1. Scrub accounting and business practices down to what’s real
2. Invest in the future, but not excessively
3. Grow while keeping fixed costs constant Leadership:
1. Leadership was, at its core, an intellectual activity. Any ninny could improve a given metric – that didn’t take much thought or creativity. The best leaders acknowledge the tensions that pop up all the time in organisations, and they get better results by probing deeper to resolve them. Leadership framework –
1. Leaders must know how to mobilise large groups of people
2. They must pick the right direction toward which their team or organisation should move
3. They must get the entire team or organisation moving in that direction to execute the designated goal
2. The idea that as a leader you can focus on strategy and delegate its implementation to great people is a fallacy.
3. The craving for fiscal shortcuts is rather like alcoholism: when you stop, you need to do it cold turkey and permanently. If you take another drink, even years later, you risk relapsing. As a leader, adopt a posture of constant vigilance. Perpetual restructuring and responsible planning are a daily routine
4. “Strategy”, such as it was, had no relevance. Operational considerations and making the quarter became daily concerns, with strategy fading into the background. Most companies face this problem of long term strategy slides filled with gyaan and no follow ups or details on how to run that path
5. Roll out an initiative thoughtfully. Do it slowly enough to ensure the change sticks, but fast enough to build momentum and get as much benefit as possible
6. If you have a 1000 underperforming/low profit SKUs, double the price on each of them. Customers will stop buying 900 of them and on the remaining 100, you’ll realise they hold value to customers and you were underpricing them. It’ll have very little impact on your bottom line
7. 4 key areas to check while pursuing M&A deals – identifying which companies to acquire (build a robust pipeline), performing due diligence on those companies (kill bad deals), calculating their value (never overpay), integrating acquisitions in our business
8. Rubin has argued that many outcomes are possible in a given situation, and you have to anticipate and prepare for eventualities that seem unlikely but could prove extremely damaging should they materialise. As Paul Samuelson said, markets have predicted 9 of the last 5 recessions, so you don’t want to overdo it. Still, it makes a lot more sense to stay on your economic toes Meetings:
1. I recommend ending every meeting by establishing the who, what and when of any follow up actions. Be clear what the follow up action is, and when it comes to “who”, never accept “the team” as an answer. On “when”, remember Parkinson’s law, that work expand to fill the time allotted. Don’t be afraid to create tight timelines. Sometimes organisations get used to telling time with calendars instead of watches, and it has to stop!
2. In public, you have to convey confidence in the moves you’ve made because teams and organisations don’t handle uncertainty very well. But that doesn’t mean you can’t question your decisions in private. Always ask yourself, “What if my hypothesis, assumptions, beliefs or decisions are wrong?” If you’re right, you’ll get even more confident. If you’re wrong, you’ll get the right prodding to push you in a new direction
3. In meetings, it is important to be right at the end of a meeting not in the beginning. Enable the right amount and quality of thinking. Control your ego Org & People Planning:
1. In general, when you have a problem to address, it pays to over resource the solution up front, since it always costs less to resolve problems earlier than later, even if the short term cost seems high at the time
2. Companies focused on process improvement realise other efficiencies too. Over time, you do wind up hiring more people because you become more competitive and grow sales, not because you’re working inefficiently. Process improvement, with rightly calibrated investments, this helps with short term shareholder returns and well as ever increasing ability to invest in its future
3. 4 steps to create better functional organisations (IT, finance, HR, legal)
1. Create a financial goal for each business function
2. Demand that functions hold flat costs (no inflation adjustments) or even cut costs as the org grows while also improving service
3. Have functions develop annual strategic plans that accomplish both
4. Establish service metric and goals, then use surveys to confirm that service is getting better over time
4. Sometimes The best course to change management is to change management. Get people past the mindset of “ I have to do my job and this too?” And if they don’t change, apply the rule
5. Revolutionary change sounds good, but it’s not the most optimal route to strong short term and long term performance. Revolutions can move in unintended directions. Process improvement is less dramatic and glamorous than that. But over a sustained period, it counts. This is also relevant as even the market dynamics change slightly over a sustained period of time. He says Darwin’s theory of survival of the most flexible rather than fittest
6. If you want to perform well over both short and long term, pay close attention to executive leadership in general. As much as you invest in areas like culture, process transformation, and M&A, you’ll only make progress if you have senior leader who are both committed to the company’s strategies and are capable of executing them. Having the right number of those leaders matters too. Do not increase fixed costs by being top heavy
7. Don’t be the patron saint of poor performance. Give people the second chance to improve, but if they don’t, you need to take hard calls. Great succession planning also helps you with backups to take hard calls faster
8. It’s far better to leave a job open for a few months and to get the very best person and deal with the disruption it causes, than to settle for mediocrity
9. In my experience, experience is overrated. Just a little bit of experience combined with a lot of raw talent is worth far more. Always ask, could this person be the next Tom Brady
10. I like to think of our efforts cultivating intellectual rigour as an important albeit intangible long term investment. It’s tough carving out time to read and think amid the pressures of the day, but that investment does eventually pay you off in the form of better decisions
11. People must hear the truth about about how business is doing. If you present an overly rosy picture at the outset, you might have to go back and explain the situation yet again when sales have dried up further. At the same time, don’t pretend you know how bad the recession will get- because you don’t! Any predictions you make will come back and haunt you
12. I wanted to leave a 3 part legacy. First, I wanted everyone associated with Honeywell during my tenure – investors, customers, employees, suppliers – to make a lot of money. Second, create a deep bench of all star leadership talent, leaders who were constantly being recruited for other jobs but who stayed at Honeywell because they loved their jobs and felt proud about the company. Third, I wanted to feel good about holding my Honeywell shares for ten years or more, because the company was thriving without me