Last week, Professor Don Sull of the London Business School told us how "managing by commitments" gives organizations more flexibility than traditional management hierarchies or processes. As we continue our conversation, Sull explains when this approach fits best and who does it right.
BNET: Why is managing by commitments more important for modern businesses than some of the more well-known models?
Sull: Some people think the key to success is nailing the right strategy. But companies in your industry often will have a base strategy very similar to your own. Execution is where the real separation comes between winners and losers. Executing via hierarchies can be too slow in the kind of unstable markets most companies face today. Standardized processes by their very nature don't lead to the kinds of variation and flexibility you need to execute new types of projects.
BNET: What are some leading companies that you think are truly dedicated to managing by commitments?
Sull: A lot of the organizations we've traditionally thought of as well-managed companies have put emphasis on making and fulfilling these kinds of commitments. It's a big deal in General Electric and similarly Goldman Sachs. Another company that I've been interested in these days is InBev. Fifteen years ago they were the nearly bankrupt number-two brewer in Brazil, and today they are the lead partner in Anheuser-Busch InBev, the largest brewer in the world. In fifteen years they've become an incredibly effective execution-oriented company. They merged with their rival in Brazil, then merged with the Belgian company Interbrew and recently acquired Anheuser Busch. They've built a culture where people are very clear on what they are being asked to commit to, and their progress on their commitments is very transparent and obvious to people throughout the organization. For instance, everyone is in an open office environment. Everyone from the CEO down sits in the same size desk, and behind them they have posted their key five performance commitments for the year and their progress toward them. The charts are right there on the wall with red, yellow and green tracking stickers for everyone to see. They are very careful about bringing in people who are achievement oriented, not driven by power.
BNET: Do companies go through phases from hierarchies to processes to commitments, or could they use all the methods at once?
Sull: First of all, I'm not saying one is good and one is bad. Power has a role, and standardized processes can always have a role in just about any type of company or organization. In most organizations, you're going to rely on all of these tools -- power, processes and commitments. If you're trying to get stuff done, you'll pull any lever you can get your hands on. What really matters is the kind of work you have on your plate. If you're Toyota, and the bulk of the value you're adding is in manufacturing a huge number of cars with a low number of defects, then an almost exclusive focus on standardized processes is completely appropriate. The times when you need to be more oriented toward managing by commitments is when you have this kind of emergent work that has to fit within networks rather than within a hierarchy.
We'll visit again with Professor Sull in coming weeks to talk about his views on innovation in emerging markets and managing in turbulent times.