Aaron de Smet, Et Al.-performance and Health

8/2/2019 Aaron de Smet, Et Al.-performance and Health

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August 2006Confidential White Paper

Copyright 2006 McKinsey & Company

Aaron De SmetMark LochWilliam Schaninger

Performance and HealthIn Search of Sustainable Excellence


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Contents

3 Introduction

4 The perils of performance

6 The healthy company

10 Getting healthy

2


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Introduction

Ask almost any business leader about a companysgoals and you are likely to hear some variation ofthe performance mantra we want to outper-form our peers, say, or we aspire to market-lead-ing performance. Rapt attention to performance simply, to doing better according to the most ob-

vious metrics, such as profits and share price per-vades modern business, and even modern life. Afootball coach, when asked if he was building histeam for the future, famously replied that the fu-ture is now. Many CEOs take the same view, wa-gering all their chips on bets with immediatepayoffs.

What exactly is wrong with performance, or prof-its, or a rising share price? Nothing. But we believethat the current fixation on short-term perform-ance can debilitate a company or organization overthe long term, leaving it incapable of achievingmore than a brief moment of deadline-driven glory.

Many companies would dispute this, counteringthat they have taken steps to build a durable or-ganization. But often, these fail to yield the intend-ed result. Consider stock option grants. Thousandsof companies award them to executives, attempt-ing to align leaders interests with those of share-holders. Yet the prevailing research concludes thatthe practice of granting options is at best ineffec-tive and sometimes harmful.

Take another example: Many companies are justi-fiably proud when they eliminate costs from theirsupply chain. In a world where one industry afteranother is succumbing to low-cost, no-frills cham-

pions, cost cutting is a necessary step. But somecompanies take it too far, eliminating needed re-dundancies, jeopardizing relationships with long-

time partners and suppliers, and leaving themselvesexposed to a variety of external shocks.

In these and many other ways, companies thatthink they are prepared for the marathon are fitonly for a sprint. To be ready for both, companiesmust be in good health, which we define as theprevalent qualities and practices of an organizationtoday that help sustain performance tomorrow.

So how can an executive determine the health ofher company? To answer this question, we have

conducted surveys with more than 115,000 busi-ness leaders, assessed more than 800 recent articlesfrom the business and academic press, and con-ducted more than 100 workshops with senior lead-ers at some of the worlds largest companies.1

The result: We have determined that good healthhas five characteristics. First, a healthy organiza-tion is resilient, possessed of a sound strategy andable to combat risk and weather shocks to its sys-tems. It executes its core activities well and alignsits people and resources so that every team mem-ber is running in the same direction. The healthy

company renews itself through investment ingrowth, innovation, and adaptation. Finally, itenjoys complementarity, the ability to add one andone and make three that is, the ability to derivebenefits from a system of mutually reinforcing ele-ments, such as management practices, intellectualcapital, and brands.

Looked at this way, many companies, even strongperformers, find themselves in fragile health. Ifhigh fliers want to continue to thrive, they toomust pay attention to the underlying health of

their enterprise. All companies, the sick and thestrong, should embed the ideals of health into theirmanagement and planning processes to ensure thatthey count profits both today and tomorrow.

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1 McKinseys organizational performance profile surveys of more than 115,000 executives at 230 companies,

conducted over five years (2002 to 2006).


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The perils of performance

In 1980, Atari was on top of the world. The com-pany was founded in 1972 to exploit what was thenonly a figment of a designers imagination the elec-tronic game. In 1973, Atari sold $40 million worthof these games (remember Pong?) and earned$3 million in profits. In the next few years, it wasbought by some deep-pocketed owners and investedheavily in R&D. In 1980, it posted record revenues($415 million) and was the fastest-growing com-pany in U.S. history. Two years later, it was salutedby Waterman and Peters in their book In Searchof Excellence.2

Even as the books readers were learning howAtari excelled, the company was crumbling.Spending and investment, especially in R&D, werecut. Creativity and product quality were sacrificedin the name of faster time-to-market. The result was some ofthe biggest duds in video gaminghistory: The shoddy visuals andpoor playing characteristics ofPac-Man and ET alienatedthe companys devout customers.Fed-up engineers left in droves,many to join or form rival com-panies whose innovative prod-ucts captured Ataris formercustomers. By 1983, the rot wasexposed: The company lost $536million and resorted to massivelayoffs. Atari never again cameremotely close to its brief heyday.The shell of the company, whichby then consisted mainly of abrand name, was sold in 1998for a mere $5 million. Today,Atari is mainly a memory but

the video game market is worth$25 billion and is still growing ata tremendous rate.

Two questions arise from thistale: What did Atari do wrong?

And how did Waterman and Peters miss it? A sin-gle answer will suffice: Both the company and itschroniclers were intensely focused on performance

and indifferent to the indicators of deterioratinghealth. In this regard, they are not alone. Manycompanies, executives, and analysts are consumedwith boosting this quarters profits, hoping for aknock-on effect on the share price.

Many executives will protest, claiming that theyinvest in the future, are committed to enduringperformance, and have engaged in building a com-pany for the long haul. But as we will show, manyostensibly performance-enhancing measures canultimately prove detrimental to companies health.These measures include not only stock options and

lean-to-a-fault supply chains but a variety of otherclearly beneficial practices, such as consequencemanagement for increased accountability and in-vesting in the best talent money can buy.

4

2 Tom Peters and Robert H. Waterman, In Search of Excellence, New York: Harper & Row, 1982.

Five common misconceptions about compensation

Exhibit 1

Sources: McKinsey OPP survey; Catherine M. Daily and Dan R. Dalton, The Problem with Equity

Compensation,Journal of Business Strategy,July-August 2002, vol.23, pt. 4, pp. 28-30.

RealityMyth

Total compensation drives retentionbut does not always drive performance

Incentives help drive perferformance,but only if used properly

Resea rch covering five decades,229 studies, and nearly 1,000,000 equity/performance relationships, reveals nosystematic relationship between executiveequity ownership and company performance

Repricing defeats the supposedpurpose of stock-based incentives

Stock-based incentives caninadvertantly reward behaviors thatundermine long-term value creation

CEO performance should be measuredusing considered oversight and goodjudgment, with stock price being one ofmany data points in the evaluation

1. F inancial incentives drive

retention and performance

4. Stock-based incentives reward

value creation

5. CEO performance should be

measured and rewarded according

to stock price

3. Repricing options that are

underwater maintains their

incentive effects

2. S tock-based incentives encourage

executives to focus on improving

company performance


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Most companies, especially those in high-growthindustries, grant options to their senior leaders.Companies are currently reviewing this custom as

a result of changes to the accounting rules, butthey should be doing so for another reason. Signif-icant research spanning more than five decadesand including 229 studies investigating nearly amillion cases yields compelling results: There isno evidence that executive stock options helpincrease a companys performance, but plentyof evidence that other kinds of incentives do(Exhibit 1, see p. 4).

What about those companies that have cut theirsupply chains to the bone? Many companies be-lieve, following successful examples such as Wal-

Mart, that they must remove costs from theirsystem. Land Rover, for example, pressured itssuppliers relentlessly, always pushing for furtherreductions in its price.3 But as it planned for themanufacturing and rollout of a new model, the

Discovery, it suddenly found itself exposed: Thesole supplier of chassis for the new vehicle, facingimminent bankruptcy, threatened to stop ship-

ments. Redesigning the car would have taken ninemonths, cost the company tens of millions of dol-lars, and thrown an estimated 11,500 workers outof work. Fortunately for Land Rover, it was ableto invest in the near-bankrupt chassis maker andturn the situation around. Less fortunate compa-nies are unable to cope with the fallout from an at-tenuated supply chain.

Many executives point to their investment in talentas proof of their commitment to the health of thecompany. But few realize that new and expensivetalent cannot simply be dropped into the organiza-

tion and expected to prosper (Exhibit 2). In fact,when high-quality talent is added to companieswith weak social networks i.e., companies whereworkers are not meaningfully engaged with oneanother, where they fail to create strong personal

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3 Yossi Sheffi and James B. Rice, Jr., A Supply Chain View of the Resilient Enterprise, MIT Sloan Management Review,

Fall 2005, vol. 47, no. 1, pp. 41-48.

Talent needs a good home

Exhibit 2

Source: Mohan Subramaniam and Mark Youndt, The Influence of Intellectual Capital on the Types of Innovative Capabilities,

Academy of Management Journal,2005, vol. 48, pp. 450-463.

Highly talented individuals

Less talented individuals

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

Weak

Incremental innovation capability

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

Radical innovation capability

Weak systemsnegate the powerof top talent

Strong

Social network

Top talent in astrong network liftsperformance of

weaker players

Performance Performance

Strong

Weak

Strong

Weak

Weak Strong

Social network


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and professional connections, where it is difficultto find expertise and information, and where thesharing of knowledge and expertise is not valued

then the net effect is typically muted or even neg-ative, as new workers contributions are underval-ued or ignored.

The healthy company

High performance is clearly a requirement for suc-cess. No business can thrive without profits, and astalled share price can constrain a company un-duly. But without robust enterprise health, no busi-ness can thrive year after year for 10, 20, or 50years. It is the combination of performance and

health that engenders long-term success. Broadlyspeaking, the qualities and practices that underliean organizations health fall into five main cate-gories (Exhibit 3).

The first category is resilience. We know that mar-kets are unkind, customers are fickle, and competi-tors are relentless. But beyondthese everyday problems, man-agers must also contend withunpredictable, often life-threat-ening disruptions financialmarket meltdowns, extremeweather, power failures, eventerrorism.

Healthy companies engage infour kinds of practices that en-hance their resilience. First, theybuild a sturdy foundation: arobust corporate strategy (Ex-hibit 4, overleaf). They placethemselves in the right competi-tive environment and offer cus-tomers an enduring value

proposition. Next, they arepracticed at spotting risks of allkinds including low-probabil-ity but high-impact catastrophicrisks and they act to manageand mitigate them. They havesufficient resources includingcash reserves, some slack in

resources, and backup IT systems to weather dif-ficult periods. Finally, they work to build strongnetworks, including logistical chains to ensure

adequate supply and unencumbered distribution,and networks of relationships with customers, sup-pliers, distributors, regulators, and others criticalto their operation.

Consider Wal-Mart, which had 125 stores in thepath of Hurricane Katrina. The hurricane devas-tated the Gulf Coast, paralyzing the highway sys-tem yet the company opened almost all of itsstores within a few days. How? Wal-Mart hadplanned for catastrophe and developed an alterna-tive distribution system that relied heavily on rail-

roads. When forecasts indicated that a catastrophicstorm was on the way, Wal-Mart was already stag-ing its equipment and stocking inventories. Whenhighways closed, Wal-Mart activated its plan andwas able to restock stores and supply its customerswith essentials. The company demonstrated ex-traordinary resilience at a time of crisis.

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The five characteristics of healthy companiesExhibit 3

Source: McKinsey team analysis

Complementarity

Renewal

Alignment

Execution

Resilience

Do different things complement

each other to create

additional value (1 + 1 = 3)?

Can you drive change to spur

growth, innovation, and ability

to adapt to market shifts?

Do people agree about what

they are trying to do and why?

Can you make good decisions

and execute essential tasks?

Do you have what it takes to

weather risks, shocks, and

competitive threats?


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By execution, we mean the set of attributes that al-lows a company to operate effectively and effi-ciently (Exhibit 5, overleaf). These include a clear

and well-designed management structure, whichmakes explicit the companys expectations of per-formance, the reporting structure, and decisionrights to allow the company to act swiftly and de-finitively. The company must also have at least onecore competence a collective ability to do somevalue-creating activity well. This competence mustbe central to the companys strategy, of course; fur-ther, it must be distinctive, difficult for competitorsto copy, and continually refreshed. The companyshould also have a deep bench of talent, and aleadership engine to provide a steady stream ofhigh-quality leaders at all levels of the organization.

It must have a planning process that actively gener-ates feedback and uses that feedback to make

course corrections an element noticeably missingin many of the big corporate disasters of recentyears. And it must possess sound judgment and a

capacity for critical thinking qualities that are es-pecially important among top leaders but alsothroughout the enterprise.

Alignmentis needed to make sure that all thecompanys activities serve a common purpose.Alignment is achieved through the companysmission and direction, a focus on its stakehold-ers, its degree of shared identity, and its formalreinforcing mechanisms. A companys missionprobably needs no explanation. Even so, manycompanies can improve their mission by avoidinggeneric platitudes such as excellence, customer

satisfaction, and innovation, and by articulatinga specific or even unique value proposition and

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Exhibit 4

A robust corporate strategy

THE HEALTHY COMPANY:

Expands into industry sectors and subsectors with high growthpotential for the foreseeable future

Anticipates market changes and reallocates resources to business

areas likely to be attractive Maintains an objective understanding of which businesses are

becoming less attractive and exits early

Makes sound strategic decisions about which businesses, products,and markets to invest in

Implements major initiatives to ensure competitive advantage inkey businesses, keeping overall portfolio of initiatives well-balancedacross multiple time horizons, risk levels, and markets

Takes calculated risks and makes bets to develop strategic optionslikely to be crucial for future success

Identifies, develops, and screens many acquisition and divestitureoptions, and conducts rigorous assessments and due dilligence

on the most attractive Makes well-informed and unbiased decisions, bearing in mind both the

short- and long-term interests of the company and its shareholders

Negotiates and closes deals that maximize both value capture andfeasibility of implementation

Executes completed transactions quickly and efficiently, includingeffective integration (spin-off) of acquired (divested) companies


SECTOR

ATTRACTIVENESS

STRATEGICCHOICE

ACQUISITIONAND DIVESTITURE


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business strategy that energize and guide employ-ees in their day-to-day work.

Just as important is a sense that the companys val-ues and practices genuinely address the concernsof important stakeholders, notably employees, cus-tomers, shareholders, and business partners. Acompany should aspire to a shared identity one

with common values and beliefs that helps employ-ees feel connected, as though they are part of some-thing bigger than themselves. Finally, alignmentmust be stitched into the fabric of the workplacethrough formal reinforcing mechanisms, includingfinancial and other incentives that go beyond sim-ple reward systems. The criteria on which peopleare evaluated, role modeling by leaders, verbalrecognition, supporting tools and training all are

needed to reinforce the expected behaviors, andnot mere outcomes. Its not simply what you do;its also how you do it.

Execution and alignment are critical to todayswork. To position a company for continued successtomorrow, its leaders must also invest in renewal.One important practice here is thoughtful expan-

sion into markets where the probability of successis high and where current assets and competenciescan provide leverage. Another is innovation thecreation of an environment where idea generationis encouraged and acted on. Finally, the companymust be adaptive, responding with speed andagility to fundamental shifts in the market, remak-ing its strategy and culture in anticipation of suchchanges, and quickly reallocating resources to new

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Exhibit 5

Assessing a companys capabilities

Definition The internal skills and talent to support strategy, execute core competencies, and createcompetitive advantage

Talent

People

Leadership

Competition The company lacks one or The company has the basic The companys strategic

more of the core competencies capabilities it needs to deliver capabilities/core competen-

it needs to be competitive its current strategy and cies are distinctive, difficult

compete effectively to imitate, and consistently

renewed over time

The company lacks sufficient The company has sufficient The company has a deepquality and/or quantity leader ship to execute bench and a robust pi peli ne

of leaders effectivelyand remain of high-quality leaders at a

competitive levels to deliver excellence

into the future

Good people are hoarded by The most appropriate people The most appropriate people

their owners (e.g., business are allocated to the right can be allocated to the right

unit heads) projects across the firm projects easily, regardless of

their function or unit

The company faces a constant The company has the people A constant flow of talented

shortage of talent because of it needs to get todays people are attracted, hired,

poor recruiting yields, poor work done developed, motivated, and

development, or high turnover retained by the company

1 2 3 4 5

Weak HEALTH Strong



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activities and business areas when necessary evenwhen, as is almost always the case, it has only im-perfect information.

The kind of corporate failure that Atari experi-enced comes from a lack of renewal capability.McKinsey research has documented the results ofthis kind of failure, and a way to overcome it,called creative destruction.4 An exhaustiveanalysis of decades of history of public companiesreveals that over the long term, almost no compa-nies survive in any form, let alone as industry lead-ers. Markets and industries move quickly;companies do not. Thus, according to the propo-nents of creative destruction, companies must con-tinually re-invent themselves, buying promising

new businesses and shedding old and fading ones.

For many companies, this kind of readiness totrade is indeed one answer to the renewal chal-lenge. But healthy companies can build for the fu-ture in a number of other ways, throughinnovation, say, or targeted expansion. Nike hasdone this repeatedly, and has established a patternin which it establishes a leading position in foot-ware in a new market (golf, for example), then fol-lows with clothing lines endorsed by top athletes,and then higher-margin equipment (irons and driv-ers). At the same time it builds its supply chain forall the new products, and then expands from U.S.to global distribution. This strategy of building ina deliberate way for the future has helped Nike todominance in its industry.

Finally, a company enjoys complementarity whenits assets, processes, relationships, and manage-ment practices act in concert, creating more valuecollectively than they would individually. This isthe essence of synergy and requires that the variouselements be consistent and mutually reinforcing.

Complementarity, a concept explored in some de-tail by John Roberts in his book The ModernFirm,5 can be seen in organizational practices, suchas hiring policies, training programs, and behav-

ioral incentives that are consistent and mutuallyreinforcing in attracting, developing, retaining, andmotivating the right kinds of employees to perform

in the desired fashion. Product categories shouldlikewise be consistent and mutually reinforcing;this is the premise of value creation that underpinsmany of todays big content companies. And ac-tivities across the business system from productdevelopment through manufacturing to sales anddistribution should also be complementary, en-suring that a company makes products that con-sumers want and that operations can deliver.

While many rightly point to Toyota as the exem-plar of lean manufacturing, few realize that theToyota Production System embeds the ideal of

complementarity into the company. Famously,parts arrive at the assembly line just in time. Butwhy? Because procurement and purchasing haveabsorbed the high-level goals of the company andchanged their procedures in ways that benefit oth-ers, in this case the manufacturing division. Andmanufacturings practices, such as their pull sys-tem of inventory management, are a good fit withprocurements just-in-time delivery. Manufactur-ings way of assembling cars using less inventoryand fewer people in turn allows HO to switch itscapability-building effort to vendor managementand away from manual labor. And so it goes, in avirtuous cycle.

Complementary relationships among individualsand teams can also produce value. Organizationsachieve this when its people are sufficiently butnot overly connected with one another, makingit is easy to find and collaborate with others. Inlarge organizations, it is cumbersome often evenimpossible for everyone to have direct ties witheveryone else. A more efficient model is for peopleto know someone who knows someone. Whentightly interconnected teams are knitted into the

organization (through mechanisms such as infor-mal liaisons or more formal brokers, whose jobit is to bridge gaps between divisions), a companycan maximize the cohesiveness of its networks

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4 Richard Foster and Sarah Kaplan, Creative Destruction: Why Companies that are Built to Last Underperform the Market,

New York: Random House, 2001.

5 John Roberts, The Modern Firm: Organizational Design for Performance and Growth, New York: Oxford University Press, 2004.


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Exhibit 6

Embed health metrics in management

Selected key health indicators Target Current Status

Cross-BU revenue synergies 20% 11%

Share of cross-BU promotions 15% 7%

No. of FTEs on cross-functional initiatives 50 38 !

Investments in growth initiatives $20mn $31mn

Share of revenues from new products 10% 7% !

Share of revenues from new markets 20% 14% !

Share of senior managers that disagreewith strategy/priorities 0% 0%

Share of review/planning meetings withpar ticipation of both CC and BUs 25% 17% !

Micromarkets with market share >20% 50% 48% !

Share of new customers developed 35% 35%

Average application turnaround time 4.5 hrs 5.75 hrs ! Training days per employee 15 17

Top-performer retention rate 85% 84%

Credit fraud volume $20mn $123mn

Share of variable costs 50% 42% !

Share of recurring revenues 60% 43%

without overwhelming the organization with toomany relationships to nurture, meetings to attend,phone calls to return, and e-mails to send. Organ-

izations get a big boost in performance when alarge and diverse population is sufficiently net-worked that it feels like a small world, sup-ported by a culture of collaboration, knowledgesharing, and efficient and egoless transfers of re-sources (information, people, money) to wherethey are most needed.

Getting healthy

When assessed against these five characteristics,most companies will come up short in one or two

areas. Some will be weak across the board, anda few will find that their organizations are, in

fact, robust and healthy. For those with gaps toclose, highly tailored initiatives can be designed.But all companies, the sick and the strong,

should think about inculcating health into theirmanagement. Again, we see five ways to makethis happen.

First, companies should embed health-derived met-rics in their management systems (Exhibit 6). Manybusinesses make a religion out of counting the num-ber of new customers and the growth of revenues.Banks love to look at the cost/income ratio; insurers,the combined ratio. But these measure performance,not health.

Instead, companies should keep track of cross-BU

revenues, say, or the share of cross-BU promotions.Doing so will give them a better handle on their

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Complementarity

Renewal

Alignment

Execution

Resilience

RETAIL BANKING EXAMPLE



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complementarity. Likewise, they should monitorthe share of variable costs among all costs, and theshare of recurring revenues among all revenues. A

rising proportion of variable costs and recurringrevenues is indicative of growing resilience.

Second, companies should break out their resourceallocations in terms of performance and health. Itsnot enough to know what total labor costs are. In-stead, companies should know how much of theirworkforce is working on the here and now andhow much on the hereafter.

Third, companies should assess all their businesses,business ideas, and new initiatives using two crite-ria: the time at which they are likely to create

greatest value and the companys degree of famil-iarity with the work, which is an indicator of theprobability of success and the need for resources.This portfolio of initiatives should then be evalu-ated for its contribution to performance andhealth, and companies should redress the imbal-

ance they are likely to find. They should continueto monitor and assess their progress in this areaover time.

Next, companies should extend this kind ofhealth-oriented strategic planning into their otherplanning and budgeting processes. For instance,they should modify traditional budget reviews todetermine whether cash flows are healthy (Exhibit7). In this example, a company should take all themoney going out in the current quarter and split itinto two piles: payments for current operations(i.e., the expenses necessary to generate this quar-ters revenue), and everything else. The first stackis purely performance-related. The second repre-sents longer-term investments. From the latter

stack, the company should strip out in-kind capitalreplacements as performance-maintaining expen-ditures. What remains is real investment in health.This process will help a company see how muchof its IT spend, say, goes toward innovation andR&D (health) vs. toward productivity (perfor-

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A healthy balance sheetExhibit 7


BANKING EXAMPLE

Traditional income statement

%$ mn

4418,132Personnel expenses 4418,132Personnel expenses

10041,235Total income

2932Product advertising 2932Product advertising

1376Corporate advertising 1376Corporate advertising

177,103Ge neral and admini -

strative expenses177,103General and administrative

expenses

31,263Management training and

development31,263

Management training anddevelopment

31,034Depreciation of property

and equipment31,034

Depreciation of propertyand equipment

2673Amortization of goodwill

and other intangible assets2673

Amortization of goodwill

and other intangible assets

62,678Goods and materials

purchased62,678

Goods and materialspurchased

32,191Total expenditure 78

Health

orient

ed

Resilience 31,156

41,508Execution

Alignment 2754

Renewal 31,206

5,027Total 12

Performance

oriented

177,103General and administrativeexpenses

3815,676Personnel expenses

Expenses %

31,034Deprecation of propertyand equipment

2673Amortization of goodwilland other intangible assets

62,678Goods and materialspurchased

27,164Total 66

Restructured expense overview

Complementarity 1403

$ mn


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mance). And it will let a company compare howmuch it invests in brand building, lobbying, com-munity outreach, and the employee value proposi-

tion (all health-related areas) with how much itspends outsourcing operations to boost profitabil-ity (performance). Most companies will find thatthey overinvest in performance and underinvest inhealth.

Companies can conduct similar reviews in areassuch as allocation of human resources. A simpletest can involve reviewing how executives spendtheir time. Jack Welch said he spent at least 50%percent of my time on people issues and talentdevelopment when he ran GE.6 Most CEOs spendfar less.

Finally, companies should embed health in the for-mal mechanisms they use to manage people, suchas performance contracts, incentives, career pathplanning, and staffing decisions. Managers at alllevels should know their performance and healthexpectations. Reflecting back to the change in met-

rics discussed above, companies should use theseto structure evaluations that ensure employees arerewarded as much for health-building work as for

performance.

* * *

People obsess over performance in part becausedoing so is comfortable: They can obtain instantand reliable feedback (such as that provided byprominently displayed stock tickers) that tells themhow they are doing. Investing time and resourcesinto fostering long-term health is less comfortable.Without prompt feedback, executives worry thatdespite their best efforts, they might be managinghealth poorly but that they wont discover this

until years later. Companies must make health tan-gible and observable by embedding it into their ac-tivities and culture. They must make it measurableby establishing specific targets and keeping trackof when those targets are hit and missed. And theymust make sure that they pin their aspirations onthose factors that really make a difference.

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Aaron De Smet is an expert in the New York office, Mark Loch is a director in the Johannesburg office, and

William Schaninger is an associate principal in the Philadelphia office.

Contact for distribution: William Schaninger

Phone: +1 (215) 594-4431 Email: [email protected]

6 The Wall Street Journal, Boss Talk: Top CEOs Share the Ideas that Drive the Worlds Most Successful Companies,

New York: Random House, 2002

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