Execution risk is all pervasive when a turnaround is being effected, if you get it wrong it can negatively impact all elements in a turnaround, from operations to strategy. Frustratingly, you may not and will never know why it went wrong.
A business definition of execution risk is: the risk that a company’s business plans will not be successful when they are put into action. However, execution risk can be hard to identify, predict and measure. A bit like Donald Rumsfeld’s famous quote, it involves “known knowns, known unknowns and unknown unknowns”. Also, when considering the management of execution risk it is important to understand that it is both:
Complicated: involving a step by step process which if well planned and led will most likely lead to a successful outcome. For example, moving production offshore to save costs is a difficult process that if well organised will probably be effective.
Complex: where no matter how sophisticated the systems, planning and management things can go wrong and the desired outcome is not achieved. For example, trying to boost sales through bringing in new product lines may not work and the reasons for this are not entirely clear.
There have been many great turnaround plans which were well planned and supported by all the key stakeholders but for some reason they weren’t successful ie. complex risks are not always able to be removed and the outcome of processes is often driven by unknown issues. Therefore, you cant eliminate these risks. However, focussing on planning and people are two ways of mitigating the risks of execution. Here are a few tips to keep in mind when managing execution:
1. Planning: Have a detailed, well understood and dynamic turnaround plan, and for these reasons:
Share the plan with all relevant stakeholders.
Update it regularly.
If circumstances change, then change the plan ie flexibility is required.
Simplicity is good. This is especially when communicating with the wider organisation about the turnaround.
and while we are on communication .. remember to communicate, communicate, communicate.
2. People: Finding the right people to manage execution is critical as you cant do it all on your own, any successful turnaround involves many hands. The right people:
Are willing to do things differently and with energy and enthusiasm.
Demonstrate an understanding of what is required.
Include those who retain some of the corporate memory of the organisation. Don’t forget about them! It is difficult to have a whole new management team drive a turnaround as for instance these people would not know of some past strategic mistakes of the organisation which you don’t want to repeat or reasons that alternative logistics management systems wont work.
A final thought is that you can inherently reduce execution risk by having a plan that is less risky!
When any turnaround is being conceived, you certainly need to have elements in your approach of thinking big, considering issues from left field and being a contrarian ie. you have to do things differently otherwise you get the same result. However, that needs to be tempered with hard headed analysis around what is possible and the likelihood of the desired outcomes being achieved. Saying that another way, having a plan with a higher probability of success reduces your execution risk.
If you would like a no obligation, confidential discussion about turnaround management and executive solutions, please contact me at svertullo@integralfinancial.net.au.