This author has had a singular pre-occupation this past decade: researching and documenting the ability of organizations to demonstrate the efficacy of their promises to customers, employees, investors and the public at large. What he’s found is not surprising. His suggestions are original, compelling and practical.
Scan the newspapers for the latest political or corporate crisis. All too often, you will find organizations and leaders incapable of delivering promises that, straightforward when articulated, became prohibitively complex in execution.
President George Bush and his rationale for invading Iraq. His predecessor’s assurances that he did not have sexual relations “with that woman… Lewinsky.” Dalton McGuinty’s election “promises.” Dan Rather and CBS. All were examples of explicit commitments made from positions of high moral authority and trust. All were examples of credibility that collapsed under the weight of a modern public able and willing to demand an unparalleled level of honesty and transparency.
Promise management – the science of systematically connecting what we say with what we do — is quickly becoming a differentiating factor in the decision making mindset of the twenty-first century. Today, we have unprecedented power to demand a logical, direct and proven connection between stated priorities and the actions taken to achieve them. Unfettered access to information and knowledge has created a new and turbo-charged level of accountability. This has enabled a much more precise definition of what constitutes a delivered promise, a narrowing allowable gap between our statements and our practices. As consumers, we make informed choices about doing business with those who prove they can connect what they say with what they do. This has profound implications for corporations and leaders.
I have dedicated the past decade to researching and documenting the ability of organizations to execute business practices that demonstrate the efficacy of their promises to customers, employees, investors and the public at large.
My work confirms that failed promise delivery is not a phenomenon restricted to troubled or crisis-stricken companies, nor is it the exclusive domain of politicians or the media. All organizations, including our best and most ethical, are at risk. Despite this, there are remedies available to manage the risk associated with the widening gap between commitment and action.
The contradicted promise
On June 2, 1998, Royal Caribbean Cruises Ltd (RCCL), the world’s second largest cruise line, issued an extraordinary public statement. Following a twoyear battle in the courts during which it had vehemently denied charges it had deliberately and systematically dumped massive amounts of waste oil into the oceans, RCCL announced a settlement with the United States Department of Justice. It agreed to $18 million in fines, in addition to the $9 million it had paid a year earlier. In its statement, company president Jack Williams promised that Royal Caribbean would immediately establish “higher-than-industry standards by which to govern its environmental performance.”
The statement detailed RCCL’s comprehensive new environmental program, its moves to establish environmental officers on board each ship, the hiring of a former Environmental Protection Agency administrator as a Director, and the appointment of a new senior executive to oversee its compliance efforts.
It had been six years since RCCL had launched its “Save the Waves” environmental management system. Crew members signed company pledges to reduce the creation of waste material, recycle as much as possible and commit to proper dumping. But in June of 1998, “Save the Waves” seemed a cruel paradox as the company admitted for the first time it had dumped oily sludge into the very oceans it was showcasing in its brochures.
The oil dumping incidents threatened to do far greater strategic damage than the millions in fines would indicate. The oceans were the chief marketing asset of a company, which upon its founding in 1967, had chosen to identify its brand with the name – Caribbean – of a tropical sea. Now it was asking passengers to vacation on waters it had admitted to polluting. It was a crisis that struck at the heart of the company brand. “We know we don’t have a business if the oceans aren’t a beautiful place to go,” a company official said.
But there was still time. Media coverage had not dramatically hurt the company’s reputation with cruise enthusiasts. Most knew little, if anything, about the incidents. If the company came clean now, it could move forward with minimal damage.
Williams, an expert in public relations, had been brought in by RCCL in 1997 in the middle of the crisis. He had convinced the company to spell out a lucid response to the charges, make a public statement that would acknowledge its errors and, most important, signal its intention to proactively manage the fallout. It was classic crisis management, admitting your mistakes fully and specifically, taking your medicine, and then moving on.
Then the shocker. On July 15, 1998, six weeks after Williams’ mea culpa had established a new high road for the embattled company, engineers working deep below decks on RCCL’s Nordic Empress were caught manipulating pollution control equipment and dumping untreated oil waste directly into the sea, an infraction striking in its similarity to the previous violations.
As it turns out, failed alignment between corporate practices and stated promises was at the root of Royal Caribbean’s troubles. Like most other companies during the early 1990’s, the company was fighting the after effects of a debilitating recession. The first Persian Gulf War had savaged the travel industry and the company had asked its business departments to find innovative methods for slashing costs.
Court records show that operational practices aimed at cost control clashed blatantly with the environmental commitment integral to its business strategy. In one telling example, performance management systems were altered to reward cost cutting behavior. When engineers identified an activity that would significantly reduce the operating costs of the ships, they were rewarded with year-end bonuses by grateful senior management. The fact that the activity on which they focused was routine disconnection of the ships’ waste oil separator, the device used to separate dirty oil from water, was an operating detail seemingly below the radar of the strategy makers at the top. The company was paying bonuses to employees to meet a short-term operational goal – cutting costs. But the effect, as unintended as it may have been, was the contradiction of a deeper long-term strategic intent to keep the oceans clean.
There were other examples. The company’s head office routinely cut annual budgets allocated to operate and maintain pollution control equipment. Court records show that one ship, the Nordic Empress, spent a mere $7,000 to run separators in 1991, when the company was well aware it would take between $400 thousand and $500 thousand a year to run the equipment properly. The approved budget was a clear leadership signal to operations staff that the company was not serious about complying with environmental standards.
The RCCL value proposition promised a pristine ocean environment, but delivery of the promise was undercut by business practices that slashed operational budgets and permitted gross under spending on pollution control expenses by the ships themselves. It was a total breakdown between promise and practice, with serious consequences for the company and its employees.
The Royal Caribbean case offers a striking example of the difficulty corporations are having in living up to the myriad of organizational promises they must make daily to their stakeholders. Yet, RCCL is not alone. In an environment that demands unprecedented speed of decision making, pumps mountain after mountain of information at our leaders, and delivers human complexity through a new cynicism and sophistication from those who have a direct interest in what we do, management of basic promises has become a corporate art few have mastered.
The rise of the “superempowered” employee
Technology-driven speed has altered the balance of power in corporate decision making — and employees are in the driver’s seat. They have the ability to execute a pre-determined promise or, alternatively, to sabotage it. It wasn’t so long ago that important corporate decisions were destined to be made by the “gifted few”, as a prescient Friedrich Hayek, the Nobel laureate economist, lamented in 1945. Hayek added that companies were losing sight of a treasure trove of recyclable information deeper down in the organization. He called this information the “knowledge of experience,” the real-world knowledge that employees were eager to share. In exchange, he explained, employees would be happy to “actively co-operate” in executing strategy, providing their work environment would help them to learn and grow.
Today, not only are we being forced to find ways to utilize this practical employee knowledge, we are fast coming to rely on it, not out of sudden recognition of principles like those Hayek espoused, but because we have no choice. The speed of information and the resulting multiplication of decisions that enable organizations to operate every day mean that a centralized structure for making them is becoming extinct. There are not enough hours in a day for the “gifted few” to make even the most important, brand-critical judgments. Not that our leaders don’t continue to try. Modern corporations are filled with stressed managers working 16-hour days as they attempt to keep the finger on the pulse of every decision and action made throughout their hierarchy, an impossible task in today’s world. As a result, the companies that are best at executing are becoming those who surrender to the allure of micromanagement and engage their employees.
But engaging employees in the information age has turned out to be a tricky proposition. Research conducted last year by the Centre for Ethical Orientation (CEO), a private Toronto-based think tank, suggests that a new level of sophistication has been twinned with an intense cynicism.
Nine of ten respondents to a CEO survey believe the basic level of trust in society is in decline. How people define that trust is most telling: “reliability, including assurance of performance, quality and value – the most basic alignment of actions to words.”
This highlights the fact that the onus has been placed on corporations to prove they are capable of executing what they have promised. But achieving this will likely require yet another attempt at retooling how we work with our employees. The last time we tried was during the 1990’s. Then, consultants trumpeted the need to “empower” employees. Empowered employees, the theory went, would require less of an entitlement mindset and would take charge of their own career paths, freeing up our companies to take advantage of more energized, creative and driven people. We needed to step out of the way and allow our employees to produce by calling on an enlightened self-interest that would greatly benefit our organizations.
Today, we don’t hear much about empowering our people. That’s because technology has allowed employees to empower themselves, whether we like it or not. We are faced with the prospect of managing a workplace full of what journalist Thomas Friedman has termed “superempowered” individuals. Technology has provided employees with unfiltered access to information. They have the means to search for the truth on their own terms and are able and willing to hold public pronouncements to a staggering level of scrutiny and accountability. The result is a far greater influence on the strategic destination of employers. And a modern corporation is at far greater risk of contradicting promises, unless they can trust and rely on the people who will ultimately execute them.
Ten to 15 years ago, in the early days of the Internet, the companies we worked for were the only credible source of information for employees. A business strategy was a reasonably straightforward matter to articulate. The corporation relayed its communications through videos, magazines, e-mails and canned presentations from supervisors.
Recently, as I consulted with a team of financial services executives responsible for a major systems overhaul, the impact of the “superempowered individual” became readily apparent. It was clear the strategy recently communicated by their company was largely recycled news. Most had checked the websites of consulting houses and competitors for information about the strategic direction that was about to be explained to them by their employer. An hour of earnest searching had given them a working knowledge of the strategic options available and had made the internal business case, a potent communications positioning only a decade before, somewhat redundant. It was clear to me the mindset of those receiving our corporate messages had shifted — from that of eager absorber of the corporate line to that of skeptical expert ready to question management in highly strategic terms.
There is no question our strongest potential advocates- or detractors — in the quest for effective promise management are our employees. Engaged and involved, this workforce is omnipotent. Ignored, it will derail even the most thoughtful of promises and strategies.
We must be to able to forge a clear understanding of the connection between stated corporate promises, our business strategies, and the processes used to implement decisions made by ordinary people every day. Leaders must quickly and convincingly convey the logic driving their strategies while shifting quickly to fine-tune them when markets and customers change, as they do with unpredictable frequency today. Employees, on the other hand, must work in an environment that gives them confidence to act on the message, to make informed decisions within an understandable, logical context.
How can we improve our chances of working with our employees to take the actions and make the decisions that will define our ability to execute on strategy? Will it be possible in the future to build organizational competencies that improve our chances of routinely linking what we said today to what we do tomorrow?
Despite the barriers the modern world has stacked in our way, promise management is a corporate skillset that can be learned. There are specific remedies we can and must take.
The promise management cycle
The art of promise making starts with creation of an actionable business promise. This is not a vision or mission statement, nor is it a list of corporate values. It is a clinical, measurable statement of intent that is the focal point for leaders and employees making decisions and taking actions that embody the strategy of the business.
It continues with development of a corporate-wide promise management architecture. This is the hardnosed connection of the promise to key business, process and functional activities which will enable stakeholders to “see” our strategy in everything we do.
It culminates in a continuous process of promise affirmation. This is the stakeholder pulsetaking that determines in real time the gap between strategic intent and real-world business practice.
Each component of the promise management cycle must be delivered simultaneously and continuously. Most important, depending on what we learn from execution of our processes and from the ongoing dialogue we have with our stakeholders, we must be willing to alter our actionable business promise as our markets and circumstances change, as they do with increasing frequency today.
The Actionable Business Promise
With apologies to Johnson & Johnson, it is becoming clear that, in an era of speed, information and superempowered individuals, the deliverable vision statement is all but dead.
Rapidly changing market and customer conditions mean that by the time a company has communicated the premise on which its vision is based, it is likely that its stakeholder behavior has already changed. Today’s finely-crafted vision ends up in tomorrow’s recycling bin. Day-to-day business practice – what the company does and not what it says – has become the determining factor for stakeholders choosing to have a relationship with us. Asked to reflect on his own company’s experience, RCCL President Jack Williams admitted “you don’t build a company based on declaration, you build it on action.”
In the past, company visions were crafted by professional communications experts as sweeping pronouncements that spoke of lofty ambitions to all stakeholders simultaneously. As corporations added breadth and depth to their value statements, visions and missions, they became unavoidably vague and undifferentiating.
The actionable business promise
To replace the vision statement, I recommend development of a new statement of intent, what I have termed the actionable business promise. This is not a branding statement, nor is it a vision or mission statement. Instead, it guides the corporation in its efforts to execute the practices that validate delivery of business strategy. This statement is rarely, if ever, communicated to employees as an organizational rallying cry. It is used by business and functional leaders as a nexus of strategic focus that organizes and drives business actions and decision making.
During the early 1990s, U.K.-based Thomas Cook Group was on the verge of irrelevance. A staid, conservative provider of travel and financial services, its product line was dominated by the soon-to-be-obsolete traveler’s cheque. It was under direct attack by more nimble competitors.
From 1995 to 1998, it implemented a transformation that institutionalized the alignment of promises with business practices. In 1995, before the changes, the estimated value of its combined travel and service businesses was US$275 million. In 2000, with strategic alignment entrenched, the same businesses were sold to European-based investors for a combined US$1.4 billion.
Thomas Cook’s transformation efforts were defined by a process at the top of the organization for clear, precise articulation of a business strategy that, over time, could be systematically connected to every major business practice in the organization. The focal point for this was a statement of intent which served as a beacon for business practice implementation.
Company leaders determined that TCG’s purpose was “to create the best and most profitable traveldriven service business in the world.” Standing alone, this vision was hardly differentiating. What made it competitively compelling was the rigor by which TCG’s leadership team developed an executional framework that hardwired its meaning to the day-to-day actions and decisions of the company. TCG’s senior management team worked meticulously through the statement to achieve a common interpretation which, once finalized, became the standard by which all core business processes and functional activities were measured. Each of the nine-member leadership team was asked for their personal interpretation of each word in the sentence. Once common ground for each word was determined, a common organizational definition of the statement was finalized complete with its own success metrics.
Next, the statement was shared with all executives within the organization, who were asked for input on how the statement would be reflected by their day-to-day implementation efforts.
Finally, the statement was cascaded to key business and functional divisions so they could work through how it would be applied to operational practices. The statement became the company’s actionable business promise, the point of executional focus for the company.
Thomas Cook realized what most do not. That, in a large organization comprising a wide array of organizational sub-cultures (not to mention business and life experience), interpretations of a vision or mission statement, however finely crafted, will diverge radically, making its execution by middle management a crap shoot at best. A CIO will interpret it one way, the CFO another, the head of marketing still another. TCG invested the necessary time up front to achieve common ground on its strategy before it progressed to the next stage, applying its promise to its practices.
“We needed real, genuine agreement on our strategic direction by our leadership team or it would have been impossible to engage all of our employees to follow the same route. And I don’t mean the quick approval of words… it was an intense process of developing a common organization-wide definition for our strategy,” said Paul Frederick, architect of the TCG transition efforts as head of business transformation at the time. “Misalignment at the top would have produced a chain reaction of inconsistencies that would have been fatal to implementation.”
Promise management architecture
When RCCL’s cost cutting goals were interpreted by engineers in a manner which jeopardized its environmental policy, it was a classic case of operational goals dictating business practice in the absence of a clearly-articulated strategic direction. In order to execute effective promise management, operational goals must become a subset of business strategy.
There must be explicit linkages between a company’s actionable business promise, its core business processes and its functional activities. I call this promise management architecture, the long-term execution of strategic intent. Over the past decade, sustainable execution has become fraught with complexity, with leaders constantly pressured to embrace performance improvement fads served up as elixirs for achieving increasingly short-term financial objectives.
“We learned from our own experience and from the experience of other companies that had failed with programs like TQM (total quality management) and CRM (customer relationship management),” said Frederick of Thomas Cook. “We knew early on we had to pursue an approach that would systematically align customer-focused processes with the strategy that had been agreed to throughout the organization. If a process didn’t align with our strategic intent, it just didn’t make the cut.”
Once the leadership at Thomas Cook Group had achieved leadership consensus on its business strategy, it scored its business processes to determine those most integral to aligned execution. These “core” business processes – marketing, sales, information technology, human resources operations and finance – were, in highly disciplined fashion, redesigned or rebuilt with one overriding objective in mind – execution of the company’s strategic intent.
All process transformation efforts were pieced together to form a holistic change effort, driven in integrated fashion from the top of the organization.
Key functional activities were then addressed. For example, training centered on newly-aligned customer-focused processes and, as a result, employees became better equipped to deliver a wide range of new and additional sales routines. Job descriptions were redesigned so that all employees, whether on the front line or in the back office, were focused on delivery of the newly-aligned customer processes. Competencies were divided into “teambased”, “continuous improvement” and “innovation process” categories, all outgrowths of the business strategy. Reward and recognition policies also linked directly with these competency goals.
Measurement was a key driver of alignment. In addition to specific financial metrics, new customer value enablers such as employee satisfaction and leadership effectiveness were added to gauge the success of the newly-aligned core business processes.
In the mid-1990’s, as it too recovered from recession, Toronto-based RBC Financial Group found itself in an unusual situation. Employee morale was at an all-time low for a company characterized by a strong and ingrained sense of corporate responsibility as well as leading human resource practices.
Layoffs and branch closures, unprecedented for a bank in Canada, were in full swing. At the same time, the level of confidence employees had in the leadership of the organization had dropped to 62 per cent, 24 per cent lower than a year earlier.
There was much discussion at senior levels about a solution that would return morale to pre-recession levels and a new vision was created and approved at the very top of the organization. The vision was communicated to employees in presentations from their managers. A manifesto-like booklet was distributed, carrying the signatures of RBC’s top management committee and a commitment to execute the company’s promises.
At the time, I was a middle manager working at RBC and my office was a key distribution point for the program. The day the materials arrived in my office, I received calls from angry colleagues asking if they were indeed mandated to deliver it. The managers felt the vision was admirable but that current business practices did not reflect its execution. Nonetheless, they found a way to communicate the promises and waited for the company to catch up with business practices to validate it.
Two years later, the organization went back to its employees to determine the extent to which the corporate promises had been acted upon. There were consistently serious gaps between the company’s formally stated promises and its perceived ability to execute them. For example, 83 per cent of those surveyed said they were hearing the organization saying it valued “treating staff with respect”, one of the fundamental principles of the newly-minted vision. Only 42 per cent were seeing this demonstrated by the actions of the corporation, a gap of 41 per cent. Seventy-nine per cent of employees were hearing the company say that it was “making changes to benefit the customer”; 36 per cent said they saw this being demonstrated through real business practices, a 43 per cent gap. Overall, the gaps between “say” and “do” ranged from 13 to 49 per cent (see Royal Bank of Canada Say/Do Research Summary). It was clearly a case of Emerson’s “what you do speaks so loud, I cannot hear what you say.”
Employees were, in effect, discounting or, at the least, suspending judgment on viability of wellintentioned corporate promises made from the top of the organization. The study suggested the organization was operating with two parallel business strategies. One was the formally stated or intended strategy – the core corporate promise articulated in its vision statement. The other was the “real” strategy that middle management was implementing by assessing the stated strategy and then executing their own “real world” version based on the issues they were facing at the employee and customer level. There is evidence that managers believed execution of the stated direction could, in fact, result in failure within their sphere of responsibility. So, they relied on their own “real-world” efforts which operated well but, at times, independently from the direction set at the top of the organization. It was a case of superempowered managers taking charge to drive their own experience-based version of strategy forward throughout the organization.
RBC quickly benefited from the knowledge gained from its efforts to assess promise affirmation. It has established mechanisms for improving the process for creation and articulation of business strategy. It is also widely recognized for its ability to implement major change and has garnered consistent respect from the most demanding of stakeholders, corporate chief executive officers. Since 1995, Canadian CEOs have voted RBC the country’s most respected corporation five times, most recently in 2004.
The court-enforced promise
In January, 2005, RCCL completed a five-year criminal probation period. During that time, it met and reported regularly to the courts on how it was living up to the spirit of promises to clean up its environmental record. The company today is committed to delivering on those promises. It now recognizes its long-term survival depends on the thousands of individual decisions that, together, will determine whether its business actions can sustain its new corporate mantra, “Above and Beyond Compliance.” The courts have created an urgency that the company, in hindsight, would rather have created on its own.
The vast majority of corporations will avoid probation as a means of enforcing their promise management mechanisms. Yet, in a world of cynicism, access, speed and complexity, failure to make good on our word will precipitate threats much wider in scope and significantly more dangerous strategically than the public relations debacles failed implementation generated in the past. Our ability to clinically assess and formally manage our day-today corporate promises is destined to become one of the most important management sciences of our generation.