Execution capability is a data driven metric indicating the business’s ability to deliver on a specific strategic initiative.
10% of business success is rooted in strategy, and the remaining 90% is dictated by execution. However, most companies would report percentages far below that. Most businesses struggle to bridge the gap between implementation and strategy, with 61% of them reporting problems. The loss of productivity, opportunity, and earnings results from a lack of data-driven decision making, which should be used to narrow down the pool of initiatives to only viable ones.
Decision bias and poor decision making practices cause even successful companies to lose substantial amounts of money.
According to Harvard Business Review’s article, How to Overcome the High, Hidden Cost of Inconsistent Decision Making, “The problem is that humans are unreliable decision makers; their judgements are strongly influenced by irrelevant factors…it is an invisible tax on the bottom line of many companies.”
The article points out that “academic researchers have repeatedly confirmed that professionals often contradict their own prior judgments when given the same data on different occasions. For instance, when software developers were asked on two separate days to estimate the completion time for a given task, the hours they projected differed by 71%, on average.”
Decision bias and poor decision making practices cause even successful companies to lose substantial amounts of money, without even realizing it. Given that on average, it takes $8 in revenue to generate $1 in retained earnings, the impact of poor decision making is significant.
How to correct decision bias
Management theory has not changed very much in the past 20 years, as the big management ideas of the past, such as business process management (BPM), total quality management (TQM), and lean [management] are less applicable to current needs. In many of the largest global institutions, executives are finding that by the time the older management theories run through their processes, market demands have changed, and the organization is forced to start their initiative-selection process all over again.
The focus is to identify viable initiatives quickly, through measurement tools such as ReM Score™, and to abandon the initiatives that cannot meet performance targets. This is difficult in an age where innovation and action are progress. This includes everything from acquisitions, product launches, and back-end business process re-engineering efforts.
Scoring each initiative quickly creates viability pools that are used to determine which initiatives should be considered:
Once the pool of initiatives is identified, existing decision making practices can take effect to determine value to the business, and level of return. The removal of bias from the decision-making process eliminates the waste that is currently plaguing the S&P 500, resulting in a reduction of bad initiatives, and an increase in net earnings.
The pace of market movement no longer allows for traditional management principles to be applied in the decision-making process. Accuracy in decision making is the differentiator for global businesses to survive and thrive in a very transformative economy.
Removing the biases that executives and managers apply in selecting an initiative will eliminate the waste that is negatively impacting corporate earnings, and will provide more data-driven decision making opportunities.
Utilizing an execution capability metric, such as ReM Score™, delivers actionable data to the decision-making process, to increase competitive reach in quickly evolving strategies.
To learn more about ReM Score™, check out http://remscore.com.