Operational excellence: supply chain, distribution, and continual improvement comprise the second component of the operational playbook. The heart of operational excellence is turning your cultural choices into guiding principles and then continually improving how you implement them.

What do these have in common?

1. Communication. Respect. Integrity. Excellence.
2. Social responsibility. Sustainability. A spirit of partnership. Pro Ehrenamt volunteering initiative.

Each of these is a nice set of corporate values set in stone and ignored by the organization's leaders. The first set belonged to Enron, which got brought down by a complete lack of integrity. The second set is directly from the website of Volkswagen, whose chief executive officer (CEO) resigned because the company was lying about emission tests.¹

Specifically, as described by Elaine Shannon of the nonprofit Environmental Working Group,

The company had deliberately installed a “defeat device” in diesel vehicles sold worldwide from 2009 to this year. The device was really a bit of software coding expressly engineered to spoof standard emissions testing instruments and evade the federal Clean Air Act and related state rules.

Whether Volkswagen CEO Martin Winterkorn knew about this or not, he was the leader of an organization in which people blatantly contradicted one of its four core values. As Shannon explained in a brief interview,

At the end of the day a company or nonprofit group, all it has to sell is its values and reputation.” VW was about being “humble, iconic (and then added) greenness.” But “they lied.” And now, “VW is all about dishonest cars.”

The emissions scandal could not have happened if VW's leadership actually believed in its stated values.²

The good news was that those values were relatively straightforward, easy to understand and remember. The bad news was that they weren't real. As part of their effort to recover, the company created a new set: Values from us, values for us. Staff from all over the world were involved in developing the brand's new corporate values—an important step forward on the journey to improving the corporate culture.

This was a complete abrogation of leadership. Instead of inspiring, enabling, and empowering others to do their absolute best together to realize a meaningful and rewarding shared purpose, VW's leaders essentially let everybody come up with whatever they thought was useful. Involving? Yes. Democratic? Yes. Practical? You tell us. Here's what they came up with:

Values from Us, Values for Us

• Genuine

  Speak out | No fear of hierarchies | Honest | Across hierarchies | Open | Transparent | Focus on the real issue | Take a stand—less politics

• Courageous

  Be an inventor | Examine habits | State my opinion | Challenge | Try out new things | Decide, decide, decide

• Customer-Oriented

  Listen | Understanding customers around the globe | For the best product | High quality | For customer mobility | What our customers want, not what we want

• Efficient

  Less discussion | Economical | Fast | Effective | Concentrated | Cost-conscious | Take responsibility | Do things

• Mindful

  Empathy | Respectful | Less focus on status | Thoughtful | Issue, not status

If people can't understand, remember, and follow five words—social responsibility, sustainability, partnership, volunteering—how are they going to understand, remember, and follow 111 words? To be fair, VW would tell you their new values from us, values for us are about genuine, courageous, customer oriented, efficient, and mindful, and the other words just elaborate on them. Let's test that. Without looking back, how many of these six key words can you remember? (Most won't remember most.)

The tragedy is that Volkswagen's name is a core message, mantra, and guiding principle all rolled into one. At its best, VW owned “the people's car.” The VW Beetle and VW Bus were iconic parts of everyday folks' lives. Few companies have it this easy. Everyone at Novo Nordisk knows they're all about defeating diabetes. People at Coca-Cola focus on refreshing the world's consumers. NASA in the 1960s was completely focused on putting a man on the moon.

VW's leadership message has to fit with VW's roots and help the organization get back to those roots. They should make “people's car” their mantra. They should believe in the value of the right cars for ordinary folks, talk about that, and drive that one idea in everything they do. VW forgot its five core values. No one is going to remember their new 111 words, but if the core guiding principle is “volks wagen,” no one at VW will ever forget it.

At PrimeGenesis, we had five values:

• Inspiring: Committed to excellence and the pursuit of mastery
• Results-oriented over short-term with urgency; sustainably with long-term view
• Integrity beyond reproach
• Lasting relationships: Doing what's right for clients over the long run
• Team: Committed to each other, supportive, collaborative

Nice—but not as proscriptive as they could be. We turned them into guiding principles with verbs and have followed these ever since. Same ideas—with verbs.

• Inspiring: Commit to excellence and the pursuit of mastery.
• Results-oriented: Drive results with urgency over the short term and sustainably with a long-term view.
• Integrity: Be, do, say beyond reproach.
• Lasting relationships: Be, do, say what's right for clients over the long run.
• Team: Commit to support and collaborate with each other.

Do this for all your cultural choices. Turn them into guiding principles—with verbs. For example:

Behaviors: What Impact

• Working units: One organization, interdependent teams => Think and act as one organization made up of interdependent teams.

Relationships: How Connect

• Power, decision-making: Diffused/debated – confront issues => Confront issues in debate at all levels.

Attitude: How Win

• Strategy: Premium price, service, innovation => Innovate to deliver superior products and services worthy of premium prices.

Values: What matters and why

• Risk appetite: Risk more and gain more (confidence) => Risk more to gain more with confidence.

Environment: Where play

• Work–life balance: Health and wellness first => Put health and wellness ahead of short-term productivity.

Action Plans

On the surface, this one is relatively straightforward. Solve for what's getting done by whom, by laying out the actions, measures, milestones and timing, accountabilities, and linkages to make things happen.

In a merger, you want to maintain and evolve the best of the current processes while adding new processes as required. You do not have to change everything. And you certainly do not have to change everything all at once. Start with the processes around the core focus of the newly combined organization (design, produce, deliver, service). Then move on to strategic enablers.

Identify the processes that are working well—in either organization.

Fold the other organization's process into that.

• Make a hard shift where possible.
• Adopt the new process completely as is first, with no changes.
• Then, once the combined process is running smoothly, improve.

Performance Management

Put in place weekly demand management; daily, weekly, and monthly business operations management; and semiannual performance management systems with a focus on

1. Pricing and margin stabilization
2. Liquidity
3. Demand management and customer experience via application of technology tools
4. Supply chain resiliency
5. Market share expansion

The pivot point is milestones.

Let's start with some definitions:³

• Objectives: Broadly defined, qualitative performance requirements
• Goals: The quantitative measures of the objectives that define success
• Strategies: Broad choices around how the team will achieve its objectives

Now add:

• Milestones: Checkpoints along the way to achieving objectives and goals

Milestones are the building blocks of tactical capacity⁴ that turn a burning imperative into a manageable action plan. Your new combined team's milestone management practice, if done right, will be a powerful team reinforcer. Milestone management is about identifying accountability, monitoring progress, and taking action to stay on track.

Burning imperative meetings tend to produce many ideas and choices on flip charts. They are all completely useless unless someone takes action to make them happen. As Steve Jobs once said, “Ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” This chapter is about execution. In brief, to help ensure that the team delivers the desired results, in the time frame specified, you must delegate well. That involves:

• Direction: Clearly defined objectives, goals, strategies, and desired results.
• Resources: Make available the human, financial, technical, and operational resources needed to deliver.
• Bounded authority: Empower the team to make tactical decisions within strategic guidelines and defined boundaries.
• Accountability and consequences: Clearly define standards of performance, time expectations, and positive and negative consequences of success and failure.

Along the way, strive for absolute clarity around:

• Interdependencies: Be aware of critical interdependencies that exist within the team, with other teams and projects, and with outside resources.
• Information flows: Know what information needs to be shared when and with whom. Ensure there is a method to share that information in a timely manner.
• Collaboration: Know what negotiations and joint efforts are needed to ensure alignment and adherence.

Rarely is the delivery of a milestone reliant on one person. More often than not, a milestone requires contributions from several members of the team across many functions. Despite the complexity of delivery, each milestone should be assigned one “captain” who is ultimately accountable for the delivery of that milestone.

The captain is not the person required to do all the work, but rather, the key spokesperson for the communication of issues regarding the timely delivery of that milestone. The captain should be the final decision-maker, responsible for communicating across groups, ensuring needed information flows, collaboration, and delivery of the desired result. Avoid co-captains. They never work. There needs to be a single point of accountability.

Practices are the systems that enable people to implement the plans. They need to be coupled with systems of metrics and rewards that reinforce the desired behaviors. There is an old saying: “Show me how they are paid, and I'll tell you what they really do.”

John Michael Loh, U.S. Air Force Air Combat Command, during the first Gulf War, said, “I used to believe that if it doesn't get measured, it doesn't get done. Now I say if it doesn't get measured it doesn't get approved…. You need to manage by facts, not gut feel.” As former senator Daniel Patrick Moynihan put it, “You're entitled to your own opinions, but not your own facts.”

Specific performance measurements, accountabilities, and decision rights free people and teams to do their jobs without undue interference and provide the basis for nonjudgmental discussion of performance versus expectations and how to make improvements. It is essential that people know what is expected of them. When the expectations are clear, people also must have the time and resources needed to deliver against those expectations. The milestone management process is focused on clarifying decision rights and making sure that information and resources flow to where they need to go.