To Succeed, Create Alignment

April 23, 2020

To Succeed, Create Alignment

During my first job out of business school, I worked for a manager who insisted the best business book he’d ever read was The Will to Manage by Marvin Bower.

In essence, Bower argued for aligning a company’s “never-changing philosophy”—its starting point for what it promises to deliver—with its core activities. For Bower, great management all started with a “timeless objective,” one that could then devolve into strategy—the (rarely changing) plans to achieve that primary objective. And, only then should tactics emerge along with the metrics necessary to ensure the delivery of on-time, on-budget results.

When David Neeleman started JetBlue, he was moved to “bring humanity back to air travel” by delivering value to customers and treating them like valued guests. This objective drove the strategy that defined our equipment, network, innovations, reservation system and culture. These, in turn, defined how JetBlue delivered what we came to call “the JetBlue experience.” And, of course, it drove us to measure not just financial results but customer delight and loyalty.

From whatever “timeless objectives” are set, Bower moves into the nuts-and-bolts of running stuff (setting policies, procedures, and standards; developing an organizational structure; hiring/coaching/firing; providing facilities; securing capital; developing communications; and so on). These are the who, how, where, and when decisions necessary to deliver on the strategy that will deliver the objective. For most organizations, it is at this tactical level that the wheels fall off, that conflicts emerge and that confusion reigns.

If, on the other hand, every element supports every other element and the team is united around a memorable, aligned and doable goal, they find meaning. And things almost manage themselves. For me, it was understanding Bower’s power of alignment that made me realize that most of the management challenges I faced resulted from a disconnect between multiple, sometimes warring objectives and who was doing what, under what time frames, with what budget and how they were being measured and rewarded.

Alignment Builds Energy

Wherever values conflict with objectives, or when strategy doesn’t support the objective, or the granular actions of individuals don’t support the overarching strategy or, finally, employees are rewarded for things that have nothing to do with the objective, people don’t only become confused, they also become cynical. They figure that power determines priorities, concluding that politics are the operating system for the enterprise. In such organizations, the who is more important than the what when it comes to the how

Put simply, alignment gets people moving in concert toward an agreed-upon goal, without much direct supervision or micromanagement by superiors. People sense they are on the same team. They can see winning. And they feel good about doing something meaningful.

Setting goals consistent with shared values reflective of natural priorities would seem a simple and logical first step for any leader. For most, however, getting this right and building a system around it that is aligned with delivering on a common goal is hard. The alignment of values, objectives, strategy, tactics and controls will release the energy of teams, however.

The following diagram represents the hierarchy of concepts to illustrate the power of alignment and how the various categories relate to each other. 

Under the headings—Values, Objective, Strategy, Tactics, Controls—I list core questions for the entrepreneurial leader and suggest that their answers should flow from values that include respect for people, a commitment to profitability, and a desire for controlled growth. For me, these are values for all seasons and for every organization, whether it’s a commercial enterprise, a charity or a family.

Alignment to Solve Conflict

One of the principles my students find especially useful and compelling is to use this chart when they experience conflict. Conflicts that revolve around issues nearer the bottom of the pyramid—such as controls and tactics—are easier to solve through change and/or compromise. Conflicts that revolve around issues near the top (where they change less frequently)—especially values—may prove intractable.

Most conflicts are over tactics. By bumping the discussion up a level—in this case to strategy—people often find that they are aligned at that level and can more easily compromise tactical priorities that may have them stymied when they forget their commitment to the same strategy.  And, if the conflict is over strategy, by bumping the discussion up to the objective, people often find they have the same objective and can compromise to achieve it.

When the conflicts are over values (i.e., priorities) however, it’s over. Values conflicts are generally irreconcilable. When someone defects from his or her country of birth, or when someone who has devoted decades to a specific religion leaves that church, it is rarely over small-bore issues; it is usually due to a conflict over fundamental values. Values may not be immutable, but they are deeply ingrained—and as a result, people will rarely change or compromise them.

Over time, I’ve found that the best entrepreneurial leaders (1) hire for values; (2) set clear objectives that everyone understands; (3) come up with a strategy to achieve them that takes into account marketplace realities, organizational strengths and the passions of the team, (4) develop the tactics to carry out the strategy, then (5) measure the delivery.

An Example of Misalignment

Many companies inadvertently create alignment problems with their incentive systems. I experienced this at Trammell Crow Company in the 1980s. We were in the business of building, leasing and managing commercial real estate. Our systems were aligned around this mission, and that included our compensation system. Everyone we hired at Trammell Crow was paid the same salary—$18,000 per year. (This was at a time when the average MBA graduate might earn $100,000 in a “hot” field like consulting or investment banking.) We were able to hire talented people with low salaries because they recognized they’d make most of their com¬pensation on profits from the building projects they developed—the kind of pay system used in many industries that’s colloquially known as “you eat what you kill,” but which business-school types call pay-for-performance.

In good times, this compensation system created great alignment between a company whose goals were to aggressively build, lease and manage new buildings and the partners who did the blocking and tackling to accomplish our never-changing objective.

The problem came in the late 1980s, when property markets were overvalued and over-built and a correction seemed almost certain. I wanted our partners to dramatically slow (or even stop) the pace of development activity, and I argued for less development. But our compensation system continued to provide heavy incentives to keep developing. In the end, we made adjustments, but too slowly. Like turning a fleet of battleships around, it took too long and, ultimately, the company was sold to Coldwell Banker. Had we aligned our control system with our objectives in a timely fashion, the Trammell Crow Company would, in my opinion, be a large, stand-alone development firm, the envy of the real estate development world.

When there’s a lack of alignment—from values at the pinnacle to metrics at the base—it is like the ignition timing being off in an internal combustion engine. Companies, nonprofits and families will fail to achieve their missions without thinking through and aligning these vital systems. By contrast, when everyone is on the same wavelength around this simple, but powerful map, behaviors become self-reinforcing, leading to seemingly effortless success.

Excerpted from Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others, and Running Stuff (HarperCollins Leadership; April 21, 2020) by Joel Peterson. 

The Authors: 

Joel Peterson is the Chairman of JetBlue Airways and, until recently, on the Board of Overseers of The Hoover Institution. He is the Founding Partner of Peterson Partners and has been on the faculty at the Graduate School of Business at Stanford University for the past 28 years.