How networks reshape organizations--for results

Recently a new term-networks-has entered the vocabulary of corporate renewal. Yet there remains much confusion over just what networks are and how they operate. Ram Charan, a leading international consultant, has spent four years observing and participating in the creation of networks at ten companies in North America and Europe. These companies--which include Conrail, Dun & Bradstreet Europe, Du Pont, and Royal Bank of Canada-are clear about why they are creating networks, what networks are, and how they operate. A network is recognized group of managers (seldom more than 100, often fewer than 25) assembled by the CEO. Membership criteria are simple but subtle: What select group of managers, by virtue of its business skills, personal motivations and drive, and control of resources is uniquely positioned to shape and deliver on the strategy? Networks begin to matter when they change behavior-the frequency, intensity, and honesty of the dialogue among managers on priority tasks. The process of building a network starts at the top. Senior managers work as change agents to build a new "social architecture." Once the network is in place, they play three additional roles: 1. Define with clarity the business outputs they expect of the network and the time frame in which they expect it to deliver. 2. Guarantee the visibility and free flow of information to all members of the network who need it. 3. Develop new criteria for performance evaluation that emphasize horizontal collaboration and leadership.     

Identifying periods of market inefficiency for return predictability

The article examines the efficiency of 31 stock index series spanning 26 countries across the world, using generalized spectral test (GST) and detects departure from the martingale difference hypothesis (MDH). A moving window of 24 months was used and p-values of GST were estimated. In order to explore whether the departure from market efficiency can be used for generating profitable trades, an exponentially weighted-moving-average-based trading rule was applied and was found that average profits per trade were significantly higher when p-value of the GST was less than 0.1. These observations are in consistent with the adapted market hypothesis.     

Conquering a culture of indecision

The single greatest cause of corporate underperformance is the failure to execute. Author Ram Charan, drawing on a quarter century of observing organizational behavior, perceives that such failures of execution share a family resemblance: a misfire in the personal interactions that are supposed to produce results. Faulty interactions rarely occur in isolation, Charan says. Far more often, they're typical of the way large and small decisions are made or not made throughout the organization. The inability to take decisive action is rooted in a company's culture. But, Charan notes, leaders create a culture of indecisiveness, and leaders can break it. Breaking it requires them to take three actions. First, they must engender intellectual honesty in the connections between people. Second, they must see to it that the organization's "social operating mechanisms"--the meetings, reviews, and other situations through which people in the corporation do business--have honest dialogue at their cores. And third, leaders must ensure that feedback and follow-through are used to reward high achievers, coach those who are struggling, and discourage those whose behaviors are blocking the organization's progress. By taking these three approaches and using every encounter as an opportunity to model open and honest dialogue, a leader can set the tone for an organization, moving it from paralysis to action.     

Ending the CEO succession crisis

The CEO succession process is broken. Many companies have no meaningful succession plans, and few of the ones that do are happy with them. CEO tenure is shrinking; in fact, two out of five CEOs fail in their first 18 months. It isn't just that more CEOs are being replaced; it's that they're being replaced badly. The problems extend to every aspect of CEO succession: internal development programs, board supervision, and outside recruitment. While many organizations do a decent job of nurturing middle managers, few have set up the comprehensive programs needed to find the half-dozen true CEO candidates out of the thousands of leaders in their midst. Even more damaging is the failure of boards to devote enough attention to succession. Search committee members often have no experience hiring CEOs; lacking guidance, they supply either the narrowest or the most general of requirements and then fail to vet eitherthe candidates or the recruiters. The result is that too often new CEOs are plucked from the well-worn Rolodexes of a remarkably small number of recruiters. These candidates may be strong in charisma but may lack critical skills or otherwise be a bad fit with the company. The resulting high turnover is particularly damaging, since outside CEOs often bring in their own teams, can cause the company to lose focus, and are especially costly to be rid of. Drawing on over 35 years of experience with CEO succession, the author explains how companies can create a deep pool of internal candidates, how boards can consistently align strategy and leadership development, and how directors can get their money's worth from recruiters. Choosing a CEO should be not one decision but an amalgam ofthousands of decisions made by many people every day over years.