3 Leadership Capabilities You Need to Run a Company

This article is an excerpt from the Shortform book guide to "Playing To Win" by AG Lafley. Shortform has the world's best summaries and analyses of books you should be reading.

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Are you in charge of running a company? What three leadership capabilities do you need to ensure a business’s success?

In their book Playing to Win, former CEO A.G. Lafley and consultant Roger Martin explain that a good leader must have these three capabilities: 1) a systems to review strategy, 2) a systems to communicate strategy, and 3) a system to measure progress. Furthermore, each of these three leadership capabilities requires a clear and specific structure to support it.

Let’s take a look at what each entails.

Organize for Success

How should you manage your company? It’s tempting to believe that if you complete the previous steps—determine your aspirations, a place to play, a way to win, and the capabilities to fulfill all of those goals—then your company will succeed. But Lafley and Martin warn that, while those steps are important, a successful company also needs three leadership capabilities to make sure the rest of the waterfall flows smoothly:

  1. Systems to review strategy 
  2. Systems to communicate strategy throughout the organization
  3. A system to measure progress
The Challenges of a Work-From-Home Team

With the coronavirus pandemic and the resulting increase in teleworking, these capabilities are more important than ever. Managing a work-from-home team or a hybrid team (where some employees are in the office and some aren’t) presents unique challenges. Specifically, fairness and communication are the keys to effectively managing such a team. That’s exactly what the capabilities listed above accomplish. 

Clear systems for measuring progress and performance ensure fairness at both the individual and the company level: Everyone will be held to the same standards, regardless of where they work from. Clear communication structures—both top-down and peer-to-peer—ensure that your employees at home aren’t left out of the loop. 

Capability #1: Systems to Review Strategy

Lafley and Martin say that a healthy work environment—one with good communication and happy employees—is necessary for strategic success. The CEO needs to be able to have an open and collaborative relationship with those working under him, and so on, all the way down to low-level managers and employees. To foster this collaboration and deftly respond to new challenges, managers and executives must discuss issues and review strategies in the open

According to Lafley and Martin, the best way to do this is to have regular open discussions. Focus on simple strategic questions during these discussions, and don’t expect to come up with a perfect plan in one fell swoop—strategy is a continuous process of innovation, discovery, and review. 

If your company isn’t used to open strategic discussions, Lafley and Martin warn that implementing them may be a difficult process. People are taught to work in a certain way, and it’s not easy to start receiving and giving feedback in a different way. However, if you emphasize this new, interactive meeting style over a period of months, your team will adjust and come to enjoy it.

As an added benefit, people will start to think more about the strategy of the company. Lafley and Martin assert that when people have to defend their ideas with a detailed presentation, they’re more likely to be concerned about presenting well than formulating strategy. With open discussions, the pressure of presentation is removed, and people feel more confident about suggesting new strategies and contemplating the options. 

Open Discussions Start With Trust

Open discussions of this nature require trust: Each person in the discussion must trust the overall company strategy, and also trust his or her coworkers to be respectful and honest. 

According to Simon Sinek’s book Start With Why, trust isn’t a rational feeling, and isn’t tied to actions; rather, it’s tied to values. Therefore, to make these open discussions productive, you first need to build trust by demonstrating to your employees that you share their values and their concerns. 

For someone in a leadership position, this means giving your team a compelling shared cause or goal—something they can work toward, instead of just working on. If everyone believes that they’re working toward the same goal, they’ll naturally develop a shared trust that gives them the courage to speak up and take risks in open discussions, which will lead to more productive meetings and effective strategies. 

Set Guiding Principles for Open Discussions

Lafley and Martin add that open discussions are useful for crowdsourcing ideas, finding weaknesses in your strategy, and building your team’s enthusiasm. However, the authors also warn that open discussions can be counterproductive if people have different ideas about what your company or team is trying to accomplish. 

To avoid confusion and ensure that everyone’s working toward the same goals, create a standard set of principles for strategic discussions. These principles should keep people focused on the company’s goals and its winning strategy. 

(Shortform note: Interestingly, in Built to Last, the authors note that the success of a company might actually hinge more on how well they keep to their principles than on what those principles actually are. Their evidence is that the world’s most successful companies don’t share all of the same principles, but they do share a commitment to upholding those principles at every level. This may have to do with trust, as Sinek says in Start With Why—if you have a reputation for sticking to your principles, then your employees and customers will trust you, which will lead to greater success in business.)

Capability #2: Systems to Communicate Strategy

Since Lafley and Martin emphasize that a successful strategy is developed and enacted at every level of an organization—from the CEO to low-level employees—company leaders must communicate the organizational strategy to everyone. 

First, executives need to make the message compelling by distilling the few elements of the strategy that are key to the company achieving its goals. These elements will reflect the answers to the first four questions of the waterfall strategy: the company’s ideal future, its target market, its arena (cost leadership or differentiation), and its capabilities.  

Second, leaders must communicate the strategy in clear, simple language. This makes it easier for employees to remember and carry out the strategy.

(Shortform note: When a company strategy is unclear or doesn’t resonate with employees, they don’t do their part to execute it, rendering the strategy virtually useless. To close this communication gap, many CEOs are appointing chief strategy officers (CSOs) to not only develop organizational strategies but also ensure that every employee understands the strategy and their individual role in it.)

Capability #3: A System to Measure Progress

Lafley and Martin say that it’s hard to keep generating ideas for new strategies if you don’t have a clear sense of how much progress you’re making. Especially in a big company, it’s difficult to see how your ideas are implemented and how they affect the company’s bottom line. 

Therefore, when you create a strategy, establish expected outcomes and a way to measure results against those outcomes. Invest in measuring systems that deliver reliable data on your company’s performance. Use that data to determine what’s working, what isn’t, and how you can improve your strategy. 

Lafley and Martin warn that you should never use a single outcome to determine your success. Establish individual goals for each department to ensure your company’s overarching strategies are well-rounded, and that one missed goal doesn’t derail your motivation or morale.

(Shortform note: When setting goals, make sure that they’re appropriate for each individual department or employee, not just a “company standard.” For example, an innovative new unit within your company shouldn’t be held to the same standards as a long-established and optimized core business unit; doing so just sets that new unit up for disappointment and failure.)

3 Leadership Capabilities You Need to Run a Company

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  • Why the cascade strategy will help you become victorious in your chosen field of play
  • Why you should make every choice with the purpose of not just competing, but winning
  • How to develop a system of decision-making for your company

Hannah Aster

Hannah graduated summa cum laude with a degree in English and double minors in Professional Writing and Creative Writing. She grew up reading books like Harry Potter and His Dark Materials and has always carried a passion for fiction. However, Hannah transitioned to non-fiction writing when she started her travel website in 2018 and now enjoys sharing travel guides and trying to inspire others to see the world.

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