strategic excecution final

University of San Diego

Improving Strategic Execution Identifying the Aftermarket’s Organizational DNA and a Path Towards Continued Success

University of San Diego & United Technologies Aerospace Systems

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Nathan McCutcheon

Nathan McCutcheon is a current MBA and MS in Finance student at the University of San

Diego. He will graduate with a dual-degree in 2017 and plans to enter the financial sector.

Currently, Nathan works as an Analyst for both United Technologies Corporation and Analytics

Ventures. He has a passion for startups and artificial intelligence. Prior to returning to Graduate

School, Nathan served in the Army as a Combat Medic and Team Leader.

[email protected]

Ike Ekeh

Before pursuing the MBA/MS Finance dual degree at the University of San Diego (USD), but following

the completion of his BA in Accounting at San Diego State University, Ike spent five years developing

his accounting and management skills. Concurrently studying and working at a private marketing firm

in the San Diego area, he has thrived in leadership roles early in his career. Ike was able to hone his

management skills while simultaneously sharpening the accounting acumen gained through

undergraduate studies. While at USD, Ike has competed in several case competitions and has become

a student member of the CFA Institute with plans to become a charter holder after completing the

CFA program. Ike is currently employed as the Director of Business Development & Corporate Finance

at NDC Data and aims to complete his dual degree in 2017.

[email protected]

Matias Llona Feuereisen

Matias Llona is a current MBA and MS in Finance student at the University of San Diego. He will

graduate with a dual-degree in 2017, and plans to continue his career in corporate finance. He

already has a degree in Agricultural Engineering from Pontifical University of Chile. Prior to his

MBA and MS in Finance studies, Matias developed his career in the sales area for a manufacture

company in Chile.

[email protected]

Table of Contents

Organizational DNA 2 Overview 2 Organizational Traits 2 Survey Results 3 Improving Strategic Execution 4

United Technology Aerospace Systems 4 Background 4 Surveying the Team 5 Survey Results 5 Interviews 5 Results 6 Pulling the Right Levers 6 Recommendations 7 Conclusion 8


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“A brilliant strategy, blockbuster product, or

breakthrough technology can put you on the competitive

map, but only solid execution can keep you there.”

-Gary L. Neilson


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Organizational DNA

Overview

Gary L. Neilson and The Harvard Business Review

(HBR) have coined The Organizational DNA as a tool

companies may employ to understand their organization’s

ability to execute strategy. Utilizing nearly a decade of

research, this framework provides management the tools

necessary to quantify improvement goals in executing

corporate strategy and simulate the effects of those

changes across their organization. Stated simply, the

authors created dynamic tools which allow management

the ability to pull various levers while understanding the

affects of those adjustments. With respect to these levers,

Neilson notes that, “In our experience working with

companies and government agencies, we’ve identifies

four fundamental tools that organizations can wield to

achieve that alignment: decision rights, information,

motivators, and structure. These tools in combination,

determine – even predict – how an organization behaves

internally and performs externally; they are the

organization’s genetic code, so to speak.”1

With this framework in mind, the HBR team partnered

with PWC to release the necessary tools for organizations

to take full-advantage of their hypothesis. The duo

attracted thousands of companies and over one-hundred

thousand employees from within those companies.

Specifically, the project, “Generated a database of

125,000 profiles representing more than 1,000

companies, government agencies, and not-for-profits in

over 50 countries.”2 This impressive response rate

allowed the research team to construct a robust database

and run regressions across variables to understand the

unique dynamics at play across. Most surprising, is that,

“Employees at three out of every five companies rated

their organization weak at execution.”3 While many may

conclude that disgruntled employees may have influenced

these results, it should be noted that roughly 25% of the

respondents came from the executive ranks.

The team then used this database to identify 17

organizational traits and correlate those traits to seven

organizational profiles. Discussed further below, these

traits are key in understanding the levers an organization

may consider utilizing to impact the greatest change

throughout their organization.

1 Neilson, G. L. (2008). The dominant genes & Organizational survival of the fittest. Strategy&, 1-36. 2 Neilson, G. L. (2008, June). The Secrets to Successful Strategy Execution. Harvard Business Review, 1-25.

Organizational Traits

Using a survey of roughly 30-questions, the HBR team

created an effective method to quickly determine an

organization’s profile. The team distilled the results of

these surveys into 17 traits that make organizations

effective at implementing strategy. These traits and their

relative strength index are seen in Table 1. These traits

correspond to one or more of the four buildings blocks,

which are located below Table 1.

Rank Organizational Trait Strength

Index 1 Everyone has a good idea of the decision and

actions for which he or she is responsible 81

2 Important information about the competitive

environment gets to headquarters quickly.

68

3 Once made, decisions are rarely second-guessed. 58

4 Information flows freely across organizational

boundaries.

58

5

Field and line employees usually have the

information they need to understand the bottom-

line impact of their day-to-day choices.

55

6

Line managers have access to metrics they need

to measure the key drivers of their business

48

7 Managers up the line get involved in operating

decisions.

32

8 Conflicting messages are rarely sent to the

market.

32

9

The individual performance-appraisal process differentiates amount high, adequate and low

performers.

32

10

The ability to deliver on performance

commitments strongly influences career

advancement and compensation

32

11

It is more accurate to describe the culture of this organization as “persuade and cajole” than

“command and control.”

29

12

The primary role of corporate staff her is to support the business units rather than to audit

them.

29

13 Promotions can be lateral moves. 29

14

Fast-track employees here can expect promotions

more frequently than every three years.

23

15 On average, middle managers here have five or

more direct reports.

19

16

If the firm has a bad year, but a particular division has a good year, the division head would

still get a bonus.

13

17 Besides pay, many other things motivate

individuals to do a good job.

10

Table 1: The 17 Fundamental Traits of Organizational Effectiveness

Building Blocks Decision Rights Information

Motivators Structure

3 Neilson, G. L. (2008, June). The Secrets to Successful Strategy Execution. Harvard Business Review, 1-25.


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By ranking these traits, the team identifies decision rights

and information as the two dominant levers to effective

strategy execution. The study also applies a general

definition to each of these levers4:

With these building blocks, the HBR team examined the

overall results of the survey so that they might analyze

4 Neilson, G. L. (2008). The dominant genes & Organizational survival of the fittest. Strategy&, 1-36.

which blocks are typically utilized and if any levers are

preferred over others across the executive ranks.

Survey Results

It would be a difficult task to outline all the results from

the Organizational DNA survey. For that reason, we have

decided to highlight the results derived from the Top 5

organizational traits listed in Table 1. If nothing else, the

Top 5 traits provide an excellent framework to both

understand the overall results and provide the reader with

a tangible guide to implementing change within their

organization. From these top traits, the following results

were identified:

1. Everyone has a good idea of the decisions and

actions for which he or she is responsible: in

companies, strong in execution, 71% of

individuals agree with this statement; in

companies with week execution 32%.

2. Important information about the competitive

environment gets to headquarters quickly: 77% of

individuals in strong -execution organizations

agree with this statement, whereas only 45% of

those in weak-execution organizations do.

3. Once made, decisions are rarely second guessed:

71% of respondents in weak-execution companies

though that decisions where second guessed,

whereas only 45% in strong execution companies.

4. Information flows freely across organizational

boundaries: 21% from weak execution companies

and 55% from strong execution companies.

5. Field and line employees usually have the

information they need to understand the bottom

line impact of their day-to-day choices: 61% of

individuals in strong-execution organizations

agree, 28% in weak-execution.

Using the survey results, organizational traits and the key

building blocks, HBR and PWC created a fundamental

framework that allowed organizations a “prescription” to

improve in their ability to execute strategy.

Decision Rights

The underlying mechanics of how and by

whom decisions are truly made, beyond the

lines and boxes of the organizational chart.

Information

What metrics are used to measure

performance? How are activities coordinated,

and how is knowledge transferred?

Motivators

What objectives, incentives and career

alternatives do people have? How are people

influenced by the company’s history?

Structure

The overall organization model, including

the “lines and boxes” of the organization.


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Improving Strategic Execution

After a company completes the Organizational DNA

survey, HBR utilizes a ratings system to begin

development of a strategic roadmap towards Resiliency.

These ratings offer a starting point so that organizations

may benchmark their executional ability. While no rating

is considered relatively “good” or “bad” it does allow

managers a constructive starting place in understanding

their organizational strengths and weaknesses. The seven

organizational types are:

1. The Resilient Organization

2. The Military Precision Organization

3. The Just-in-Time Organization

4. The Fits-and-Starts Organization

5. The Outgrown Organization

6. The Overmanaged Organization

7. The Passive-Aggressive Organization

Once an organizational trait has been identified, the

company can utilize the HBR and PWC Simulator to

move towards Resiliency. This simulator gives a manager

or team the ability to change one of twenty-eight

indicators and watch, year over year, how that change

impacts the organization. The simulation allows for up to

five changes in any one year.

With this framework and toolbox in hand, our team felt it

would be beneficial to apply this framework within a

large-scale corporation. After vetting a list of potential

candidates, we felt that the Aftermarket Business Unit

under the United Technologies Aerospace umbrella made

the most sense for several reasons. First, access to the

organizations middle management, we felt, would allow

for survey results that were unbiased and truly reflective

of the organizations ability to execute strategy. Secondly,

our team thought that the truly global nature of this

organization would allow us to engage with business units

across multiple time zones, which would give us excellent

insight into how communication and information benefits

or affects this organization. Finally, we felt that the year

over year success and growth patterns of this

organization, while impressive, might allow us to

examine a complacent organization with room to defend,

and perhaps increase, their global market share.

5Corporate Fact Sheet. (2012). Retrieved December 3, 2016, from

United Technology Aerospace Systems

Background

UTC Aerospace Systems (formerly Goodrich) was

acquired by United Technologies Corporation (UTC) in

2012. The acquisition sought to increase UTC’s global

reach within the aerospace industry. Additionally, the

acquisition aimed to diversify the company’s offerings to

substantially cover the needs of commercial aircraft,

satellites, UAVs, and other aerospace flight systems.

United Technologies Corporation identified strong sales,

year over year growth and perhaps a strong management

as justification for the acquisition. For instance, in 2012

UTC Aerospace Systems generated over $14B in sales

across roughly 150 worldwide locations. This fact

demonstrates that the company is one of the world’s

largest suppliers of technologically advanced aerospace

and defense products. 5

More impressive than these large sales figures, is the

amount of sales attributed to the Aftermarket. While

public information does not allow for an actual figure,

publicly available company charts and graphs indicate

somewhere between 25-35% of sales are traced to the

aftermarket while nearly 80% of margin is associated to

the aftermarket.

Leading this team through an impressive growth cycle is

Paul Snyder. Since 2014, Paul has been the Vice President

and General Manager of Aftermarket Services. Since

assuming command, the aftermarket continues to meet or

exceed operational goals. Driven by a strong ACE process

and a commitment to his customers, Paul has created a

winning culture inside his Aftermarket organization. For

these reasons and more, our team wanted the opportunity

to explore the workings of this organization so that we

http://utcaerospacesystems.com/SiteCollectionDocuments/Corporate-Fact-Sheet.pd

Sales

Aftermarket Original Equipment Manufacturer (OEM)

Chart 1: Aftermarket Sales to overall Sales


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might provide a mutual-beneficial opportunity to improve

on this sustained success.

Surveying the Team

Our team set out to create a robust list of managers and

employees to which we would draw insight from. Human

Resources was critical in this regard, and our team

compiled a list of over 90 managers. Utilizing Typeform,

we allowed individuals surveyed to respond

anonymously. Over a period of 4 weeks, we gathered

survey results and began compiling these results into a

database that was used to effectively analyze the results.

Survey Results

Compiling the list of responses allowed are team to

individually run each set of responses through the

Organization DNA survey. Doing so, we hypothesized,

would allow us to identify patterns in the results and set

limits to our results. Stated otherwise, we felt we may

need the option to set a range of possibilities for the

organizational type. Instead of ranking the organization as

“Fits-and-Starts,” for instance, we might look at the

results and determine that the organization is best

represented by a spectrum of possibilities.

This hypothesis proved to be useful, and the results of the

final survey are demonstrated in Table 2.

Organizational

Type

Total Rate

of Type

Percentage of

Overall Survey

Responses

The Resilient

Organization

4

10%

The Military

Precision

Organization

5

13%

The Just-in-Time

Organization

6

16%

The Fits-and-Starts

Organization

2

5%

The Outgrown

Organization

4

10%

The Overmanaged

Organization

10

26%

The Passive-

Aggressive

Organization

4

10%

Table 2: Organizational Types

Interviews

Following the online survey, our team felt that firming up

the results of the survey would be necessary for several

reasons. First, understanding the limits of the survey and

the questions asked would give our analysis more

visibility to the complications or frustrations felt with the

survey format. Furthermore, we could use this

opportunity to explain some of the questions, the

implications of those questions on the survey results, and

determine if any results from our analysis needed

adjusting.

Second, it appeared that while the robustness of the

survey allowed us to gather unique insight into the

organization, personal interviews would allow our team

an opportunity to explore the unique aspects of the

organization before finalizing the results and providing

recommendations. In all, we conducted 6 on-site

interviews.

90

Managers

Surveyed

~50%

Response

Rate

38

Questions

Replicated

HBR

Figure 1: Survey Stats


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Results

By combining the survey with the in person interviews

our team concluded it was best to rate the organization

across a spectrum. For instance, some might point to the

largest proportion of responses being an Overmanaged

Organization as indicative as a likely indicator of the

organization’s ranking. However, armed with the

informational interviews, our team places the

Aftermarket organization on a spectrum which includes:

Passive-Aggressive, Overmanaged and Outgrown.

While no one interview or survey question drove us to

establishing this spectrum, the combination of several

factors influence the decision. For instance, a typical

Overmanaged Organization is described by Senior

leadership who often do not “walk the talk.” Plagued with

micromanaging, these organizations usually see

management more concerned with subordinate tasks than

they do with performing their own tasks. While our

survey results were split on this question (52% of

respondents felt their managers do “walk the talk”) we

also confirmed through interviews that, generally, people

are satisfied with management involvement in their daily

tasks.

In addition to Overmanaged, our analysis shows that the

Aftermarket may exhibit signs of a Passive-Aggressive

Organization. HBR indicates that these organizations

may, “Build consensus easily, but struggles to implement

agreed-upon plans.”6 Stemming from a fundamental

breakdown in decision rights and overall authority to

understand decisions which people are responsible for,

this type of organization finds it hard to implement plans

without falling into an overmanaged state. Support of this

point, comes through the survey results. When asked,

6 Neilson, G. L. (2008, June). The Secrets to Successful Strategy Execution. Harvard Business Review, 1-25.

“Once made, decision are rarely second-guess,”

respondents seemed to overwhelmingly disagree (64%

disagreed). Furthermore, our interviews bolstered this

point. One manager we interviewed mentioned that

people often do not, “Understand the why,” when it comes

to their assignments. This highlights the point that

improved understanding for responsibilities and tasks

may decrease second-guessing of decision in

implementing various strategies. This fact is important

because as Neilson’s results demonstrate nearly 60% of

respondents from companies rated Resilient agreed that

decisions in their organization were rarely second-

guessed.

The final consideration for implementing a spectrum

came after fully-understanding the characteristics of an

Outgrown Organization and comparing those

characteristics to our survey results. Outgrown

Organizations typically react slowly to market

developments and influence inside these organizations

often depends on title and role. To the latter point, our

survey found roughly 56% of respondents agreed that

within this organization title and role do more to influence

than does reputation and credibility. To the former point,

our interviews uncovered an example that seems to

represent a slower than necessary response to changing

market dynamics. The move to various spare part

“pooling” strategies is something well-known and

accepted throughout the competitive landscape. While the

organization had the opportunity to implement this

strategy many years before Paul took over, one manager

did indicate that implementation is, “at least a year off.”

Overall, this represents a good example of a slow market

adaption and supports our decision to place the

aftermarket on a spectrum of organizational types.

Pulling the Right Levers

Utilizing this insight, it is now possible to determine

which levers would be most beneficial for the

Aftermarket to progress from Overmanaged to a Resilient

Organization. HBR put a scoring system into place so that

an organization could simulate their year over year

progress in moving towards Resiliency.

Passive – Aggressive

Organization

Overmanaged

Organization

Outgrown

Organization

Figure 2: Organizational Spectrum

Passive – Aggressive

Score: 22

Outgrown

Score: 32

Figure 3: Spectrum Scoring

Overmanaged

Score: 26

Resilient

Score: 66


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Choosing which levers an organization should pull is both

extremely difficult and important in improving their

ability to execute strategy. The wrong lever could provide

a reduction in score, or only temporary desired results.

“Put simply,” Neilson notes, “decision rights and

information are the ‘dominant genes’ in Organizational

DNA.”7 In other words, an organization would be better

off, and see more of an impact, if it chose to pull the levers

associated with these dominant genes. Through their

research the HBR team identifies a paradox in this

distinction. “The irony is that structure is the first – and

often only – lever most senior executives reach for when

organizational performance lags.”8

Often, these types of changes are relatively easy to

implement and highly visible across the organization.

Even though we could not determine if this was the case

within the Aftermarket, we did feel it was important to

highlight this point because an organization could have a

much broader impact by adjusting decision rights and

information flow, than with the other two building blocks.

To prove this point, we used the HBR Simulator. Our

team chose the following 5-levers for the first-year of

simulations:

Create Centers of Excellence

Assign Process Owners

Establish Individual Performance Measures

Develop an Anonymous Feedback System

Create-Cross Functional Teams

The results of improving on or implementing these

actions is staggering. Over a 1-year period, we increased

our organizations score by more than 25 points. By

focusing on information and decision rights, we


significantly outpaced average companies in a relatively

short time-span.

This demonstrates the importance of the dominant genes

in improving organizational strategy, and shows the

implied benefits the aftermarket could receive from such

improvements. Moreover, the greatest impacting lever in

this simulation was to assign process owners. While we

are aware that this is a current practice in the aftermarket,

we do feel that more could be done to improve these

owner’s decision making authority while also increasing

the accountability to these process owners. Supporting

this point, one manager we interviewed noted that,

“Decision rights here are terrible,” and that, “Corporate

drives the decisions made.” While this is not out of the

norm for large organizations, strides in this area could be

replicated to effectively replicate this simulated results.

The simulation allows us to include an additional year of

changes to reach Resilient status. With the above

information in mind, our team decided the following

levers made the most sense for the second simulation:

Focus Corporate Staff on Supporting Business-

Unit (BU) decision making

Clarify and Streamline Decision Making

Clarify Key Processes

Assign Process Owners

Develop an Anonymous Feedback System

Again, the results indicate a positive shift towards

becoming Resilient. Similarly, we see an increase in

performance well above the average market score. What’s

more, these changes enabled us to take the organization

from Overmanaged to fully Resilient in just two years.

With improved decision making authority and a business-

unit that operates with an increased level of autonomy

from Corporate Headquarters, our team believes

incremental improvements will result in the

organization’s ability to execute strategy.

Recommendations

Aside from the above-mentioned shifts, we have

identified several opportunities for improvement. From

improving culture within the organization to promoting

high-performers, there are some relatively easy tasks that

Paul may take to increase strategic effectiveness within

the aftermarket


0 20 40 60 80 100

Average Score

Your Score

Comparison of 1- Year Results

Starting Ending

Chart 2: 1-Year Performance Comparison


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The first of our recommendations involves increasing the

flow of information across organizational boundaries. As

mentioned, information provides the largest effect on an

organization and drives the biggest levels of performance

increases. First, cross-functional teams would allow for

many of the segments to communicate with each other

across the MRO, Technical Services and Commercial

functions within the aftermarket. Several ad-hoc teams do

exist, but perhaps cross-functional teams could drive

improvement of overall goals with a variety of tools and

employees. Instead of operating in siloed units, for

instance, finance and technical services could work

together to reduce cost and understand the budget. Cross

training may also deliver intended results across the

organizations.

Second to cross-functional teams is overall

communication throughout the organization. To combat

this, many organizations offer a cafeteria discount for

employees who opt to sit together during lunch. By

throwing in small discussion leaders, aftermarket could

turn their lunch and learns into a more dynamic two-way

conversation to promote innovations.

Innovation is a tremendous way to increase business and

improve an organization’s culture. Therefore, our group

recommends the company adopt small “pitch

competition” type initiatives. With that, we feel

aftermarket could allow its employees to pitch ideas they

feel would help improve a certain aspect of the business

to the executive staff. If chosen, that employee may be

awarded resources or a team to carry out that project.

Community and University partnerships also make sense

to increasing organizational innovation efforts. Just North

of Chula Vista, the University of California, San Diego is

existing as one of the top engineering schools in the

country. Aftermarket could sponsor exciting case

competitions for relevant problems every semester. The

benefits here are two-fold. First, aftermarket would be

gaining assistance from cutting edge academic

knowledge. Secondly, aftermarket and UTAS could gain

visibility amongst young engineers who may opt to

pursue a career with the company after graduation.

With communication and innovation, our team feels that

strides could be made to improve the culture within the

aftermarket organization. For instance, it is a well-known

policy that no work time is to be allotted for certain types

of events. For instance, the annual Barbeque and

Christmas party are both hosted on the weekend, and do

not offer time for employees to connect during work hours

in a more personal setting. Instead, we recommend that

the company offer an annual event, sponsored by the

aftermarket, which allows the employees to engage in

team building during work hours.

Conclusion

Like many companies (3 out of every 5) included in the

original survey conducted by the dual efforts of the HBR

and PWC teams, Aftermarket’s survey results did not fare

well in regards employee opinion on efficiency of

company execution. The usefulness of this survey is two-

fold given that it both diagnoses the status of execution

levels of the subject organization while also providing

granular information on why that subject may falter in its

execution efforts. Moreover, the simulation capabilities

provided by the vast amount of data in the original survey

gives Aftermarket the ability to forecast reachable goals

and track its own progress of the course of its active

efforts to improve strategic execution.

The decision to conduct interviews sub sequentially came

because of the realization that the major difference

between our analysis and that of the original survey is the

fact that we had a single subject company as opposed to

the 1000+ organizations surveyed by the HBR PWC

tandem. Our unique situation allowed us to reach out to

individuals within the subject group to gain detailed

insight on their opinion of both the survey itself as well as

the results derived from it. This insight played a role into

the recommendations put forth by our team.

After considering the general survey results as well as

information gained through 1-on-1 interviews conducted

with individuals who participated in the survey, our

recommendations built on what the survey prescribes for

companies that express similar symptoms to Aftermarket.

The “levers” that the survey advises should be pulled

share a common theme, one of inclusion and

collaboration. Our recommendations attempt to propose

active changes that would align with what the pulling of

these levers would achieve, further connecting the groups

within Aftermarket, while fostering the innovative spirit

that creates a cohesive environment, and widening the

reach of the company by active inclusion of the business

community around it.