Managing By Commitments

Great managers know when to makeand breakpromises

The Idea in Brief

You make commitments—R&D investments, public promises to hit growth targets, hiring decisions, joint ventures—every day. Each involves actions taken today that bind your company to a course of action tomorrow.

Commitments shape your business's identity—defining its strengths and weaknesses, setting its direction, establishing opportunities and limitations, and focusing and energizing employees. But like double-edged swords, commitments are dangerous if wielded carelessly.

While each decision defines your company's capabilities now, it also reduces its flexibility in the future. When competitive conditions change, you may be unable to respond effectively—even if you see the threat and know what's needed.

You can't anticipate every commitment's long-term consequences, but you shouldn't shy away from making commitments. But before each key decision, ask: "Am I locking us into a course of action we'll regret later?"

The Idea in Practice

As your company matures, you make different types of commitments:

1. Defining commitments. These earliest, most enduring commitments establish:

• strategic frames: shared views about how you'll compete

• resources: hard assets (land, machinery) and soft assets (brands, technologies)

• processes: production, decision making, resource allocation

• relationships: associations with individuals and organizations providing resources, including customers, suppliers, distributors

• values: shared norms uniting and inspiring employees

Defining commitments determine a young organization's course and identity well into the future—but hamper later change efforts. To make the right commitments, ask, "Is this a decision we can live with in the long run?" Don't define commitments hastily if you don't have to.

2. Reinforcing commitments. These buttress your defining commitments as your firm matures. They include daily actions such as customer contract renewals, and occasional big bets like a major acquisition. They build efficiency, sharpen focus, temper risk, and attract employees, customers, and partners who fit the company's identity.

They also increase your company's rigidity, closing off needed new options if the competitive landscape shifts. Yet many executives cling to them because they paid off before.

3. Transforming commitments. When disruptive change strikes, pressure to make even more reinforcing commitments mounts. Instead, force your firm out of the status quo—with new, transforming commitments:

Select an anchor. Choose a new strategic frame or revamped process. Invest in different resources. Establish new partnerships or values.

Secure the anchor. Make clear, credible, courageous commitments that render the status quo untenable—leaving no room for retreat.

Align your organization. Reconfigure remaining frames, processes, resources, relationships, and values to support your new direction.

When digital technology took off, newspaper publisher Thomson Corporation's president, Michael Brown, transformed his company. He selected an anchor, publicly stating Thomson's plan to serve the specialized-information market in the U.S.—a new strategic frame. He secured that anchor, repeatedly communicating the new direction to stakeholders, acquiring information providers in the legal and financial markets, and divesting publishers that didn't support the new direction. He aligned his organization, integrating new acquisitions and tightening operations to secure financing for more acquisitions. Thomson became the leading provider of specialized information to financial-services, legal, and health-care professionals. Operating in 53 countries, its 2002 revenues exceeded $7 billion.

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