A manager, by the very definition of the term, is someone who has control of and responsibility for the direction of their business. An important but often neglected part of this responsibility is to disengage from offerings, markets, and customers that are no longer providing value and profits to the organization. Leaders who continually avoid the tough decisions and refuse to pull-the-plug on projects, products and customers that aren’t generating real value are slowly but surely killing their organizations.
In my experience providing strategic counsel to senior leaders around the world, there are two types of disengagement: active and passive. Active disengagement involves reviewing areas of resource allocation on a monthly basis and jettisoning activities, projects, reports, and tactics that are either not working or not providing value. Research has shown that the number-one driver of revenue growth is the reallocation of resources from underperforming initiatives to those with greater promise–throughout the year–not once a year!
However, because in most organizations strategic planning is an annual event rather than an ongoing dialogue of key business issues, passive disengagement is much more common. In passive disengagement, managers tend to wait for planning season to arrive to make changes. And typically, the changes they make aren’t significant enough to make a difference. A study of more than 1,500 companies over a 15-year period showed that a full one-third of businesses received almost exactly the amount of capital in a given year as they did the year before. During his tenure as CEO of Exxon Mobil, Lee Raymond had a requirement that 3 to 5 percent of the company’s assets be identified for disengagement every year. Having this type of requirement in place can reawaken people’s mindset and discipline to make real trade-offs.
When we make trade-offs, inherently we’re making decisions. The word decision comes from the Latin decidere, which means “to cut off.” If you have trees on your property, you know that every few years you have to cut off, or prune, some of the low or dead branches. The primary reason we prune a tree is to promote new growth. The same rationale applies to decisions to disengage in business. We’re cutting something off in one area, to promote new growth in another area.
Are all the hours your team invests in the strategic planning process resulting in significant changes in resource allocation? For most leaders, there are changes in their market, changes in customer value drivers, and changes in the competitive landscape from year to year. Yet, the areas they allocate resources to and the corresponding amounts see little, if any, change. Unless you as a leader are involved in active disengagement on a regular basis, you are most likely wasting a significant portion of your people’s time and budget. As Twitter co-founder Evan Williams said, “When I meet with the founders of a new company, my advice is almost always, ‘Do fewer things.’ The vast majority of things are distractions and very few really matter to your success.”
The discipline to do fewer things better—to focus—begins with your ability to disengage.