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How is 'execution capability' defined as a part of behavioral economics?
Hi! Thank you for your question about how 'execution capability' is defined as a part of behavioral economics.
In short, execution capability is defined as the discovering of processes that require different behaviors. These processes will develop new habits for adoption to behave rationally to achieve the best possible outcome. However, since these are time dependent, they would require leadership support with visibility and accountability. Execution capability can be quantified through assessment of various parameters such as the effectiveness of mission, goals, metrics/KPIs, priorities, roles and responsibilities and more. I have provided a deep dive of my findings below.
OVERVIEW
Behavioral economics came into existence in contrast to the classical economic theory, which assumed that individuals will behave rationally to achieve the best possible outcome. The irrational behaviors exhibited by individual and group psychology can alter the outcomes significantly. McKinsey survey revealed that due to biases and behavioral differences, execution capabilities vary. Although this study is from 2009, subsequent research shows the results are still valid and apply to today's companies as well. The McKinsey survey showed that even at companies that have good overall processes, realistic assessment of execution capabilities is the third highest-rated activity, regardless of the outcome of a particular decision. At companies that make poor decisions overall, realistic assessment of execution ranks sixth or tenth whether the decision was satisfactory or poor respectively. The translation of plans from paper to reality is highly dependent on “execution capability”.
MEASUREMENT/QUANTIFICATION
Therefore, execution capabilities need to be quantified or measured to be able to create the processes to achieve the best possible outcome from decisions. Collaborat quantifies execution capabilities across five dimensions — Clarity, Charisma, Judgment, Synergy, and Attention. These five dimensions are defined in behavioral economics as Clarity, which a leader may possess on how to execute a plan which involves setting goals, creating clear focus, good scoping, fixing accountability, planning and determining drivers of results. Charisma consists of the initiative, drive, clarity in communication, energizing the team, questioning, listening skills, escalating skills, emotional quotient, self-balance, flexibility and insight into one’s own mistakes lead to the outcome of execution. Sound Judgment helps to reduce delays, failure rates and is defined as an art — mix of facts and experience. Synergy is the art of connecting, influencing, facilitating, partnering and collaborating with others. Attention means constantly overseeing, monitoring and much more.
Crow argues that the execution capability development relies on the underpinning processes that require different behaviors. These new habits are cultivated over time and require support from leadership through visibility and accountability. Another way to assess the execution capability is through understanding the mission, goals, metrics/KPIs, structure, strategy, culture, project portfolio priorities, roles, responsibilities and communication systems. An article on UVA provides insights on how to enhance execution capability — business assessment, analysis of underlying metrics and action plan for targeted intervention.
CONCLUSION
To conclude, execution capability is defined as the discovering of processes that require different behaviors. These processes will develop new habits for adoption to behave rationally to achieve the best possible outcome, however since these are time dependent, they would require leadership support with visibility and accountability. Execution capability can be quantified through assessment of various parameters such as the effectiveness of mission, goals, metrics/KPIs, priorities, roles and responsibilities and more.
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