.jpg)
“All organizations are perfectly designed to get the results they get.” Bill Veltrop
“The last remaining source of truly sustainable competitive advantage is organizational capability, which is determined by the organization’s underlying architecture.” Nadler & Tushman in Competing by Design
Characteristics of High Performance Organizations
Jim Collins, in his two well-researched books, Good to Great and Built to Last, did all those of us who are interested in creating effective organizations a great service. He showed us what has worked and what hasn’t worked for the most successful companies in existence -- those companies that could be called High Performance Organizations by any definition of the term. His research revealed some of the design essentials, shattered some myths, and served up some surprises. Here is a summary of his findings :
1. They have a clearly articulated Core Ideology, made up of:
· an Enduring Purpose
· a Vision of a desired future state
· Core Values
2. They are focused on Preserving the Core, and at the same time, have a Passion for Change/Stimulating Progress.
3. They Preserve the Core by:
· pursuing ends above and beyond profit
· having a homegrown management team
· having a cult-like culture.
4. They Stimulate Progress by:
· setting Big, Hairy, Audacious Goals
· trying a lot of stuff, and keeping what works
· living by the standard, “Good enough never is”
5. In the process, they invest in building a lasting organization, versus relying on a charismatic leader, or a great product idea.
6. They have Disciplined People engaging in Disciplined Thought, taking Disciplined Action.
7. Disciplined People
· They have “Level 5 Leaders” (more like Lincoln and Socrates than Patton or Caesar) who
- display personal humility and professional will -- for the good of the whole
- are focused on building and contributing to the organization versus fame, fortune and power
· They seek out the right people – people who are self-motivated, self-disciplined and are driven by greatness
8. Disciplined Thought
· They maintain the conviction that they will can and will prevail in the end, no matter what it takes
· They confront the brutal facts of reality
- They create a climate where the truth is heard
- They lead with questions, not answers (Socratic leadership)
- Engage in dialogue and debate, not coercion (have healthy conflict, heated discussions)
- Conduct autopsies without blame
- Build “red flag” mechanisms – that highlight information so it can’t be ignored
9. Disciplined Action
· They maintain a culture of (self-) discipline and an ethic of entrepreneurship
- With these, there is no need for hierarchical and bureaucratic control
· There is freedom to act within a framework of clear purpose/identity and principle/standards of excellence
· They are relentless in sustaining a direction
· They maintain strong relationships and mutual respect
· They are rigorous, not ruthless (e.g., they don’t rely on restructuring and layoffs
A review of these findings suggests most organizations have a lot to learn from these great companies. Very few organizations I know of have these characteristics to any meaningful degree, and it appears that they will need to have them just to survive, as the business environment becomes more turbulent and competitive. They can almost certainly improve performance by adopting these proven practices. But will it be enough to enable them to thrive -- to be a leader or to be great themselves? I don’t think so.
Building the High Performance Organizations of the Future
Research like Collins’ looks at the past, and identifies what has been successful in the past, not necessarily what will work in the future. Any company that chooses to focus on adopting these characteristics would be following a practice similar to benchmarking, or trying to gradually catch up to the leaders in an industry by imitating them. This improvement strategy is better than standing still, but has little chance of real success, as the leaders being imitated are continually evolving, and will be well down the path once the imitators figure out how to do what the leaders used to be doing. The great companies never became great by imitating anyone else – they did it by imagining what could be done and making it happen.
I once worked as a consultant with some of the leaders of one of the major oil companies, who had decided they wanted to create the world’s greatest strategic planning system. I asked them how they planned to do that, and they said they were going to benchmark the companies reputed to be the best at strategic planning, cherry-pick best practices from them, and assemble those into one superior system. I suggested that, in parallel to that process, a small group work with me to imagine and design the ideal system, and we would choose which of the two products to implement. It turned out that the ideal system had all the features of the benchmarked system, and many more that were much more highly evolved. They decided to implement the system they had envisioned.
Likewise, other companies that aspire to be great need to think about the future, about what can be imagined, about what is possible, about what the right thing to do is, and how to make it happen. They need to visualize what they want and invent ways to leapfrog beyond where anyone else is, to what’s next.
Characteristics of Today’s Ultra-High Performance Organizations
There are a number businesses or companies that have been doing this kind of inventive evolution, and that have moved beyond the great and lasting companies in design, capability and performance. I would call them the Ultra-High Performance Organizations of today, and the most likely candidates to be the High Performance Organizations of tomorrow. Some of the key characteristics of these firms are outlined below.
Ultra-High Performance Organizations build on the organization designs of the Great and Lasting Companies by adopting the design features of organizations at the next higher levels of organization evolution:
I. Context Design/Context of Governing Ideas
- Shifting the paradigm on people from Theory Y to Theory Super-Y: seeing people as not only responsible and dependable, but as capable of understanding the complexity of the value chain, the business and business strategy, and of high levels of expertise, commitment, creativity and autonomy
- Shifting from Management by Personality to Management by Principle: operating by standards of excellence for everything important, that bring out the best in everyone
- From having an overarching set of governing ideas for the company, to having nested sets of governing ideas at every level, resulting in complete organizational alignment
II. Infrastructure Design/Social Processes, Systems and Structures
- From command and control and behavior management to strategic self-management processes, systems and structures: e.g., self-managing teams
- From diverse to common disciplines for recurring processes like planning, problem-solving, role clarification, meetings
- From periodic to continuous learning processes: e.g., 10% of people’s time
- From periodic to continuous innovation
- From innovation by a few specialists to innovation as part of everyone’s job
- From technician roles to business people roles: understanding of the value chain, the business, the business strategy
- Involvement of employees in the business: e.g., in planning, problem-solving, decision-making, innovation
- From periodic, incremental, to continuous, idealized/breakthrough improvement
- From SMART goal-setting to Breakthrough goal-setting
- From visions of leading an industry to visions of changing the world
III. Capability Development
- Emphasis on developing thinking capability - critical, creative, logical, systemic, strategic, composed thinking
- From people having an external locus of control to having an internal locus of control
- From people being reactive, dependent and conforming to being proactive, independent and unique.
Examples of Thinking Organizations include businesses or groups of businesses in Procter & Gamble, Clorox, DuPont, Imperial Chemicals, Sherwin Williams, A.E. Staley, Consolidated Diesel and Tektronix. Some other companies that have adopted many of these design features, and have achieved dramatic performance improvements as a result, include Hewlett Packard, Exxon, Gulf, Digital Equipment (now HP), Pacific Bell (AT&T), Crown Zellerbach (GP) and Scott Paper.
Little has been written about these organizations and their remarkable accomplishments in creating high performance organizations, primarily because they have been considered to represent a competitive advantage, and their stories have been kept confidential. One interesting case that was described in the literature was the Kingsford Charcoal Division at Clorox.
The Kingsford Division was barely breaking even in what was seen to be a dying business, was just able to meet its production requirements with 15 plants, and had the worst safety record at Clorox. Within a few years, it was able to produce as much tonnage as before, but with just 5 plants, and it had the best safety record at Clorox. In addition, its quality had improved tenfold, it was introducing new and unique products at three times its previous rate, and with twice the rate of success. It had positioned its products as first or second in the industry in every category, and became Clorox’s second most profitable subsidiary. One other interesting statistic is that 34 Director-level managers participated in this turnaround. According to the EVP who led this effort, seven years later, seven of these managers were Presidents or CEOs of Fortune 500 companies.
The case histories of these companies that have made it into the literature have been held up as paragons of organizational transformation. Five independent studies on organization performance improvement found the level of performance improvement in these cases to be about 10 times that found using other methods.
Designing Ultra-High Performance Organizations
How, more specifically, did these organizations go about evolving themselves?
One way to understand how they did it is to understand the distinctions and the relationships in the following model.
This is a model I have used for some time to help people discover that the greatest leverage for increasing results is to work back up this chain of cause-and effect. The premise is that improving thinking capability (e.g., more critically, creatively, strategically, systemically) and thought processes will give you better thoughts, which in turn will give you better actions, which will give you better results. The farther back in the chain you go, the more options you have, and the more powerful these options can be. Very few organizations seem to have discovered this approach, which is central to becoming and being an ultra-high performance organization.
Using the terms in the model, we could say that, in essence, these companies adopted many of the Actions (processes, systems, structures and practices) of the great and lasting companies, which enabled them to improve their performance significantly.
They also adopted the Thoughts (beliefs, values, principles) of the great and lasting companies, which gave them more options and enabled them to design better Actions (processes, systems, structures and practices) that better fit their own unique needs, and perform at a level on par with the great and lasting companies.
The key to their success was learning new Thinking Capabilities and Thought Processes, which enabled them to develop new, more empowering Thoughts (beliefs, values and principles), new and more empowering Actions (processes, systems, structures and practices), and get superior results.
You may have heard the saying, “Give a man a fish, and he eats for a day; teach a man to fish, and he eats for a lifetime.” I would add to that, “Teach a man to think creatively about commercial fishing, and he will dominate the market.
Basic Process for Designing Ultra-High Performance Organizations
The design process that has worked for my own and my colleagues’ clients, are variations on the following themes, which unfold in phases:
1. Entity leaders develop a common understanding of the current situation and the need to change/get on the same page about the critical issues, gains, opportunities, causes, goals, strategies while learning systemic and breakthrough thinking processes
This phase can include an organization assessment, which can be very educational and motivational, as well as diagnostic. It can clearly lay out the design variables that determine organization performance, most of which are invisible, and show the gaps in design quality, as well as provide insights on why the organization is performing as it is, and how it can improve. This need not be a massive effort with statistical sampling and automated scoring – just a rigorous, honest appraisal by a few informed people.
Some essential organization design variables include:
- Context of governing ideas (Purpose, Vision, Beliefs, Values, Principles)
- Infrastructure (processes, systems and structures)
- Individual and team capabilities
- Culture and climate
- Relationships
- Organization health/capability
- Level of Organization Evolution
2. Entity leaders create the new context of governing ideas, while learning creative thinking and planning processes. Leaders commit to achieve breakthrough improvements and the vision.
3. Create a change Infrastructure to manage the change process and model the organization of the future. This is a parallel organization, made up of overlapping groups that provide strategic direction, identify opportunities for improvement, develop the means to improve, and test the means from all perspectives for systemic fit.
4. Build higher levels of capability to think, and to lead in the organization as a whole
5. Build momentum by capturing low-hanging fruit that are energy drains and strategically significant
6. Optimize the core production process for quality and reliability
7. Increase the output of the core production process
8. Reduce the energy requirements of the core production process
9. Redesign the support infrastructure
10. Redesign the strategic infrastructure
11. Renewal.
Each of these phases is an ongoing process. The overall process, which is difficult to describe in words alone, is an iterative, unfolding one, with a first pass at the first phase, then a pass at the second phase, back to the first phase to test for fit, a pass at the third phase, back to the first and second phases to test for fit, a pass at the fourth phase, and so on. A graphic illustration depicting this overall process is at the beginning of this article. The overall process is sometimes called the Evolutionary Change Strategy. It embodies the notion of revolutionary thinking and evolutionary change.
As described in my four earlier articles over the past few weeks, underlying this design process is the Strategic Self-Management paradigm (at www.examiner.com/examiner/x-20018-SF-Workplace-Issues-Examiner~y2009m9d4-Your-Organizations-Culture-may-be-Sabotaging-its-Performance); the process used for managing its change process would be the Transformational level of Change Management (at www.examiner.com/examiner/x-20018-SF-Workplace-Issues-Examiner~y2009m9d4-Change-Management-can-be-hazardous-to-your-organizations-health); this work of change would be enabled by the use of disciplined methodologies or mental software (at www.examiner.com/examiner/x-20018-SF-Workplace-Issues-Examiner~y2009m8d20-Your-Organizations-Mental-Software-May-Be-Obsolete); and the outcome of this work is the creation of a Thinking Organization (at www.examiner.com/examiner/x-20018-SF-Workplace-Issues-Examiner~y2009m9d8-The-organization-of-the-future-is-here-today-the-Thinking-Organization-revealed).
Comments