How to Create a Breakthrough in Organizational Performance

Most organizations fall short when it comes to execution

It is during tough times when you will see an organization’s real performance capabilities. The pressure today to generate results, satisfy shareholders and keep customers happy is intense and shines a spotlight on many organizational weaknesses. Innovation is critical to growth, particularly as the speed of business cycles continues to increase. Most companies understand the importance of innovation but fall short when it comes to execution. It is during the good times that organizations need to build their reliance.

Our strategic insights help you transform your innovation performance by focusing on four requirements for innovating: strategy, ideas, execution, and organizational alignment.

Innovation depends in part on your ability to get profitable ideas into your pipeline. You need to identify the areas of your business that are ripe for change and find insights in those areas. Learn to reap the benefits of "open innovation," positioning you to look beyond your boundaries to gain access to ideas, knowledge, and technology that add to the value of your resources.

Too often, CEOs will allow what is urgent to crowd out what is essential. When an organizational bias for action drives doing, often thinking falls by the wayside. Instead of working to develop a winning strategy, ineffective leaders

• define strategy as a vision,
• see strategy as a plan
• deny that long-term (or even medium-term) strategy is possible
• define strategy as the optimization of the status quo
• describe the strategy as following best practices

Operating in tough times

During tough times, top-line revenue growth is just not likely in many industries. While most organizations find ways to cut costs, these are usually only short-term cost avoidance efforts that don’t change organizational performance. Savings realized in one part of the business often add expenses somewhere else. In any case, the research in this area indicates that before long, cost savings are quickly passed on to customers in the form of lower prices. The net result is that many businesses find themselves treading water, waiting for the economy to rebound.

So, the question is “How can my organization thrive and prosper in tough times?” Behind this question is a sense that we cannot get there by making an incremental change; we need to make a step change in organizational effectiveness.

Our focus in this white paper is twofold.

• First, we will outline our prosperity recipe focusing on the best opportunities for significant improvement. We will talk frankly about why it is tough to make a substantial change to the practices that have become engrained in your business.
• Second, we will outline the leadership circumstance required to make a successful step change. However, be warned, these are not easy to do. If they were, every organization would be doing them!

Where Is the Sweet Spot for Creating Dramatic Changes in Performance?

Our team uses the axiom that “conflict and opportunity always exist in the white space of the organization chart.” Inside the white space is where the hand-offs between individuals, workgroups, and departments occur. These hand-offs and the rules that guide them are built up over time, often independently and sometimes not well connected to the business of delivering value to customers, shareholders or employees. It is in rethinking the hand-offs where you:

• improve work cycle times significantly
• reduce work complexity
• realize significant cost savings

Our definition of ‘white space opportunities’ includes the edge of the organization chart, where your organization interacts with its suppliers and customers. There can be significant opportunities to streamline these interactions.

Many executives know, from experience, that the white space is where the sweet spots lie and where they can make significant improvements to organizational performance. They also know that it takes hard work to create change in these spaces and many of the efforts fail.

Are There Examples of This Kind of Change?

A great example of rethinking the white space inside the organization chart was what Lou Gerstner did after taking the helm of IBM in 1992. He re-invented the white space and changed the internal hand-offs. At the time, IBM, a business with a vast array of technical skills, was on the verge of bankruptcy.

After retiring from IBM in 2002, Gerstner wrote a book about his experiences there, Who Says Elephants Can’t Dance. In 2003, IBM employee Dennis Elenburg wrote a review of the book. His analysis is on the IBM website.

Here are a couple of excerpts from Elenburg’s review

When Gerstner came on board, the conventional wisdom, from both industry pundits as well as many IBM insiders, was that the only way to save IBM from the inevitable disaster was to break it apart. However, Gerstner looked beyond this advice and opted to preserve the real strength he believed IBM brought to customers. His decision to keep the company together and “teach the elephant to dance” was “the first strategic decision, and, I believe, the most important decision I ever made — not just at IBM, but in my entire business career,” Gerstner writes.

In Gerstner’s own words, “fixing IBM was all about execution” and required “an enormous sense of urgency.” His whole approach was to drive the company from the customer’s view and “turn IBM into a market-driven rather than an internally focused, process-driven enterprise.” Moreover, it worked. It was all about execution — and honest ways to measure its effectiveness. Before Gerstner arrived, IBM tended to fool itself with bogus indices and data (e.g., customer satisfaction numbers generated from hand-picked samples; subjective product milestones, etc.), but he changed all that. “People do what you inspect, not what you expect,” he explains.

Take the customer's view

By driving IBM from the “customer’s view,” Gerstner forced the way internal hand-offs got done to change, and he broke up time-honoured internal processes. Behind the scenes, many long-time organizational boundaries disappeared, and new metrics for measuring success emerged. In the end, IBM became a service company driven by customer expectations. Did it work for the long-term?

2008 was a tumultuous year for most firms, particularly technology ones, yet IBM posted both record sales and pre-tax profits for 2008. In first quarter 2009, with decreased sales, earnings per share increased from the previous year.

Another example of rethinking the white space, this time looking to the edge of the organization chart, is the story of Walmart and its founder Sam Walton. Setting up his first retail store in the late 1940s, Walton, like other retailers, was looking for deals from his suppliers. At the time, if retailers got a deal, they usually left their store prices unchanged and pocketed the savings. When he founded Walmart in 1962, Walton wondered what would happen if he could take the savings from his suppliers and use them to lower prices.

Many books and articles have written about Walmart’s success and much attention paid to the culture that Sam Walton created; the way Walmart uses information technology; and the virtues of keeping it simple. Indeed, these are all part of the Walmart success story. However, Sam Walton understood that his organization chart had to be extended to include suppliers. He focused attention on the white space at the edge of the traditional organization chart. This change in the retailer/supplier relationship re-invented the retail business.

Are You Ready for This Kind Of Change?

Are you ready to make a dramatic change to improve your organizational performance?

Our approach is to treat strategy-making as developing a set of answers to five interlinked questions. The questions cascade logically from the first to the last.

• What are our broad aspirations for our organization?
• What are the concrete goals against which we can measure our progress?
• Across the potential field available to us, where will we choose to play and not play?
• In our chosen place to play, how will we want to win against the competitors there?
• What capabilities are necessary to build and maintain to win in our chosen manner?
• What systems are necessary to build, operate and maintain the key capabilities?

Our approach to strategy

Our approach makes strategy easier and more meaningful. It saves you from endless visioning exercises, misdirected SWOT analyses, and lots of uninformed big thinking. We help you in crafting your strategy in solid chunks through iteration of the answers to the six questions. The result is that you get a better strategy that you can carry out, with much less pain and wasted time.

Each question has additions questions to challenge you to get to your white space opportunity. For example, how will we choose to win against the competitors:

• What will enable us to succeed in the way we want?
• How will we know when we are winning this way?
• What evidence or trend exists that allows us to make this claim?
• How can we influence our desired outcomes in a way that adds value, is rare and is very hard for our competitors to imitate?
• What noticeable “levers” can we pull?
• Why would our customers believe we are different than our competitors?
• How will win?
• What is our ‘good pain’?

Both the IBM and Walmart examples illustrate how to improve organizational performance significantly. In both cases, a critical re-examination of the status quo of the organization chart and then moving into the white space opportunities became the catalyst for significant change.

Could Your Business Reinvent Your Industry?

So, why doesn’t every business make this kind of market-leading change? While we believe that every company is capable, most continue to ‘get by,’ tread water and wait for the next up-swing while shareholder value continues to erode.

Why? Because that is how most of us organize, lead and manage businesses. Almost all organizations are purposely organized to produce predictable, repeatable results. This effort requires the development of policy, well-defined processes and a myriad of other things to make our business outcomes predictable. To ensure predictability, we hire managers and supervisors whose job it is to ensure that things do not change much from one day to the next. The chief artifact of this desire for predictability is your organization chart, with its groups, departments and business units. This chart is often used to explain just how the Company works.

We build our businesses to become predictable, and you hire people to make sure things stay the same. The result is that it is difficult to generate momentum for significant change and change driven by the middle of the organization will always be slow and incremental. So many well-intentioned change initiatives collapse as they try to cross the white space of the organization chart. We talk about this as watching the ‘corporate antibodies’ kick in.

Ask yourself, “What visible behaviours do you see daily at your company that you would not see at the company you desire to become?”

Now is not the time to tread water

If you do not have the luxury of treading water, with the hope of things getting better on their own, there is only one place to look for the answer - ‘the team at the top.’ This group, involving the top two or three levels of the organization chart, is the only one with the power to reach across organizational boundaries effectively. To make a step change their role becomes about:

• Charting the course for success
• Removing barriers by reinventing the organization chart
• Streamlining the white space interactions in the new organization

Fundamental to success, the “team at the top” needs to work together as a team, and this is much easier said than done.

Many senior leaders know, from experience, if their Executive Team is not on the same page, working together regarding priorities or any other matter, their differences will show up as fracture lines running throughout the entire organization chart. Their differing priorities are the cause of many inefficient organizational practices. In our consulting business, we often see poor executive level teamwork and hear many complaints from the middle of the organization that the team at the top is the worst “team” in the organization.

“First Who, Then What”

How do you move from merely being an executive team working at the same company to a high performing Executive Team? First, take a hard look at the players.

In Good to Great, Jim Collins concluded that in market-leading organizations, it is “first who, then what.” His observation that “it is about who is on the bus” is now a common phrase in business jargon.[1] When Lou Gerstner decided to “teach the elephant to dance,” he began by choosing the team players he wanted to work with. He started with changes at the board level as well as other key executive positions.

...executives spend too much time drafting, wordsmithing, and redrafting vision statements, mission statements, values statements, purpose statements, aspiration statements, and so on. They spend nowhere near enough time trying to align their organizations with the values and visions already in place.” — Jim Collins

Are you ready to make a dramatic change to improve your organizational performance? Here are some tough questions to see if you have the right people on the bus:

• Do you have an executive team willing to take on the challenge of becoming a high performing Executive Team?
• What does our executive team care about more than our competitors do and will this enable us to win in the way we want?
• Do we have executive team members willing to take on the challenge of confronting the status-quo inside our organization?

Optimize your executive team

Optimizing your executive team by attracting and retaining the best high performing talent is a critical factor in leading successfully in more desperate times. Having the best talent is not just about high technical skill. It is also about the individual members’ ability to think about the success of the Company independent of their roles in the hierarchy, to consider as a team and to work together to make a step change. These are fundamental building blocks to improving organizational performance.

We help you find high performers using our Best-Fit Staffing process. A top performer can deliver 400% MORE PRODUCTIVITY than the average performer. Best-fit staffing is essential for business success. Despite this, most hiring managers use hiring tools that are woefully biased and inaccurate for making many crucial hiring decisions. We are committed to helping your hiring managers identify and employ best-fit candidates for critical positions without the guesswork. We have over 500 industry standard benchmark to assess talent against the best in class.

How Do I Know When I Have A Real Team?

The research of Jon Katzenbach and Douglas Smith, outlined in The Wisdom of Teams, demonstrated that high performing teams are a vital factor in outperforming the competition. They defined a “true team” as a “small number of people, with complementary skills, who are committed to a common purpose, performance goals and an approach for which they hold themselves mutually accountable.”[2]

Real teamwork evaporates as you rise in the ranks

There are many reasons why the practice of real teamwork begins to evaporate as you rise in the ranks. Here is our list of the top five commonly held perceptions:

• Organizational functions compete internally for resources thus creating the perception that a leader's role is to fight for his group’s share.
• Roles and contributions of team members, including the CEO, are limited to their hierarchical and functional positions.
• Spending extra time together is inefficient.
• Team effectiveness depends only on communication and openness.
• The way organizations assign accountability and then focus on individual rewards.

Katzenbach & Smith found that organizations often mistake working groups for real teams. However, precise distinctions exist between the two and, in our experience, too many executive teams are working groups.

Executive Team or Working Groups

If your Executive is a working group, you will likely find it interacts in one of four ways:

• A team of individualists – Each team member will do his job and look out only for himself, his team, and his function.
• Factional team – In this corner sits Design and Manufacturing facing off against Marketing and Business Development in the other corner.
• Conflict-avoiding team – Everyone needs to go along, to get along. If the Design Department does not criticize the Operations Department’s performance, then it will return the favour.
• Indecisive team – Tough decisions, with few attractive alternatives, surround this team so they send it back for more study, with the hope that new choices will emerge.

Do any of these descriptions sound like your Executive?

There is nothing inherently wrong with having a capable working group at the top, and it suffices in most organizations. However, it is only when you have a high performing Executive Team, capable of reaching into the organization and reorganizing the boundaries, which your organization will be able to deliver a step change in organizational performance!

Where Do I Start?

Are you ready to make dramatic changes to your organizational performance? It takes time, and lots of effort to build a High Performing Executive Team and some of the steps include:

• Develop:
  • a clear mandate for the Executive Team that goes beyond hierarchical and functional roles
  • statement of shared values and have team members sign it
  • a strategy around making a step change
  • understanding of the kind of culture that will support ongoing change
  • powerful change management strategies that recognize the critical role the direct reports to the executive team have in making change succeed or fail
  • small teams from the executive team who plan for teamwork in creating boundary-busting approaches and new metrics for measuring success
• Identify the:
  • capabilities that are necessary to build and maintain to execute strategically
  • management systems that are necessary to build, operate and maintain the essential capabilities
  • some early wins and celebrate them
• Document the culture and share it with employees for input. Once finalized sign by the Executive team and post throughout the workplace.
• Anchor changes in the culture.
• Align the organization's resources with its goals. (GAP™)

High-performance team

Our high-performance team development will dramatically improve your team. The CEO needs to ensure that the organization is developing succession-ready executives for all senior roles. A CEO should drive management succession planning at top levels. This process includes the early identification of any inside CEO contenders and providing counsel to the board on CEO succession. We offer strategic insights to CEOs — How to be Effective in Succession Planning.