Professional Documents
Culture Documents
ORGANIZATIONAL
PERFORMANCE IN
COMPLEX TIMES
D RIVING O RGANIZATIONAL P ERFORMANCE IN
C OMPLEX T IMES
By Mark Kinnich, VP Consulting Services Midwest Region and Strategy Execution Global
Subject Matter Expert with Right Management
So, how do companies incorporate such change while staying afloat in during
uncertain times?
Executing strategy was difficult before and it is getting even harder. In 2007 an MIT
Sloan Management Review noted that less than 45% of Board Directors believe that
their companies are fully capturing strategic objectives. While this may not be
surprising given the complexity of the business environment, it is still not an
acceptable level of performance. Most companies formulate strategies, however,
according to recent studies, 70-90% of them fail to execute and, when asked to
assess their results, only 1 in 3 companies report achieving significant strategic
success.
That historical lack of success and capability is being brought into the current
business environment. The list of current critical business drivers now includes global
competition and many markets are in the midst of challenging economic times. The
degree of difficulty may vary by industry but, according to CFO Magazine (April
2008), “nearly 90 percent [of CEOs surveyed] say the economy will not return to
normal growth conditions until late 2009,” and “as a result of this economic
uncertainty, 60 percent of CFOs have postponed expansion plans.” Yet, interestingly
enough, and to highlight the problem of approaching issues one dimensionally,
“eighty-six percent of companies with foreign sales say the declining dollar has
helped them by accelerating their business overseas.”
Various studies have pegged the current • Leadership Teams having the same
average employee engagement level in discussion over and over again without
organizations to a range of 30% to 45% coming to resolution, taking action, and
of the workforce. That means an appalling solving the problem.
majority of employees are not
significantly engaged in their companies • Inability to talk about all elements of the
and/or their jobs and, as a result, are not business (financial, operational, and
fully engaged in driving organizational people) with equal levels of intelligence
performance. This also means there are and insight.
considerable gains to be made. Gains (as
indicated by employee engagement
For example, one mining organization, when the market price for the raw materials it
produced more than tripled, changed its strategy from “cost containment” to
“volume production at maximum speed.” The ability to drive a new set of behaviors
through all levels of leadership and employees was critical. To quickly take
advantage of opportunities, the company needed to optimize efforts of the entire
workforce. The organization succeeded due to a well-defined specific focus and the
ability to engage people in achievement of the strategy.
From a human capital viewpoint, there are multiple perspectives to consider, for
example; talent management, employee engagement, leadership, culture,
organization design, productivity, retention, recruiting, etc. Addressing any of these
may improve the leverage an organization gets from their workforce, but which one
is the right one?
• Aligned organizations have a consistent environment, tend to hire people who will
succeed in that environment, and empower people to act within the strategic
framework in alignment with the strategic priorities.
Question #1: Do employees at all levels understand how the organization (or their
business unit) intends to successfully compete in the marketplace (price, value,
service, innovation, etc.) and how they can contribute to that value proposition?
Question #2: Has leadership established a mission and vision, a consistent set of
values, a leadership and operating philosophy, and a commitment to drive
organization success (vs. functional success)?
Question #3: Is the organization’s value chain (how value is produced for the
customer across functions and business units) well understood (clear roles,
capabilities and process handoffs defined) and managed (metrics to support
continuous improvement)?
Question #4: Do the people practices clearly drive strategic achievement? Are the
people practices aligned with the mission, vision, values, leadership and operating
philosophy of the organization?
Question #5: Do the leaders regularly pay attention to a set of employee metrics
that inform their actions on how to build a more capable organization (metrics such
as level of engagement, talent, retention, ability to acquire talent, internal
promotions, lateral moves, etc.)?
The absence of answers (or inadequate answers) to these key questions helps
identify areas that are hindering (or creating outright barriers) to improved
organizational performance. These five questions provide a starting point for creating
higher levels of alignment in an organization. An organization that pays attention to
these key questions is more likely to create and sustain a work environment that is
highly engaging to employees.
There are many views about how organizations approach strategy execution. One
such viewpoint that has proven successful for Right Management clients is shown in
the graphic below. Effective strategy implementation, as illustrated here, is driven by
how the organization aligns the elements of leadership, structure, and people
processes, creating a culture or work environment that facilitates a high level of
employee commitment to the organization’s goals and customers.
Within each of the alignment elements in the framework, there are additional areas
to be explored. The examples below demonstrate how lack of alignment in specific
areas can impact organizational performance. While an organization would need to
ensure alignment in all areas, the examples below highlight one specific area for
illustration purposes.
The Framework for Driving Organizational Performance has resonated with many
senior executives, enabling dialogue about where their organizations could enhance
alignment and drive improved organizational performance. While the concept
diagram is simple, executives agree that it is more difficult to achieve success than
to describe the process.
• In another example, some executive team members were “at odds” with each
other. There was agreement with the strategy, but not with how the organization
could work together to create value for the customer. Leaders were publicly vocal
about their personal perspectives of how the organization should operate and the
differing perspectives adversely affected the employees’ confidence in leadership,
thereby causing difficulties and increased stress working across functions. In this
organization’s journey towards greater alignment, the leadership team learned
how to productively discuss and reach agreement on vision, executive leadership
operating requirements, and the ways in which the organization creates value
(across functions). Even though the larger management team was not directly
involved, they acknowledged the impact that the leadership team’s improvement
had on their work and morale. In addition, the confidence and trust they felt
towards the executives dramatically improved.
• Set the mission, vision, values and strategy for the organization.
• Establish the organization’s design (of which management structure is just one
key element).
Continuous Process
After ensuring the leadership team is aligned, the company must set about
identifying the other areas most needing to come into greater alignment and begin
work there, progressing to create greater alignment throughout all parts of the
organization.
Alignment is not a static concept but one that needs to be reassessed at key times
such as during major investment decisions, acquisitions/mergers, organization re-
design, and hiring of key executives, as well as during strategy development. All
organizations experience change and opportunities that naturally create a need for
reassessment, redevelopment, and reconfirmation of alignment.
Alignment can occur through many organizational elements, making it easier for
employees at all levels to perform consistently with the way the Executive Team’s
strategy and, thus increasing the level of energy moving in toward intended
outcomes or results. When creating a new organization, it is imperative to consider
all these elements together to ensure the organization is built in an aligned manner
from the start. When working with an existing organization, it makes sense to
identify which of these areas will provide the greatest leverage to improve strategy
execution and work on the top ones first. An example of one new organization’s
approach is illustrated below:
That we are in a challenging business environment is obvious. The drivers that are
most impacting a specific business will be unique to an organization’s market,
business environment, and internal capability. The impact of these challenges may
show on a company’s financial structure, IT system
needs, product development capability, etc. In any “I believe that the change in Orica’s
case, the impacts will also affect an organization’s culture was the main reason the
employee base…from leadership to the back company turned around so
office…to front-line employees. successfully, as reflected in the
share price, which rose from $4 to
$20 within three years.”
Improving the level of alignment in an organization
creates a competitive advantage. Benefits include: CEO, Orica Ltd.
reduced waste in decision making time and increased
speed and effectiveness for creating value throughout the organization. Alignment
also helps capture more of the hearts and minds of all employees. The improved
organizational performance can positively impact revenue, operating margin, and
share price even in these challenging and complex times.