In our View …
The business of business has never been easy.
Organizations, and their leaders, have long searched to find the secrets to the holy grail of sustainable business performance. They have been disappointed time and time again, only to discover they have fallen well short when it mattered most. The challenging conditions, under which we have all operated since 2008, have severely tested the resolve and conviction of even the bravest and boldest of leaders. At times, it seems as though the mysteries of high performance remain locked deep in the catacombs and are not that easily retrieved.
The Beacon Group has chosen to make our professional work and personal passion the continuing search for answers to the most common and vexing problems organizations encounter. As a result, we committed ourselves, in 2008, to conducting an in-depth study to help determine what lessons can be learned that would help aspiring organizations break the back of this serious pattern of under achievement. During this period, we collected data from seven organizations, according to a fixed set of assessments, the results of which are being published in this White Paper.
As we release this study, we believe, more than ever, the answers to the challenges so many organizations face are far less difficult than mustering the resolve required to address them. It is our hope the results will serve as a call to action to leaders everywhere who are seeking to shift their organizations, transform their cultures and find sustainable solutions to driving more effective business performance.
The usual challenges of organizational effectiveness and high performance have been made even more difficult, over the past several years, by the unprecedented global economic conditions we have witnessed, and their impact on even the historically best run and best led organizations. The pressures have been made worse still because so many organizations simply failed to set the proper foundation for high performance in the good times, making it even more difficult for them to cope when times became exceptionally challenging and unpredictable.
The Beacon Group has supported countless organizations during this difficult period, and in the years leading up to the financial meltdown of 2007. We have long sensed a dramatic disconnect between what the circumstances warranted, in terms of transformational effort, and the willingness and capacity of organizations to face the fire, identify the gaps and address the underlying issues. Beginning in 2008, we began an in-depth study of the conditions required for organizational success and developed a series of unique organizational assessments to help us better understand the symptoms and more accurately pinpoint the performance triggers.
We have followed the progress of seven organizations, from across a wide variety of industries, and believe, as conditions remain challenging for so many, it is now a good time to share those insights, observations and learning’s, so that others can take action and drive organizational change in a positive and urgent manner.
This study included:
- Two multi-national manufacturing organizations,
- Two Canadian based service organizations,
- Two technology based companies, and
- One Not for Profit organization.
We believe this study will be of particular interest to senior executives who are anxious to understand what they need to do to create the “winning conditions” for success and build a high performance organization capable of delivering sustainable, reliable results over time.
The conclusions will be clear and will point to the need for senior executives to work even harder, smarter and in a far more focused manner on the three principle levers of organizational success.
- The health of the Organizational Culture
- The framework for Leadership Effectiveness
- The necessity for crisp Strategic Focus and Goal Alignment
The findings and conclusions will serve to remind well intentioned and forward looking leaders that the key to success lays in creating both the conditions and the architecture necessary to:
- Underpin high performance
- Attract and develop great talent
- Develop human potential and imagination
We will identify the very specific leading indicators, and will explain how rapid, large scale improvements can be made when a committed leadership team decides to focus on what really matters, and creates an environment in which transformation is led from within the body of the organization, not just the top.
The Beacon Group’s “Study on the Keys to Driving Organizational Effectiveness” examines the five essential and interrelated performance effectiveness categories we believe most accurately help determine the true health and fitness of an organization. In our view and experience, these elements underpin the serial success of any high performing organization. Several of the elements have appeared in other studies, in various forms and, most specifically, the Booz Inc. Organizational DNA Model. However, we believe our assessment, and subsequent study, is the first of its kind in Canada and is significantly more robust than others as it broadens the analysis to examine several factors others have not integrated into their models.
The Beacon Group’s Performance Effectiveness Framework examines:
Elements which speak to the issues of – alignment and effectiveness
- Business Architecture
- Social Architecture
Elements which speak to – the orientation of the organization’s people and its leaders
- Organizational Focus
- Organizational Balance
Elements which speak to – the behaviours which drive success
- Organizational Culture
The results of the study are based on detailed web-based surveys conducted with the employees, managers and leaders of each of the seven organizations we studied. The findings have been compared, on a consistent basis, using best practice methodology to ensure accuracy and veracity.
The interpretations and analysis are those of The Beacon Group.
High Level Findings …
The Beacon Group has carefully collected and consolidated the comprehensive survey data obtained from the senior management teams of the seven organizations. We then rank ordered the various categories to examine whether or not there were any clear, unequivocal trends and/or messages that transcended the wide variety of industries within which the organizations operate.
We discovered that:
- In six of the seven organizations we studied – Lack of Focus was the #1 issue
- In the seventh organization, it was the second lowest rated element
- The average overall score for Organizational Focus was 52%
- The second most significant issue related to the – Business Architecture
- The average overall score here (amongst the seven) was 57%
- Five of the seven organizations scored below 60%
- The final concern to be noted rested with – Organizational Culture
- The average overall score here (amongst the seven) was 61%
- Even the “best” culture still ranked below 68%
Key Learning’s …
1. Organizations, and their leaders, will not necessarily be happy to learn they must dedicate significantly more time and attention to understanding and improving the social dynamics of their organization, if they wish to maximize effectiveness. We believe this is not achieved through formal programs and or policies, but rather through the willingness and ability of the most senior leaders to build their credibility by acting visibly and urgently to remove barriers, promote candour and practice true transparency.
The quality and nature of the social fabric of an organization, and how it is fostered by senior leaders, makes a huge performance difference.
2. Silos, and the narrowly focused, rigid and insular departmental orientation they evidence, are one of the principle factors detracting from high performance effectiveness at the enterprise level. They emerge, exist and multiply as a direct result of business unit leaders failing to ensure their departments are fully aligned and linked, in a coherent and clear manner, to the organization overall. They foster short sightedness, protectionism and narrow mindsets which work against the good of the collective performance.
Leaders must banish silo mentalities if they wish to reach high performance. They cannot put the whole enterprise in jeopardy by allowing rogue units.
3. Senior executives appear to be failing miserably in their efforts to ensure front line managers are fully supporting the organizational objectives. This suggests to us the cascading of information and insight, in most organizations, is simply not penetrating the level below Vice President. As a result, it is depriving front line mangers of the context they need in order to guide the day to day business operations.
Alignment has to run in all directions, from top to bottom ,and everywhere in between. The most important constituency are the middle managers and their staff.
4. The lack of enforcement of true accountability, with “teeth”, is a huge problem in all of the organizations we studied. There is a distinct and concerning gap between the high level of expectations which have been set by the most senior leaders, and the costs and consequence for low, partial or even outright non-compliance at levels below.
Credibility takes a huge hit when it is obvious under performance is tolerated. The senior leaders have to be willing to differentiate based on objective, true performance.
5. The logic, rationale and business case for important strategic decisions, made at higher levels, is simply not well understood and/or fully communicated to all managerial levels. The unfortunate and costly net result is a very significant amount of time and effort lost through chronic second guessing of decisions made by senior officers.
Leaders cannot assume their logic will penetrate the hearts and minds of those at lower levels without a commitment to greater transparency and scene setting.
6. The need for significant improvement in performance feedback and coaching is not a new revelation. What is a surprise is how, after being so long in the headlines of the organizational effectiveness movement, this powerful and liberating role of people managers is simply not practiced, supported or encouraged.
Organizations will never reach the nirvana of high performance until the process of performance feedback and coaching is made a serious priority.
Social Architecture – The Framework
In far too many organizations, any talk about the value and importance of culture, social networks and morale receives only the slightest attention from the most senior leaders when compared to the thrill and excitement of, say, mergers, acquisitions and capital investments. More often than not, even what discussion there might be, is undertaken with a polite, barely hidden disinterest and a not too subtle suggestion to move the conversation along to more important matters.
- How misdirected – that premise is!
- How unfortunate – the results!
- How narrow – the mindset!
While the link between culture and performance may often not be well understood, it has not been for lack of effort by many well regarded people and experts, ranging from Jim Collins to John Kotter, who have valiantly attempted to improve the body of insight, knowledge and understanding on the connection.
Our own study supports what these and others have been saying for some time now, but it adds a vital new twist by examining the specific drivers of what we have chosen to call the Social Architecture of the enterprise. We have chosen that phrase deliberately as Corporate Culture seemed just too narrow and nebulous a definition of what we believe is a much more intricate web of interpersonal and psychological factors. In addition, it does not accurately reflect the significant changes in society, in general, and the way in which people relate in the workplace, in particular.
Culture is not something that just emerges – it has to be carefully and deliberately crafted, in just the same way, and with just the same detail, as the Strategic Plan.
In our view, there are four essential components comprising our definition of Social Architecture.
PRIDE AND LOYALTY
- The degree to which employees are advocates for the organization.
- The way in which they feel about each other, within the community.
- The degree to which the organization creates a continuous performance dialogue.
- The way in which feedback is framed, delivered and acted upon.
- The degree to which senior leaders remove performance barriers for employees.
- The way in which success is defined – individually and collectively.
ORGANIZATIONAL GOALS & BUSINESS STRATEGY
- The degree to which the strategy is understood and socialized.
- The way in which line managers communicate strategic intent to their team.
Social Architecture – The Findings
In our study group of seven quite different organizations, we were surprised to see how fragmented individual opinions can be on the nature of the social fabric across an entire organization. In our view, no organization can reasonably expect to be high performing when there is a large group of people who find fault with the way in which their efforts are being managed and directed from above.
The results we find most disturbing in this category are the responses to a very specific series of questions we asked under the Leadership Effectiveness heading. We believe these results provide important, fresh insight into how an organization and its leaders can take meaningful steps to reorganize.
The Key Performance Indicator questions in this set are as follows:
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Bottom line, when half of the overall management level population (as shown above) do not have confidence in how success and performance is defined and measured, the senior leaders of those organizations have a significant issue to deal with. Then, to make matters even worse, when 37% are not confident their leaders are acting to remove barriers to high performance, you have a serious credibility erosion problem that helps explain some of the chronic challenges leaders face when trying to point their organization in the direction of sustainable high performance.
Social Architecture – The Analysis
Our analysis suggests the credibility of a senior leadership team is most negatively impacted when the leaders are not seen to be proactively and visibly removing obstacles, and making good decisions that are well understood and clearly communicated. In short, whenever there is a perceived gap between the rhetoric and the actions of a leadership team, the social network (which is typically very acutely attuned to such discrepancies) begins to buzz, and then judge.
When they do, the unofficial social communication infrastructure is triggered. At that point, the narrative behind the organization’s mission, strategy and purpose is high jacked and then shaped, not by the senior leaders in their Town Halls, skip level meetings and off-sites, but rather by the informal, hidden social influencers much lower down in the organizational structure.
The principal learning here is that understanding and mastering social networks is vitally important, and employees respond more to the conversation behind the scenes, amongst peers, than they do to the messages carefully crafted and eloquently relayed from the top.
As with social media, the community itself controls the message and the medium, and they determine what gets talked about, not the senior team. The implications can be huge and leaders must do better at understanding this phenomenon
Business Architecture – The Framework
We have known for a considerable period of time now that an organization needs to pay particular attention to how it is structured if it wants to ensure performance at the highest levels. Historically, this has meant senior leaders typically begin the transformation process by playing with the organization chart and moving boxes around in hope of arriving at the optimum configuration.
Regrettably, this is only one small part in the overall architectural design of an organization. In fact, the other tools, mechanisms and processes, in combination, are far more important, but they often receive far too little attention by comparison.
Our study examined the level of effectiveness of not just the formal organizational structure, but also three other dimensions of the requisite business architecture required to underpin performance. We have observed that the flaws of bad structure can be made to work when the other three components are strong but, without the other three, structure on its own will not achieve performance success.
The complete bundle of factors that matter includes:
DECISION MAKING & EXECUTION
- The manner in which decisions are made, communicated and implemented.
- The degree to which second guessing occurs within the organization.
KNOWLEDGE SHARING & TRANSPARENCY
- The manner and speed with which information gets to those who need it.
- The degree of candour practiced by leaders at all levels.
MOTIVATION & DIFFERENTIATION
- The manner in which talent is recognized, rewarded and developed.
- The degree to which performance rewards are differentiated.
ORGANIZATIONAL STRUCTURE & EFFECTIVENESS
- The manner in which clear accountabilities match clear responsibilities.
- The degree to which leaders stay in touch with the ideas and emotions of people.
Business Architecture – The Findings
In our study group of seven organizations, we observed some startling similarities and common deficiencies. It seems as though, all too often, senior leaders do not fully understand the cost and consequence of three particular ineffective management processes, those related to:
- Knowledge Transfer and Information flow
- Performance Management
- Decision Making
In our view, these are as important, or even more so, than, say, the budgeting process, the capital allocation process, the manufacturing process or even the financial reporting process. However, we found little evidence to suggest these vital management processes receive anything like the attention the others do, and certainly far less than they deserve or require.
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Business Architecture – The Analysis
It occurs to us that, like any other business process, these three particular performance enabling management processes can be described and documented. As a result, they can also be understood and improved upon, but it requires senior management to understand these processes in a new light and recognize that improvements will only come when and if the process rigour is enforced.
The importance of these factors is best underscored when you examine the very large percentage of respondents in our study who were very critical of their organization, and how, comparatively, very few there were at the other end of the spectrum.
In others words, the study data suggests to us most organizations likely have a huge task ahead of them if they wish to swing the pendulum back to where it needs to be.
The starting point is developing an improved awareness of the impact these processes can and do have on organizational effectiveness.
Organizational Focus – The Framework
In this portion of our Study we examined four characteristics we believe help gauge the overall health of an enterprise along a continuum ranging from dysfunctional, to bad, to good, to great. We believe this methodology allows leaders to better understand the relative positioning of their organization and clearly identify the issue(s) holding it back.
As we noted earlier, lack of crisp Organizational Focus was the number one issue for six of the seven organizations we studied.
We believe the insights gained through an objective analysis of these elements provides a critical set of learning’s for any organization who wishes to achieve the goal of high performance.
While the issues themselves are intuitively rational, the real surprise for us was the significantly negative weighting and the severe degree of anxiety caused within the organizations by the failure of management to reposition.
The four categories covered in this section of the analysis include:
- The extent to which people in the organization feel empowered to lead.
- Versus – feeling cautious and tentative.
- The extent to which the organization is outwardly focused.
- Versus – being internally focused.
CHANGE APPETITE & READINESS
- The extent to which the organization values change and innovation.
- Versus – remaining stuck within the confines of the status quo.
BREADTH OF ORIENTATION
- The extent to which people in the organization are enterprise focused.
- Versus – operating only within their own functional silo.
Organizational Focus – The Findings
In our study we were especially interested to examine how the management population of the seven firms we studied viewed the way in which their organization was focused in four key areas noted above. We believe that, together, these factors provide an accurate assessment of the relative maturity level of the organization and hence its readiness to meet the challenges of high performance.
As the numbers below indicate, the two key issues which stand out are:
- The difficulties in promoting change, and
- The challenge of breaking free of the power of departmental silos.
While you would hope the value of any organization would be greater than the sum of its individual parts, the data suggests quite the opposite. It seems to us the failure to create an enterprise wide point of view actually causes significant loss of performance value.
The overall low average scores across the seven study organizations is concerning.
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Organizational Focus – The Analysis
It was significantly revealing to us that, over and over again, the senior managers who completed the assessment were so very critical of their own organization and how, when confronted with an opportunity and a framework to better help them understand the dynamics of dysfunction, they were actually able to diagnose the problems inherent in their own organization.
It indicates to us that senior leaders must do a much better job of reaching down a level in their management ranks to seek out the truth from managers who are closer to the front lines and have views about change and focus that can provide clues to how the organization can improve overall.
Leaders simply have to do a better job of engaging their broader management teams in debate and discovery which can only serve to strengthen the understanding of those factors which impair organizational performance.
Organizational Balance – The Framework
While there is no single right answer to organizational performance improvement, and certainly no single right set of actions to help cure all ills, we believe we can, with reasonable certainty, suggest that getting the balance right between a few critical dimensions of excellence is probably the most important thing a leadership team can do.
If so, the question then becomes – exactly what are those dimensions?
It was revealing to us that when we reduced the complexity of understanding organizational performance to the following four fundamentals, we were able to measure overall effectiveness with great accuracy.
The key is not in over engineering or in over complicating the analysis, or the solution, but rather in invoking simplicity and synthesis in order to arrive at a sober understanding.
Organizational Balance – The Framework
These critical dimensions stem from an assessment of whether or not organization has the “right”:
GUIDING VISION – FOR THE FUTURE
- Compelling enough to generate intrinsic motivation.
- Clear enough to ensure understanding.
CORE VALUES – TO SUPPORT ITS OBJECTIVES
- Credible enough to guide personal action.
- Coherent enough to remove subjective vagaries.
STRATEGY – TO DELIVER ON THE VISION
- Crisp enough to be understood.
- Communicated thoroughly enough at all levels.
ATTITUDES & BEHAVIOURS – TO SUPPORT THE INTERNAL BRAND PROPOSITION
- Consistent and relevant enough to link the social and business architecture.
- Comprehensive enough to remove uncertainty.
Organizational Balance – The Findings
The manner in which our study was conducted was intended to help clearly identify those very specific elements of organizational effectiveness that are most often misaligned or out of balance. We anticipated the results of the Vision and Strategy dimensions would move in tandem as would the dimensions related to the Core Values and the supporting Attitudes/Behaviours.
It was, therefore, quite surprising to discover that, instead, there were significant discrepancies within each of the two groupings, suggesting a much greater deal of complexity than we had envisaged.
Further study of the data was necessary because, rationally, the gaps should not have been there and there was no obvious logic for it at first glance. As you will see below, the differences were significant enough to be well outside of the margin of acceptable error.
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Organizational Balance – The Analysis
In our view, and based upon our intimate knowledge of the organizations studied, we have concluded the reasons for this apparent inconsistency are actually quite clear. They are:
In the first case – lack of a sufficiently clear, well understood and coherent strategy to help determine actions, guide decisions and serve as a filter for prioritization.
In the second case – failure by senior leaders to ensure the values they espouse are consistently applied across the entire organization and are not diminished by bad behaviour that is allowed to go unaddressed.
While it is easy enough to be critical of others when they have the ultimate responsibility, the core issue is not about blame, but accountability.
The various issues we have seen come to the fore are all avoidable. The loss of performance they cause can be reversed, and the only thing that stands in the way is the willingness of senior leaders to face the facts straight one.
Organizational Culture – The Framework
In the same way an organization’s business strategy needs to be relevant to both the context and the market in which it operates, an organization’s culture needs to be relevant to the people through whom the strategy is executed. All too often this is just not the case and, as a result, weaknesses appear in the cultural fabric that ultimately overwhelm success and diminish or, even worse, work against the fundamental business proposition.
It has long been a curiosity to us to know what attention these issues would receive if only the accountants were able to quantify the lost efficiency attributable to this and put a tangible cost on it.
We have to assume it would draw more attention from leaders, their Boards and their shareholders, resulting in far more questions being asked and far more action taken.
Why do we have to wait for that to happen?
The unfortunate fact of the matter, and one of the many dirty little secrets of business, is that the costs of a bad culture, or even a mildly dysfunctional cultural, are not calculated, quantified or reported. As a result, they remain hidden within the mysterious hard shell of organizational performance.
We believe that must change!
The framework we used to assess the cultural effectiveness of the seven organizations in our Study covers eight essential factors in two broad groupings.
BUSINESS PERFORMANCE ESSENTIALS
- Desire to Win
- Customer Focus
- Entrepreneurial Attitude
INTERPERSONAL PERFORMANCE ESSENTIALS
- Respect for the Individual
- Continuous Learning
- Team Orientation
Organizational Culture – The Findings
We fully expected the “softer” interpersonal elements of the overall study of culture would score lower than those associated with “harder” attributes, however, we did not anticipate that within each of the two pillars there would be such obvious indications of clear deficiencies.
In other words, we were surprised to discover that when senior managers within each of the seven organizations were asked direct questions, it became evident they were well aware of the problems and were able to pinpoint, with great accuracy, the trigger points.
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Organizational Culture – The Analysis
The study indicates to us that organizations have not yet figured out how to tap into the latent creative capacity of their people and simply do not foster or reward imagination, originality and novelty in the way they must. While that may have been acceptable in the past, we would argue the changing global environment demands a dramatic shift be made, unless irrelevance is among the strategic options an organization wishes to pursue.
We face a huge loss of economic value if the innovative and learning capacity of the people within an organization is not unleashed and leveraged.
It is deeply concerning to see that:
- 45% of senior managers do not believe their organization rewards the entrepreneurial mind.
- 44% do not believe their organization supports continuous learning.
At the end of the day, organizational performance requires the:
- Passion of the entrepreneur, and the
- Curiosity of the learner – if it is to achieve its full potential.