Building a High-Performance Organization
One of the eternal questions for leaders is: what makes a High-Performance Organization? Lots of companies claim to be High-Performance Organizations. The real thing is rare, however, and instantly recognizable.
Apple, Google, Berkshire Hathaway, Microsoft, Procter & Gamble, General Electric, Unilever, Coca-Cola, Southwest Airlines and Johnson & Johnson are members of an elite circle where exceptional performance is an everyday event. These groups operate on a different plane. We can name them - but can we explain them? When does High-Performance happen? What does it feel like? Can it be replicated?
High-Performance Organizations are the role models of the organizational world. They represent real-world versions of a modern managerial ideal: the organization that is so excellent in so many areas that it consistently outperforms most of its competitors for extended periods of time.
Managers want to know more about High-Performance Organizations so they can apply the lessons learned to their own companies. Of course, the goal is to ensure that their own organizations excel in the marketplace.
Recent research provides new insights about high-performance organisations and how these can be applied.
The High-Performance Organization Survey - commissioned by the American Management Association (AMA) and conducted by the Institute for Corporate Productivity - asked 1,369 respondents about a series of organizational characteristics associated with high-performance and found that, generally speaking, high-performance organizations are superior to their low-performance counterparts in the following seven areas:
Area 1. Their strategies are more consistent, more clear, and are well thought out. They are more likely than other companies to say that their philosophies are consistent with their strategies.
Area 2. They are more likely to go above and beyond for their customers. They strive to be world-class in providing customer value, think hard about customers’ future and long-term needs, and exceed customer expectations. And they are more likely to see customer information as the most important factor for developing new products and services.
Area 3.They are more likely to adhere to high ethical standards throughout the organization.
Area 4. Their leaders are relatively clear, fair, and talent-oriented. They are more likely to promote the best people for a job, make sure performance expectations are clear, and convince employees that their behaviors affect the success of the organization.
Area 5. They are superior in terms of clarifying performance measures, training people to do their jobs, and enabling employees to work well together. They also make customer needs a priority.
Area 6. Their employees are more likely to think the organization is a good place to work. They also emphasize a readiness to meet new challenges and are committed to innovation.
Area 7. Their employees use their skills, knowledge, and experience to create unique solutions for customers.
The study also indicates that even High-Performance Organizations could improve in various areas. It found, for example, that high performers are much more likely than low performers to report that their organization-wide performance measures match their organizations’ strategies. This was, in fact, the single largest difference between the two groups.
There is likely a lesson to be learned here: like great athletes, even High-Performance Organizations must continuously strive to improve and “work on their game.” Without the passion for improvement, they are unlikely to remain high performers for long. After all, there’s no shortage of business leaders who are working hard to ensure that their own companies reach the top echelons of organizational excellence.
According to another study by the HPO Center in Netherlands which reviewed 290 academic and management publications and gathered data from 2,500 organisations in 50 countries, High-Performance Organisations share 35 characteristics which always appear in five groups: Management Quality, Continuous Improvement and Renewal, Long Term Orientation, Openness and Action Orientation and Employee Quality.
They found a clear correlation between how well an organization scores on these high-performance factors and its financial performance. Revenue growth was increased by an average of 10%, profitability increased by 26%, and Total Shareholder Return by 23% in High-Performance Organizations compared with non- High-Performance Organizations. Other non-financial performance was also better in the High-Performance Organizations including higher customer satisfaction, customer loyalty, employee loyalty, and quality of products and services than their less able counterparts. These positive correlations were found in every industry, sector and country in the world. In short, it pays to be a High-Performance Organization.
1. Management Quality
The first and foremost factor which determines whether an organization becomes and stays a High-Performance Organization was identified as the quality of leadership and management of the organization. In a High-Performance Organization leadership maintains trust relationships with people on all organizational levels by valuing employees’ loyalty, showing people respect, creating and maintaining individual relationships with employees, encouraging belief and trust in others, and treating people fairly.
Managers of a High-Performance Organization live with integrity and are a role model by being honest and sincere, showing commitment, enthusiasm and respect, having a strong set of ethics and standards, being credible and consistent, maintaining a sense of vulnerability and by not being self-complacent. They apply decisive, action-focused decision-making by avoiding over-analysis but instead coming up with decisions and effective actions, while at the same time fostering action-taking by others.
High-Performance Organization leadership coaches and facilitates employees to achieve better results by being supportive, helping them, protecting them from outside interference, and by being available. Management holds people responsible for results and is decisive about non-performers by always focusing on the achievement of results, maintaining clear accountability for performance, and making tough decisions. Managers of a High-Performance Organization develop an effective, confident and strong management style by communicating the values and by making sure the strategy is known and embraced by all organizational members.
2. Continuous Improvement and Renewal
The second factor concerns characteristics that not only create an open culture in the organisation but also focus on using the openness to take dedicated action to achieve results. Management values the opinion of employees by frequently engaging in a dialogue with them and by involving them in all important business and organisational processes. High-Performance Organisation leadership allows experiments and mistakes by permitting employees to take risks, being willing to take risks themselves, and seeing mistakes as an opportunity to learn. In this respect, management welcomes and stimulates change by continuously striving for renewal, developing dynamic managerial capabilities to enhance flexibility, and being personally involved in change activities. People in a High-Performance Organisation spend much time on communication, knowledge exchange and learning in order to obtain new ideas to do their work better and make the complete organisation performance-driven.
3. Long Term Orientation
The third factor indicates that long-term commitment is far more important than short-term gain. And this long-term commitment is extended to all stakeholders of the organization, that is shareholders but also employees, suppliers, clients and the society at large. A High-Performance Organization continuously strives to enhance customer value creation by learning what customers want, understanding their values, building excellent relationships with them, having direct contact with them, engaging them, being responsive to them, and focusing on continuously enhancing customer value. A High-Performance Organization maintains good and long-term relationships with all stakeholders by networking broadly, being generous to society, and creating mutual, beneficial opportunities and win-win relationships. A High-Performance Organization also grows through partnerships with suppliers and customers, thereby turning the organization into an international network corporation.
Leadership of a High-Performance Organization is committed to the organization for the long haul by balancing common purpose with self-interest, and teaching organizational members to put the needs of the enterprise as a whole first. They grow management from their own ranks by encouraging people to become leaders, filling positions with internal talent, and promoting from within. A High-Performance Organisation creates a safe and secure workplace by giving people a sense of physical and mental safety and job security and by not immediately laying off people until it cannot be avoided, as a last resort.
4. Openness and Action Orientation
The fourth factor is very much in line with a trend which has been keeping organizations busy for the past two decades: continuous improvement and innovation. This starts with a High-Performance Organization adopting a strategy that will set the company apart by developing many new options and alternatives to compensate for dying strategies. After that, the organization will do everything in its power to fulfil this unique strategy. It continuously simplifies, improves and aligns all its processes to improve its ability to respond to events efficiently and effectively and to eliminate unnecessary procedures, work, and information overload. The company also measures and reports everything that matters so it rigorously measures progress, consequently monitors goal fulfilment and confronts the brutal facts. It reports these facts not only to management but to everyone in the organization so that all organizational members have the financial and non-financial information needed to drive improvement at their disposal. People in a High-Performance Organization feel a moral obligation to continuously strive for the best results.
The organization continuously innovates products, processes and services, thus constantly creating new sources of competitive advantage by rapidly developing new products and services to respond to market changes. It also masters its core competencies and is an innovator in them by deciding and sticking to what the company does best, keeping core competencies inside the firm and outsourcing non-core competencies.
5. Employee Quality
The fifth factor addresses workforce quality. A High-Performance Organization makes sure it assembles a diverse and complementary management team and workforce and recruits a workforce with maximum flexibility, to help detect the complexities in operations and to enable creativity in solving them. A High-Performance Organization continuously works on the development of its workforce by training them to be both resilient and flexible, letting them learn from others by going into partnerships with suppliers and customers, inspiring them to work on their skills so they can accomplish extraordinary results, and holding them responsible for their performance so they will be creative in looking for new productive ways to achieve the desired results.
Culture and Performance
Culture, like brand, is misunderstood and often discounted as a touchy-feely component of business that belongs to HR. It is not intangible or fluffy, it is not a vibe or the office décor. It is one of the most important drivers that has to be set or adjusted to drive long-term, sustainable success and performance. It is not good enough just to have an amazing product and a healthy bank balance. Long-term success is dependent on a culture that is nurtured and alive. Culture is the environment in which your strategy and your brand thrives or dies a slow death. Think about it like a nurturing habitat for success. Culture cannot be manufactured. It has to be genuinely nurtured by everyone from the CEO down. Ignoring the health of your culture is like letting aquarium water get dirty. That is why it is so important to focus and work on culture. But it is an area that is often neglected or poorly managed.
Bain & Company research found that the best companies succeed on two dimensions simultaneously. First, every high-performing company has a unique identity - distinctive characteristics that set it apart from other organizations. Second, winning cultures usually embody six high-performance behaviors. These include:
1. High aspirations and a desire to win: For employees in high-performance cultures, good is never good enough. They are always pushing to go farther, better, faster. It’s not just about short term financial performance. It’s about building something truly special and lasting.
2. External focus: Companies with high-performance cultures focus their energies externally on delighting customers, beating competitors and caring for communities. They don’t get caught up in internal politics or navel gazing.
3. A “think like owners” attitude: A hallmark of a high-performance culture is that employees take personal responsibility for overall business performance. They strive to do the right thing for the business, putting aside issues of personality or territory.
4. Bias to action: High-performance cultures are impatient to get things done. They are doers, not talkers, keeping an eye on where the value is to ensure their actions will enhance the business.
5. Individuals who team: Winning cultures encourage people to be themselves and help individuals develop to their full potential. They also recognize the importance of teamwork, being open to other people’s ideas and debating issues collaboratively.
6. Passion and energy: Everyone in a high-performance culture gives 110%, striving to go beyond adequate to exceptional in the areas that really matter and bringing an infectious enthusiasm to everything they do.
Southwest Airlines is the classic example. Under Herb Kelleher’s leadership, the company became known for its sense of humour, irreverence, and focus on the employee. This unique identity not only made flying Southwest fun for passengers, it made its labor force more productive. Flight attendants, not cleaning crews, cleaned aircraft between flights, reducing time at the gate and improving on-time performance. Maintenance workers routinely devised better ways to maintain Southwest’s fleet of 737 aircrafts, lowering costs and improving up-time. The company’s unique identity reinforced many of the elements that were critical to Southwest’s strategy, such as keeping costs low. As a result, Southwest is the world’s largest low-cost carrier and is consistently among the most profitable airlines in the world.
A true vision for a business rests on foundations of both purpose and values. The power of vision is at its best when it comes alive in the people of the organisation and they ‘live the vision’. They become passionate about what they do and why they do it and perform at a higher level. The business goals must then align with this foundation. Without a clear foundation, a business will never be truly strategic. So it is better to stand for something beyond simply increasing profits.
It should come as no surprise that an organization that genuinely places their customers and their people at the heart of the business, whose people understand where the company is headed and the role they play in delivering the future, and continually improves the way it works is one that will outperform its peers. The key to an organization’s success, as ever, lies in the commitment of its leaders and their willingness to implement.
The good news is that regardless of your current reality, you can always elevate your leadership game. High-performance is within the reach of any organization.
About the authors: Dr Bart Sayle, CEO and Nick Hawker, Principal Consultant, The Breakthrough Group. Bart Sayle is the author of Riding the Blue Train: A Leadership Plan for Explosive Growth
The Breakthrough Group specializes in accelerated business growth, unleashing innovation, sustainability and culture transformation to deliver outstanding business results, with over 20 years experience working with leading companies including Mars, Danone, Unilever, Ferrero, Pepsico, Coca-Cola, Bayer and P&G.
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