Strategy execution essentials – Organisations potential Vs performance
Do you think that the performance of your organization, although great, is not quite close to what it is capable of achieving? Well you’re not alone!
Organizational leaders, more often than not, are able to clearly see the impact their organizations can create in the marketplace. They see the huge opportunities that exist and build strategies to capitalize on them. However, the organization’s performance often tells another story!
How many of us haven’t heard what Norman Vincent Peale said famously “Shoot for the moon. Even if you miss, you’ll land among the stars.”? I thought this would make for an interesting parallel in an organizational context.
Let’s say that a few organizations indeed have the capability to land on the moon. Various global studies reveal that while many among them would even barely manage a “lift off”, a few other better performing ones at best, would achieve transatlantic passages. Only the crème de la crème manage to reach the moon. Why the disparity in performance when all the organizations had similar capabilities to start with?
Recently, I came across a very interesting HBR article which captured beautifully and succinctly, this disparity between performance and potential at organizations. Authors Michael C. Mankins and Richard Steele call it the VENETIAN BLINDS EFFECT IN BUSINESS. I have attempted to recreate the graphic they used to describe an effect that is found to occur at organizations, big and small.
So this is what happens. In year 1, the management approves a strategic plan that is quite modest for the first year (getting ready to grow big phase) and thereafter, aims to grow to a level that is more commiserative of its potential! At the end of year 1, they realize that the earlier plans of achieving a high growth in year 2 might not be “realistic” and that they’re not “ready” yet to achieve the planned rate of performance improvement. Thus, at the start of year 2, a new plan is prepared which projects rather uninspiring results for the subsequent year while once again promising a fast rate of performance improvement thereafter! This recurs in an organization’s lifetime and thus the performance of an organization is never really close to what its potential is! In fact, if things are going reasonably well, the starting point for each year’s new “blind” may be ONLY a BIT higher than the previous year’s starting point, but rarely does performance match the true potential of an organization.
While some organizations go into the “MAKE BELIEVE” phase of saying that they’re performing well, they’re, most often than not, comparing their performance to “the modest targets” shown in the graphic and not really the potential they posses.
And then, there are a set of newer breeds of organizations that tend to focus primarily on one parameter of performance (mostly growth), invariably at the COST of other parameters that sustain a business!
If organizations are value creation engines, in that sense, organizational performance MUST be a reflection of the business, technological and social logic they combine to create the VALUE. Therefore, I opine that organizations that tend to focus any one parameter of performance at the cost of others are not really “performing”!
Amidst all this, we see that a few organizations (the crème de la crème) manage to achieve results that are a true reflection of their potential.
SO, WHAT SETS THE HIGH PERFORMING ORGANIZATIONS APART?
Well, we believe that there are primarily three things that contribute to the disparity between performance and potential and when these are constantly focused on and improved upon sets an organization well on its path to greatness!
- Clarity in the WHAT
- Clarity in the HOW
- Science of effective business execution
CLARITY IN THE WHAT
While studies reveal that the leadership at organizations are quite clear on what “largely” needs to be achieved, sometimes a clear cut definition is found lacking in terms of saying we need to GET to Point A from Point B within a specific timeframe.
Let’s go back to the example of those organizations we spoke about earlier, that possess capabilities to LAND on the MOON. While the leadership at most of these organizations would be quite clear about the overarching mission of landing on the moon, only the highly performing companies would “translate” that mission to a goal that every entity within the organization could work towards.
Consider this! When Eisenhower (erstwhile President of the United States) announced the mission of achieving space supremacy by the US during his regime, there was indeed a lot of activity, including the creation of NASA. However, not until the next couple of years, when President Kennedy stated that the goal was to put a man on the moon by the end of the decade, did we hear about a man named Neil Armstrong who actually set foot on the moon!
CLARITY IN THE HOW
This is yet another characteristic of great companies. Not only do they clearly mention what are the results they have set out to achieve, there is clarity among every entity in the organization on HOW their everyday activities have to change to support the organization goals. There is enough impetus laid on getting a buy in from the strategy implementers during the formulation of strategies and, a clear sense of HOW every entity needs to contribute is well established.
Why is this important you ask? Well, Stephen Covey put it simply when he said if you want to achieve goals you’ve never achieved before, you need to start doing things that you’ve never done before!
Now let’s go back to our previous example of those set of organizations that are shooting for the moon. Let’s say that a certain Mr. X was hired by the company because of his skills in improving the fuel efficiency of an engine. Furthermore, let’s say that Mr. X has been working on improving the fuel efficiency of cars since the time he joined the organization, because that was the focus of the organization up until now.
If this Mr. X continues to work along the same things that he’s been working on in the past, and perhaps even harder than ever before, do you think he would still be able to make any meaningful contribution to the organizational goal? Remember, the organization now wants to land on the moon. Wouldn’t you agree that the organization would rather benefit if his “focus changed” towards making rocket engines more efficient?
I agree that the example is a bit exaggerated and may even sound absurd, but unfortunately this is a sad reality at many organizations!
SCIENCE OF EFFECTIVE BUSINESS EXECUTION
This is perhaps the largest gap that prevents organizations from achieving “greatness”. In fact, studies reveal that close to 75% of organizations globally, struggle to implement their strategies!
Although we might know what to achieve as an organization and the path we need to take, we are most often than not pulled into activities that we perceive as “URGENT” on an everyday basis. Chris McChesney, from the Franklin Covey Institute, calls this the whirlwind effect. (To know more about this, please click here). The trick is therefore to stay focused on the important things we need to do, amidst this whirlwind of activities that we perceive as URGENT on a daily basis!
This is yet another undertaking that great organizations do really really well. They are able to break down the goal into specific activities that different entities need to perform and get them to see the importance! Allocate the best possible resources based on an optimal competency fit, identify and track indicators that can be influenced on a daily / weekly basis, identify risks and prepare for a suitable response and finally, influence performance to achieve the goal as opposed to measuring performance as a post mortem of what has already happened.
Let’s go back to the organizations who want to land on the moon. Consider this scenario.
One organization goes about doing what it was doing in the past, and perhaps in its view, more efficiently than before. It measures its performance vis-a-vis its target of landing on the moon only at the end of the year.
Another organization that,
- Breaks down the task of landing on the moon to activities like building an efficient rocket, hire the best astronaut, acquire funding among others.
- Identified how much of time they have (known as TAKT in Lean parlance) to complete each activity
- Allocate the best resources (competence) they have for each activity
- Identify the metrics they could track on a daily / weekly basis (like time to build the rocket, competency level of the astronaut v/s what’s required for a successful mission)
- Work constantly & cohesively towards improving these metrics
- Influence performance through coaching, mentoring etc on a continuum.
Who in your view better stands to land on the moon?
I’m guessing you’d agree with me that organization 1 is more likely to fall short, really short. Perhaps not even being able to take off! At best, achieve a transatlantic flight.
Guess what their immediate reaction would be at the end of the “performance review”? Most likely, “To reset the target for the next year saying that they’ll need some more time to get ready before actually being able to land on the moon”, a dynamic that is captured beautifully by the VENETIAN BLINDS EFFECT!
With organization 2, even if there are certain “external” factors that may prevent it from landing on the moon, there is certainly a high likelihood that they’ll at least land on the stars! Right you are Mr. Peale!
Simple stuff, you say? Yes, I agree. But sadly, very often neglected!