Recent research provides new insights on High-Performance Organisations and how these can be applied. Not surprisingly, the research confirms that psychology and culture are the most important drivers and both have to be properly managed to drive long-term, sustainable success and performance.
Culture, Psychology and Performance
New research has found that the key to high-performance and growth is to be found in the psychology & culture of an organisation rather than in the mechanics. So the important work is in shifting the mindsets, emotional states and behaviours to a psychology that will create and deliver performance. However, most businesses focus the vast majority of their energy, attention and resources on the mechanics. The collective psychologies of your people is, of course, the culture.
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 habitat for success. It has to be deliberately designed and 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.
According to 84% of more than 2,200 global participants in the 2013 Culture and Change Management Survey by Booz & Company, culture is critically important to business success. However, there is a clear disparity between the way companies view culture and the way they treat it. Less than half of the participants saw their companies effectively managing culture, and more than half said a major cultural overhaul was needed. Interestingly, 60% of C-suite executives see culture as a bigger success factor than either strategy or operating models.
In his latest book The Culture Cycle, Professor James L. Heskett of Harvard Business School concludes that effective culture can account for 20-30% of the differential in corporate performance when compared with “culturally unremarkable” competitors. Even more remarkable were the findings of Kotter and Heskett’s landmark study. It documented results for 207 large U.S. companies in 22 different industries over an eleven-year period. They reported that companies that managed their cultures well saw revenue increases of 682% versus 166% for the companies that did not manage their cultures well – stock price increases of 901% versus 74% – and net income increases of 756% versus 1%. These results are staggering and highlight the impact of culture on performance and the bottom-line.
Kotter and Heskett found that strong corporate cultures facilitate adaptation to a changing world, highly value employees, customers, and owners and encourage leadership from everyone in the firm. So, if customers need change, a firm’s culture essentially forces people to change their practices to meet the new needs. And anyone, not just a few people, is empowered to do just that.
According to a five year study by the HPO Center in Netherlands that 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.
They found a clear correlation between how well an organisation 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 Organisations compared with non-High-Performance Organisations.
Other non-financial performance was also better in the High-Performance Organisations 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 Organisation.
The first and foremost factor which determines whether an organisation becomes and stays a High- Performance Organisation was identified as the quality of leadership and management of the organisation.
In a High-Performance Organisation, leadership maintains trust relationships with people on all organisational 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 Organisation 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. At the same time they foster action-taking by others.
High-Performance Organisation 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 Organisation develop an effective, confident and strong management style by communicating the values and by making sure the strategy is known and embraced by all organisational members.
Openness and Action Orientation
The second factor concerns characteristics that not only create an open culture in the organisation but also focuses on using this 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 by 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.
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 organisation, that is shareholders but also employees, suppliers, clients and the society at large.
A High-Performance Organisation 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 Organisation 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 Organisation also grows through partnerships with suppliers and customers, thereby turning the organisation into an international network corporation.
Leadership of a High-Performance Organisation is committed to the organisation for the long haul by balancing common purpose with self-interest, and teaching organisational 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 safety (physical and mental) and job security and by not immediately laying off people until it cannot be avoided, as a last resort.
Continuous Improvement and Innovation
The fourth factor is very much in line with a trend that has been keeping organisations busy for the past two decades: continuous improvement and innovation.
This starts with a High-Performance Organisation adopting a strategy that will set the company apart by developing many new options and alternatives to compensate for dying strategies. After that, the organisation will do everything in its power to fulfil this unique strategy.
It continuously simplifies, improves and aligns all of its processes to improve its ability to respond to events efficiently and effectively. It eliminates 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 Breakdowns. It reports these facts not only to management but to everyone in the organisation so that all organisational members have the financial and non- financial information needed to drive improvement at their disposal. People in a High-Performance Organisation feel a moral obligation to continuously strive for the best results.
The organisation continuously innovates products, processes and services and thus constantly creates 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. It keeps core competencies inside the firm and outsources non-core competencies.
The fifth factor addresses workforce quality. A High-Performance Organisation makes sure it assembles a diverse and complementary management team and workforce. It recruits staff with maximum flexibility to help detect the challenges in operations and markets and take advantage of opportunities.
A High-Performance Organisation continuously works on the development of its workforce by training them to be resilient, innovative and flexible, letting them learn from others by going into partnerships with suppliers and customers. It inspires them to work on their skills so that they can accomplish extraordinary results. It also holds them responsible for their performance so they will be creative in looking for new productive ways to achieve the desired results.
Creating a High Performance Culture
A performance culture is not an accident, does not occur naturally and requires constant vigilance to maintain and build. It is a deliberately designed living system of mindsets, processes, incentives, behaviours, leadership and values that are applied with discipline and commitment. Implementing a performance culture is not a short-term fix and it cannot be done without the total commitment of the leader and the executive team.
What many companies don’t realise is that there are a number of practical “tools” (concepts and techniques designed to change the way individuals think and act) and processes that are proven to increase both the individuals’ and the company’s future success, and to build and sustain a strong customer-centric culture.
Companies with strong performance cultures think innovatively in everything they do and are constantly searching for better or more effective ways of doing things. The optimal outcomes are achieved when each person in the organisation channels their creativity and actions toward; business growth, people development, an empowering and supportive culture, providing innovative tools and processes for effectiveness and executional excellence.
Strengthening consumer and customer focus, accountability for results, teamwork, and sense of urgency along with instilling an entrepreneurial, winning spirit are the key to achieving success. A High-Performance culture cultivates engagement, enthusiasm, challenges people to take risks in a safe environment, fosters learning, and encourages independent thinking.
People are the most important drivers of outstanding performance. Great people do great things and build outstanding businesses. That is why your major focus should be on the development of your people. The effectiveness of your people can be exponentially increased as they gain exposure to world-class tools and processes, and selectively incorporate and utilise them. These include leadership, management and technical tools. Staff, managers and leaders should be encouraged to create, explore and devise new strategies to further develop leadership and technical skills.
It is the leaders’ role to provide people with the tools and resources necessary in order to open minds to possibilities of innovation. For innovation to thrive it must exist in a culture that energises and ensures that creative thinking is constantly occurring. Creativity, curiosity and a genuine openness are essential for Breakthrough innovation. Creating a culture of trust where risks can be taken without a culture of blame and perceived failure is valuable as long as the people benefit through learning and discovery.
It is crucial to nurture an innovative spirit among team members. They should exhibit a combination of creative zeal, problem solving, risk-taking and teamwork. Team members need to share in the past successes and not be afraid to mutually address past failures using effective communication methods that do not assign blame.
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.
Recent research in the area of High-Performance Organisations underlines our experience that corporate success depends entirely upon how the leadership engages with its people. After all, your people are your single most important source of competitive advantage – as long as they understand your strategy and are aligned and engaged to deliver.
Low-Performance Organisations are looking for the next quick fix and are too short-term focused. They are spending too much time working ‘in’ and not ’on’ the business and cannot decide where to focus and sustain effort.
Low-Performance Organisations tend to overlook the importance of their people and are more likely to treat employees as a consumable commodity.
Changing organisational culture involves changing the mindsets and behaviours of many individuals and takes significant effort, time and committed leadership. But this investment in achieving High Performance will deliver a substantial return.
These mindsets and behaviours need to become so deeply engrained in the organisation’s culture and DNA that they literally become the organisation’s new way of life. These new behaviours and mindsets will impact every facet of the organisation, make it a better place to work, increase employee engagement and drive High-Performance.
As Edgar Schein, author of Organizational Culture and Leadership put it “The only thing of real importance that leaders do is to create and manage culture. If you do not manage culture it manages you and you may not even be aware of the extent to which this is happening.”
Getting the corporate culture right can transform business Performance and unleash explosive Breakthrough Innovation and Growth.
(Writing by 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; editing by Caroline Mittermair)
You can follow Bart Sayle on Linkedin & Twitter: @BartSayl; Nick Hawker on Linkedin & Twitter: @EcoChemex.
The Breakthrough Group unleashes innovation, specialising in accelerated business growth, sustainability and culture transformation, with over 20 years experience working with leading brands including Mars, Danone, Unilever, Ferrero, Pepsico, Coca-Cola, Mondelez, Bayer, British Airways and P&G.