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FROM: MAR-APR 2008 ISSUE | BY RICHARD LEPSINGER
All leaders want to be part of a top-performing company. All employees do, too. And partners and customers seek out businesses that are at the top of their game as well. It’s natural to want to spend our working hours engaged with dynamic organizations that flourish, not struggling ones that flounder. But have you ever wondered what makes a company a top performer?
Research on how top-performing companies prepare for and manage change and what they do to ensure they are able to execute plans and strategies effectively reveals some interesting similarities and differences between the most and least successful companies.
First, the similarities between the two groups are striking. Companies in both categories can point to visions that employees believe are clear and strategies that are perceived to be realistic. They have employees who are engaged and have the skills required to do their jobs.
What, then, differentiates the very best companies from those that are less successful? Top-performing companies are characterized by cultures that are flexible, adaptive, participative, and innovative – and they operationalize these cultural attributes through leader behaviour and organizational structure and systems.
Lead Your Company into Top Performer Territory
Leaders in top-performing companies are capable in four areas: managing paradoxes, leading change, participative leadership, and leading by example. Leaders need to ensure they are comfortable in all four areas. If you’re a CEO, make sure your leaders are comfortable with managing paradoxes.
Leaders in top-performing companies are better at finding the right balance between what appears to be mutually exclusive outcomes: achieving short- and long-term goals, establishing control and providing autonomy, ensuring stability and managing change, and keeping costs low and quality high while growing the business. They are also better able to manage the sometimes contradictory needs of customers, employees, and stockholders/owners.
Five Keys to Managing Change
1. Be forthright about change and its impact.
Sixty-four per cent of the 655 participants in a recent OnPoint Consulting survey found that open and honest communication from leaders, even when they don’t have all the answers, would make change easier. People want leaders to be accessible and to engage in “change talk.” What is change talk? It’s an open discussion of the pros and cons of making the change or maintaining the status quo, and of the behaviours required to support the change and boost people’s confidence in their ability to transition successfully to the new way of doing things.
2. Model behaviours that support the change.
It is not enough to just say the right thing or even enthusiastically communicate the benefits and the business case for the change. Employees want to see those words backed up with behaviour. That is how they judge how effectively someone is leading and managing a change.
3. Set realistic objectives and milestones.
As employees reach realistic goals and milestones, they become more positive about the change and will see its benefits. Targeting unattainable goals will frustrate and demoralize employees during the first few critical months, and the time and energy you’ve spent preparing for the change will have been a waste.
4. Don’t underestimate the resources required.
The over-commitment of existing resources or underestimating what it takes to accomplish objectives is a primary cause of change initiatives’ failing to meet their intended outcomes. Keep in mind that your employees have commitments to annual performance goals in addition to the work they need to do to make the change a success.
5. Maintain enthusiasm and excitement among your employees.
During the first month of a change, managers meet with employees to get their support. After the first month, though, those managers return to their day-to-day jobs, and employees can lose focus. Leaders need to model behaviours that support the change for the duration of the initiative, not just at the kickoff.
Participative Leadership
Involve team members in the decisions that affect them. In 2006, the NBA introduced a new basketball and never asked the players for input while it was in development. As a result, the players refused to use a new ball they felt was difficult to handle. Involving the players early on would have increased the quality of the ball and acceptance of the change.
Employees should be involved in critical decisions that affect them, and they should be able to freely share their thoughts and concerns. It gives employees a sense of ownership and nothing truly great can occur in the absence of that.
Lead by Example
Leaders in top-performing companies understand that people will not trust or follow them if they are not willing to live by the same values and support the same priorities they require of others.
Take, for example, two contrasting approaches to the “leadership by example” factor: Donald Carty, former president of American Airlines, who offered gigantic “stay bonuses” to senior executives after asking employees to take significant pay and benefits cuts, and Carlos Ghosn, CEO of Nissan, who, when he took over the floundering company in 1999, pledged to step down if Nissan failed to show a profit in 2000. Carty lost credibility and had to step down, while Ghosn is celebrated as a “master of execution” and a “turnaround artist.”
Improving Structure and Systems
Of course, having the best leaders in the world won’t matter if your organization isn’t set up in a way that allows them to use their skills. Corporate structure and operational systems are just as important as a leader’s behaviour. Here are some goals to shoot for:
- Strike a balance of centralized and decentralized responsibility.
Ensure that people at all levels have the freedom to take action to achieve results. This improves responsiveness and allows issues to be managed right where they happen.
When Mark Hurd took over as CEO of Hewlett-Packard, he understood that the key to success was to make the Compaq acquisition work. He did just that when he reorganized the company into three divisions, with each division having its own sales force, making the heads of the divisions responsible for sales.
He also reorganized the IT function. Instead of having eighty-five data centres, he centralized them into three. Essentially, he decentralized the sales force and centralized the IT function of the company. This is the opposite of the way the company was organized before, and it ensured the organizational structure would be better aligned with the business strategy.
One measure of HP’s success is that operating profit increased during 2006 by 31 per cent.
- Excel at coordinating decisions and actions across organizational boundaries.
In 2006 Ford demonstrated how difficult this is. When the company decided to update the Ford Focus the North American operation wanted to simply refresh the existing model, while the European operation wanted to develop a new version of the model.
The two groups couldn’t come to an agreement, so they each did what they wanted to do. The North American group updated the existing model, and the European group developed a new model. As a result, Ford couldn’t share parts or take advantage of economies of scale and it cost the company money.
- Ensure that systems are aligned with strategic initiatives.
If your strategy calls for “innovation,” does the organization have systems in place to facilitate organizational learning and creative thinking? To encourage innovation, a company needs a mechanism to screen and fund these ideas. Furthermore, individuals shouldn’t have to struggle to find support and resources to help develop their ideas.
The bottom line? Being a top-performing company is a rigorous challenge – one not for the faint of heart. Indeed, recent events at Dell, Motorola, and Chrysler illustrate how difficult it is to execute effectively and maintain top performance year after year. Still, the results are worth the effort.
Becoming a top performer requires constant attention to the differentiating factors discussed above and a willingness to review and continuously improve products, services, and the business model itself. But the alternative is settling for mediocrity, and in a global economy, mediocrity is the kiss of death.
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