ENGAGING HUMAN PERFORMANCE TO DRAMATICALLY IMPROVE STRATEGIC BUSINESS RESULTS
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February 2011

BUILDING A PERFORMANCE CULTURE: BRICK BY BRICK (MORTAR TOO!)

There is much being made these days about the crucial need to have a performance fostering culture. It seems almost axiomatic. But its ingredients are rarely appreciated or understood. Howard Dresner contributed a great deal to our understanding in this regard, and here I want to build on, adapt and extend his insights.

First, let me state something presented in an earlier newsletter. “Every culture is perfectly designed to deliver the results it currently does.”

So, start by looking at areas where your current performance culture delivers results you don’t want. Perhaps it throws up too many leaders who don’t model performance excellence. Perhaps it proliferates politics rather than urgency, edge and execution. Perhaps it is overly centralized and people feel more like minions rather than co-architects. Perhaps you deliver results but at far greater cost and wear and tear than needed due to corrosive bureaucratic or behavioral passion killers. Or perhaps you simply are systematically late to market, or lagging behind competitors, or unable to sustain results in certain brands, or are experiencing too much leadership burnout or turnover.

Wherever the plateau or chronic challenge is, ask: “What aspects of our current culture produce this result so consistently?” It is a fascinating and bracing question and one well worth asking, tackling and acting on.

When ready to move from remedial to generative, here are certain key planks of a performance culture proposed by Dresner, adapted and added to by Sensei.

EVERYONE MUST BE ALIGNED WITH A MEANINGFUL MISSION

With all of these planks, let us suggest three levels. Level one, we’ll call “Chaotic”. Level two we’ll call “Functional”. And Level three we’ll call “Building a Performance Culture”.

By “Mission” here we mean a raison d’etre for the business, a core purpose, a distinctive competitive aim. We are not here referring to empty rallying cries or hyped up rhetorical embellishments. In the rousing words of Steve Jobs , “Create a cause, not a business.” That’s spot on…it’s astute and it’s powerful. Here we are referring to the primary value proposition of the business.

So one manufacturing leader in the steel industry kicked off its transition to a performance culture by reaffirming its direct relationship to the end user (something that made them distinctive in the industry) but transitioning from “low cost” to “total value” with a fresh dedication to eliminating the shipment of incomplete orders (which resulted in end user downtime) and opening sales and distribution centers closer to their key customers. IBM moved from a computer IT product focus to an enterprise-wide solutions focus. GE has moved away from acquisitions and pure execution efficiency to refocusing on its heritage of innovative products and solutions and now deeper customer partnerships.

Level one here has to do with missions that are vapid, vacuous, not understood, not well communicated, not actionable and not underwritten by meaningful metrics.

Level two here is reflected when primarily the understanding and alignment are at the functional or departmental level — not across the value chain.

Level three is when the mission is both clear and compelling, the “must win battles” that support the mission are encompassing — not just top-down much less primarily functional — and they are visibly and volubly embraced by key stakeholders and reinforced by acted upon leadership priorities and by living metrics.

DRIVING TRANSPARENCY AND ACCOUNTABILITY AS PALPABLE NORMS

Two separate elements here. How much time is spent debating reality versus improving it? Linked to this, is there a clear line-of-sight between the key projects and activities and the larger outcomes committed to by the organization?

Secondly, can everyone answer clearly and unambiguously why certain people were or weren’t promoted or recognized? The trust of the entire organization sinks or swims with this.

In terms of transparency and accountability, it’s great to give real-time “feedback”, but how much energy also goes into productive and creative “feedforward” (future-based requests and expectations which use the past as a base-line but not a burial mound)?

Constantly reviewing the past is a wearying business. The past and present must be faced and accepted yes, and certainly accountability must be taken. That’s a test of leadership mettle, maturity and character. But the bulk of everyone’s energies should go into creating the future. And that’s a test of leadership will, energy, imagination, passion and commitment.

So if in the culture we’re more past-focused rather than future-creating, watch out! Confront people’s results and behavior we must, but let’s move on quickly to challenge them, invite them and coach them to grow.

Level one here is arbitrary and erratic transparency and accountability, opacity and playing favorites.

Level two is fragmented transparency, present in some parts, murky in others and accountability primarily within functions and practice areas.

Level three has a robust combination of individual, team, functional and enterprise-wide transparency (in appropriate measure). Functions are collaborating and partnering, as are people across networks, and accountability for both the present and future is a cultural tenet. No one progresses who doesn’t embody that and instill it in others.

NEW INSIGHTS ARE SHARED, INTEGRATED AND ACTED ON

When Fernando Flores went from being a Minister in Pinochet’s government to jail and then emerged into freedom in the UK and became a very famous niche consultant (he would only take on clients whose problems to them were worth at least $1 million to resolve) and a seminal thinker in ontological design, he offered a powerful insight into corporate waste.

He suggested that the biggest unacknowledged cost in companies is untracked commitments. How many meetings, Conferences, presentations, get-togethers result in lists on flip charts, or injunctions captured in Power Point, earnest assurances and solemn nods at the prospect of the weighty matters to be progressed — which then produce nothing by way of action and follow-up?

And what is the cost in high powered people’s time, travel, venue costs, opportunity cost in terms of where else time and energy could go, leadership credibility and more? It is astronomical!

It is a stealth virus that produces the rolling eyes, apathy and cynicism of people who are hectored and lectured and enjoined by senior leaders…often with nothing to show for it. Under their breath they mutter, “Don’t worry, this too shall pass.”

So, the first commitment here is tracking and follow-through. Initiators are far more common than “finishers” in most companies. And finishing skills should be enshrined along with “initiative” as a key corporate value.

Secondly though, this requires sharp prioritization. One cannot track and follow through on 500 commitments. Show me the one thing people will pay attention to and make happen from a meeting. Point out the four public commitments emerging from a real Conference, and show me the person who’s publicly accountable for each one, the team that will support them, and when assumptions will be tested in the crucible of reality. How and by when, in Jim Collins terms, will we get the flywheel turning?

The genius of the GE “Work-out” process pioneered by Welch was that people could directly share with a leader anything that was demotivating or inhibiting them from delivering the most critical strategic goals and provide suggested improvements. The leader in real-time had to say “yes”, or “no” (explaining why credibly), or if needing to genuinely consult, had to commit to action one way or the other within 30 days. The import and impact of the initiative was directly underwritten and vitalized by coming through on this, consistently. In doing so, it became almost a secular religion and a real transformation engine in the process.

So where shall we get these insights from, in order to act on them? First, we get them from the market. Senior leaders have to be connected to the external environment in a variety of ways and in John Kotter’s phrase have to frequently find ways of bringing “the outside in”.

Another source of insights is our customers and consumers (more on this also when we speak about data and facts). What listening posts and relay stations have we set up? Are we getting customers and other partners to participate in our innovation processes? Do we get them on some of our teams to look at ways of improving service? Do we deploy our own people at customer sites to immerse themselves in their reality and to get an experience of what our product or service looks/sounds/feels/smells/tastes like and whether it measurably improves their lives and outcomes or not?

A third area is from our own people, with leaders playing high engagement roles and rewarding those who bring bad news, rather than shooting them like the proverbial Babylonian messengers of old. However, like Walt Disney, we should ask that those who convey the tough realities, also demonstrate what they are doing to deal with them, not just deliver the problem and abdicate. Leaders also need to practice the Tom Peters idea of “MBWA” — management by wandering around. These should not be the manicured state visits, where carefully contrived and staged experiences are presented to gullible leaders only too eager to be flattered. These should be real deep dives, a chance to experience the thinking and capability of the team, an opportunity to really listen, to mix it up…to emerge with something that can make a difference, and then to make sure it actually does.

A fourth area is to study not only bad news, but good news with equal fervor. This approach is called Positive Deviance. Aid workers working on malnutrition in Vietnamese villages, with no budget, and six months to make a measurable difference or to be thrown out, ditched the conventional thinking that you had to first improve macroeconomics and only then could people stop starving. They called such positions, “TBU” or “True but useless.”

Instead they went into a prominent village and sought to identify any families where children were not suffering from malnutrition. Dialing out families with political connections or rich relatives, they found that in some families where children were healthier, the rice being fed them was spread out into more meals (making digestion and absorption of nutrients easier). Secondly, these families were putting in sweet potato tops and stone crabs they found in the rice paddies, and mixing them in with the rice. This provided protein and vitamins. While these were readily available, local lore said these foods were inappropriate for children. These families let visceral need trump local lore.

The difference in results could not be debated. As they then set up joint cooking workshops, villagers enrolled each other, and tested this out. An over 60% reduction in child malnutrition in that village resulted in under a year, and the program was rolled out to numerous other villages and is cited today as a ground-breaking example of positive change.

Not all positive deviance is as clear cut. There are “technical” aspects — i.e. adding stone crabs and sweet potato tops and spreading out the meals. Then there are the “adaptive “aspects, getting people to gather these items, change schedules, shift paradigms re foods, be willing to experiment. We must study positive anomalies, divisions, departments, teams, networks and others that outperform our overall default setting.

The Gallup research is emphatic. Managers matter more than organizations. There are great leaders and managers even in dire organizational cultures. But if you run a company where there is a positive trajectory already and in the areas where you seem to have ankle weights, someone operating in and with the same framework, networks and more, has cracked it (even if in part)…be a zealous student!

Having gathered the insights, get them shared, activated, tracked, and recognized.

Level one here is that insights are hotly debated and rarely enacted; it is truly in the Bard’s words, “sound and fury, signifying nothing”. By the way, most companies that are surviving much less thriving will have pockets where they are well out of level one. But there may be critical areas where level one is the norm. Focus there rather than whitewashing it by pointing only to the areas of excellence.

Level two is uncoordinated action based on parochial or often hoarded insights and a great deal of “us versus them” behavior. Ad hoc action is taken at times, but in spurts and rarely sustained.

Level three is decisively prioritized, tracked, collaborative as well as individually focused sharing of insights and resulting action being a key leadership expectation, accountability and reality.

CONFLICTS ARE RESOLVED POSITIVELY AND EFFECTIVELY

There is a book out called “The Right Fight”. It argues that companies are made up of conflicts. We can’t shun them. Pure alignment with no friction will produce nothing, no ignition, no spark. However the friction has to be purposeful, about the true end in mind and principles, not personalities or personal agendas or fiefdoms.

Conflict will inevitably exist when human beings co-exist and interact. But what is the nature of the conflict in your organization? Is it the right fight? Is it where you would want energies to truly go? Do people present their views passionately as if they believe they are right while being able to truly listen as if they might be wrong?

Patrick Lencioni has suggested that most meetings are duller than watching paint dry because nothing happens. All the real deals are struck outside the room, and most conflict goes underground, or else erupts relative to irrelevancies because people have been seething at each other for months.

Lencioni suggests that for any decision-making meeting, the aim should be to get to conflict fast. Expose it, evoke it, get it out there. If all are in perfect harmony, why are we there? We watch sports events on the edge of our seats because we like the healthy competition and aren’t sure what the result will be.

In meetings and interactions, while it’s not about a personal winner or loser, the outcome is uncertain, the ball will move here and there, and perhaps the goal-posts will even move. And unlike in sports, adversaries will become allies as they find a new design that incorporates (at least to some extent) both the aspirations and concerns of the various parties. It should be riveting and exciting, as also unlike a sporting event, this affects your life, your business destiny, your budgets, your time, how you will be evaluated and possibly more.

That also means we need to be able to move a seeming conflict to first a shared goal (elevating us above our short-term imperatives), to then agreeing outcomes, to then learning facts, onto debating tactics, to then aligning on mutual roles and contributions. These are skills to be learned, practiced, modeled and honored.

If someone enjoys conflict, they’re probably sick. But if they shun it, or evade it, or duck it, or chloroform it, they’re not a leader.

Level one here is a plethora of conflicting, redundant and often competing efforts with people subjecting each other to either passive or active sabotage (not cooperating, delaying, simply not doing what was agreed or reinterpreting the request), sniper fire or undermining behavior.

Level two is pseudo-harmony in public and “opportunistic” reconciliation when pushed to it, but with no building of trust or a relationship that can sponsor larger outcomes and results.

Level three is proactive identification of friction points, ensuring we save our energies for the right fights, ensuring we “catch people doing things right” so we build up our relationship bank account and bolster them as well as challenge them. Real-time engagement, courageously, candidly and as supportively as possible becomes the DNA of the culture.

FACT-BASED AND DATA DRIVEN

We have to trust both intuition and data. The data has to be multi-faceted, whether using the Balanced Scorecard quadrinity of financial results, customer satisfaction, process performance and learning and growth measures or some other(s). Having the facts, we can then apply our intuition. Otherwise we’re being superstitious not intuitive.

Alternatively, our intuition can often provide a hypothesis, an informed hunch which is often wiser than research. But then we have to convert it into a “testable assumption” and then verify it, or adapt it, or dump it based on what emerges. In fact most strategies should be converted into “testable assumptions” that are validated, falsified or adapted and improved.

Many leaders tell us you have to know the 1-2 numbers that most drive your business performance. These could be growth in share, the performance among a certain demographic, costs and effectiveness of key processes, key capital ratios, addition of new customers, profitability per engagement or others, depending on the nature of your business, your markets and your competitors. Whatever the key numbers are, you have to ensure you have a good balance between lag indicators (for example, last quarter’s financial results) and lead indicators (say a new innovation or new customer pipe-line).

You have to make sure people are aligned on the most critical indicators, sources of facts, semantics, filters, frameworks. Otherwise the same information will be mediated and interpreted in different ways and lead to starkly different conclusions, responses and reflexes.

We can all choose what numbers to study and congratulate ourselves accordingly, but we have to agree what the most meaningful ones are. I worked with clients in Sri Lanka who in the hotel sector were delighted that they had a 30% return rate from guests. I asked how that compared with the rest of Southeast Asia. They had no idea. I asked if they had tracked spending and profitability per visit (many were coming for low cost stays and were actually not the tourists they were seeking to attract). They hadn’t.

We had another client who said they had 80% market share but were losing their shirt metaphorically. It didn’t take much to discover the way they were defining their market was meaningless. Before we chuckle at this evident lunacy, no less a company than GE was guilty of this, when Jack Welch found that his famous requirement that every GE business had to be one or two in their industry was being internally “scammed” by judicious defining of the market. Well, two can play that game, and he then demanded that everyone redefine their market again so they had a minority share and then challenged them to become number one or two in that redefined market! This led to explosive growth in services, web commerce and international expansion as a result.

Level one here is multiple, inconsistent sources of data with different frames of reference, nomenclature and importance ascribed.

Level two is departmental data and standards being aligned upon, with departments patting themselves on the back for this while others challenge their choice of scorecard. An R&D department of a client thought they were excelling based on internal technical measures. Other functions complained that there had been no real innovation (that wasn’t an iteration or a line extension) in almost a decade and even the improvements that had taken place didn’t have enough confidence behind them for the company to make public claims and enjoy market bragging rights as a result.

Level three is availability of the right data, agreed metrics, with current information and frequently updated data being utilized for key decisions and to calibrate and recalibrate efforts, initiatives and innovations.

BRINGING IT ALL TOGETHER

A Performance Culture is finally ratified by the interplay of the above dimensions and two key additional “moments of truth”.

First, what happens when there is a setback? How does the company handle it? Does it panic, does it throw transparency overboard, do performance metrics other than sheer financial returns fall by the wayside, does alignment cease to matter? During the financial crisis circa 2008, I heard a leader woefully tell me in a financial institution that a colleague announced to his unit, “No pay increases, no bonuses, we’re getting rid of 20% of you, and those that remain will work longer and harder, and if you don’t like it, leave; there’s a line forming outside of those looking for a job.” Very macho, except the thundering sound heard in the background was the crashing of the productivity, engagement and discretionary commitment of the work-force. After that, florid positive speeches will have no more edifying or rallying impact than a leaky balloon. His results were about as inspiring as his tactics.

We suggested then and maintain today that great companies seek a ‘ROC’ or “return on crisis”. That comes from cutting costs but protecting value, by giving people a reason to rally. When after 9/11 Southwest Airlines decided not to cut staff and keep their team together, and everyone voluntarily took a pay cut to enable that, starting with the CEO (who took the biggest one) and senior team (proportionately), then the Richter-scale topping passion for this place that employees demonstrate isn’t so hard to understand. Moreover they remained profitable through that period!

More than one of our clients in industries hardest hit are focusing now on how to create a “post-crisis” mentality and reality. That’s impressive, even if it is two years too late.

The second element re a performance culture is the reaction to a wake-up call. Earnings fall short, a key project is delayed, there is defection of critical talent, competitors catch us off guard, a key regional team fails to cohere. How fast do we face the facts, how quickly do we tap the widest band of insight to understand what happened non-defensively, how fast do we move away from scapegoats to solutions, how well do we take full accountability, how much urgency and focus do we lavish, and how congruently do we recognize all movement forwards remembering as ever that “progress not perfection” is what makes eventual breakthroughs both possible and sustainable.

Combine the above, and make them reflexes. The difference finally between winning and losing is habits. We can’t fight ourselves to do what’s needed each time and we can’t exhort others continually when it counts. Vince Lombardi nailed it, “Winning is a habit, unfortunately so is losing.” Let’s build a culture that will let us earn and learn our way to victory…and let’s make sure that culture is the very fabric of how we do business.