A few weeks ago, I was scheduled to visit the dermatologist to assess a few spots on my face for potential health risks. After his diagnosis he advised me the irregular facial spots were the result of abnormal sun exposure when I was a teenager. He said after 40 years I am just now experiencing the consequences. A stinging spray of nitrogen to freeze and then eliminate the damage was a small price to pay to lower the risk of future potential problems.
After my visit, it occurred to me, how little I thought about the future when I was a teenager. A few rays of sun to darken a pale skin seemed a good thing to do. For many years, the damage was hidden. But now it has surfaced and requires immediate attention.
As part of my advisory practice with Nuvision (nuvision.ca), I advocate for firms to regularly conduct an organizational health assessment in much the same way we participate in personal health assessments. As leaders we assume the culture of the organization is the least of what’s important. However, many times the greatest risk to the performance of the organization, is what’s hidden beneath. Beneath the surface of extraordinary earnings may hide a mess of unrecognizable issues. At some point in the future those issues will be exposed. In shock, we then wonder where they originated from. Many times the consequences are so severe there is no recourse.
The above is illustrated in the following chart.
To understand organizational health, consider this: “A multifaceted interplay of factors that contribute to organizational health largely due to the interrelated components of a system functioning together and seeking a dynamic balance in a complex environment.” (jpma.org)
Many potentially dangerous issues are hidden by exceptional financial results. The consequences may not be known immediately. As financial performance declines, we then start asking what went wrong and search for answers. Often it is too late and companies fall into serious trouble. With the right diagnosis and treatment, a realignment can be administered to start the journey back to higher performance. Our traditional means (or the old paradigm) of analyzing performance is based on typical performance measures such as: ROI, ROE, EVA, ROA, EPS and Market Capitalization – all financial measures. However, a new paradigm of thinking and analysis is required.
The new paradigm requires the following attributes:
1. Strategic direction is understood by all employees.
a. A shared vision must be adopted.
b. All employees enjoy goal congruency.
2. The organizational design fits the firm’s mission and strategy.
a. There must be an alignment of people, processes and technology.
b. Each employee has a “purpose-driven performance” attitude.
3. Execution demands a culture of discipline.
a. Employees are involved, committed and act with discipline.
b. Managers lead by teaching and coaching.
The consequence of the above focus is a “high performance organization”. The characteristics of such a state is this:
· Each person is a contributing partner in the business.
· People understand the business and are committed to achieving expected results.
· People are organized into self-managing business units and teams.
· Everyone takes responsibility for decisions, problems and continuous improvement.
It has been proven (by the U.S. based Centre for Organizational Design) that building and leading organizations under the new paradigm outperform traditional organizations by more than 40 per cent. Why then do many then lead with such outdated thinking?
I believe the answer to that question is simple. Old paradigm leaders do not understand or appreciate how important culture is to successfully executing the strategic plan. As one unknown author stated, “culture trumps strategy”.
According to the HPO Centre in the Netherlands, there are 35 characteristics that define a superior culture or HPO (visit hpocenter.com for the complete list). These are summarized under five headings:
1. Quality of management.
2. Openness and action oriented.
3. Long term goal orientation.
4. Continuous improvement and renewal.
5. Quality of all employees.
One of the critical problems with many of today’s leaders is a lack of self and corporate awareness. Leaders fail to understand the true drivers of success. A leader’s success is found in their ability to understand and motivate employees. Corporate success is the result of a leader’s ability to coach employees so that their fullest potential is achieved. That potential must be channeled collectively and aligned to the company’s mission and vision with explicitly defined goals and objectives (with, of course, a proper supporting structure). This approach will define a company’s culture. To do otherwise will result in failure.
This approach to leadership is just so simple. Why have we made it so difficult?
Several years ago, after a rigorous search process, I was one of two candidates being considered for the President & CEO position of one of Canada’s largest not-for-profits. I was not selected. The Board’s choice was a very popular gentleman with many contacts on Bay Street. It was decided by the Board, the public profile of the other candidate would offer an immediate solution to the current financial needs of the organization.
A few years later I met a former Vice President of that particular NFP. I was told the appointed President did in fact use his contacts to solicit much needed funding through multiple sponsorships. These financial sponsorships though hid the true ailments of the NFP. After a few years the President left and so did the corporate sponsorships. The NFP fell into extreme financial difficulty. What hid beneath was an organizational mess.
As a result, a major restructuring was required. The long term negative affect on the NFP’s reputation was significant. The NFP’s Board made a major mistake and their search was based on a flawed assessment of the organization. Challenging financial issues were the outcome of the NFP’s poor organizational health and the Board’s assessment of the NFP’s performance was based on the wrong indicators. Ultimately, a flamboyant, charismatic President & CEO was a poor choice. Neither the Board and the new President truly understood the organization’s needs.
For existing and emerging leaders, a holistic understanding and approach to organizational leadership is required. Sustainable high performance cannot be achieved unless the real drivers of success are identified.
To determine if you are developing a high performance organization, recognize and assess the signs of the firm’s organizational health. These include:
· Employees have great clarity of purpose
· There exists a candid and trusting culture
· Employees are empowered to make necessary decisions within well-defined boundaries
· Leaders treat employees with dignity and respect
· Everyone cares about real results
· The organization constantly develops its staff
· Leaders are leading with humility