Pow­er­house per­for­mance

The Smart Manager - - Contents - JAMES BOWEN IS CO-MAN­AG­ING DI­REC­TOR OF KOTI­NOS PART­NERS AND CO-AUTHOR OF POW­ER­HOUSE. BRIAN MACNE­I­CEIS CO-MAN­AG­ING DI­REC­TOR OF KOTI­NOS PART­NERS AND CO-AUTHOR OF POW­ER­HOUSE.

Can you sus­tain your busi­ness’ high per­for­mance? James Bowen and Brian MacNe­i­ceis, Koti­nos Part­ners, have the an­swer.

Creat­ing high-per­for­mance lead­er­ship is just one step to­wards achiev­ing suc­cess; how com­pa­nies can sus­tain it is what ul­ti­mately de­cides the fate of the or­ga­ni­za­tion. Af­ter study­ing some of the lead­ing busi­nesses across the globe, James Bowen and Brian MacNe­i­ceis, of­fer you a model that can help fu­ture lead­ers.

For many years we have been stu­dents of or­ga­ni­za­tional high per­for­mance. What is it about those or­ga­ni­za­tions that are the best in their fields that un­der­pins their en­dur­ing suc­cess? Can we iden­tify com­mon ele­ments in the mod­els for suc­cess of lead­ing or­ga­ni­za­tions? Is there help­ful guid­ance we can of­fer to as­pir­ing lead­ers ev­ery­where, on the cre­ation of sus­tained high per­for­mance?

These ques­tions have framed our re­search over the last five years—a pro­gram of first-hand in­ves­ti­ga­tion and anal­y­sis that has taken us to all cor­ners of the globe to study lead­ing or­ga­ni­za­tions in mul­ti­ple sec­tors. The scope of our work has ex­tended from busi­ness to elite sport, from mil­i­tary to arts, from medicine to ed­u­ca­tion, and from cri­sis re­sponse to phi­lan­thropy and na­tion-build­ing. Hav­ing stud­ied around fif­teen or­ga­ni­za­tions in to­tal across these fields, some key con­clu­sions were ob­vi­ous.

A pri­mary con­trib­u­tory fac­tor vis-a-vis the or­ga­ni­za­tions we stud­ied hav­ing achieved (and main­tained) sus­tained high per­for­mance was: hav­ing es­tab­lished out­come as a spe­cific, ex­plicit goal in the first place.

South­west Air­lines, Amer­ica’s largest sched­uled air car­rier, has achieved 7% an­nual pas­sen­ger growth for the last 25 years, and bal­anced con­sis­tent lead­er­ship in cus­tomer sat­is­fac­tion with top-tier fi­nan­cial and share­holder re­turns over the same pe­riod. Its sus­tained progress in the hyper-com­pet­i­tive US avi­a­tion in­dus­try has been truly re­mark­able, and it has been en­abled by South­west’s ex­plicit ob­jec­tive of be­ing ‘the world’s most loved, most flown and most prof­itable air­line’. The clar­ity, stretch, and pur­pose em­bed­ded in the air­line’s vi­sion state­ment have gal­va­nized the ef­forts of all its stake­hold­ers to work to­gether to achieve its ends for many years.

Se­condly, the lead­ers of each of the high-per­for­mance or­ga­ni­za­tions we stud­ied were unan­i­mous in be­liev­ing in their peo­ple and or­ga­ni­za­tions as ‘the’ source of their en­dur­ing ad­van­tage. They un­der­stood that suc­cess aris­ing from the devel­op­ment of in­di­vid­ual innovations (for ex­am­ple, Lexus in the case of Toy­ota), or the per­for­mance of su­per-tal­ented in­di­vid­u­als (for ex­am­ple, Richie McCaw or Dan Carter in the case of the New Zealand All Blacks), while wel­come, was also by def­i­ni­tion short-lived. These lead­ers saw the or­ga­ni­za­tional grave­yard as be­ing full of ‘su­per­novas’—in­sti­tu­tions that achieved rapid, brief suc­cess be­fore fad­ing equally quickly back to earth. They un­der­stood that true sus­tained high per­for­mance arose uniquely from or­ga­ni­za­tions with the ca­pa­bil­ity to main­tain a pipe­line of in­no­va­tive new prod­ucts (for ex­am­ple, Toy­ota has moved on from Lexus to the equally in­no­va­tive Prius and Mi­rai mod­els, and from there to a fleet of con­cept cars cur­rently un­der devel­op­ment) or, in more peo­ple-cen­tric busi­nesses, a con­veyor-belt of new tal­ent (for ex­am­ple, the All Blacks have moved seam­lessly from the era of Richie McCaw and Dan Carter to that of Kieran Read and Beau­den Bar­rett). They viewed the essence of their roles as be­ing about de­sign­ing and mo­bi­liz­ing or­ga­ni­za­tions to de­liver ev­ery day, while si­mul­ta­ne­ously build­ing the ca­pa­bil­ity and ca­pac­ity to grow and ex­tend their ad­van­tage.

Thirdly, we con­cluded that not­with­stand­ing the enor­mous cultural, sec­toral, and ge­o­graph­i­cal di­ver­sity of our study base, when it came to think­ing about the ‘how’ of sus­tained high per­for­mance, we could iden­tify a dis­cernible best-prac­tice ap­proach we could share with as­pir­ing man­agers. Sim­ply put, we ob­served lead­ers of high-per­for­mance or­ga­ni­za­tions work­ing ex­plic­itly or im­plic­itly across four key ‘pil­lars’ of high per­for­mance in a con­sis­tent and aligned way. These four pil­lars come to­gether to form our Pow­er­house Model of high per­for­mance (see fig­ure 01 be­low).

Fig­ure 01: pow­er­house model of high per­for­mance

The first pil­lar is ‘plan’: the def­i­ni­tion, ar­tic­u­la­tion, and com­mu­ni­ca­tion of medium-term di­rec­tion for the or­ga­ni­za­tion such as to pro­vide di­rec­tion, stretch, pur­pose, and in­spi­ra­tion for its peo­ple. The Cheshire cat from Lewis Car­roll’s fa­mous novel Alice in Won­der­land said, “If you don’t know where you’re go­ing, any road will take you there”, and while many or­ga­ni­za­tions give the ap­pear­ance of hav­ing in­ter­preted the cat’s wis­dom as doc­trine, high-per­for­mance

or­ga­ni­za­tions take a com­pletely op­po­site slant. Not only do they es­tab­lish and com­mu­ni­cate a sin­gle di­rec­tion and def­i­ni­tion of suc­cess, they also main­tain and adapt this di­rec­tion on an on­go­ing ba­sis to take ac­count of changes in their in­ter­nal and ex­ter­nal con­texts. Rather than hav­ing a strat­egy, high-per­for­mance or­ga­ni­za­tions are strate­gic.

The sec­ond pil­lar is ‘pri­or­i­ties’: es­tab­lished, in­sti­tu­tion­wide pri­or­i­ties for de­liv­er­ing on the plan that re­flect both the start-point and the des­ti­na­tion. Dr Peter Killing, a pro­fes­sor of strat­egy at IMD, once said, “the prob­lem with strat­egy is that ul­ti­mately it dis­in­te­grates into work”. High-per­for­mance or­ga­ni­za­tions use pri­or­i­ti­za­tion to proac­tively drive this dis­in­te­gra­tion process—ad­dress­ing and align­ing com­pet­ing ini­tia­tives and en­sur­ing that the de­mand for work is matched up with the sup­ply of re­sources in the sys­tem.

The third pil­lar we call ‘peo­ple’ re­lates to the cultural and be­hav­ioral stan­dards in place in the or­ga­ni­za­tion. We would say that all of the or­ga­ni­za­tions we stud­ied could be de­scribed as value-driven, and some of them de­scribe them­selves ex­plic­itly us­ing that term. Valuedriven means hav­ing a de­fined cultural and be­hav­ioral iden­tity—a clear def­i­ni­tion of who we are and how we work to­gether—that con­nects the per­son­al­i­ties and ca­pa­bil­i­ties of the peo­ple to the pur­pose and am­bi­tion of the or­ga­ni­za­tion. South­west Air­lines has a clearly ar­tic­u­lated ‘South­west Way’, while the United States Marine Corps op­er­ates to its three his­toric val­ues of Honor, Courage, and Com­mit­ment. Tata Group like­wise has five core val­ues, while the All Blacks have a doc­u­mented code that is one of the first things shared with all new ar­rivals to the squad. These or­ga­ni­za­tions are not at all unique in hav­ing writ­ten-down val­ues, how­ever they are out­liers in the level of their ded­i­ca­tion to those val­ues, and the ex­tent to which they make them lived within their or­ga­ni­za­tions. In the words of Reed Hast­ings of Net­flix, “the real com­pany val­ues, as op­posed to the nice-sound­ing val­ues, are shown by who gets re­warded, pro­moted, or let go.”

The fourth pil­lar ‘process,’ refers to the more me­chan­i­cal ele­ments of how the or­ga­ni­za­tions work— again in the ex­plicit con­text of de­liv­er­ing and evolv­ing their vi­sions. High-per­for­mance lead­ers un­der­stand the growth para­dox whereby growth cre­ates com­plex­ity, and com­plex­ity kills growth. They ad­dress this para­dox in part through main­tain­ing a stan­dard of ‘just enough process’—es­tab­lish­ing mod­els that are em­pow­ered by de­sign—free­ing up, trust­ing, and ex­pect­ing lead­ers to lead, and peo­ple to do what they need to get done.

By work­ing over ex­tended pe­ri­ods within and across each of these pil­lars and, in par­tic­u­lar, by proac­tively man­ag­ing the in­ter­de­pen­den­cies that ex­ist be­tween them, lead­ers of the high-per­for­mance in­sti­tu­tions we stud­ied have man­aged to achieve sus­tained per­for­mance lead­er­ship in their fields. Not only that, but in many in­stances they have and are man­ag­ing to in­crease their in­sti­tu­tions’ ad­van­tage over time, by con­stantly re­fin­ing their mod­els and im­prov­ing the rate at which they im­prove. High­per­for­mance lead­ers un­der­stand that the challenge of sus­tained high per­for­mance is in it­self en­dur­ing, and they live by the words of South­west Air­lines’ founder Herb Kelle­her, “If you rest on your lau­rels, you’ll get a thorn in your butt”. At the same time, they un­der­stand that in all cases the view is worth the climb. ■

True sus­tained high per­for­mance arose uniquely from or­ga­ni­za­tions with the ca­pa­bil­ity to main­tain a pipe­line of in­no­va­tive new prod­ucts.

Rather than hav­ing a strat­egy, high­per­for­mance or­ga­ni­za­tions are strate­gic.

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