Success in business

In an article entitled What Really Works in the current issue of Harvard Business Review, authors Nitin Nohria, William Joyce, and Bruce Roberson report that of the 160 companies they studied,

Without exception, companies that outperformed their industry peers excelled at what we call the four primary management practices—strategy, execution, culture, and structure. And they supplemented their great skill in those areas with a mastery of any two out of four secondary management practices—talent, innovation, leadership, and mergers and partnerships.

We learned, for example, that it doesn’t really matter if you implement ERP software or a CRM system; it matters very much, though, that whatever technology you choose to implement you execute it flawlessly. Similarly, it matters little whether you centralize or decentralize your business as long as you pay attention to simplifying the way your organization is structured. We call the winning combination the 4+2 formula for business success. A company that consistently follows this formula has better than a 90% chance of sustaining superior business performance.

The July issue also contains an article by Art Kleiner that asks, Are You In with the In Crowd? Reading Kleiner's article, I realized that every large organization I've ever worked with has its own "In Crowd" or "core group." That's good and it can be bad.

At the core of your company, there is a group of people who seem to call the shots. More precisely, all the shots seem to be called for their benefit. It’s as if the organization, beneath its formal statements of mission and purpose, has actually been set up to fulfill this group’s needs and priorities. Everything else that the organization does comes later: satisfying customers, creating wealth, delivering products or services, developing employees’ talents, returning investment to shareholders, and even insuring the company’s own survival. They are means to the end of keeping the core group happy.

The core group won’t be found on any formal organization chart. It exists in people’s minds and hearts—indeed, the root of the word “core” is probably the Latin word cor, for heart. It comprises the cluster (or clusters) of people whose perceived interests and needs are taken into account, consciously or not, as decisions are made throughout the organization. In most organizations, talking explicitly about this group is taboo; its existence is a dirty secret that contradicts the vital corporate premise that we all have a common stake in the company’s success. In fact, all employees do have a common stake in the company’s success, but the company has a greater stake in the success of some employees than of others.

This is all too true:

For a start, while corporations legally belong to shareholders, the psychological truth is that they will always belong to some inner group of managers.

What to do? Create a core group of exemplary leaders, not masters and toadies:

When core groups display independence, creativity, and power, the rest of the company follows. The same goes for when core groups take courageous stands; when they talk together openly and raise disputes for the sake of understanding them better; when they are diverse in their makeup and their thinking; when they forgo politicking, empire building, and exploitive behavior; and when they embody a sense of stewardship for the organization. Such behavior on the part of the company, in turn, creates value for shareholders, especially over the long term. But unless you are prepared to remove many of the members from the organization, these traits can’t be engineered into the core group. In most situations, core groups take on such traits when they realize they will be rewarded for them—in part by the approval of regulators, but primarily by the group’s own newfound ability to attract employees, customers, financiers, and shareholders.

For once, here's an alumni benefit of substantial benefit: I now receive HBR online. For free.

Culture is vital, in spite of the feelings of some managers that it's "soft" and hardly worthy of the sort of attention devoted to manufacturing or IT.

Winning companies... design and support a culture that encourages outstanding individual and team contributions, one that holds employees—not just managers—responsible for success. Winners don’t limit themselves to besting their immediate competitors. Once a company has overmatched its rivals in, say, the effectiveness of its logistics, it looks outside the industry. Employees may ask, for instance, “Why can’t we do it better than FedEx?” If the goal is unreachable, it still represents an opportunity for high-performing employees and managers: “If we can’t be the best at logistics, why not outsource it to a partner that can?”

Posted by Jay Cross at July 23, 2003 10:32 AM | TrackBack

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