Looking back to move forwards

The value of creating a  performance health index

By Christine Awuor and Stella Muthoni

Mediocrity is a word not used often in the business press.  Yet, this ‘opposite of excellence’ is a direction many organisations are heading.  In 1982, when Tom Peters and Robert Waterman wrote In Search of Excellence they identified 43 companies as ‘excellent’.

Mediocrity is a word not used often in the business press.  Yet, this ‘opposite of excellence’ is a direction many organisations are heading.  In 1982, when Tom Peters and Robert Waterman wrote In Search of Excellence they identified 43 companies as ‘excellent’.  In Built To Last, written some 12 years later, by Jim Collins and Jerry Porras they focussed on 18 firms that  they thought had the makings of long term success.

Looking back at all these ‘star companies’, today one finds that: 20% no longer exist, 46% are struggling, with only the remaining 33% still being high performers.

Same thing happens in Kenya.  One only has to look at the ‘ski slope like decline’ of  the once market leaders listed on the Nairobi Stock Exchange.   The ten year graph of their declining performance is a disturbing testament to missed opportunities and shrinking shareholder value.

So how does one take action and prevent this onset of organisational dementia, countering the prevailing trend of deteriorating performance ?

 

Seeing on four dimensions

“Change is a door opened from the inside” says a French proverb. Top management  needs  to be open to looking at the bigger picture and inject a dose of new thinking, on several dimensions.  In essence: a solid diagnosis is the prescription, based on creating a revealing performance health index.  

First step on the road to improved performance is understanding what is going on in four dimensions:  finance, marketing and sales, operations, and people in terms of their mindset and behaviours.

Looking at the business only through the lens of finance, or just putting  operations under the microscope does not give a true perspective.  One needs to look at the big picture.  For instance, while return on capita employed [ROCE] may have increased by 10%, a lack of innovation and a mindset of simply copying the competition in a ‘me too’ fashion will soon impact profitability.   

Joining the dots, looking at the whole canvas, understanding where on the chain of activities,  value is created and lost is critical.  First step is financial ratio analysis of the business over time, including benchmarking with select competitors.

A full review of operations should follow.   In addition, one has to ask: How innovative is the business ?  Is the focus on sustaining innovations, the small improvements just about all organisations make, simply to stay afloat ?  Do managers have an understanding of the innovator’s dilemma ?  The impact of disruptive  innovations, that often seem to pop out of left field and gobble up market share ?

In marketing and sales, is there an understanding that marketing is asking ‘what does the customer want’  and sales is telling ?

On the people dimension: culture trumps strategy.  Without an engaged staff and management team, even the most creative approach to the business will flop.  It’s very helpful for staff to understand where they are strong, and where they are weak.  Having a psychologist administer the Myers - Briggs personality type test can be insightful for people in better understanding themselves and their colleagues.

 

Linking  people to value

It is not uncommon for CEOs to write in their annual reports “our people are our greatest asset”  without really understanding the value that people in each unit generates.

Despite all the talk of being a ‘strategic business partner’ the human resources function, often serves  as a ‘policy and procedures police’.  HR managers have a problem in demonstrating the exact value they bring to corporate performance.  Contrast this with finance,  operations, or sales and marketing who are able to precisely define, with a full range of  empirical indicators, their contribution, the value, they provide.  Starting point has to be, understanding the organisation’s  value chain, then examine how peoples’ abilities and actions, either add or subtract value.  In most organisations staff costs, the total cost of employment, is a major chunk of expenditure.  Strange how traditional HR can not clearly define value, while in contrast, the finance function can come up with fifty plus  indicators. 

 

80% easily addressed

In developing a performance health index, using a range of approaches and tools, included must be a confidential organisational culture survey, measuring staffs’ engagement combined with  interviews and focus groups that brings to the surface issues and concerns that have to be addressed.  Fortunately, generally 80% of staff concerns can easily be dealt with, creating ‘small wins’  that show movement in a positive direction and management is listening.

In measuring and tracking the  organisational elements that drive performance, the art is to provide hard measures for the softer issues that are often tough to get a handle on.

Once all the numbers and feedback is in, then there is a need to triangulate to establish the true position of the business.   In addition to understanding what drives performance and the health of the business, one of the products of the performance health index diagnosis, is in identifying the changes and interventions required.  Creating a simple analytics scorecard is easily done to allow managers to visualise and track real time progress and catch emerging issues early on.

‘Not the same old’ is a wise mantra for  management.  In the words of Albert Einstein:

“We cannot solve our problems with the same thinking we used when we created them.” 

 

Christine Awuor This email address is being protected from spambots. You need JavaScript enabled to view it.  and Stella Muthoni This email address is being protected from spambots. You need JavaScript enabled to view it.  are project leaders at aCatalyst Consulting.