Organizations that outperform their counterparts excel at 4 primary practices
Most management tools and techniques available have no direct causal relationship to superior business performance. This holds true in faith-based environments and non-profit organizations as well. While these entities are not striving for superior business performance, per se, they have (or ought to have) guiding goals, plans, or a sense of direction as to where their efforts will be taking them in the future. This is especially true at times like this as our lives are filled with doubt, uncertainty, and trepidation.
Many churches are asking themselves the Post-COVID questions. What will our ministry look like? How will we cope with change? How will we continue to make a positive impact for the Kingdom of God? Hold on. There are some more crucial questions that should be addressed first – prior to making plans for programs, starting new ministries, and placing hours of effort into what our new worship experience will look like.
While these questions matter, what matters more is having a strong grasp of business basics. While touted to hold true for secular organizations, there’s no doubt that they spill over into the church or faith-based environment. Without exception then, organizations that outperformed their counterparts excelled at four primary practices. These practices deserve our attention over and above all as we begin to enter into a world that is very different from the onset of the pandemic.
There are four primary business practices that deserve a laster-like focus at this moment:
Strategy
Structure
Culture
Execution
These four are supplemented by two out of four secondary management practices:
Talent
Leadership
Innovation
Mergers & Partnerships
WHAT REALLY MATTERS? For example, the structure of your organization. It doesn’t really matter whether you centralize or decentralize it. The main thing is for you to pay attention to simplifying the way the organization is structured.
WHAT IS THE WINNING COMBINATION? It’s called the 4 +2 Formula for success. A company or organization that consistently follows this formula has better than a 90% chance of sustaining superior performance. This is taken from a study known as The Evergreen Project.
THE EVERGREEN PROJECT. This project studied 160 companies in a narrowly defined industry. They all had approximately the same fiscal conditions, however fortunes differed dramatically. The project was obsessed with two questions:
Why do some companies consistently outperform their competitors?
Which of the hundreds of well-known business tools and techniques can help a company be great?
The Project researchers started out by defining classifications for the companies involved:
Winners – Consistently outperformed its peers in the industry
Losers – Consistently underperformed against its competitors
Climbers – Started off poorly but dramatically improved its performance once it applied the 4+2 formula
Tumbler – Began the decade in good shape then fell far behind
As the study progressed, eight basic practices were identified. Those eight practices were narrowed down to four. It was felt that that succeeding at the eight practices can be hard work. Maintaining a laser-like focus on one element alone – year in and year out – can be grueling. It’s much easier to be a tumbler than to remain a winner.
THE FOUR PRIMARY PRACTICES. The goal is to master these practices using various tools and techniques. Keep in mind that there is no single, obvious choice that will bring a company success. There are, however, hallmarks of each practice that were found to be demonstrated in virtually all 40 companies for 10 solid years.
1. STRATEGY
Devise and maintain a clearly stated focused strategy
The key to achieving excellence in strategy is to be clear about what your strategy is and consistently communicate it to customers, employees, and shareholders
Begins with a simple, focused value proposition that is rooted in deep, certain knowledge about your organization's target "customers" and a realistic appraisal of your own capacities
Staying clear on strategy means companies need to be careful how they pursue growth
Executives are often tempted to seize any opportunity to expand, sometimes pushing their companies into unfamiliar territory as a result
Moving into areas unrelated to the core business inevitably causes strategic drift. In strategic drift, confusion reigns, performance falters, profits evaporate
Winners of this study set aggressive growth goals (2x as fast as other companies in their industry)
Primary aim was to grow the core business while at the same time expanding only into related markets
Over time, ancillary businesses can become part of the core, allowing companies to gradually shift focus as market demands change
While staying clear on strategy, you need to be able to fine-tune your focus in response to new technologies, social trends, or government regulations
THE BOTTOM LINE: Devise and maintain a clearly stated focused strategy!
2. STRUCTURE
Build and maintain a fast, flexible, flat organization
Procedures and protocols are necessary for any organization to function
Too much red tape can impede progress, dampen employees’ enthusiasm, and leach their energy
Winning companies trim every possible vestige of unnecessary bureaucracy – extra layers of management, an abundance of rules and regulations, outdated formalities
No particular organizational structure separated the winners in the study from others
What mattered most was whether the organizational structure simplified the work
Frontline employees and manager can make good decisions only if they have access to relevant, up-to-date information.
Knowledge can’t be held close to the vest
Winning companies spent considerable time, money and energy on opening the boundaries and getting divisions and departments cooperating and exchanging information
Winning companies are convinced that their future rests not on the brilliance of their executives but on the dedication and inventiveness of their middle managers and employees
Decision making isn’t bogged down by a lengthy chain of command
Employees are free to create and innovate
Once a company has assessed all its core practices and scraped off the bureaucratic barnacles, it’s time to begin again.
THE BOTTOM LINE: Build and maintain a fast, flexible, flat organization!
3. CULTURE
Develop and maintain a performance-oriented culture
Building the right culture is imperative
Promoting a fun environment isn’t nearly as important as promoting one that champions high-level performance and ethical behavior
In winning companies, everyone works at the highest level
These organizations 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
If a goal is unreachable, it still represents an opportunity for high performing employees and managers
The best way to hold people to such high standards is to directly reward achievement
Executives are often tempted to seize any opportunity to expand, sometimes pushing their companies into unfamiliar territory as a result
15% of the losers did the same
Winners were scrupulous in setting specific goals, raising the bar every year, and enforcing those benchmarks
To complement any financial rewards, winning companies develop programs that recognize people’s achievements and offer them opportunities to use their talents
Winners establish and abide by clear company values, giving employees a reason to embrace the organization
Write down values in clear, forceful language and demonstrate them with concrete actions
THE BOTTOM LINE: Develop and maintain a performance-oriented culture!
4. EXECUTION
It’s not what you execute, but how
Disciplined attention to operations is what counts
To be a steady winner, a company must increase its productivity by about twice the industry’s average
Winners increased productivity 6-7% every year
New technologies play a role in productivity improvements, but such investments must always be judged by whether or not they significantly lower costs or boost output
Winning companies are realistic
They recognize that there is no way they can outperform their competitors in every facet of operations
They determine which processes are most important to meeting their customers’ needs and focus their energies and resources on making those processes as efficient as possible
Winning companies are realistic
They take the same critical eye to product and service quality as well
They deliver offerings that consistently meet customers’ expectations and they’re very clear about the standards they have to meet
They don’t necessarily strive for perfection – unless perfection is explicit in their strategic value proposition (i.e. FedEx or Tiffany)
Winning companies are realistic
Many customers don’t care about a level of quality that goes beyond their needs and desires
They won’t necessarily reward you for exceeding their expectations
They will, however, punish you severely if you don’t meet their expectations
You tumble quickly when you fail on execution
Develop and maintain flawless operational execution
THE BOTTOM LINE: You tumble quickly when you fail on execution!
EMBRACE TWO OF FOUR SECONDARY PRACTICES. The winning companies complemented their strengths in the four primary practices with superior performance in any 2 of the secondary practices – it didn’t matter which two areas they chose. It doesn’t seem to make any difference if a company excels in all four secondary practices, there is no reward for going beyond the 4+2 formula
1. Talent
Hold on to talented employees and find more
The best sign that a company had great talent was the ease with which any executives who were lost to competitors were replaced from within
It’s much cheaper to develop a star than it is to go out and buy one – it’s also more reliable; you’re getting a known quantity
Winners that chose talent as one of their secondary practices demonstrated a distinct preference for developing and promoting their own stars and an ability to retain their top performers
A commitment to promote from within is meaningless unless the company offers training and development that can prepare employees for new jobs in the company and creates conditions that encourage employees to enroll rather then penalizing them for taking time way from their jobs
A talented employee can be just as valuable and hard to replace as a loyal customer
Many companies that go to great lengths to retain a customer won’t lift a finger to hold on to a skilled, seasoned manager
Half of the winners in the study excelled in the talent practice and these companies dedicated major resources to building and retaining an effective workforce and management team
THE BOTTOM LINE: Hold on to talented employees and find more!
2. Innovation
Make industry-transforming innovations
What passes for technical achievement in most companies would never satisfy organizations that excel at innovation
They’re focused on finding altogether new product ideas or breakthroughs that have the potential to transform their industries
Innovation also includes the ability to foresee and prepare for disruptive events
No correlation found between the sources the winners used and the general sources of innovative business ideas
What the group had in common was the ambition to lead the way with major, industry-changing innovations and a willingness to cannibalize offerings, resisting the temptation to wring every last cent out of an existing product before introducing another to take its place
A bare majority of winners excelled at innovation – underscores how difficult this practice is. Not to be entered into lightly
THE BOTTOM LINE: Make industry-transforming innovations!
3. Leadership
Find leaders who are committed to the business and its people
CEO’s influence 15% of the total variance in a company profitability or total return to shareholders.
Some common beliefs about leadership had little to do with a company’s becoming and remaining a winner
Certain CEO skills and qualities matter
The ability to build relationships with people at all levels of the organization and inspire the rest of the management team to do the same
CEOs present themselves as fellow employees rather than masters foster positive attitudes that translate into improved corporate performance
Certain CEO skills and qualities matter:
Leader’s ability to spot opportunities and problems early
Effective leaders help their companies remain winners by seizing opportunities before their competitors do and tackling problems before they become troublesome nightmares
What about the Board of Directors? Two characteristics really matter:
The board members should truly understand the business
The board members should be passionately committed to its success
THE BOTTOM LINE:
Find leaders who are committed to the organization and its people
4. Mergers and Partnerships
Seek growth through mergers and partnerships
Winners did not enter deals in order to diversify into areas far removed from their core business – this is generally a losing proposition
M or A makes sense only when the move leverages the buyer’s or seller’s existing customer relationships or complements both companies’ existing strengths
Partnerships can yield growth by allowing two companies to move into new businesses using the talents of both, uniquely combined.
Partnerships provide some of the same advantages as mergers and lack many of the disadvantages
Partners aren’t expected to accommodate all of each other’s idiosyncrasies
Partners remain separate entities, united in the expectation that their individual talents can be combined in a new business venture that will benefit both beyond what either might have gained alone
Winners and climbers did not treat acquisitions/partnerships casually or as one-off deals
They invested substantial financial and human resources in developing an efficient, ongoing process for deal making – for instance, establishing dedicated teams comprised of individuals with certain skills
Winners don’t limit themselves to besting their immediate competitors from experience that enable them to more consistently choose the right partners and integrate them quickly.
THE BOTTOM LINE: Seek growth through mergers and partnerships
THE 4 + 2 FORMULA. Tells managers which management practices they need to focus on and which they can ignore. The formula is a true-north compass that works in any business climate.
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