KnE 004 Governance – Leadership – Excellence Created by James on 6/13/2013 4:30:59 PM
Dr James Robertson is an independent management consultant who has investigated what is required to attain success and excellence throughout his career. In this article he shares his insights into the subject of excellence as this pertains to corporate governance and leadership.
Dr Robertson can be contacted at James@JamesARobertson.com
Nearly two decades ago I realized that there was little in the way of a systematic, structured approach to strategic analysis and solution design -- what most people call “strategic planning”.
As I worked to bring the formality and disciplines of engineering into the field of management consulting, information technology solution success and strategic capability I investigated various options and progressively formalized a systematic approach to strategy. This was done drawing on a diversity of other practices with the work of Professor Malcolm McDonald and Michel Robert having the greatest influence.
In particular I developed a concise, high impact, critical issues method with diverse applicability that, amongst other things, included a process in which delegates rated the performance of their organization historically, at present and at some target date in the future. These ratings are made on a scale of zero to ten where zero (0) represents a situation that “could not be worse anywhere in the world” and ten (10) represents a situation that “could not be better anywhere in the world”. In other words, ten represents excellence.
In using this scale I have discovered that there is disparity in the definition of excellence and also in the definition of “could not be worse” and consequently differences in perceived performance. Such disparity can give rise to tension, "politics" and other inter-personal differences which are not helpful.
This gives rise to the question – what IS excellence?
In the discussion that follows I will set out what I have come to understand about corporate excellence and also how this relates to corporate leadership and corporate governance.
In applying the basic method over about fifteen years I have found that depending on the background of delegates their perception of 10 out of 10, that is "excellence", can differ dramatically. One delegate may rate the organization eight and another rate it five on the same scale in the same session. Sometimes this is a matter of performance in different divisions being different, other times it is a matter that delegates are looking at the same picture but with different paradigms of excellence.
At first glance a gap of three out of ten may not seem significant. In fact, this is nearly a third of the scale and since in practice real world occurrence of the extreme values is infrequent a difference of 30% is highly significant.
Furthermore, for someone who thinks they are close to the best of the best there is no incentive to learn, grow or change.
On the other hand, in goal setting, if one person has a conservative view of a situation and another person rates the objective as ten, the more conservative person may become discouraged, dismissive or angry.
I have come to understand that these gaps frequently represent distinct paradigms – mental models of the world that shape the conduct of people individually and in groups. The existence of these different paradigms represents one of the greatest challenges facing the debate on improving the lot of people from historically disadvantaged backgrounds in South Africa and globally. I plan to share my thoughts on paradigms in a future issue.
So, how does one define what constitutes excellence as “best of the best” in the world?
How would one recognize a truly excellent organization if one encountered it?
Coupled to this is the question of how one facilitates different constituencies in an organization from moving closer to an absolute scale in the interests of developing a common view of the future and harnessing their energies to work in unison.
Towards this end I have defined the following seven attributes in terms of "how does an organization get to become truly world class, and aspire to being a 10?"
The percentages at the end of the headings represent the relative importance of each of these seven factors in supporting an organization to attain excellence.
1. Leadership (Strategic and Operational) -- 28%
The first requirement for corporate excellence is leadership which is clear, effective, empowered, accountable, visionary, goal directed, integrated, coherent, cohesive, decisive, incisive, in charge, self sacrificing, humble, caring, sensitive, self disciplined, passionate, willing to take pain and make sacrifice, resolute, sharp, go the extra mile, passionate about service, good relationships with customers, personnel, suppliers and owners / shareholders, loyal, committed.
In addition to these attributes the organization operates primarily strategically where strategy is defined as the essence of why the organization exists and how it thrives. Thus leaders have a clear vision of why the organization exists and how it thrives, they communicate this to all personnel and they move purposefully into the future based on these parameters.
Jim Collins, in his book “From Good to Great” defines five levels of corporate leadership with level 5 being the highest level:
- The level 5 executive “Builds enduring greatness through a paradoxical blend of personal humility and professional will”. (emphasis added)
- The level 4 “effective leader” “Catalyses commitment to, and vigorous pursuit of, a clear and compelling vision, stimulating higher performance standards”.
Collins asserts that level 5 leadership is essential for corporate greatness and further asserts that many chief executives do not achieve this level.
In his book “How to Win Friends and Influence People” Dale Carnegie cites Charles Schwab, one of the first American executives to earn US$1 million per annum as first President of the newly formed United States Steel Company in 1921 as saying “I consider my ability to arouse enthusiasm among my people, the greatest asset I possess, and the way to develop the best that is in a person is by appreciation and encouragement.“
"There is nothing else that so kills the ambitions of a person as criticisms from superiors. I never criticize anyone. I believe in giving a person incentive to work. So I am anxious to praise but loath to find fault...“
These quotes stress some aspects of leadership in achieving excellence that are not as widely discussed as they should be.
2. Governance and Custody -- 20%
The second requirement for excellence is effective and goal directed governance and custody. Professor Mervyn King, formerly Justice King, author of the King report on corporate governance defines governance as “care” for the organization.
Governance includes clear chains of command, competence based hierarchies (relevant knowledge and experience), empowerment of leaders and staff at all levels, enabling policies that declare relevant and constructive guidelines and boundaries, effective training, clear and effective methods of performance management that measure the real issues that make a difference and clear and meaningful sanctions and incentives.
A well led and well governed organization recognizes that in order to grow people must make mistakes. Mistakes are actions people take that prove to be inappropriate or unhelpful or outright destructive. Mistakes are unintended.
An important requirement for attaining excellence is to allow people to make sincere, unintended mistakes and learn from them. It has been said that people learn more from their mistakes than from their successes.
3. Strategic Definition -- 18%
The next requirement for excellence is a concise definition of strategy and the right things for the organization to thrive. This should be communicated and understood throughout the organization to the most junior staff member or contractor.
This definition should be coupled with clear and concise definition of strategic drivers and their relative importance in assisting the organization to achieve exceptional outcomes in line with the essential reason it exists.
Strategic drivers are the essential drivers of the business such as “the essence of how it uses money”? – does it follow a banking model and sell products in order to lend money and profit from the interest so charged? - does it buy goods on credit and sell them for cash in order to invest the cash and profit from the interest on the cash so borrowed? - does it engage in straightforward commercial trade -- buying and selling at a profit?
These things are frequently not as self evident as one would think.
Strategic definition includes clear definition of strategic architecture in the current and objective states – what does the organization look like? How does it operate? How does it thrive – simple statements that are clear and unambiguous and summarize the essence of the business.
An essential component of strategic definition is a clear definition of the critical value consuming / destroying actions and practices of the organization that are to be minimized.
This should be coupled with a clear and concise definition of the critical value creating actions and practices of the organization that are to be maximized – what Malcolm McDonald calls “the right things”.
4. Strategic Capability -- 16%
The next essential element of an excellent organization is what I term “strategic capability”, the capability to analyze and define the strategy and drivers referred to above, visualize the desired future state and move there quickly and efficiently with minimum effort, energy and cost.
The human brain is an amazing super computer. An organization whose leaders are able to distil the essence of their vision, communicate that essence and actualize the vision through the human beings who represent the true power of that organization, is well on the way to achieving excellence.
And in the process they overlook the fact that the computer systems that they seek to implement are the result of the collective creative genius of human beings just like them, human beings with unique skills and intuitive gifts who have systematically instructed machines to assemble huge streams of 0’s and 1’s to create impressive technology.
Focus on machines and other technology at the expense of the people may be seductive but it is not where real corporate excellence lies. Excellent companies may be able to afford impressive technology but impressive technology does NOT create excellent companies.
This is one of the biggest traps of the computer age – executives are seduced by language that imputes mystical ability to computerized systems when the value is delivered by the human beings that run the organization assisted by the computerized systems.
Effective strategic capability includes effective analysis of the strategic environment (those things that impact why the organization exists and how it thrives) and methods of working that achieve planned outcomes consistently and reliably.
This should be coupled to a clear, balanced, weighted strategic map -- a succinct structured analysis of the inter-relationship of shareholder / owner critical success factors, market factors, supplier factors, external environment, internal environment including staff and systems, strategic capability and strategic governance.
5. Standards and Policies -- 8%
Excellence requires clear, concise, focused, appropriate, outcomes orientated policies, standards, procedures and guidelines that give direction and enable effective and efficient action.
This is about communication, letting people in the organization share a common understanding of methods of working and essential protocols in order to allow the human computers in the organization to gear up knowledge and experience to deliver the most effective solutions cost effectively.
6. Systems, Methods, Tools, etc -- 6%
Excellence requires that we support and equip people to deliver exceptional outcomes i.e. do the right things exceptionally well. This includes the tools and systems in the factory, administration, management and all other aspects of the organization.
Systems begin and end with people, systems as formalized ways of working systematically to create repeatable and reliable outcomes may comprise only people. Notwithstanding the common use of the word “system” today a system does not need to include a computer but a business computer system DOES need to include people.
One of the most impressive systems I have ever heard of was an illiterate store man in a warehouse. When the warehouse was computerized he succeeded in keeping his job because he had memorized the alpha numeric pattern of 40,000 stock codes! His lack of literacy was only discovered months after the computer system was implemented! Excellence is about people, even in the notionally irrelevant things.
7. Continuous Improvement -- 4%
Finally, sustainable excellence requires a culture of continuous improvement. A learning, focused, self actuated organization of people who continuously deliver exceptional outcomes in all the critical (key) performance areas.
10, the best of the best, can theoretically not improve further -- however 10 is a moving target, the very act of achieving what was viewed as a 10 three years ago opens up new vistas of what is possible and therefore no organization will EVER achieve a full 10 on anything.
Continuous improvement is given the lowest weight simply because it requires that the other factors are in place at a reasonably high level in order to achieve a culture of continuous improvement.
Without standards and systems continuous improvement is not possible, because the basics are constantly being reinvented.
One of the fundamentals that is frequently lacking at some level in many organizations is strategic efficiency, the ability of executives and managers and staff to focus most of their attention on doing the right things to maximize value creation in the organization. Amongst the apparent trivia required to achieve this capability include:
- Executives have equipped, motivated, trained, loyal, long term personal assistants.
- Effective time management tools, methods, training and practical day to day implementation -- NOT about computer based technology.
- Filing and document management standards consistently applied throughout the organization -- this is about standards, practices, training, etc and NOT about technology.
- Touch typing – the ability to type fast and accurately while thinking creatively. A typing speed of at least sixty words a minute with 99% plus accuracy should be a requirement for any person who will use a computer keyboard for any length of time on a daily basis.
Conclusion -- Excellence is about PEOPLE
Excellence is the essence of value creation and delivery and is achieved primarily by people not buildings, machines, information systems or any other non-human component. Humans conceptualize, plan and build these things, speak the words, and perform the deeds that lead to excellence.
Excellence is attained through leadership and good leaders care about their organization and their people. Excellent leaders do not visualize head count reduction as a way to justify an investment, they visualize improved gearing in terms of increased value delivered with the same head count.
Excellence is something that results from a state of mind, an attitude. Money and things cannot buy excellence and do not define excellence -- excellence MAY generate money and / or things if that is an objective of the organization.
Giving people things and money does not make them excellent -- vision, motivation, morale, leadership, etc build the desire for excellence and lead people to attain excellence IF they are properly equipped and trained.
Excellence is NOT NECESSARILY EXPENSIVE -- excellence can be generated with limited funds compensated for by excellent leadership and excellent people… and all people have excellence in them waiting for excellent leaders to liberate it.
Excellence is ABOUT PEOPLE!
I hope that this article will assist you to think more powerfully about how to achieve excellence in your organization.
In the next article I will discuss paradigms and the challenge and opportunity that they represent in achieving excellence. Learn why different views of the mountain are valid and valuable.
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