Business books come and go, but often not as fast as businesses themselves. Since the publication of two landmark books, “In Search of Excellence” by Tom Peters and Robert Waterman and “Built to Last,” by Jim Collins and Jerry Porras, 20 percent of the companies profiled in the books no longer exist and 46 percent are struggling to regain their former positions in the marketplace. Clearly, it’s a tough world out there, and it’s not getting easier to find sustained success.
A new book by researchers Scott Keller and Colin Price called “Beyond Performance” tackles this topic by looking at what is done by companies that have found ways to endure. In this interview with Smart Business, Keller and Price discuss the businesses that continue to be high performers and the reason that organizational health lies at the heart of longevity.
From your research into the subject, why have companies been so inclined to ignore organizational health? Is it simply a need to appease investors and shareholders or is it too much focus on short-term goals?
Colin Price: We are in no way saying that shareholder value is a bad thing. The focus of our work is performance and health, not performance or health. A very strong focus on performance and shareholder value is a very good thing. But it was so emphasized that businesses lost connection with what created not just performance and shareholder value in this month or this quarter but what created a great institution. That was most dramatically seen in the financial sector. The notorious failures all across the world were where organizations and banks were driving for short-term performance without a focus on longer-term institutional excellence. But it wasn’t just constrained to banks.
I think, in a way, this is a rediscovery of something that businesses have known for a long time. If you take any group of managers and say to them, ‘Do you believe that if you create a fundamentally healthy institution, you have a better chance of creating outstanding financial results?’ Nine times out of 10, those people will say yes. The problem is that many organizations have lost touch with that, partly driven by the short-term focus of the market, but I think it’s a bit of a cop-out for managers and leaders to say that they had to do it wrong because the market drove us that way. Leaders are employed to do the right thing for the survival and prosperity of the company, not just follow the winds of the marketplace.
There may be a temptation to look for a fix-all when setting a health aspiration. Tell us why companies need to be selective and what’s a good number of healthy organizational practices to which to aspire?
Scott Keller: It’s worth mentioning that there are, we would say, 37 practices that managers do that tend toward health or away from health. Why 37 practices? The reason is that after 10 years of research, probably the largest research effort in this area suggests that those are the right 37 practices on which to focus. It’s not that leaders or managers need to aspire to be great at all 37 practices in the same way that the gymnast has a different level of health from the body-builder, yet both can be healthy. The question is, what recipe of health is right for your organization to deliver against its strategy? As we’ve done the multi-varied analyses on this subject, it turns out the ‘magic number,’ so to speak, is to choose six practices where you will be distinctive, world-leading and better than the competition. [Your company should] be good enough at the other practices and not be in the bottom quartile relative to your competition. If you can do that, you will have a very healthy organization. The catch is that you have to choose the right six. It’s not just any six practices. It’s those six practices that, when put together in combination, actually have an impact.
“Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage”
By Scott Keller and Colin Price
Wiley, 280 pages, $29.95
About the book “Beyond Performance” offers an academic examination of why so few companies are able to sustain organizational excellence over an extended period of time. After what the authors describe as possibly the largest research endeavor into this subject, Scott Keller and Colin Price provide executives with five frames to create a balanced organization that is both high-performing and healthy.
The authors Scott Keller is a director in the Southern California office of McKinsey & Co. He is also the co-founder of Digital Divide Data. Colin Price is a director in McKinsey’s London office and leads its organization practice worldwide. He is also the co-author of “Mergers” and “Vertical Take-Off.”
Why you should read it Keller and Price offer a valuable study of organizations that demonstrated more than just a survivalist’s skill set. They focus on the innovators who push their companies to the heights of profit margin and remember to bring their people along for the ride. Keller and Price provide Five Frames that leaders can apply to performance and health.
Why it’s different The massive amount of empirical research that Keller and Price undertook would crush even an experienced leader. The strength of “Beyond Performance” is in its ability to provide just the right amount of scholarship in the context of practical application.
Can’t miss “The Senior Leader’s Role” — Unlike so many business books that attempt to grab one segment of an organization’s hierarchy, “Beyond Performance” provides this critical chapter, intended for 360 degrees of a company’s leadership. For change efforts to succeed, they must be championed, embodied and modeled by the top executive. This chapter is a guide for both those who occupy the C-suite, as well as their direct reports who may be hard at work to open the eyes of a top executive.
To share or not to share The riddle of extended high performance is one that has led to a variety of answers, but few show the quality exhibited by Keller and Price’s book. It’s recommended that a company acquire several copies of this book and pass it out to all levels of leadership.
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