Unfolding Organizational Potential and Performance
THOMAS JULI, PHD
Magna International, Motivate2B
In times of increasing competition in the marketplace, organizational excellence and performance is ever more important. But what does “organizational excellence and performance” actually mean? And how can it be achieved? – This session shares how an organizational development program at Magna International approached these questions and what answers it yielded.
Keywords: organizational development, organizational performance, people development, creative economy
THE EXCITE! PROGRAM AT MAGNA INTERNATIONAL
Magna International is the leading global automotive supplier with worldwide more than 139,000 employees in 400 facilities, located in 29 countries on 4 continents. Deep in the culture of Magna is the notion that each plant should be run in an entrepreneurial manner. Plant managers have considerable freedom to run their plants as they see fit, as long as they are aligned with the current strategic initiatives of world-class manufacturing, innovation, and commitment to the development of people.
In an effort to improve its business performance, Magna launched Excite!, an organizational evaluation and development program, in the fall of 2014. The goal was to find out what it takes to unfold organizational potential and performance. For this purpose, new approaches, methods, and tools were developed and tested in several pilot projects across Europe. The result was a model and tool kit for evaluating organizational performance and concrete measures how to unfold organizational potential and performance.
This paper and session distills the general applicable lessons learned from the Excite! program. It will also explain why and how leadership is the decisive factor for unfolding organizational potential and performance.
THE HEART OF ORGANIZATIONAL EXCELLENCE
In times of increasing competition in the marketplace, organizational excellence or performance is ever more important. The Excite! program identified three drivers for organizational excellence and performance: 1) delighting your clients, 2) building a happy workplace, and 3) sustaining business value. Let's have a look at each one of these drivers.
THE THREE DRIVERS OF ORGANIZATIONAL EXCELLENCE
(1) CLIENT DELIGHT
When running a business you have a choice. You can do the bare minimum to satisfy your customers or you decide to go the extra mile and delight your customers. In either case the prerequisite is that you know who your customers are. As self-explanatory as this is, there are a lot of companies that seem to have forgotten whom they really serve.
Another question every business should be able to answer is whether or not it wants to build customers for life or only for the short-term. What is more important: quick, short-term profits versus a long and outstanding customer relationship with long-term, sustainable profits which may yield less quick wins but greater payoffs in the long run?
And what about the customer's perspective? Which company do customers want to do business with: one that treats customers like a number, a resource, or a sole revenue source, or a company that reaches out to its customers, seeks to understand and satisfy their needs, communicates with them, walks in their shoes and shows a sincere interest in them? Client delight is about the second company.
(2) A HAPPY WORKPLACE
Most companies speak of their employees as assets. This sounds good and wonderful. But then, “assets” for what? Are the employees just resources that add up to a bigger picture, the company's outcome, products, and services? Unfortunately, most average companies fall into this category. This is not to say that treating people as human resources or human machines is advisory. Especially not if you are interested in organizational excellence and performance. Yes, you can train and treat them like machines, push them to their limits, get the most out of them—for some time, until they are either burnt out or leave your company. You replace them and start the process anew. You may be interested and actually achieve employee satisfaction.
However, this is not to be mistaken with inspired, motivated, and performing employees who enjoy their work because they can identify themselves with the purpose of the company, who love working with their colleagues and serving their customers, and who are passionate about their work and enjoy a safe, secure workplace.
Companies can build such a workplace. Just as knowing the needs of their clients they have to show a sincere interest in the needs of their employees. It starts with a safe, secure, and environmentally friendly work environment. For employees to follow a direction, you have to set it, share it, and let your employees contribute to it. Let them become a part of it.
A happy workplace does not mean that you have to do everything just to please your employees without expecting anything in return. But you have to build an environment where they can prosper and perform at their best. A first start is that you don't treat employees as resources but as people, as human beings.
(3) BUSINESS VALUE
The former CEO of General Electric, Jack Welch, describes the call for maximizing shareholder value as the dumbest idea in the world. Others describe it as corporate cocaine (Denning et al., 2015). In either way, the bottom line is that shareholder value is not identical to business value.
Think about the following: You want to invest in a company, or even better, you want to acquire a company. What do you look at? Just the present stock price and its outlook? Of course not. You take a number of factors into account: the overall business performance and outlook, customer satisfaction ratings, market position, innovation performance, the skill set and turnover rate of the workforce, the attractiveness of the company as an employer of choice and many other factors. But how come most companies these days just talk about satisfying shareholder interests and maximizing shareholder value?
Shareholder value is the result of a well-run business and not the other way around. Hence, treating shareholder value as the purpose and driver of your business is not smart but myopic and can even be detrimental to the value of your business. From a business perspective, it is plain stupid.
THE SWEET SPOT OF ORGANIZATIONAL EXCELLENCE
The sweet spot of organizational excellence is where all three drivers outlined above come together. If you depict the three drivers as three circles, it is the area where all three drivers overlap that you can spark organizational performance and excellence (Exhibit 1).
Exhibit 1: Venn Diagram of organizational performance.
This is not a one-time effort. You have to continuously improve your own performance to stay in this sweet spot. In this sense, continuous self-improvement can be considered a fourth driver of and for organizational excellence. It adds a dynamic dimension to organizational excellence. Rather than a static Venn diagram with three circles, we can depict this as a Möbius circle (Exhibit 2).
Exhibit 2: The Excite! cycle of organizational performance.
The bigger the overlapping areas of all three drivers, the better organizational performance is. This implies that in order to develop organizational performance, you have to take all four drivers into account.
This holistic view requires leadership, a specific mindset, philosophy, and practice. It is not solely driven by short-term gains but balances long-, mid-, and short-term needs and goals. It has a clear customer and people focus and nurtures an open innovative culture. This leadership mindset is at the heart of the principles for organizational performance.
PRINCIPLES FOR ORGANIZATIONAL PERFORMANCE
There are five principles that provide guidance for this philosophy and practice to emerge.
- Leadership mindset
- Organizational structure
- Commitment and discipline
- Continuous self-improvement
- Operational stability and quality delivery
(1) LEADERSHIP MINDSET
Organizational performance and excellence requires a holistic, disciplined, and committed servant leadership style. Holistic leadership in this sense means that all four drivers of organizational excellence are understood, supported, and practiced day in, day out.
Disciplined and committed leadership means that it is understood that organizational excellence and performance takes time to develop. Corollary, leadership understands the importance of long-term thinking. It knows the motivation of the organization and where it comes from; it has a deep understanding and appreciation of its customers and their needs. The interacting balance of motivation, vision, and practices of an organization can be termed the MVP of an organization. It is crucial for organizational performance and excellence to develop that leadership knows, supports and communicates the MVP of the organization. The MVP of the organization helps put short-term goals into perspective. No doubt, quarterly results are important. But they have to be seen in perspective. Not short-term profits (earnings before interest and tax, or EBIT) are the drivers of business, but the health of the organization, which encompass its clients, people, and the business as a whole.
(2) ORGANIZATIONAL STRUCTURE
Build and nurture autonomous teams with clear, commonly understood, and supported vision and goals, roles, and accountabilities.
Communication in and between teams has to be open, transparent, and conversational rather than top-down and hierarchical.
(3) COMMITMENT AND DISCIPLINE
Leadership is not limited to one or two people “at the top” of an organization. Leadership can be practiced by everyone regardless of his or her role. On this token, the principles for organizational performance ought to be understood, supported, and committed by the complete staff. This requires discipline on all organizational levels.
Performance merits recognition. Some organizations have a bonus system in place. This can work and promote organizational performance as long as it is transparent, fair, and objective. Rewarding teamwork fosters team spirit and accountability.
Standardized work can be a great help and serve to make work more efficient and productive, yielding better quality and hence value. However, standardized work, too, is just a tool and hence should remain a servant and not become a master.
(4) CONTINUOUS SELF-IMPROVEMENT
Management has to build an open, transparent, collaborative, and engaging environment for continuous self-improvement. It ought to recognize and encourage small and not just big improvements, because sometimes little changes can make a big difference. If you are faced with redundant, inefficient processes, procedures, tools, or practices, eliminate them if they are waste and do not add value.
(5) OPERATIONAL STABILITY AND QUALITY DELIVERY
At the end of the day, the organization has to deliver. Not once but in a consistent and stable manner with high quality and reliability. There is a need for long-, mid-, and short-term organizational as well operational priorities. And they have to be transparent, that is, known and supported by the whole workforce. A plan by itself is of little value if not executed. As part of a bigger, long-term plan and vision, it can give people the necessary direction and orientation. If reviewed regularly to check whether or not it still serves its purpose for leading an organization toward its vision, this plan is a cornerstone of operational stability and quality delivery.
APPRECIATE YOUR PERFORMANCE TO UNFOLD YOUR POTENTIAL
Just because a company has successfully been in business doesn't mean that it cannot improve its organizational performance and excel to the next level. The question is how to get there. The Excite! program followed an appreciative inquiry approach, inviting the various plants to talk about their existing performance. Where do they perform, how, and why? What makes them so special?
By focusing on the positive, on past accomplishments and present performance, you create an environment that invites people to think of additional ways and means to improve their performance, taking it to the next level. This is not difficult at all. All you need to do is find people who can talk about their experience and are willing to share stories.
Once you have done this, people can easily point out areas they want (or need) to improve and then plan concrete activities along those lines.
THE FUTILITY OF TRADITIONAL ORGANIZATIONAL DEVELOPMENT
Just because a company has successfully been in business doesn't mean that it cannot improve its organizational performance and excel to the next level. However, it is often not about developing a new organization but about unfolding the organizational potential and performance, as the Excite! program has shown. Once areas of improvements are identified, the affected workforce jointly develops concrete measures, in the form of prototypes or projects, to move forward and learn from them. The Excite! program revealed that organizational excellence can only be achieved through motivated and committed employees whose goal is to delight customers with innovative products and processes. Excite! placed the customer and workforce into the center of the analysis and project work, without neglecting the resulting business value and thus the sustainable economic success of the company. As such, the Excite! approach is applicable to other industries and organizations.
ABOUT THE AUTHOR
Dr. Thomas Juli is an expert in agile and systemic organizational transformation, leadership development, and people innovation. Until recently, he led a strategic organizational development program at the global automotive supplier Magna International. Next to independent consulting (www.motivate2b.com), he mentors start-ups and is a lecturer for innovation and technology management at a private research university. He is the author of Leadership Principles for Project Success (2011).
CONNECT WITH ME!
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© 2016, Thomas Juli
Originally published as part of the 2016 PMI® Global Congress Proceedings – Barcelona, Spain