Is your Company Leading or Firefighting?

Some companies never seem to have their act together. Others run like well-oiled machines. How does yours operate?  

Organizational behaviors exist on a continuum. From most chaotic at the base to most disciplined at the apex, the maturity pyramid shows where companies tend to fall. It was conceived by quality guru Philip Crosby¹ and later used in various forms by Hewlett-Packard,² the Baldrige Performance Excellence Program,³ and others. Where does your organization fit? 

1. Firefighting. The organization is highly reactive, relying on heroics to get things done. Success depends on circumstances, individual strengths, and plenty of luck. Getting sales is the primary focus, and any customer who buys is considered valuable. While the environment may be very creative, there’s typically a lot of stress and finger-pointing, customers are often disappointed, and mistakes are frequently repeated. The company does little to no planning, except possibly annual budgeting, and has limited employee training. 
2. Control. The organization becomes more aware of processes and takes steps to ensure consistency and repeatability. Checklists, inspection points, and reviews begin to appear, and more often groups coordinate their work. Sales qualification gets better as the company understands some customers are more valuable than others. Some metrics are in place, and annual planning begins to include goals and key initiatives. Execution is spotty, but improving. The company considers employee training important and screens new hires. 
3. Continuous Improvement. The organization uses formal techniques to systematically improve products, services, and the processes that produce them. Managers and staff are mostly proactive, with the exception of dealing with the occasional hiccup. Metrics are aligned and used extensively, and planning includes a clear vision with short-term and long-term goals. The company successfully executes about half of its planned initiatives. Market segmentation begins to drive development, marketing and sales strategy, and offerings get consistently better. Training is structured and delivered enterprise-wide. Executives carefully construct and manage supply and distribution chains. 
4. Optimization. The organization’s plans and processes are well aligned and integrated, and potential risks are often identified and resolved in advance. Through a history of continuous improvement and targeted innovation, the company has developed “core competencies” that create competitive advantages and open up entirely new markets. Despite its size, the organization is customer-focused, agile, and routinely introduces successful products and services. Enterprise-wide change initiatives are executed effectively. The company plans and manages human capacity and capability over a multi-year horizon. Cross-functional teamwork is high and organizational learning is methodical and widespread. 
5. Leadership. A market-maker, the organization uniquely balances the "yin and yang" of creativity and discipline. The company experiments incessantly with breakthrough ideas, carefully evaluating the ones that work, and only then scales up and introduces them. Competitors struggle to keep up. The press lionizes the company’s methods as “best practices." Despite perennial successes, the company remains on guard against complacency. It quickly detects disruptive shifts in technology, world events, and competitive innovations and mounts strategic responses. 

It’s probably no surprise that firefighting produces erratic outcomes. These companies tend to be new, small, or niche players, and they must fight to survive. Organizations with control orientations experience better success rates. Their customers are more often satisfied and buying again, and results are stable and predictable. These companies are “up-and-comers.” Firms doing a good job of continuous improvement are gaining ground, responding to market changes and becoming top competitors in their industries. Studies have shown that over a five-year period, these firms grow revenues and operating incomes twice as fast as those with control or firefighting behaviors.⁴ Companies optimizing performance are highly regarded and generally maintain top market positions. Examples include Boeing, IBM, Fed-Ex, and Toyota. Finally, a very small number of leading firms dominate their markets for fifteen years or more, producing at least ten times the return on shareholder equity than anyone else in the sector.⁵ They include Southwest Airlines, Intel, and Progressive Insurance. 

Where do you see your organization? Be honest! Chances are you rank your company towards the lower end of the pyramid. That’s where the majority operate. 

So what does it take to move up? As it is with individuals, healthy organizational behaviors are the result of good habits, born of discipline. When the right disciplines are combined into an effective strategic management system, excellence soon becomes a matter of habit. Along the way, greater discipline does not suppress creativity, but gives it necessary direction and boundaries. Senior leaders who progressively implement just enough structure at the right time, in the right place, and for the right reasons create beneficial habits and relentless progress.



Sources:

1. Crosby, P., 1979. Quality is Free. New York: McGraw-Hill. ISBN 0-07-014512-1. 
2. Hewlett-Packard Process Consulting services, 1999. 
3. Baldrige Performance Excellence Program, 2013, 2013–2014 Criteria for Performance Excellence (Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm).
4. Hendricks, K. and Singhal, V. March, 2000 “The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners” DuPree College of Management, Georgia Institute of Technology
5. Collins, J. and Hansen, M. T., 2011. Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All. Cumulative stock returns, dividends reinvested. Invest $10K on 12/31/1972 and hold until 12/31/2002. © CRSP, Center for Research in Security Prices, Booth School of Business, the University of Chicago.

Three Essential Elements for Successful Change

All organizations face periodic turning points due to sagging profits, aggressive competitors, disruptive technologies, or beckoning markets. Yet, if leaders do not enact changes swiftly, they can watch their enterprises spiral downward.

Change is never easy, and surprisingly, strategy itself is not the problem. According to Fortune, approximately 70% of CEOs who lost their jobs did so not because they had a bad plan, but because they failed to execute. Figuring out what to do is relatively easy, but few organizations are good at the hard stuff—following through. When change is complex and so much hinges on the outcome, CEOs can’t afford missteps.

There are three essential elements to executing successful change (in this order):

1.    The CEO’s total personal commitment. It all starts in the corner office. CEOs must actively participate, delegating tasks but not their ultimate responsibility for success. Larry Bossidy, former CEO of AlliedSignal and co-author of Execution: The Discipline of Getting Things Done says, “The leader has to be engaged personally and deeply in the business… and only the leader can make execution happen, through his or her deep personal involvement in the substance and even the details of execution.” The chief executive must do whatever it takes—make unpopular decisions, terminate non-performing managers, even overcome personal shortcomings—to push forward and get results. Jim Collins, author of Good to Great, says top leaders who successfully transformed their organizations demonstrated a quiet, but “fierce resolve to do whatever was needed to be done.” Without this level of personal commitment on the part of the CEO, few enterprise-wide initiatives stand a chance.

2.    Emotional engagement of the right people in the right numbers. CEOs can’t do it alone. They must build solid coalitions of executives with the right skills, knowledge, and leadership to affect change. John Kotter, a leading expert and author of Leading Change says the first step is to mobilize people by creating a sense of urgency. His secret ingredient? Appeal to emotions rather than logic. People must personally experience a truth, feel it rather than think about it, to want to change. Kotter studied hundreds of initiatives and discovered that the “see-feel-change” progression was far more effective than the usual “analyze-think-change.” By forming the right, emotionally motivated team, the senior leader creates a juggernaut with the capabilities, size, and momentum to overcome obstacles.

3.    A systematic approach. Organizational transformation always involves tackling tough, far-ranging issues. For example, a defense company re-purposing itself to capitalize on growing commercial markets requires a major shift that affects people, systems, and processes in every department. When an organization deals with challenges haphazardly or fails to create early wins, the change initiative quickly loses steam. However, a project replete with good analysis, prioritization, planning, investment, coordination, communication, deployment, and review becomes ripe for success. The real trick is achieving balance; organizations must limit turmoil and remain healthy while in transition. Those adept at execution use strategic management systems to incorporate enterprise-wide initiatives into day-to-day operations, minimizing disruptions and protecting their bottom line throughout. These managers skillfully harmonize their strategic planning, scorecards, product and process improvements, and performance evaluation systems to balance both short-term and long-term objectives.

Worse than a waste of time, change initiatives devoid of these three essential elements can cost companies progress, revenue, and profit. In today’s world, failing to adapt and execute change can quickly put companies in decline. And, as Fortune points out, that makes CEO’s lose their livelihoods.