“Success is a by-product of excellence” – Deepack Chopra
Organizational excellence can be associated with sustained prosperity. If it is possible to evaluate any business against a set of characteristics found in sustainably prosperous organizations, it would be possible to identify areas for improvement for that business.
Such characteristics must comply with the following criteria to be of real value to business executives:
- It must provide a comprehensive view of all aspects of the organizational system; however, a limited number of characteristics will enable usability and endurance.
- It must be easy to evaluate – expressed in simple terms.
- It must be possible to evaluate historical performance trends to identify operational improvement or decline for each characteristic.
- It must be possible to confirm subjective internal evaluations, completed by executives, with the general staff and the public’s perceptions.
Through research and operational optimization experience, I have identified the following four categories to classify the 12 characteristics: Noteworthy Performance and Happy Employees, each with four characteristics; and Managed Resilience and Social Responsibility, each with two.
These characteristics are well known and always used to evaluate company performance.
1. Fulfilled Purpose: An organization’s purpose defines its unique reason for being and should endure its life. Compliance to an esteemed purpose draws customers, inspires employees, and unites organizational choices and activities. According to John D. Rockefeller – “Singleness of purpose is one of the chief essentials for success in life, no matter what may be one’s aim.”
2. Financial Achievement & Independence: Various well-established financial metrics are used to measure an organization’s financial achievement. Examples are ‘Total Shareholder Returns,’ ‘Profitability,’ ‘Working Capital,’ ‘Balanced Debt and Equity,’ and many more. Financial independence refers to the company’s ability to handle operating expenses (cash flow) on a month-to-month basis. It also relates to capital availability for both planned operational change initiatives and emergency funds for adverse economic situations.
3. Continuous Growth: Initially, companies need to grow until sales increase to a point where cash inflow exceeds operating expenses and liability payments requirements. Growth then usually continues until the market is saturated or competitors reduce the addressable market portion, forcing the company into financial decline. In such situations, the company needs to expand its products/service portfolios, enter new markets, or grow inorganically by acquiring their competitors or other companies that may enhance their current business model.
4. Customer Satisfaction: It is imperative to ensure customers’ satisfaction with the company’s products and services. It is much more difficult and expensive to attract new customers than to retain and upsell existing customers. Examples of indicators used to measure customer satisfaction are:
a. Retention Rate Trends – measured as a percentage of the current customer base over a predefined period can indicate the ability to retain customers. It also shows the success of competitors in attacking customers with their offers.
b. Net Promoter Score (NPS) is usually run as a survey asking customers how likely they will refer other customers to use your products/services. The percentage of customers providing a score of 9 or 10 (on a scale of 0-10) are happy or satisfied.
Companies with ‘happy employees’ are sometimes promoted as ‘Best Company to work for.’ However, it may not be an easy achievement as employees are individuals, each with individual goals, skills, experience, values, thinking patterns, personalities, and relationships. These four characteristics, therefore, instead focus on the structures provided for employees to operate within.
5. Role Clarity: Every employee needs to understand and agree with their job responsibilities and related targets. They also need to be familiar with the decision-making principles and boundaries. Finally, it is essential to ensure that employees’ level of responsibility aligns with the level of control expected from them.
6. Collaborative Alignment is achieved primarily by the employee’s association with the corporate values and culture. Other than this, employees need to be kept in the loop with management decisions that may affect their lives. Finally, individuals need to understand how their behavior and performance influence others and, therefore, the organization.
7. Capacity & Support: This characteristic refers to employees having the skills, experience, information, and tools required to work. It is also essential that employees’ workloads are balanced so that they neither have workloads too big to handle nor continuously wait on others’ deliverables. Additionally, management needs to lead and support employees to make them feel ‘safe’ and allow them to be effective collaborators in the organization.
8. Self-Actualization: Employees need to feel they are achieving an inner purpose and that by working for this organization, they are ‘more’ than they would have been as individuals. Therefore, they need to feel valued, respected, and trusted in achieving the company’s goals. They also need to experience performance evaluations as fair and agree that performance rewards align with their achievements. Finally, most individuals appreciate learning opportunities and challenges that make them grow personally and in their careers.
Resilience is defined as the ability to recover swiftly from difficulties. Organizations face two types of difficulties: changes that happen during the normal course of doing business – called evolutionary changes; and those that are more severe and mostly due to events in the external environment – called adverse situations.
9. Accommodate Evolutionary Changes: Organizations are ‘Complex Adaptive Systems’ with many actors (people and technology systems), each with many relationships within its internal and external ecosystems. These actors and their relationships are regularly subjected to both planned and unplanned or evolving changes. For example, evolutionary changes can originate from a manager’s appointment with a new leadership style, from internal restructures, from process optimization initiatives to changes to the technology solutions used. Therefore, the whole organizational system is not static. Also, any change may at any time have unintended impacts affecting the stability of operational performance.
Consequently, it is crucial to review operational effectiveness at regular intervals and to apply corrective actions to re-balance operations. However, most organizations currently don’t pursue operational optimization exercises, hence the consequence that working environments become more complex and unpredictable over time. These conditions will result in performance degradation with financial and customer experience consequences.
10. Prudent Recovery in Adverse Situations: Examples of adverse situations are cyber-attacks threatening the organization’s survival, the introduction of disruptive competitors in the same marketplace, adverse changes in governmental policies or practices, and global pandemics such as COVID. Strategic options for such situations include:
a. Applying focus to ensure operational efficiency,
b. Re-aligning business models (product/service features, distribution channels, charging models) with customers’ requirements,
c. Expanding market share for well-performing portfolios while divesting under-performing portfolios, and
d. The re–evaluation of investments to reduce debt.
Governments and global trends impact how business is conducted, but organizations also impact the environments within which they operate. While organizations primarily exist to make profits for their shareholders, societies are starting to hold organizations accountable to ensure they behave in ethical and responsible ways towards the environments in which they operate.
11. Corporate Social Responsibility: Organizations are required to balance economic growth and the welfare of the society and environment in which they operate. They can achieve this by being:
a. Economically sustainable – the organization should pursue long-term financial achievement rather than short-term profits. Such a strategy would ensure a sustainable economic contribution for the longer term.
b. Legally responsible – organizations should adhere to the laws and regulations of the environments within which they operate.
c. Ethically responsible – they should do what is right, even if not enforced by the letter of the law, to promote self-sufficiency in the environments within which they operate.
12. Enable Circular Economy: Nature maintains ecological balances to sustain ecosystems. Humans (and organizations) mostly dispose of unwanted items, thus creating toxic waste. As an alternative, organizations should consider recycling options for parts or whole items after initial use. They could also rethink the product ownership model, replacing a situation where customers always have to purchase the items with rental and reuse options. Finally, they should consider ways to minimize the use of raw materials – using recyclable energy as an example.
Once a business’ performance has been evaluated against these characteristics, they must identify optimization activities via root cause analysis techniques. A system’s view of its internal ecosystem within its external ecosystem is a prerequisite for such an analysis. This is the only way to understand the full impact of root causes.
The identified optimization activities must then be subjected to a cost/benefit exercise as a precursor for developing a strategic plan and roadmap for the business.