Organizations can function and find success in their industry even without becoming the best in class. However, being best in class is often the goal of many a business owner embarking into providing a particular service or launching their first product into the market. Without ambition to eventually be the best or at least very close to the top, keeping up the drive to persevere through obstacles can be hard. Of course, one of the main aspects that determine whether an organization will be at the top of their sector is organizational performance.
Why does organizational performance matter for becoming best in class, and how do we even begin to understand the complexity of the factors that affect it? At Effective Managers, we’ve developed a proprietary approach to help organizations create a culture of accountability that improves performance and drives better results. To accomplish this, we first understand the key elements necessary for organizational performance.
The Analogy of the Tree
As a complex system, an organization has many similarities with a tree. They share traits such as resilience, and the ability to thrive under challenging conditions. Consider all the organizations that perform superbly despite having a problematic business model, much like trees that can grow on cliffs and rock.
However, there’s the other side. Some trees should be able to thrive but are dying instead. In the same way, sometimes organizations seem like they have a good market position and a lot of potential for growth, but they’re unable to succeed.
Structural Elements of an Organization
At the foundation level of an organization, we have its business model, corresponding to what bedrock would be for a tree. A business model of an organization contains its fundamental ideas and processes. It should answer several questions about the mission of the organization, its products or services, intended target market and other necessary information.
Then there’s the topsoil — the strategy of the organization. It is interactive with the bedrock or business model, and provides the primary support to the whole structure by defining ways in which an organization can reach its intended market and ensure that they’re setting themselves up for success. In the same way, bedrock provides stability and fertile soil ensures that a tree will be able to grow tall and strong.
In this analogy, the roots of a tree would correspond to the organization design. Once the strategy and business model are in place, organization leaders need to think about how they’re going to perform their work. There are a few critical questions to ask and answer here, most notably about the number of layers required for the complexity of planned work, the alignment of functions, whether the organization will be centralized or not, and so on.
People In the Organization
The second component of the organization is its people. In the tree analogy, they would be the trunk of the tree, providing strength, protection, health, and ensuring that the outcomes are the best that they can be. There are three key aspects to mention here:
- The accountability and authority model — extremely important to an organization as it provides the language on how to work together and collaborate. Just as the bark protects and surrounds the trunk of the tree, the accountability and authority model surrounds and contains how work is done.
- Managerial leadership — the central element that determines the strength of the organization. This is like the sap wood of the tree – it provides life to the tree just as managerial leadership drives all of the activity in an organization.
- Managerial capability — ensuring that the managers that are appointed to their position have the necessary skills to manage the organization.This is the heartwood of the tree – it provides the strength of the tree. In the organization, having capable managers in the managerial positions creates the strength of the organization.
Outcomes of the Organization
The crown of the tree is the outcome of its growth, provided by a fertile foundation and firm support.
- The organization’s culture corresponds to the branches and limbs of the tree. Like an organization’s culture, it is difficult to change them, but the can be pruned and shaped over time, just as culture can be adapted for changing circumstances.
- The foliage represents performance. Bright green leaves represent a healthy tree that is well nurtured and successful. Yellowing or falling leaves indicate poor nutrition or a dormant state.
- In the same analogy, any fruits that the tree bears represent the profits of the organization. If all of the elements of the tree perform well, there will be abundant fruit, just as a successful organization yields a healthy profit (or other forms of outcomes in non-profit or governmental organizations).
If we look at the organization’s culture, performance and profits, we see that they largely depend on the organization’s managerial leadership: an accountability and authority model that defines how we manage and how we collaborate, managers doing their managerial leadership work, and qualified managers in role.
Consequences of Not Getting It Right
All three components of an organization have to be set up right to avoid some of the common consequences that plague unsuccessful organizations. However, perhaps the most crucial thing is ensuring good managerial leadership. If it’s lacking, the organization may show some of these symptoms that negatively affect performance:
- Too many meetings
- Duplicated work
- Poor communication
- Poor collaboration
- Silos in the organization
- Decisions not made
- Work not done
- Lost opportunities
And in the extreme case of organizations also failing to come up with good organization design, these problems could get even worse. Over time, this leads to a situation where the organization is continuing to fail, and experiencing inefficiency, reduced margins, failed systems, losses, broken processes, more accidents, higher risks, and lower quality.
Importance of Managerial Leadership
Good managerial leadership is crucial for the organization’s success. It’s the link between strategy and execution. If you want your plan to be executed well, the managers need to be doing their work to provide context and delegate work to the employees. They also must gather information and offer it to the organization’s leadership, so that they could make strategic decisions in full knowledge of the organization’s ability to implement.
It is possible to have a reasonably good performance despite being plagued by common organizational performance issues. Even though most organizations can succeed in spite of managerial leadership gaps, it’s important to ask whether they can still be the best in their sector.
That kind of success becomes much more unlikely without proper managerial leadership. And since that’s the case, wouldn’t it be a lost opportunity not to do everything you can to ensure that your organization has all of the three main components right? After all, if your performance is already good, but you still recognize your organization in some of the above symptoms, how much more successful could you be?
Ensuring High Organizational Performance
If you want to know the answer to that question, you might want to assess your current managerial leadership and other critical aspects of organizational performance. Here at Effective Managers, we’ve developed the The Effective Organization Program, which can help you and your organization be even more successful.
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