All leaders want to be part of a top-performing company. All employees do, too. Even partners and customers seek out businesses that are at the top of their game. It’s natural to want to spend your working hours engaged with dynamic organizations that flourish rather than struggling ones that flounder.
Top-performing companies prepare for and manage change, and what they do to ensure they are able to execute plans and strategies effectively reveals some interesting similarities and differences between the most and least successful companies. Companies in both categories can point to visions that employees believe are clear and strategies that are perceived to be realistic. And employees at both kinds of companies can be engaged, understand that the “customer is king” and have the skills required to do their jobs. But top-performing companies are also characterized by cultures that are flexible, adaptive, participative and innovative — and they foster these cultural attributes through leader behavior and organizational structure and systems.
If you’re a leader, you need to ensure that you’re comfortable in those four areas. If you’re a CEO, make sure all your leaders, especially in the technology department, meet the following criteria as well:
1 Get Comfortable With Managing Paradoxes: Leaders in top-performing companies are better at finding the right balance between what appear to be mutually exclusive outcomes: achieving short- and long-term goals, establishing control and providing autonomy, ensuring stability and managing change, and keeping costs low and quality high while growing the business. They are also better able to manage the sometimes contradictory needs of customers, employees, and stockholders and owners.
2 Understand (and Use) the Five Magic Keys to Managing Change: Leaders must be forthright, model the right behaviors, set realistic objectives, provide the right resources to do the job and be enthusiastic about the new course you’ve set.
• Be forthright about change and its impact. Employees appreciate open and honest communication from leaders, even when they don’t have all the answers or can’t make change easier. People want leaders to be accessible and to engage in “change talk.” What is change talk? It’s an open discussion of the pros and cons of making a change or maintaining the status quo, and of the behaviors required to support change and boost people’s confidence in their ability to transition successfully to a new way of doing things.
• Model behaviors that support change. It is not enough to just say the right thing or even enthusiastically communicate the benefits and the business case for a change. Employees want to see those words backed up with behavior. That is how they judge how effectively someone is leading and managing change.
• Set realistic objectives and milestones. As employees reach realistic goals and milestones, they become more positive about a change and will see its benefits. Targeting unattainable goals will frustrate and demoralize employees during the first few critical months, and the time and energy you’ve spent preparing for the change will have been wasted.
• Don’t underestimate the resources required. Overcommitting resources or underestimating what it takes to accomplish objectives is a primary cause of change initiatives failing to meet their intended outcomes. Keep in mind that your employees have commitments to annual performance goals in addition to the work they need to do to make the change a success.
• Maintain enthusiasm and excitement among your employees. Typically during the first month of a change, managers will meet with employees to get their support. After that, managers often return to their day-to-day jobs, and employees can lose focus. Leaders need to model behavior that supports the change for the duration of an initiative, not just at the kickoff.
3Involve Team Members in Decisions That Affect Them: Participative leadership matters. In 2006, the NBA introduced a new basketball and never asked the players for input during its development. As a result, the players refused to use a new ball they felt was difficult to handle. Involving the players early on would have increased the quality of the ball and its acceptance.
4Lead by Example: Leaders in top-performing companies understand that people will not trust or follow them if they are not willing to live by the same values and support the same priorities they require of others. Take, for example, two contrasting approaches to the leadership-by-example factor. Donald Carty, former president of American Airlines who offered gigantic “stay bonuses” to senior executives after asking employees to take significant pay and benefits cuts, and Carlos Ghosn, CEO of Nissan, who, when he took over the floundering company in 1999, pledged to step down if Nissan failed to show a profit in 2000. Carty lost credibility and had to step down; Ghosn is celebrated as a turnaround artist.
The bottom line? Being a top-performing company is a rigorous challenge — one not for the faint of heart. Becoming a top performer requires constant attention to differentiating factors and a willingness to review and continuously improve products, services and the business model itself. The alternative is settling for mediocrity, and in a global economy mediocrity is the kiss of death. After you claw your way to the head of the pack, and after you realize how much fun you and your employees are having, you’ll be glad you didn’t settle.
Having the best leaders in the world won’t matter if your organization isn’t set up to let them unleash their skills. Here are some goals to shoot for:
1) Strike a proper balance of centralized and decentralized responsibility, and ensure that people at all levels have the freedom to take action to achieve results. This improves responsiveness and allows issues to be managed where they happen.
When Mark Hurd took over as CEO of Hewlett-Packard, he understood that the key to success was to make the Compaq acquisition work. He did that by reorganizing the company into three divisions, with each division having its own sales force, and making the heads of the divisions responsible for sales. He also reorganized the information technology function. He centralized 85 data centers into three. Essentially, he decentralized the sales force and centralized the IT function of the company — the opposite of the way the company had been organized — creating a structure better aligned with the business strategy. One measure of HP’s success is that operating profit increased by 31 percent during 2006.
2) Excel at coordinating decisions and actions across organizational boundaries. In 2006, Ford demonstrated how difficult this can be. When the company decided to update the Ford Focus, the North American operation wanted to refresh the existing model, while the European operation wanted to develop a new model. The two groups couldn’t come to an agreement, so they each did what they wanted to do. As a result, Ford couldn’t share parts or take advantage of economies of scale, and it cost the company money.
3) Ensure that systems are aligned with strategic initiatives. For example, if your strategy calls for innovation, does the organization have systems in place to facilitate organizational learning and creative thinking? To encourage innovation, a company needs a mechanism to screen and fund ideas.