The fast-changing markets of today make it hard for companies that ever reach peak operating levels to maintain it over a long period of time. As demand changes and markets shift, companies that don’t make the needed corresponding shifts can easily find themselves behind the times. Pallet and forest products companies are no exception, with uncontrollable and unpredictable factors such as weather patterns and natural disasters able to drive up supply costs overnight.
According to Scott Keller and Colin Price, authors of the book Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, the answer to this problem is to move beyond focusing on a company’s performance based on quarter-to-quarter, or similar results, to an integrated focus on both performance and health. The authors contend that both performance and health require action today, even though returns on investments in health may not materialize for many years.
Business strategy often discusses how to improve a company’s performance, but attention is seldom focused on improving a company’s health as a way to prepare it to weather changing markets in the long-term. In this book, the authors convincingly argue that focusing on a company’s health is just as important as focusing on business performance, even though both do not have immediately visible benefits, and doing so will enable a company to maintain higher performance levels than a focus on performance alone would. The book describes a structured process that the authors designed to help organizations transform both performance and health in an integrated fashion that goes beyond many typical business planning books.
“In effect, our aim is not to help organizations ‘learn to adjust’ to their current context, or to challenges that lie just ahead, but to help them “learn to learn” so that they will be able to respond flexibly to, and even shape, whatever the future may hold in store,” wrote Keller and Price. This strategy is designed not only to support an organization through a one-time cycle of major change, but to help it increase its capacity to change and keep changing over time.
Keller and Price describe the process in terms of five questions, which they call the Five Frames of Performance and Health. Each frame, or question, is to be applied to both performance and health in an integrated manner where both support and depend on the other. See sidebar #1 to read the five questions that are key to this process.
These frames include setting aspirations, assessing if the company is capable of reaching those goals, determining what needs to be done to reach them, figuring out how to manage the needed changes, and knowing how to continue improving beyond the first set of goals. The book goes into extensive detail on how to process each frame for both performance and health, much more than there is room for here.
The integrative way the frames apply to both performance and health can be understood by looking at the first frame: Aspire. This frame is the dreaming phase, where a company decides what its goals are for the future, as they answer the question, “Where do we want to go?” for both performance and health.
When answering this question about performance, the authors stress that although each company’s goals will and should be unique to its situation, there are three general rules that they suggest all companies follow.
1.) Focus on your medium-term future. They said that this works well because knowing where you want your company to be in two or three years is much nearer and clearer than a long-term vision. “It gives you the immediacy and tangibility you need to inspire stakeholders, set a rapid pace for change, break through resistance, and create an action-oriented attitude right through the whole organization to the front line.”
2.) Balance fact and intuition. The importance of both of these in setting performance goals is stressed in the book. They said that the key is to balance intuition with a full array of facts so that both can hold the other in check. It is suggested that companies obtain a full fact base by asking questions such as:
• What competitive pressures and opportunities do we have?
• How does our performance compare to benchmarks?
• What would happen if we pushed our processes and systems to their limits?
As important as having all these facts is, the authors do not write off the role intuition can play in helping companies avoid bad decisions, advising companies not to go forward with decisions that they do not feel right about.
3.) Set tough but achievable goals. Surveys have shown that programs with tough but achievable goals are more likely to succeed than both those with easy targets and those with seemingly impossible ones. The book says that easy-to-reach goals don’t provide enough incentives. Similarly, setting goals that seem impossible can be discouraging and prevent people from actively trying to reach them.
It is important to set just as clear aspirations for a company’s health as for performance. “When an organization sets aspirations for its health that are as clear and explicit as those for its performance, it significantly increases its chance of achieving a successful transformation,” the authors wrote. As part of setting a company’s health goals, they should look at the elements of organizational health. The book identified nine – direction, leadership, culture and climate, accountability, coordination and control, capabilities, motivation, external orientation, and innovation and learning – each with multiple underlying practices. While it is important to achieve a basic threshold level of health across all of these elements, not all of them need to be emphasized. Rather, what it means for a particular company to be healthy, beyond the basics, depends on what the performance aspirations are. When setting the health goals, the ones that should be emphasized are those that support the performance goals. Out of the three questions that the authors suggest companies ask as they set their health goals, the first one is: “Which practices are most likely to enable me to reach my performance aspirations?”
The reason that they do not give a one-size-fits-all answer for what a company’s health aspirations should be is that performance goals differ from one company to the next. The book gives the example of how what is considered physically healthy differs between professions. For instance, a healthy weight for a body builder is quite different than for a jockey. Or that what is considered a healthy flexibility of joints for a lawyer would not be enough for a ballerina. What is considered healthy varies based on what it is that they hope to achieve. In the same way, healthy practices for a company that wants to double its production volume in two years differ from those for a company whose main goal is being known as the most capable of creating custom pallets for any application. The company that is focused mainly on production levels would need to improve supporting health practices, such as using effective incentives and opportunities, part of the “motivation” health element. A company interested in being known as capable of creating pallets for any application may need to focus on practices such as hiring new workers with the right knowledge and skills while developing those of existing workers, part of the “capabilities” health element.
As you can see from this example, performance and health goals must be made in an integrated way where one supports the other. The other four frames follow a similar in-depth idea of performance and health working together and supporting the other in a similarly unified manner. For example, if a company finds that it is not capable of reaching the goals set in the first frame based on current performance, they then look at the health practices that are preventing them from doing so.
Beyond Performance is a good resource for companies that are interested in taking a serious look at making changes for long-term benefits. It is not a quick fix formula. Rather, it is an in-depth process that takes time to achieve positive transformation. But there is an abundant amount of information in the book that could benefit any business leader or manager.
The Five Frames of Performance and Health
The process described in Beyond Performance is to ask each of the following questions about a company’s performance and health to determine what changes need to be made. They are called frames because change does not usually happen in a linear fashion in real life. Something learned in one stage will often prompt leaders to go back and rethink decisions made in an earlier one.
1. Aspire: Where do we want to go?
2. Assess: How ready are we to go there?
3. Architect: What do we need to do to get there?
4. Act: How do we manage the journey?
5. Advance: How do we keep moving forward?
Top Quotes from Beyond Performance
• “In this hyper-dynamic, hyper-competitive environment, every organization is either going forwards or going backwards – there’s no standing still. Getting better is no longer enough; today, a company must be capable of getting different – of proactively challenging and changing the fundamental assumptions that underlie its business model.”
— Gary Hamel, professor of strategic and
international management and business author
• “Healthy organizations get things done quicker, better, and with more impact than unhealthy ones.”
— Sir William Castell, chairman, Wellcome Trust
• “The ability to manage an organization dynamically so that it can both shape its environment and rapidly adapt to it is becoming the most important source of competitive advantage in the twenty-first century.”
• “Our 2010 survey of companies undergoing transformations revealed that organizations that focused on performance and health simultaneously were nearly twice as successful as those that focused on health alone, and nearly three times as successful as those that focused on performance alone.”
• “What we might think of as the usual suspects – inadequate resources, poor planning, bad ideas, unpredictable external events – turn out to account for less than a third of change program failures. In fact, more than 70% of failures are driven by what we would categorize as poor organizational health, as manifested in such symptoms as negative employee attitudes and unproductive management behavior.”
— Keller and Price, authors of Beyond Performance
