Organization and Management

What Drives Effectiveness?

1 Oct 2018  

The name Drucker always gets my attention. Peter “the Great” Drucker wrote the only book (Management:  Tasks, Responsibilities, Practices) that I can honestly say changed the course of my life. After reading it I switched from pre-medical studies to management, and the rest is my personal history. When I read things now that Drucker wrote decades ago, I often find them so timeless that they could have been written yesterday.

There is an organization (The Drucker Institute) dedicated to nourishing and spreading the many valuable lessons of Drucker. A study they published recently got my attention, not just for the Drucker name, but because it illuminates what I have observed in working with my own clients.

The TDI Corporate Effectiveness Index

TDI (I’ll call them here) has a gauge of corporate effectiveness on which they annually rate nearly 700 large public companies. The results are published in conjunction with the Wall Street Journal, whose August 13, 2018 issue is the genesis of this post and the source of the chart below.

The TDI index captures 37 variables within the five factors that Drucker is said to have considered mission-critical: customer satisfaction, employee engagement and development, innovation, social responsibility, and financial strength. “Effectiveness” is defined as “doing the right things well,” an elegant definition that I find, well, effective.

The greatest thing is that they were able to calculate the index for 2017, then generate an equivalent index for 2012, and finally compare the change over the intervening five-year period. Their overarching research question: What drives enterprise effectiveness?

Some companies increased their overall effectiveness during that period, some decreased it. The Drucker analysts then deconstructed these results to determine how heavily each of the five factors weighed in driving the overall results.  They did this by comparing the factor results for the 50 companies with the greatest effectiveness increases to those of the 50 with the greatest decreases.

It’s PEOPLE!

A_Company’s_Performance_Depends_First_of_All_on_Its_People_-_WSJAs you see in the Journal graphic at right, the single factor with the greatest “leverage” on both the upside and the downside was the same: employee engagement and development. The article’s headline captures it nicely: “The Key Factor Driving a Company’s Results: Its People.”

This makes intuitive sense when you think about it. Payroll is a huge item in most organizations’ cash flow, and in many is the single largest expense item. If “human assets” are performing well, the enterprise does well. If they are not, enterprise effectiveness is compromised, and operating results suffer.

But “what makes Sammy run?” Before starting my business career, I worked for four years as a research psychologist — and I can report that human motivation, as important as it is generally agreed to be, is far from wholly understood. This causes some business types to veer away from these “soft and wet” human issues toward metrics and abstract models — usually, at their peril.

Purpose

When I work with clients in identifying how the KVC can help them, I usually equate Enterprise Value at its highest levels with the Purpose and Mission of the enterprise. Why are we here? What is our role in the universe? Where and how do we contribute? Where do we fit in the ecosystem surrounding us?

EPMOf course everyone in the enterprise, even those at the highest levels, has their day-to-day tasks to accomplish and their goals to achieve. But in my experience, the connection between these tasks and goals, on the one hand, and the “why” of the enterprise, on the other, is sometimes indirect, unclear — or missing altogether. And this can easily lead to all kinds of problems: lack of engagement, low morale, high turnover, low productivity — to name a but few. I’ve seen this have direct bottom-line impact, for example in the form of increases in overtime pay from under-motivated employees.

When, on the other hand, Enterprise Purpose and Mission align with and drive Individual Purpose and Mission, which then drive Individual Tasks and Goals, as in the diagram at left, it’s an effective enterprise — and a beautiful thing.

The engagement wave

Younger millennial workers are said to be significantly more attuned to their purpose in life and work than are my own boomer peers. Consequently, as the latter age out of the workforce, we are seeing a sea change in the importance of employee engagement — and what a welcome change that is! So it is all the more urgent that we learn to manage engagement better.

One simple but effective way to do this is to make the overall Enterprise Purpose and Mission (EPM) ubiquitous and impossible to ignore. By this I mean more than the mission and vision statements that too often are overlooked day-to-day.

Making mission manifest

One very successful organization I worked with recently has their six-word mission engraved in large letters on the wall behind their entrance, along with their logo. You can’t fail to notice it on your way in each morning. This was inspiring for me, sparking my engagement even as a guest of the firm.

Aaron Hurst, in his book The Purpose Economy, explains how people can be motivated by thinking of their jobs’ higher purpose. Hospital orderlies who empty patients’ bedpans, Hurst points out, can be led to re-envision their work as helping people be physically comfortable — and ultimately, as saving lives.

A graphic example, to be sure — but I’ll bet you won’t forget it! I’m informed by social psychologist Dr. Lura Forcum of Clemson University that this is formally called Action Identification Theory. Whatever name you give it, this is indeed a powerful tool for driving greater value from the top.

Marketers often speak to enterprise purpose instinctively when they follow the old maxim of “selling into the benefits.”  WeWork, for example, promises to deliver its users relationship building, a community experience, and increases in productivity and collaboration — rather than short-term office rentals, which is what they actually sell.


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