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Establishing and Sustaining a High Performance Culture: Article #2, The Mechanics of How High Performance Cultures Work

In our last article, Establishing and Sustaining a High Performance Culture, we defined what a high performance culture is and described its four key organizational functions. This article is intended to be more pragmatic in that it will outline the mechanics of cultivating a winning culture.

Before we get into the mechanics, lets talk about the real benefits senior leaders realize by focusing on culture. We will look at these benefits through the lens of a real world example – ANZ Bank. The Australia and New Zealand Banking Group Limited, commonly called ANZ, is the third largest bank by market capitalization in Australia and also the largest bank in New Zealand. In 2008, for the second year in a row, ANZ was named the most sustainable bank globally by the Dow Jones Sustainability Index. They attribute their success in the last decade to their focus on culture. In 2003, the bank implemented an initiative they described as a “unique plan of eschewing traditional growth strategies and recasting the culture of the bank to lift efficiency and earnings.” Their results were significant:

  • In two years, the share of employees having the sense that ANZ “lived its values” went from 20 to 80 percent
  • The share seeing “productivity in meetings” went from 61 to 91 percent
  • Revenue per employee increased 89 percent
  • The bank overtook its peers in total returns to shareholders and customer satisfaction

Ten years later, ANZ has sustained its results. Its profit after tax has grown at a cumulative average growth rate of 15 percent, putting it well ahead of its industry. It announced a statutory profit after tax for the half year ended 31 March 2018 of $3.32 billion up 14% and a cash profit on a continuing basis of $3.49 billion up 4% on the prior comparable period.

ANZ Chief Executive Officer Shayne Elliott attributes most, if not all if their success to its corporate culture. In their half year results of 2018 he reported, “We are now benefiting from a more focused organization with sector-leading capital and improving returns. The progress of our multi-year transformation demonstrates we have the right team in place to manage difficult conditions and deliver for our customers and our shareholders.”

Organizational Culture and Leadership

Culture and Leadership

The model illustrated above is the traditional way of viewing how organizational cultures influence the day-to-day environment in which managers and senior leaders operate. It depicts how the collective values, beliefs, norms and customs of the organization determine how decisions are made. Decisions lead to actions. Actions lead to results. The results reinforce the values, beliefs, norms and customs of the culture. In this article, I am going to propose a counter argument regarding organizational cultures that will be a departure from this model. Not only will it challenge the efficacy of the model depicted above, but it may also challenge any predisposition about business cultures you have been educated to adopt. However…after considering its potential value, you will find the proposition at least interesting enough to ponder or test.

We all know how it goes…at the beginning of the fiscal year, senior leaders convene off-site meetings. Along with producing a corporate strategy and a compliment of initiatives, senior leaders often create a set of corporate beliefs and values. They invest a significant amount of thought and time to define and communicate the meaning of these value statements. The hope is that the values will become a code of conduct by which the workforce can operate whenever they are faced with a unique circumstance or an absence of a defined policy. If the workforce operates by the values, they can consider their conduct to be in the company’s interest thereby making them good corporate citizens. This, my friends and colleagues, is a fallacy! Moreover….the posters, speeches and business workshops built around this model not only creates an illusion of corporate culture, but also explains why the expression, “Culture eats strategy for lunch,” is valid.

Organizational Culture: Which comes first the chicken or the egg?

In reality organizational culture resides in how leaders and managers make decisions and take actions. Whether their decision models are used to address corporate politics, problem-solving or improving performance; organizational culture resides in the nature of the decisions leadership makes and actions they take. For example, if leadership values a culture of collaboration but their decisions are made 1. without seeking the pooled knowledge and creativity of a team, or 2. by kicking them upstairs to be made by a select group of senior leaders, then consensus and collaboration are killed in their infancy. If, on the other hand, the senior leaders value managing-by-fact and they use a series of metrics and scorecards to analyze shifts, trends and changes in key performance indicators, then a culture of data-based decision making can thrive.

In conclusion: proposed beliefs, values, norms and customs don’t feed decision and actions. Quite the contrary. The way we make decisions, the decisions we make, the actions we take and the results we achieve, produce and sustain our business cultures.

When TPMG first began training and coaching senior leaders on high performance cultures ten years ago, this theory was met with some skepticism. But….through exhaustive experimentation and analysis, we have found the theory to hold true. We welcome any and all comments.

Whats Next?

Next in this series is The Role of Senior Leadership in Establishing a High Performance Culture.

If you would like the series delivered directly to you, feel free to contact us by clicking here!

Gerald Taylor is the Managing Director of TPMG’s Strategy and Operations Advisory Practice. His expertise includes coaching and advising senior leaders, strategy and performance improvement.

Strategy – The 5 Forces That Shape Strategy

 

Core Competency Analysis

Core Competency Analysis – An Overview

A clear identification and thorough understanding of an organization’s core competencies is central to obtaining a competitive advantage and sustaining performance excellence. Understanding core competencies and using them well….frequently results in marketplace differentiators that deliver greater returns on the capital a firm invests.  In addition, decisions about core competencies are integral to how senior leaders align strategy and translatate executive decision-making into operational management.

What are Core Competencies?

The term “core competencies” refers to an organization’s areas of greatest expertise.  An organization’s core competencies are defined as either those internal capabilities that are essential to fulfilling its mission or those distinctive competencies that provides a firm with competitive advantages in its industry.  Core competencies are challenging for competitors and suppliers imitate.  Absence of a needed core competency can make a company vulnerable to threat in the marketplace.

Core competencies may involve technology expertise, unique service offerings, a marketplace niche, or a particular business acumen (e.g., business acquisitions).  They focus on an organization’s internal capacities and deep proficiency which enable it to deliver unique value to its customers. Core competencies also contribute substantially to the benefits a company’s customers experience. The distinguishing characteristic of organizational core competencies are that they develop overtime and represent the continual accomplishment of a firm’s strategy. 

 

 

Core Competency – An Example, Southwest Airlines

Southwest Airlines enjoys the US Airline industry’s best cost advantage. This advantage is not solely due to its production and efficiencies but also due to many other internal competencies that are distinctive to the company – including the industry’s fastest turnaround time.

Fast Turn Around Time: defined as the time from when a plane lands to when it leaves again. Due, in part, to a variety of factors such as the use of un-congested airports, minimal food service, and early check-in, the company can turn around a plane in less than 30 minutes – compared to the industry average of more than 45 minutes.

Consider the financial impact if this 15 minute advantage –
A carrier with 2,000 flights per day that uses each of its planes for 10 hours per day. The carrier with a 15 minute advantage would save 500 hours per day turning its aircraft. This carrier would need, perhaps, 50 fewer airplanes (500 hours saved/10 hours per day of flying per plane) to offer the same number of Revenue Per Passenger Miles. If each plane costs approximately $50 million, this would translate into a savings of $2.5 billion in assets.

This is an example of how understanding core competencies can allow a company to invest in the strengths that differentiates it in the industry.

To develop core competencies a company must:

  • Determine which internal capacities are key strategic factors for creating and sustaining value.
  • Conduct an organization wide core competency assessment and isolate strengths and weaknesses.
  • Benchmark against other companies with the same capacities to ensure the firm aims to develop the right key factors.
  • Isolate these key factors and hone them into enterprise-wide strengths.
  • Create an organizational road map that sets goals for competence building.
  • Encourage involvement in core competency development across the enterprise.

Core Competency Analysis – Rates of Usage and Satisfaction:

Bain Core Competency

                                                       Source: Bain Management Tools 2011

Since 1993, core competency analysis and management exists as one of the 25 most popular and pertinent management tools. In a recent Bain & Company survey, core competency analysis and management is a management tool consistently used by close to 80% of executives, with an overall satisfaction rating range averaging almost 80%. Decision makers achieve better results by championing this method as part of a realistic strategy rather than just viewing it as a tool to simply achieve a strategic goal.

Analyzing Core Competencies:

Though realizing core competencies has its rewards, what is just as important is the other side of the coin – core in-competencies.  Whereas core competencies can empower an organization to create and sustain value, core in-competencies disable an organization’s ability to achieve its mission. Too often core in-competencies and their related dysfunctions are tolerated or swept under the rug.  They need to be found, rooted out, and replaced by competent and functional methods for managing an organization’s resources.

TPMG’s multiyear research gathered data regarding the most proven methods and best practices in industry. The research has provided a number of key insights. Among them includes the need for an organization to analyze and build core competencies around the following areas:

  1. Leadership Effectiveness: how senior leader’s actions guide and sustain a firm. The insights give attention to how senior leaders communicate with their workforce, measure organizational performance, what performance indicators they regularly review and how their performance review findings are used to drive improvement.
  2. Workforce Capability and Engagement: a firm’s systems for engaging and empowering its workforce with the aim of enabling their employees to contribute effectively to the company mission.
  3. Organizational Systems and Structures: the use of a firm’s work systems, technology, and work process decisions with the aim of creating value for customers and sustaining organizational success.
  4. Operational Performance: how well a company’s core internal functions accomplish their respective strategic objectives. And…how effectively a company’s internal operations contribute to profit objectives along with how efficiently a company’s core operations deliver its value proposition to its customers.
  5. Customer Satisfaction and Relationships: how companies determine customer satisfaction and how they build relationships to retain current business and develop new opportunities.
  6. Innovation: how a firm’s ability to satisfy the voice of the customer based on its current strategy and long-term plans. This insight is directly related to the alignment of new additions of a firm’s product portfolio with corporate business strategy as well as the management of the product life-cycle.

Selected References

  1. TPMG LLC Manual, “The Performance Management Balanced Scorecard, A Practical Guide to Strategic Planning, Strategy Deployment and Performance Management.” TPMG LLC Publications 2010.
  2. Bain & Company, “Management Tools 2011.” Published by Bain & Company Inc. 2011
  3. TPMG Educational Services, “Knowledge Space Research Project” Published by TPMG Educational Services 2008 – 2012.
  4. Harvard Business Review “The Explainer: Finding Your Company’s Core Competencies.” July 2, 2019

For more information regarding Core Competency Analysis & Consulting Services, contact TPMG LLC at  www.helpingmakeithappen.com.

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