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Enhancing Organizational Performance

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Energizing Against Mediocrity in Organizations

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Organizations are companies, producing products and services for sale, but they can also be volunteer fire departments, bridge clubs, reading circles, religious organizations, or schools. Let’s define an organization as any group of people who get together for the accomplishment of shared goals that are better and more easily accomplished together than by any individual alone. And let’s define mediocrity as being average or similar to other organizations. With some rare exceptions, the last thing an organization wants is to have its products or services to be viewed as hum drum, just like anyone else’s.

Imagine you are looking into a room with a divider down the middle. On one side of the divider there are 2000 molecules of oxygen and on the other side there are none. There is a hole in the divider allowing the oxygen molecules from one side of the room to move to the other, if in their random bouncing around they perchance pass through the opening. At the beginning of this thought experiment, when all of the oxygen is on one side of the room, you have a greater degree of order than when some of it begins to diffuse to the other side. How many ways are there (various combinations of molecules) to have all of the oxygen molecules on one side of the room while the other side has none? The answer is that there is only one way to accomplish that. How many ways are there to have one oxygen molecule on one side of the room and the other 1999 on the other? The answer is 2000, because any one of the 2000 molecules could be the one to move the other side of the room. Now, how many ways are there to have 2 oxygen molecules on one side of the room and 1998 on the other? The answer jumps to 1,999,000, because there are that many combinations of any 2 molecules that can theoretically move to the other side of the room.

So if you think of perfection as having all the oxygen molecules on one side of the room, neat and tidy (a state of low entropy), there is only one way to accomplish that, and as you move away from perfection (a higher state of entropy) the number of ways to accomplish oxygen diffusion rises very rapidly, in fact it rises logarithmically. If you think of the eventual end state of this thought experiment, that the oxygen gas will equalize itself across the entire room with 1000 molecules on each side of the divider, the  number of ways to accomplish that jumps to 2 x 10600 (that is the number 20 with 600 zeros after it).  There are a huge number of different pathways than can be taken to reach equilibrium of oxygen distribution within the room.

Across many physical processes, the world we live upon, over time, tends to move from rare conditions, for instance, all the molecules of oxygen on one side of the room, which can be accomplished only one way, to much more common conditions, i.e. the number of ways in which the oxygen can diffuse itself across the room. And we should all count ourselves as very lucky that the world works this way, or you could be walking around in your neighborhood and all of a sudden find yourself in an area lacking in oxygen. Don’t you just hate it when that happens? “Honey, why are you so blue?” “I was out jogging and ran into an area with no oxygen.”

In many respects the results above reflect the probability of one type of event, equilibrium of the oxygen distribution across the room (very likely to happen over time), against the probably of another event, that all of the oxygen would be on one side of the room (not impossible, but very unlikely). While the number of possibilities for the combinations of which molecules will end up on one side of the room or another is huge, the likelihood of any one molecule, over time, ending up on one side of the room or another is 50/50. The difference in difficulty in determining which combination of 1000 molecules will end up on one side of the room vs. the other, compared to predicting the likelihood of any one molecule ending up on one side or the other is not dissimilar to challenges organizations face in creating effective and efficient organizations as they try to maximize current performance while building future organizational potential.

Organizations may start out with somewhat “rare” conditions, a unique combination of people, or new technology, or a hot product, etc. but as they grow and bring in more and more people there will be a natural tendency for the organization to reflect the characteristics of the population external to the organization, as well as being faced with all of the same problems that commonly occur to other organizations. As an example, technologies and products can be copied over time, becoming a dispersed capability available to many organizations, or someone else can achieve the same result with another technology.

This effect will cause an organization to run the risk of becoming quite average or mediocre if they are not constantly injecting new energy into critical processes. As more and more individuals diffuse into the organization, the natural tendency will be for the internal conditions within the organization to reflect, by and large, the external environment from which they came. If they do not, it means that there is some form of systematic bias at work, which can work in the organizations favor or against the organization depending on the type of bias.

And as organizations need to pick and choose in which activities they should invest and spend resources, which will have the most impact on organizational performance, the natural tendency is that they will begin to look more and more like other large organizations, especially as they continue to grow in size. Since organizations tend to operate within similar environments they all tend to have very many similar issues and struggles. In cases like this benchmarking to look like other organizations, even those others most admired, is an attempt to strive for mediocrity.

Think for instance of a selection procedure that is designed to determine whom to hire. Say there is one opening within an organization and 100 people apply for the job. In order to determine which “one” to hire you put the candidates through a rigorous screen. The research on the screen indicates that higher scores on the screen tend to result in hiring people with better job performance. The operative word here is “tend”. Just as you cannot predict for certain which side of the room a particular molecule will end up upon, you cannot predict with absolute certainty which “one” out of the 100 applicants will be the most successful over the long term in the job, or even if the one selected will actually fail. The best that the research can do is to give you better odds at success. That improvement in odds provided by the selection procedure is when you are taking one person at a time, think of the added complexity if you were to try to determine the best person of the 100, to interact with the others already within the organization, and not just against the job. Which combination of 1000 potential employees will result in an optimum solution? The odds of successfully achieving that perfect combination are quite low, but luckily while there may only be one perfect combination there are thousands or perhaps millions of somewhat less than perfect, but very acceptable solutions to be had.

An organization’s ability to improve those odds leading to exceptional performance, depends on how well and how thoughtfully practices and procedures have been put into place that resist the natural tendency to simply become like everyone else, expending the necessary energy to create the rare conditions that makes them exceptional. Beating the odds requires the constant expenditure of organizational and individual energy.

© 2010 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Organizational Resiliency to Time and Change Effects

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The arrow of time in our universe is unidirectional, moving from the past, to the present and forward into the future.  No matter how much we might desire to freeze moments that are precious to us, capturing forever their special meanings, they slip through our fingers as time marches on oblivious, neither slowing, standing still, nor retreating from its own journey. Though we sometimes seem to view ourselves as disconnected observers of time, remembering past and projecting or modifying the future from some place outside of the flow, we live within the time flow and are firmly subject to it.

One thing that is certain, as time moves forward things change. Things change for people as well as for organizations, inexorably. And just like you cannot control the flow of time in which we reside, you cannot slow down, stop or reverse change from happening. But both individuals and organizations can do things that will help them cope with change and to deal with, mitigate and even use its effects to personal and organizational advantage.

One key to dealing with the effects of change is to become more resilient, on an individual level and an organizational level.  How does a child raised in poverty in the Bronx rise to become a Supreme Court judge, or a child from humble roots in Ohio become the Speaker of the House, or a child raised by a teen mom, in an unstable, unpredictable environment, rise to become President of the United States? These were not children of privilege, these were children of resilience. Look at the innumerable children of immigrants, living and growing up in marginal conditions, who over the years became the engines of our economic prosperity, the pillars of our educational institutions, the creative geniuses behind our innovations and technological breakthroughs, or perhaps simply the doctor who saves the life of your child.

Organizations of resilience are seen everywhere we turn, from family farms, to single proprietor craftspeople, to large private sector corporations, to governmental entities, to NGOs and educational institutions. During the course of a year these organizations may be dealing with recession and the resultant drop in business, the next a merger or acquisition perhaps a hostile takeover, the next a disruptive new competitor, the next a disruptive new technology.  Each and every organization out there today will have a continuous stream of challenges that they will need to successfully overcome. And in today’s environment those challenges are coming at them at a faster and more furious pace.  How do these organizations become more rather than less resilient to the forces that will constantly impinge and perhaps even use the constant state-of-change to their advantage?

Resiliency is the notion of positive adaptation when faced with significant adversity or environmental threats. This definition implies that significant threats or severe adversity is present and that the individual or organization positively copes with those threats. The research that has been done on resiliency has shown that being more resilient rather than less leads to more positive outcomes for both individuals and organizations. And it is pretty clear that organizations that partake of certain activities can enhance their resiliency. Cutting across the literature the activities that make organizations more resilient seem to fall within 3 main buckets. The first one is paying attention to and mitigating the effects of the external environmental factors. The second bucket is investing in organizational capabilities and the third is recognition of achievements. Each of these buckets has sub-activities that could be summarized as follows:

Environment

Monitoring: Information collection, environmental monitoring and the appropriate analysis, dissemination and actions surrounding that information (for example, employee, customer and supplier surveys, mystery shopper, competitive benchmarking, technology awareness monitoring, market trends, the gathering and analysis of other business metrics)

Reducing: Minimizing the occurrence of negative chain reactions that can occur from one threat, before they spiral out of control. Compartmentalization of negative events so that they do not affect the entire organization. (for example, by the use of strong internal and external communications networks, strong accountability systems).

Investment

Warding: Investing in a shared vision, a shared operating style, senior leadership, employees, products and services, and quality—the standardization of those products and services as well as organizational procedures. (for example, creating a customer service culture, of a values statement, or a standard of operational excellence)

Transforming: Turning risks into opportunities by developing a culture of innovative and creating organizational capabilities (for example, rewarding innovative ideas and performance that goes above and beyond to solve problems, creating deep bench strength, tapping into the diversity of talent and developing that talent)

Enhancing: Increasing organizational effectiveness and efficacy (for example, cost control, state-of-the-art business processes, contingency planning)

Achievement

Celebrating: Celebrating and rewarding organizational and personal accomplishments (for example, successful completion of organizational and personal goals; installing robust reward and recognition systems)

In reviewing a number of models and then stepping back from any single model of organizational performance, there appear to be six enduring challenges that virtually any organization faces in its pursuit of growth and financial sustainability, in terms of increasing its resiliency or, more generally, Organizational Vitality. These are the challenges that organizations need to become more resilient upon. Three of these challenges can be viewed as internally focused and there can be viewed as externally focused. They are:

Internally

Clear and Compelling Leadership. The overarching mission and direction of the organization needs to be developed and translated through its leaders in order to properly secure and align resources.

Engaged Employees. Organizations need to create an engaging experience to encourage the most from the people who fuel the processes, create the innovation, and deliver for the customers.

Quality Work Processes. Products need to be efficiently created and, along with services, effectively delivered.

Externally

Attractive Offerings. Organizations seek to create value by providing customers—particularly paying customers—with valued and competitive products and services.

Service Orientation. Organizations need to instill a service orientation. No matter what the organization offers, it must be offered in a manner that distinguishes the organization.

Customer as Brand Advocates. Developing brand advocates who are willing to speak highly of your products or service in this interconnected age is critical.

Increasing an organization’s resiliency like any other activity is not a magic bullet that solves each and every problem faced, however the evidence does seem clear that resiliency enhancement can have positive and lasting organizational performance improvement affects.

References:

Saltzman, J.M. & Brooks, S.M. (2010), Strategic Surveying in the Global Marketplace and the Role of Vitality Measures. In Lundby, K. (ed.), Going Global: Practical Applications and Recommendations for HR and OD Professionals in the Global Workplace. Jossey Bass.

© 2010 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

The Moral Worth of a CEO

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There is an old tale, coming out of the middle ages (13th century) that describes the difficulty in understanding or knowing about a concept without a framework that lays the foundation upon which understanding can be based. This story tells of a traveler, a man, who is making a dangerous ocean passage with his infant son. Their ship is wrecked in a severe storm, the man, carrying his infant son are the only survivors. They are washed up on a deserted island. Without any books, drawings or other possessions of consequence, the man and his son still somehow manage to survive. The years go by, with just the two of them on the island, and one day the son turns to his father and asks, “Dad, where did I come from?” The man struggles to convey to his son the concept of a woman and the process of reproduction. The ideas were absolutely meaningless to the son, since he has no concept of woman, never having seen a women or even the image of a woman, and he has no basic frame of reference upon which to base his understanding.

CEO’s have taken a lot of heat over the last few years, whether it is for exorbitant salaries, perks of the office, stock options, or other activity that pad their own wallets, seemingly at the expense of other constituencies who rely on the organization (e.g. investors, employees, customers, suppliers, communities, perhaps the planet itself). They have also taken heat for off-shoring jobs, layoffs/downsizing, lack of job creation, having a short-term orientation, which goes along with a lack of vision, a lack of sensitivity, a willingness to cut on product and process safety issues, and poor skills in general on decision-making. Many of these criticisms are tinged with more than a hint of CEO’s having morality issues, that they are in it for their own personal benefit, rather than for the benefit of those whose interests they are supposed to be looking after.

Whose interest comes first and foremost? Is it the CEO him or herself, employees, investors, customers, suppliers, communities, the general public/society? Are CEO’s supposed to weigh the greater good when making decisions, or should the emphasis be based on the notion of protecting the rights of the individual or a particular group, such as investors, or should they make decisions based on the Aristotelian concept of best fit? Are they forever relegated to a balancing act, compromising and leaving everyone somewhat less than fully satisfied?

What is an appropriate frame of reference upon which we can evaluate a CEO, or any manager within an organization regarding their morality or ethics? And without a framework to build upon, how do we judge the morally correct and incorrect things to do? The different answers that are likely to come from answering the questions posed suggest that evaluating the morality of a CEO is difficult, since there is no commonly agreed to framework to base an understanding upon. What is the right thing to do, what is the wrong thing – well it depends on who you happen to be talking to and their point of view.

We could likely all agree that CEOs should not commit murder or rape for instance, but that is not what we are talking about here. We are after much more subtle morality issues, like when is it ok to layoff or fire people, to renege on a contract, to off-shore jobs, to close a plant, to pay a bribe or do special favors, to pick cheaper product or production options that might increase the likelihood of death or disaster, or perhaps simply the durability of a product, etc.

There are a number of approaches one could take in evaluating morality, and at least three major ones come to mind immediately. First there are the concepts of distributive justice, which attempts to be independent of organizational context. These include the notions of utilitarianism (managing for the greater good), libertarianism (a don’t tread on me kind of approach), meritocratic philosophy (giving everyone an equal starting point, then rewarding performance), and the difference principle (acknowledging that the starting points will never be equal, so provide equal opportunity). Other approaches are imbedded within the context of the organization itself and would include attainment of triple bottom-line goal metrics, which are ratings of organizational performance on people, planet and profit. And there is the adherence to an organizationally defined value system defining what the organization stands for and how it will treat its’ customers, employees, communities, suppliers, the planet etc.

We could start by looking at the stakeholders to which CEO’s have a legal obligation. They have, for instance, a fiduciary responsibility to the owners or shareholders who hired them. They also have statutory obligations and regulations that must be fulfilled. Sometimes there is a contract with the employees of the organization that must be followed. But legal obligations are thoroughly grounded in the mores of our society at one point in time, as legality is a shifty substance, with different interpretations over time and geography. It used to be legal in the USA for instance to dump raw wastes into rivers and streams, even if it was never an environmentally sound practice. And of course there are businesses that have moved some of their operations to third world countries where it is still legal to dispose of such waste, circumventing current USA environmental laws, enabling them to operate in a more profitable fashion. Is that moral? If it is not ok to dump the raw waste in the USA, why is it ok to dump it elsewhere?

From my own research over the years it is very apparent that the interpretation of morality or ethical behavior within a corporation varies by position and level within the organization itself. Blue collar workers are much more likely to classify reductions in benefits, salary freezes, layoffs, and a lack of control over schedule as not ethical. Among professionals the interpretation of ethical or moral behavior tends to revolve around doing what you committed to doing, promises made and not violating agreements and contracts. More senior managers will view it as adhering to legal standards. So adding to the difficulty of determining performance on morality is the various interpretations of moral and amoral behavior even within the same organization with everyone creating their own framework.

Looking at owners or shareholders, customers, employees of various levels, communities’ etc. one might rapidly come to the conclusion that an obligation to one group or subgroup, and maximizing their interests, may not be in the best interests of another group. One can only maximize a group’s benefit at the expense of others, a zero sum game.

As an aside: Those of us who are of the belief that the planet exists simply to provide for humans might argue the point, but the argument could be made that this planet is the bearer of many species, all of whom could theoretically lay claim that they have as much right to exist as humans do, if they could so argue. And so our obligation to the planet is not merely an obligation to diversity of species for the reason that said diversity benefits mankind, or an obligation to preserve the planet for future generations of humans, or that by taking care of our environment we can maintain our population, or create a healthier environment for ourselves and our children. Our obligation to Earth runs much deeper than long-term exploitation for human success. As the species that has made it to the top of the food chain, able to kill or exploit any other species that resides on this planet at will (with the exception of some bacteria, viruses and assorted others), we have an obligation as planetary caretaker to look after the Earth for the planet’s sake itself.  We are not mere residents of this planet. We have the power to shape this planet and with great powers come great responsibilities. Playing this out, just as you now can be charged with crimes against humanity for gross violation of human rights, in the future perhaps you could be charged with crimes against the Earth for the gross violation of planetary standards.

One approach that might be used in evaluating the morality of the CEO includes their adherence to achieving goals on what is known as the triple bottom line (TBL), which has been described as people, planet and profit. The people component is how employees are treated, the planet component is operating the business in a sustainable, environmentally friendly fashion and profit is furthering the value of the organization and the money that is made for the investors and owners of a business. If the organization achieves it goals in each of these three areas, it could be stated that the organization and hence the CEO is operating with high ethics or morality. But of course that depends on exactly what goals are set in each of the areas.

Another approach that some organizations have used revolves around the creation of values statements around how they are going to behave as an organization and how they expect their people to behave. These definitions are usually defined by a senior group within the organization and take shape based upon the individual values systems of the senior management team. An organization’s stated values provide a common definition and understanding of what is morally acceptable behavior and what is not. These value statements provide a framework. Organizations with these frameworks in place, I have found, are better equipped to quickly adapt and address new and challenging conditions that arise, since a common understanding is in place regarding what would be acceptable courses of action, or not, when addressing the challenge.

The bottom line, so to speak, at the moment is that CEO morality is an exceedingly difficult and slippery concept to grab hold of and tends to most often be measured by a “knowing it when I see it” mindset, rather than as a rigorously measured or defined construct, but adding rigor, a common framework to the construct can be of great value to the organization and to those constituents who interact with it.

 

© 2010 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

 

 

Written by Jeffrey M. Saltzman

November 4, 2010 at 9:04 am

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