By drs. Erik Belt, RC – Rabobank
Introduction comparison High Performance Organization – HPO studies
While studying to become a Register Controller at the Erasmus University of Rotterdam, I evaluated 26 HPO studies of high performance organizations for a report. The goal of this evaluation was to identify ‘robust’ HPO studies that I could use for my practical research. This document describes the results of that evaluation.
In today’s age of extreme competition and increasing demands, managers of modern organizations are expected to excel. The management of organizations is primarily interested in those factors that are important for achieving consistently good results. The HPO studies examined as part of this evaluation focused on the decisive financial and non-financial parameters that allow an organization to perform better in the long term than fellow organizations. The HPO studies were selected based on the following: (a) familiarity, i.e. the number of times the HPO studies have been quoted in other publications and (b) their level of practicality, i.e. a certain amount of practical research must be included. The 26 HPO studies chosen (see reference list) were then evaluated based on seven criteria. The four HPO studies that scored highest were examined in more detail, after which a final selection was made of one of the HPO studies.
The first HPO Studies evaluation
The set-up and execution of the various HPO studies varied considerably. Most researchers made a selection based on financial analyses of organizations that perform well or excellently in a certain sector, and then compared them to competitors that did not perform as well. This comparison was then used to determine distinguishing characteristics. However, if the initial selection was not made carefully due to the use of incorrect information or the wrong criteria, the validity of the rest of the study is questionable. That is why I applied the following selection criteria:
- Representative: Is the study representative? In other words, is the sampling used in the study sufficiently large?
- Statistically sound: Are the final conclusions in the publication sufficiently substantiated by statistical analyses?
- Control group: Were the findings tested with a relevant control group to determine whether the characteristics identified really did make the difference?
- Period: Was the study period sufficiently long enough to drawn conclusions that are not affected by time?
- Relevant: Is the study broad enough that the conclusions are relevant to ‘all’ organizations (profit, non-profit and government)?
- Applicable: Are the findings applicable in practice? In other words, did they result in a set of decisive HPO characteristics? Is a diagnosis model available? And has an implementation method been described?
- Universal: Can the findings be applied universally? In other words, does the study have a global set-up and was the control group internationally representative?
The second HPO Studies evaluation
The first selection resulted in four HPO studies that were then examined in more detail. These HPO studies (from Collins, Holbeche, Light and De Waal) are described briefly below, followed by the final evaluation.
Collins’ book is the result of a five-year study into the underlying variables that cause the transformation from ‘good to great’. In the study, a limited number of organizations are followed (11 of the initial 1435 companies involved in the study, all of which were Fortune 500 companies at some point), who made this switch and maintained the same results for at least fifteen years. Collins compared the remaining organizations to a limited number of comparable companies in order to identify the distinctive factors. The 11 companies all showed a clear transition point from ‘good’ to ‘great’. This transition had to be organization-related and not industry-related for purposes of the study. In a nutshell, Collins’ book deals with the underlying factors of sustainable success that
distinguish organizations from the rest. The following is a brief overview of the most important success factors that he identified.
- Factor 1: Level 5 leadership. According to Collins, the highest attainable level of leadership.
- This concerns leaders that combine a number of unique character traits. In most cases, it turns out that the most successful companies are led by modest, calm and somewhat reserved people. However, they have strong ambitions, primarily with regard to the organization.
- Factor 2: The right people. Even more important than strategy is to attract and retain the right people and to get rid of those who are inadequate.
- Factor 3: Facing the hard facts, but having faith in success. Be aware of possible threats and deal with them.
- Factor 4: Answering the three defining questions: What can we do best? What motivates us most? And what is essential for our economic continuity? This insight is decisive for all decision made by an organization.
- Factor 5: Company discipline. Bureaucracy and hierarchy exist to compensate for incompetence and a lack of discipline. This is actually an extra argument for having the right people. People with a good sense of responsibility and people who can deal with the freedom offered are prerequisites for the necessary creative entrepreneurship within organizations.
- Factor 6: Technological accelerators. Advanced technology has often proven to yield a competitive advantage. But Collins believes that an organization can only excel on the basis of technology if it is truly relevant for the business.
- Factor 7: Perseverance and working on continuous and steady development. To develop from ‘good’ to ‘great’ requires patience and perseverance. The successful companies discussed in the book indicate that their development is evolutionary and not revolutionary. Changes are implemented step by step, while new insights gradually accumulate for further improvements. The organizations focused primarily on their business processes. They were aware that they needed to deal with matters in a fundamentally ‘different’ way.
Holbeche – The High Performance Organization
Holbeche’s book is based on the ‘high performance organization’ model by Roffey Park. This model balances worker needs and expectations with organizational needs. The model is based on various research projects conducted by Roffey since 1996 into the changing work environment. The model focuses on matters that affect the attitudes and behavior of employees, the degree to which they are involved and put their best foot forward. The study also focuses on how organizations and their employees must function to an increasing degree in order to be successful in today’s changing world.
The study uses various other HPO studies, literature and data from the consultancy field. The literature and practical cases are used to support the findings of the model. Holbeche’s most important research conclusion is that the creation of sustainable high performance is primarily a matter of building the right culture. The most important factors of the model are:
- Developing the ability of the organization to change (flexibility, speed and ability to learn).
- Creating a knowledge-rich context for innovation (or how to simulate your business breakthrough and continuous improvement).
- Creating an organization without limitations (maximizing potential synergies).
- Encouraging people to attain sustainable levels of high performance (urging people to ‘voluntarily’ get the best out of themselves).
- Becoming a ‘great place to work’ (ensuring the necessary employee value).
- Becoming a value-based organization (connecting with employees on deeper-lying levels).
The underlying characteristics of the model are:
- Appropriate management and leadership
- Built-in flexibility
- Optimal employee value
- Empowerment and accountability
The book does not provide a diagnosis model or impetus to implement improvement activities; rather, it describes the numerous factors that can contribute to excellent performance, but does not provide insight into the degree to which these factors can be decisive in achieving this. It also does not test the findings in a relevant control group and only limitedly examines the interrelationship between the factors and their degree of applicability within different types of organizations.
Light – The four pillars of high performance
Light’s book is based primarily on research conducted by the RAND (Research and Development) Corporation. The RAND Corporation is a former military think tank that has carried out hundreds of HPO studies since the Second World War into the human dimension of organizational life. It has also carried out considerable research into characteristics that can lead to achieving sustainable outperformance. According to Light, there are a number of simple, research-based points of departure for ensuring that an organization can survive and thrive in an uncertain world. One such organization is called a ‘robust organization’. This type of organization formulates the best plans for a range of possible future scenarios in order to be able to respond to all relevant developments and, as a result, helps shape the future according to its own needs. The theory of the robust organization is based on numerous HPO studies and research conducted by the RAND Corporation at large numbers of organizations. Their statistical insights form the basis for the following vision on what it takes to achieve long-term high performance.
The HPO studies carried out by the RAND Corporation are also designed to use statistical tests to arrive at those factors that determine high performance within organizations. Light submitted these factors to the 126 RAND researchers involved. First, they examined which factors are strongly related to performance (29 factors). Second, they examined the degree to which these factors appear to be of predictive value for high performance compared to the other factors.
The result was 13 factors that appear to have predictive value to a significant degree. After being compared, the following 7 factors turned out to have the strongest predictive value:
Strategy: (1) fine-tuning the mission and (2) measuring results
Internal structure: (3) delegating routine decisions and (4) investing in new ideas
Leadership: (5) promoting open communication
Resources: (6) increasing access to information
Incentives: (7) establishing clear-cut performance incentives
Through the years, RAND studies have yielded a set of central values that Light believes are decisive for excellent performance within organizations:
- Alertness: high-performing organizations remain alert by measuring results, evaluating successful activities or projects, and creating clear expectations with regard to the desired performance.
- Agility: they remain agile by authorizing employees with enough decision-making freedom, reducing barriers between departments, promoting participative management and open communication.
- Adaptiveness: they remain adaptive by conducting regular customer surveys, investing in new ideas and creating strong incentives for performance.
- Alignment: they stay aligned by providing sufficient information to the entire organization and ensuring adequate information technology.
Light’s book did not contain any impetus to implement improvement activities.
To determine the characteristics of high performance, De Waal spent five years studying excellent organizations around the world. The goal was to provide the management of organizations with a focus on the most important aspects. Nearly 300 relevant international studies into high performance were included, carried out over the past 25 years. The results were then tested using surveys among more than 3,000 profit, non-profit and government organizations. This entailed a comprehensive literature study of scientific and non-scientific studies into high performance. The criteria for which studies would be included were:
– The study must be specifically oriented towards finding HPO characteristics or achieving excellent results.
– The scope of the study must yield a relatively representative result for other organizations.
– The study report must describe and justify the research method, research approach and manner of selecting the study population, and provide a clear explanation of the results and conclusions. This was to determine the quality of the study.
– The studies must have taken place over a relevant period of time and be no older than 25 years; otherwise, the results could be out-of-date.
HPO studies that did not meet all criteria was also included if relevant for the further substantiation or further illustration of HPO characteristics. Depending on the degree to which a characteristic was mentioned in the studies, the characteristic, including extent, was included in the final list of 89 characteristics. These 89 characteristics formed the basis for questionnaires distributed during workshops and lectures. With the aid of statistical analysis, characteristics were determined that exhibit a correlation with the performance of the organizations. There appeared to be 35 of these….
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