Here’s the silver bullet you’ve all been waiting for. In the next two newsletter columns, I’m going to give you the “secret sauce” for achieving and sustaining organizational excellence – the answers to all the questions that leaders might have for improving their results. Seriously, I’m going to give you 46 best practices that have been validated to drive high performance in today’s organizations – a list that can help you reflect on your own organization’s performance. And at the end of this two-part article next month, I’m going to give you something else: a gift that will instantly improve your organization…
There are six general things that leading organizations – organizations that are at the top in their industries or markets – do. I think you’ll agree that:
1) High performing, world class organizations focus on their customers (or “stakeholders,” if you prefer). Why is that critical? Customers are the lifeblood of any organization. Consider this:
- 90% of dissatisfied customers will not come back or buy again. (Research Institute of America)
- However, only 4% of dissatisfied customers will bother to complain (so for every one complaint you hear, 24 others go unheard). (ibid)
- But dissatisfied customers tell an average of nine others about their dissatisfaction. (ibid)
- 68% of dissatisfied customers who quit doing business with an organization do so because of company indifference. Essentially, the company didn’t take the time to listen and hear the customer’s need or complaint. (ibid)
- Engaged customers are 68% more likely to increase purchases, than neutral or disengaged customers. (Forrester)
It should come as no surprise that satisfied, engaged customers positively impact the bottom line and promote organizational vitality and sustainability.
So what are some best practices to ensure a focus on customers? Consider these (and reflect on whether your organization is doing them):
- Listen to your customers! Build mechanisms that systematically capture the voice of your customers – methods like social media, focus groups, surveys, one-on-one interviews, complaint data. And then act upon that data to provide products/services that satisfy (or exceed) customer expectations.
- Design customer listening methods so that they vary for different segments of customers and/or across the various stages of their relationship with you. New customers have different needs than those that have been with your organization for awhile.
- Use methods like Quality Function Deployment, forced- or paired-choice analysis, the Kano model, and conjoint analysis to identify, prioritize, analyze, and ensure that customer requirements are incorporated into product/service design and features.
- Listen to former customers, potential customers, and customers of competitors. These represent potential “market” for your organization.
- Manage your complaints – ensure that they are resolved them completely and promptly (which requires customer access points, training, and empowerment), but also aggregate and analyze them to identify systemic issues in your operations.
- Measure customer satisfaction and engagement. Unfortunately, satisfied customers may still defect, so measure their satisfaction AND engagement levels – how committed they are to your organization and its offerings. Characteristics of engaged customers include loyalty, willingness to make an effort to use your services, and their willingness to actively advocate for and recommend your organization. There are many methods to do this (Gallup CE11, Net Promoter Score, and others); pick one, and use the data to make decisions.
- Anticipate key customers requirements and changing expectations – it’s not only about satisfying today’s requirements, but staying one step ahead of competitors in identifying and responding to emerging customer and market needs.
- Build an organizational culture that ensures a consistently positive customer experience. Think Ritz Carlton, Disney. Everything about their system (recruiting, training, employee rewards, etc.) centers on the customers’ experience.
Customer focus is critical to organizational excellence, but you can’t have engaged customers without having engaged employees…
2) High performing, world class organizations focus on their workforce. Why is that critical? In short, engaged employees are assets; disengaged employees are liabilities:
- Highly satisfied groups of employees often exhibit above-average levels of customer loyalty (56%), productivity (50%), employee retention (50%), safety performance (50%), and profitability (33%). (Gallup)
- Companies with engaged employees have 19% higher operating income, 17% higher operating margin, and 28% higher earnings per share. (Towers Perrin)
- Over the last 10 years, Fortune’s “Best Companies to Work For” (perhaps a proxy for engagement) average annual stock return was 18% versus 12% for the S&P 500 – that’s 50% better than the market. (Fortune)
There is a direct link between engaged employees and organizational results. But there is concern, because US workers are not happy:
- Of surveyed executives, 47% believed that employee trust has declined as a result of the way their company has managed the cost reductions the last two years. And while 42% believe their companies are not fully effective at measuring the impact of cost reduction efforts on employee morale, fully 37% – more than a third of US businessesbelieve that their organization’s handling of the economic downtown will make talented employees more likely to leave. (Hewitt & Associates)
- Only 45% of US workers are satisfied with their jobs (so 55% are NOT). Only 51% find their jobs interesting, 43% feel secure in their jobs, and 51% are satisfied with their boss. The result: between 50-70% of US workers are – or will – seek a new job. (Conference Board)
- Only 17% of US workers highly engaged. (Towers Perrin)
Here are some best practices in workforce focus:
- Systematically assess your workforce capability (your ability to accomplish work through the knowledge, skills, abilities, and competencies of your people) and capacity (your ability to ensure sufficient staffing levels to accomplish work processes and meet customer needs).
- Recruit, hire, place, and retain workers, ensuring that they represent the diverse ideas, cultures, and thinking of the community and that they represent – and are consistent with – your organization’s values and culture.
- Manage and organize the workforce in such a way to accomplish the organization’s work, capitalize on core competencies, and address strategic challenges and action plans. This is all about ensuring your organization structure and job design supports your strategy and complements your organizational strengths.
- Manage change with your workforce: prepare the workforce for changing capability and capacity needs, including systematically managing staffing levels (both increasing and decreasing).
- Foster an organizational culture that is characterized by open communication, high performance work, and an engaged workforce. Ensure that your culture benefits from diverse ideas, cultures, and thinking of your workforce.
- Ensure, measure, and improve workforce health, safety, and security.
- Support employees with appropriate policies, services, and benefits, tailored to the needs of different workforce groups.
- Identify the factors that affect workforce engagement, and measure levels of workforce engagement across different employee groups. There are many tools for this (Gallup Q-12, Hewitt, others).
- Develop and train your leaders and your workforce. Development should support your organization’s core competencies, address strategic challenges, and promote the accomplishment of action plans; it should promote organizational improvement and innovation; it should include ethics. Development should be delivered using many media, should be aligned with strategy (rather than “here’s a conference in San Francisco I might like going to”), and systematically evaluated and improved (using the voice of your employees, but also organizational outcomes to determine if there was an impact on results).
- Manage career progression and succession planning throughout the organization.
- Reward and recognize employees through a performance management system that supports customer focus and the achievement of organizational action plans and goals.
Engaged employees lead to engaged customers; engaged employees also promote innovation and process excellence…
3) High performing, world class organizations focus on their processes. Why is that critical? Processes are the way in which organizations design and deliver products (or services, programs) that meet customer needs. Well-designed processes promote efficiency, high productivity, and consistent outcomes; poorly designed (or executed processes) promote inefficiency, waste, and errors:
- The cost of poor quality is estimated to be on average 20% of sales (in terms of repair, rework, scrap, write-offs, warranty claims) for any type of organization – businesses, healthcare, schools, nonprofits. So for a $500 million organization, roughly $100 million is waste. This is only an average: some organizations are worse. (Quality Digest)
- Deming estimated that about 94% of organizational issues (errors, waste, breakdowns) belong to the system (processes), which by the way, are the responsibility of management.
Here are some best practices in process management:
- Design work processes that deliver customer value, profitability or financial return, organizational success, and sustainability. Process requirements should incorporate input from customers, stakeholders, suppliers, and partners as appropriate. Design for Six Sigma (DFSS) and other methods are helpful in ensuring that processes conform to stakeholder requirements.
- Manage processes so that they optimize cycle time, productivity, and cost control; they minimize rework and errors; they promote agility and rapid response to changing needs; and they incorporate new technology and organizational knowledge.
- Measure, manage, and improve work processes so that they achieve better performance, reduce variability, improve outcomes, and stay current with business needs and directions. You can use simple techniques like Plan-Do-Study-Act (PDSA) or more sophisticated tools like ISO, Lean, or Six Sigma. But you should pick a tool(s), train your people on it, create an environment that supports the use of it (including rewards), and stick with it.
- Use problem solving tools throughout your organization so that your people can quickly diagnose and address process failures. The Seven Quality Tools (which include simple tools you’ve all used) and the Japanese A3 method are good places to start. These methods should align (or be embedded) in whatever improvement method you choose.
- Manage innovation in your organization, systematically pursuing strategic opportunities that are deemed intelligent risks.
- Systematically improve EVERY process in your enterprise to keep them current with the changing environment and organizational needs.
- Ensure work process continuity, sustainability, and preparedness for disasters and emergencies.
And processes can only be improved when they are measured, which leads to the fourth factor…
4) High performing, world class organizations measure performance. You cannot manage what you do not understand, and you cannot understand what you do not measure. High performing organizations are data-driven. They rely on facts to make decisions (rather than intuition), and they systematically manage their information, knowledge, and technology.
Here are some best practices in measurement:
- Use data and information to track daily operations and also for tracking overall organizational performance. In other words, seek a balance of leading and lagging indicators that monitor progress toward strategy and also enable the management and improvement of key work systems and processes.
- Occasionally review the data you NO LONGER need, and consider “sunsetting” or discontinuing its collection and use.
- Use comparative data to support decision making and innovation. Why? Comparative data and benchmarks help you determine relative performance – how your organization compares to the average, to upper quartile or decile performers, to best-in-class. It also helps set targets and promotes innovation.
- Systematically review and analyze performance to promote continuous and breakthrough improvement and to promote innovation. This review, analysis, and action should take place throughout your organization (and in some cases, to your supply chain and partners). Frameworks like the Balanced Scorecard (or dashboards) are excellent in helping leaders and employees quickly analyze performance and take action as needed.
- Ensure data accuracy, integrity, reliability, timeliness, security, and confidentiality throughout the organization. Make data available to all parties that need it (workforce, suppliers, partners, customers, etc.) to make decisions.
- Manage organizational knowledge, transferring knowledge within your workforce, between your workforce and suppliers/partners/customers, and from departing employees. Identify, share, transfer, and implement best practices across your organization.
- Ensure hardware and software are reliable, secure, user-friendly, and that information is available during emergencies.
Good organizations need the data to see how they are performing today, but they also need data to help them set a direction for tomorrow…
Next month, I’ll share the final two elements that drive organizational excellence, along with an offer for a free gift to help your organization reach a higher level of excellence. Stay tuned…
Want to participate in a discussion on this topic?? Visit our LinkedIn group and/or post a comment below!
Yours in Performance Excellence,
Brian S. Lassiter
President, Performance Excellence Network (formerly Minnesota Council for Quality)