1. ©2009 Right Management Inc. Right Management Inc. is a wholly-owned subsidiary of Manpower Inc.
Driving Organizational Performance In Complex Times
By Mark Kinnich

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DRIVING ORGANIZATIONAL PERFORMANCE IN COMPLEX TIMES
By Mark Kinnich, Sr. VP Consulting Services Midwest Region and Strategy Execution Global
Subject Matter Expert with Right Management
Today’s business discussions revolve around continuingly increased levels of complexity for all organizations. Executing strategy
successfully in this environment is a greater challenge than most business leaders have ever faced.
This article presents a powerful—yet often overlooked—approach for driving performance improvement through leveraging human capital, centering on increasing organizational alignment and
enhancing engagement.
So, how do companies incorporate such change while staying afloat in during uncertain times?
CHALLENGES TO ORGANIZATIONAL PERFORMANCE
Today’s Business Climate
Executing strategy was difficult before and it is getting even harder. In 2007 an MIT Sloan Management Review noted that less than 45% of Board Directors believe that their companies are fully capturing strategic objectives. While this may not be surprising given the complexity of the business environment, it is still not an acceptable level of performance. Most companies formulate strategies, however, according to recent studies, 70-90% of them fail to execute and, when asked to assess their results, only 1 in 3 companies report achieving significant strategic success.
That historical lack of success and capability is being brought into the current
business environment. The degree of difficulty may vary by industry but, according to CFO Magazine (April 2008), “nearly 90 percent [of CEOs surveyed] say the economy will not return to normal growth conditions until late 2009,” and “as a result of this economic uncertainty, 60 percent of CFOs have postponed expansion plans.” Yet, interestingly enough, and to highlight the problem of approaching issues one dimensionally, “eighty-six percent of companies with foreign sales say the declining dollar has helped them by accelerating their business overseas.”
“On average, 95% of the
workforce we studied are
not aware of, or do not
understand, the company
strategy.”
Robert Kaplan and David Norton
(Harvard Business Review, Oct.
2005

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Although credit is an issue for many companies, those with stronger balance sheets will continue to pursue mergers and acquisitions. Even before the current credit crisis (and its associated domino effect), rising fuel costs began impacting
many industry segments across the globe. In fact, some experts are predicting a dampening of globalization and an increase in regionalization due to rising energy costs worldwide.
Global competition, the credit crisis, energy issues, shifts in wealth to oil producing nations, and the current U.S. economy are driving a need for further consolidation — whether that means
mergers and acquisitions or plant closings and other belt-tightening measures. As Charles Darwin noted “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change.” Certainly there is a need for Six Sigma and Lean
initiatives and other valuable methods to drive improvement throughout an organization. While process improvements are impactful, it is equally important to take a holistic view of the organization and ask how organizations can gain
greater leverage from the “people side” of the business.
People & Performance
Various studies have pegged the current average employee engagement level in organizations to a range of 30% to 45% of the workforce. That means an appalling majority of employees are not significantly engaged in their companies and/or their jobs and, as a result, are not fully engaged in driving organizational performance. This also means there are considerable gains to be made. Gains (as indicated by employee engagement research) could include customer satisfaction, operating margin, operating income,
and earnings per share among others. These potential performance gains are in part determined by employee engagement.
Warning Signs:
How does an organization recognize issues of misalignment and lack of engagement?
Symptoms of misalignment include:
 Lack of knowledge of how value is created across the organization and what critical part each function/ business unit plays in creating value.
 Lack of a balanced measurement system that includes leading and lagging measures as well as financial, operating unit performance, talent, and employee engagement measures.
 Inconsistent leadership styles/values/culture throughout the organization.
 Decisions being implemented differently (or not at all) in different parts of the organization.
 Decision making processes that are overly political, slow, or wrong.
 Hesitancy to bring up organizational concerns because of their sensitivity (conflict avoidance) or the opposite tendency to be emotionally abusive.
 Leadership Teams having the same discussion over and over again without coming to resolution, taking action, and solving the problem.
 Inability to talk about all elements of the business (financial, operational, and people) with equal levels of intelligence and insight.

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Understanding the people side of the business performance equation is key to
performance in any time but especially so in difficult times. The often quoted Jack Welsh (former General Electric CEO) was right in noting that “It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it. That’s why you need to take the measure of employee engagement at least once a year through anonymous surveys in which people feel completely safe to speak their minds.”
The leadership challenge of executing on strategy while creating a long-term
sustainable organization is more difficult than ever before. More demands and
conflicting priorities can impact leaders’ effectiveness and it is increasingly evident in employee engagement information.
For example, one mining organization, when the market price for the raw materials it produced more than tripled, changed its strategy from “cost containment” to “volume production at maximum speed.” The ability to drive a new set of behaviors through all levels of leadership and employees was critical. To quickly take advantage of opportunities, the company needed to optimize efforts of the entire workforce. The organization succeeded due to a well-defined specific focus and the ability to engage people in achievement of the strategy.
From a human capital viewpoint, there are multiple perspectives to consider, for example; talent management, employee engagement, leadership, culture,
organization design, productivity, retention, recruiting, etc. Addressing any of these may improve the leverage an organization gets from their workforce, but which one is the right one?
ALIGNMENT = POWER TO ACHIEVE
An underlying factor in performance (whether it is at the team, department, or organization level) is the degree of alignment that exists. Alignment between strategy, structure, leadership, and people practices creates the values (or culture) of the organization, and drives employee engagement, customer satisfaction and, ultimately, organizational performance. Misalignment saps energy from an organization which can show itself in the form of wasted efforts, slower decision making, lack of collaboration, internal competition, or lack of responsiveness internally or to the customer.
“Doing the right thing is
important, which is where strategy comes in. But doing that thing well— execution—is what sets companies apart.”
Jeffrey Pfeffer interview based on his book: What Were They Thinking?: Unconventional Wisdom About Management. (July 13, 2007).

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Alignment is critical to sustainable organizational performance. CEOs are more often replaced for an inability to execute against the stated strategy rather than the strategy itself. Aligning the organization to more fully utilize the workforce is one of the highest leverage areas for improved performance. Alignment is essentially an agreement on the organization’s direction (what we need to do), its operating philosophy/practice (how we intend to do it) and relationships (why it is important).
Through this agreement, aligned organizations unleash the untapped intelligence and energy of the workforce.
Several decades of research have shown
that increased employee engagement drives improved customer loyalty which, in turn, drives improved bottom line results. Employee engagement metrics provide leading indicators of downstream financial performance.
By using systematic approaches for alignment:
 Aligned organizations are more focused
and more nimble. They know where they
can and cannot be flexible.
 Aligned organizations have faster decision
making and correct decisions are made at
multiple levels of the organization. This is
a result of strategic and operational clarity
employees at all levels know how certain
matters should be addressed and address
them readily and consistently across the
organization.
 Aligned organizations have a consistent
environment, tend to hire people who will succeed in that environment, and empower people to act within the strategic framework in alignment with the strategic priorities.
The benefits of alignment add up to increased near and long-term organizational performance. Aligned organizations attract better talent, keep that talent, and are able to capture more of employees’ work-related efforts conducted during discretionary time. Such companies build organizational capability throughout so that, when a key executive or contributor leaves, the organization keeps on winning.
THE POWER OF ALIGNMENT
 Alignment gives you the power to get— and stay—competitive by bringing together previously unconnected parts of your organization into an interrelated, comprehensible system.
 Alignment creates an organizational culture of shared purpose.
 By integrating core business factors, market factors, overall direction, leadership, and culture, alignment gives your organization the power to achieve consistent, defined levels of growth and peak performance.
The Power of Alignment
by George Labovitz & Victor Rosanksy (1997)

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Five Key Questions
Companies have metrics to measure business accomplishments (revenue, margins, productivity, ROCE, RONA, EBITDA, stock price, etc.). Similarly, indicators of alignment point out increased/decreased organizational performance over time.
Using the following five key questions allows an organization to explore its
alignment. Since the focus of this article is strategy execution through leveraging
human capital, this set of questions are people oriented (i.e. not focused on
customer satisfaction or production quality metrics for example).
Question #1: Do employees at all levels understand how the organization (or their
business unit) intends to successfully compete in the marketplace (price, value,
service, innovation, etc.) and how they can contribute to that value proposition?
Question #2: Has leadership established a mission and vision, a consistent set of
values, a leadership and operating philosophy, and a commitment to drive
organization success (vs. functional success)?
Question #3: Is the organization’s value chain (how value is produced for the
customer across functions and business units) well understood (clear roles,
capabilities and process handoffs defined) and managed (metrics to support
continuous improvement)?
Question #4: Do the people practices clearly drive strategic achievement? Are the
people practices aligned with the mission, vision, values, leadership and operating
philosophy of the organization?
Question #5: Do the leaders regularly pay attention to a set of employee metrics
that inform their actions on how to build a more capable organization (metrics such
as level of engagement, talent, retention, ability to acquire talent, internal
promotions, lateral moves, etc.)?
The absence of answers (or inadequate answers) to these key questions helps
identify areas that are hindering (or creating outright barriers) to improved
organizational performance. These five questions provide a starting point for creating higher levels of alignment in an organization. An organization that pays attention to these key questions is more likely to create and sustain a work environment that is highly engaging to employees.

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Organizational Effectiveness Framework
APPROACH TO ALIGNING THE ORGANIZATION
There are many views about how organizations approach strategy execution. One
such viewpoint that has proven successful for Right Management clients is shown in
the graphic below. Effective strategy implementation, as illustrated here, is driven
by how the organization aligns the elements of leadership, structure, and people
processes, creating a culture or work environment that facilitates a high level of
employee commitment to the organization’s goals and customers.
This high level framework
provides a simple way of
defining how alignment is
created. The real depth and
benefit of alignment is achieved
when the details within each of
the key elements are defined
and operationalized in such a
way that consistency is created
throughout the organization.
Consistency is not the enemy of
innovation as some may think.
Consistency of operational
factors allows the creativity and
innovation to flourish where it
should be flourishing (focused
on the customer value
proposition defined by the
organization’s needs and
strategies).
Within each of the alignment
elements in the framework,
there are additional areas
to be explored. The examples
below demonstrate how lack of
alignment in specific
areas can impact organizational performance. While an organization would need to
ensure alignment in all areas, the examples below highlight one specific area for
illustration purposes.
Framework for Driving Organizational Performance

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Organizational Alignment Examples
 Strategy Alignment—In a down economy, a regional trucking company was able to better meet customer needs by providing a seamless distribution network and, by doing so, increase its revenue through strategic alliances. The alliances expanded the company’s geography so they could provide their customers with the same level of service on a much broader scale. The company already had the infrastructure needed to handle this increased demand, so the gain in sales provided good bottom-line margin.
 Leadership Alignment—A business unit identified as the “growth engine” for the whole organization had invested significantly in leadership development. Starting at the top level leaders, all managers participated in a world class development experience. The results showed a significant increase in decision making speed. Leadership capability was enhanced as evidenced by an increased ability to engage employees in the mission, strategy, and goals of the organization. Sixty percent of participants received promotions or additions to their responsibilities, and leaders from this business unit were selected for as succession lists for leadership positions across the organization.
 Structure/Role/Capability Alignment—One organization doubled its sales volume by restructuring the salespersons’ and sales assistants’ role. The restructuring drove increased focus on the key drivers of organizational goals. Previous sales activity was high, but lacked focus on high leverage opportunities. Using data to segment customers and focus marketing and sales efforts, the company first identified where significant gains could be made. By restructuring the salespersons’ and sales assistants’ jobs, existing resources were reallocated more effectively. Sales assistants focused more on one type of customer segment and salespersons concentrated on the higher value customer category. As a result, sales revenue increased dramatically without adding any new sales resources. Additional alignment was created through changes in the incentive plan and the VP of Sales and Marketing received leadership coaching.
 People Practice Alignment—A global organization was growing quickly and didn’t have the leadership talent ready to place in new positions. This lack of bench strength was slowing down the company’s ability to expand into important markets. Given their industry leadership position, the company sought to develop the talent internally vs. hiring from the outside. An analysis revealed three key positions (Branch Manager, Director of Operations, and Project Managers) essential to success as well as identifying the competencies needed to produce results in those positions, and the experience criteria needed for solid competency levels. A three phase development program was initiated to provide leaders in these positions opportunities at job rotation, mentor relationships, and specific core skills training. The combined assessment and development approach reduced the time to develop leaders in these key positions from an average of more than eight years to a three year timeframe.

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 Employee Engagement Alignment—An organization held a major government contract of $500 million which represented about half of the current annual revenue and the future revenue stream for the organization. When the contract budget was cut by 10%, the contractor passed along the project reduction to the provider organization but did not reduce the deliverables or change the schedule. Those 10% cuts were then allocated across the organization. What had been a very challenging program in the minds of the managers and supervisors had become impossible. Middle managers and first line supervisors were dedicated to executing with integrity and quality, but they held no belief that the new budgets could be met. The company introduced a simple incentive plan that rewarded incremental gains from the previous budget towards the new budget. The incentives and public recognition of the improvements gave the middle managers a sense of achievement which, in turn, changed the mindset from one of certain failure to one of possible success. Leaders became more engaged in developing solutions to meet the budget crisis. As a result, several areas of the program exceeded targets and the overall program concluded at a point close to the new budget.
Executive Leadership Team Alignment
The Framework for Driving Organizational Performance has resonated with many
senior executives, enabling dialogue about where their organizations could enhance
alignment and drive improved organizational performance. While the concept
diagram is simple, executives agree that it is more difficult to achieve success than
to describe the process.
The key to improving strategy execution
throughout the organization is employee alignment. Employees respond to a number
of factors in organizational strategy:
 The organization’s strategy and whether
they see it as a winning one. The
leadership team and whether they see
cohesion at that level and have confidence
in the leaders’ competence.
 The management structure and whether it
facilitates efficient, effective work or get in
the way.
 The people practices (pay, incentives,
career development, performance
management, vacation and sick pay
policies, etc.) and whether employees get
what they want in exchange for their
contribution to the organization’s success.
EXECUTIVE PERSPECTIVES
“Our business is very competitive and a key success factor is continual innovation. This requires speed and agility in decision-making and organization-wide implementation. Aligning our executive and expanded leadership team around a clear strategy, values, leadership expectations, and organizational performance has improved our focus around innovation, new product time to market, productivity, and financial performance.”
Mike Whelan, Group Vice President, Beckman Coulter
“We had implemented many initiatives to improve our strategy execution and business performance: Kaizen, Strategic Deployment, Lean processes and others. They were all very helpful but not enough to get us where we needed to be. It isn’t just about defining the ‘what’ but also the ‘how’ and the ‘why’. We have started the journey to develop greater leadership team alignment. Although our journey is just beginning, the value of achieving a highly aligned leadership team is already evident. We are able to discuss sensitive topics affecting our team performance and make the needed adjustments.”
Kim Bassett-Heitzmann, President, Bassett Mechanical

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Alignment must begin with the leadership team. Important considerations include:
how leaders intend to execute strategy through management structure and processes; and how they intend to capture employee contributions to the organization’s goals. It is not possible to have a highly aligned organization without a highly aligned leadership team. Alignment is not something that is “done to” others, but something that is modeled at all levels of the organization.
Highly aligned organizations have a significant competitive advantage. Examples of misalignment are plentiful. For example, the impact of executive misalignment can significantly affect other parts of the organization and shake the very foundation of
an organization. The following are two examples that illustrate the impact of leadership misalignment on the organization.
Examples of Misalignment in Leadership
 In one high tech manufacturing organization,
the leader of a key customer contact area was
using a customer as a conduit of information to
upper management in hopes that the customer
could get the organization to operate differently
(more in line with how that executive wanted). As a result, the customer developed a lack of confidence in the organization that nearly caused the loss of a several hundred million dollar project. While this may seem to be an extreme case of executive misalignment, it is not that unusual or unique. Leaders often have so much confidence in their beliefs, perceptions, and ways of operating, that they personally believe their actions are in the best interest of the organization (i.e. “The organization would work so much better if they just did it my way.”) Occurrences can be seen in the rifts between manufacturing and sales, research & development and manufacturing, or marketing and research & development. These rifts don’t exist in highly performing organizations. That doesn’t mean that at times there isn’t tension between those very different functions, but it does mean that the tension is around how to best achieve an agreed upon direction. It also means that the tension can be resolved so that all parties can focus on execution.
 In another example, some executive team members were “at odds” with each other. There was agreement with the strategy, but not with how the organization could work together to create value for the customer. Leaders were publicly vocal about their personal perspectives of how the organization should operate and the differing perspectives adversely affected the employees’ confidence in leadership, thereby causing difficulties and increased stress working across functions. In this organization’s journey towards greater alignment, the leadership team learned how to productively discuss and reach agreement on vision, executive leadership operating requirements, and the
EXECUTIVE PERSPECTIVES
“Historically, our leadership team has managed
from a strong values-driven perspective. Building on this core focus by gaining executive team alignment on other key dimensions has added richness to leadership discussions on topics such as how we intend to show up as leaders, which strategic objectives create real value, and how our customer value proposition affects our operations. This focus has helped us prioritize initiatives and investments which has, in turn, improved performance. Another plus is that it is more enjoyable to manage the business with a highly committed group of leaders.”
John Kapanke, CEO, ELCA Board of Pensions

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ways in which the organization creates value (across functions). Even though the larger management team was not directly involved, they acknowledged the impact that the leadership team’s improvement had on their work and morale. In addition, the confidence and trust they felt towards the executives dramatically improved.
Leadership team alignment is the first step in creating an organization that
demonstrates excellence in strategy execution. The touch points that are critical for
the leadership team to agree on and execute in concert with each other are:
 Set the mission, vision, values and strategy for the organization.
 Identify the customer value proposition.
 Establish the organization’s design (of which management structure is just one key element).
 Determine how value will be created across the organization.
 Sanction the people practices.
 Create an environment where employee’s can be committed to the organization’s success.
Continuous Process
After ensuring the leadership team is aligned, the company must set about
identifying the other areas most needing to come into greater alignment and begin
work there, progressing to create greater alignment throughout all parts of the
organization.
Alignment is not a static concept but one that needs to be reassessed at key times such as during major investment decisions, acquisitions/mergers, organization redesign, and hiring of key executives, as well as during strategy development. All
organizations experience change and opportunities that naturally create a need for
reassessment, redevelopment, and reconfirmation of alignment.
Alignment can occur through many organizational elements, making it easier for
employees at all levels to perform consistently with the way the Executive Team’s
strategy and, thus increasing the level of energy moving in toward intended
outcomes or results. When creating a new organization, it is imperative to consider
all these elements together to ensure the organization is built in an aligned manner
from the start. When working with an existing organization, it makes sense to
identify which of these areas will provide the greatest leverage to improve strategy
execution and work on the top ones first. An example of one new organization’s
approach is illustrated below:

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 New Organization Alignment Example—A global consumer food products organization decided to centralize its research & development function rather than replicate it in each geographic business unit. The company intended that product development would be more global and wanted to ensure that product investments decisions were being made from a whole-enterprise perspective. An analysis indicated that these changes were needed to stop the stock price slide the organization was experiencing.
Such a significant organizational shift required a new mission, vision and strategy. Values needed to be (re-)confirmed. New business processes were required. A new organization design was developed that would drive strategy achievement and remain linked to unique geographic tastes. Among the many people systems needing to be addressed, the first focus was set on a new set of core competencies, a development process, and a performance management process.
Each organizational element was developed to ensure strong alignment with
strategy and integration with one another. The results of this aligned organization were impressive: new product investments and developments resulted in significant global success and stock price recovery.
SUCCESSFUL STRATEGY EXECUTION
That we are in a challenging business environment is obvious. The drivers that are
most impacting a specific business will be unique to an organization’s market, business environment, and internal capability. The impact of these challenges may show on a company’s financial structure, IT system needs, product development capability, etc. In any case, the impacts will also affect an organization’s employee base…from leadership to the back office…to front-line employees.
Improving the level of alignment in an organization
creates a competitive advantage. Benefits include:
reduced waste in decision making time and increased
speed and effectiveness for creating value throughout the organization. Alignment
also helps capture more of the hearts and minds of all employees. The improved
organizational performance can positively impact revenue, operating margin, and
share price even in these challenging and complex times.
“I believe that the change in Orica’s
culture was the main reason the
company turned around so
successfully, as reflected in the
share price, which rose from $4 to
$20 within three years.”
CEO, Orica Ltd.