What is a High Performance Organisation?

A number of researchers have explored the concept of the High Performance Organisation (HPO). Some of the better known include work by Collins (Good to Great, 2001), Collins & Porras (Built to Last: Successful Habits of Visionary Companies, 1994), Kaplan & Norton (The Balanced Scorecard, 1996), Welch (Jack: What I’ve learned Leading a Great Company and Great People, 2001) and Peters & Waterman (In Search of Excellence: Lessons from America’s Best-run Companies, 1982).

The research in Australia has been less prolific, yet some notable standouts include Rimmer et al. (Reinventing Competitiveness: Achieving Best Practice in Australia, 1996) and more recently Hubbard et al. (The First XI: Winning Organisations in Australia, 2002). Hubbard’s work was conducted around the same time as Collins’s and employed a similar methodology. Hubbard’s team assessed 14 Australian organisations consistently nominated by 199 CEO's and senior managers as the best in terms of a range of performance measures. They settled on 11 that displayed the characteristics typical of a HPO. This research provides one of the best frameworks for understanding high performance in an Australian context across a range of industries.

Kotter & Heskett (1992) explored the relationship between ‘strong culture’ and company financial performance across 12 diverse companies over an 11 year period. They found that high performing companies:

• Increased revenues on average four times the comparison group of 20 other companies (who were described as having a ‘weak culture’)
• The workforce expanded eight times in comparison
• The share price increased 12 times in comparison
• The average profit increased 756 percent versus one percent in comparison

Juechter et al. (1998) identified five conditions that typified high performance cultures and supported the findings of Kotter & Heskett (1992) by highlighting the results achieved by companies meeting these conditions:

• General Electric market value growth over a 10 year period from $12 to $60 billion
• Xerox performance over the period 1983 to 1989 with a ROA rising from 5 to 12.4 percent, revenue increasing from $8.5 to $17.5 billion and market share growing from 8.6 to 16 percent

Watkin & Hubbard (2003) identified organisations with high performance ‘climates’ that displayed measurable characteristics. They found that organisational climate can directly account for up to 30 percent of the variance in key business performance measures.

Most organisational researchers agree that organisational culture, climate or corporate ideology has an indirect effect on organisational performance. Watkin & Hubbard (2003) view climate as the ‘measure of employee’s perceptions of those aspects of their environment that directly impact how well they can do their job’. Kotter & Heskett describe culture as ‘the beliefs, goals and values that guide the behaviour of a firm’s employees’. And Starbuck (1982) defines corporate ideology as ‘the beliefs and values that provide a frame of reference to members of an organization’.

Daniel Goleman (2001) suggests that 50 to 70 percent of climate is accounted for by leadership styles. Goleman’s findings are shared by many who view leadership behaviour, particularly at senior levels, as a key determinant of culture, climate or corporate ideology (Goll, et al., 2001; Chew, et al. 2005 and Watkin & Hubbard, 2003). Daniel Denison (cited in Juechter et al., 1998) conducted longitudinal research over 15 years focusing on more than 1,000 companies of different sizes, sectors, industries, and ages. He consistently proved that culture affects an organisation’s ability to change in ways that support sustainable success.

Hence, most researchers are suggesting that the way to influence the beliefs, goals and values that guide the behaviours of employees is through effective leadership at all levels in an organisation. This in turn influences an organisation’s culture and therefore its performance. A HPO requires the leadership behaviours that support a high performance culture.

Many researchers suggest the following attitudes, conditions, factors or principles contribute to a high performance culture:

In 1998, The Gallup Organization surveyed 55,000 workers in the US and found that four attitudes, taken together, correlated strongly with higher profits (Grant, 1998):

• Workers feel they are given the opportunity to do what they do best every day
• They believe their opinions count
• They sense that their fellow workers are committed to quality
• They have made a direct connection between their work and the company’s mission

Watkin & Hubbard (2003) identified six key climate dimensions that demonstrate the ‘greatest direct effect on individual and work-unit performance’:

• Flexibility
• Responsibility
• Standards
• Rewards
• Clarity
• Team commitment

Watkin & Hubbard found that the positive climate created in a multinational petrochemical firm, comprising 350 managers in three business units, generated greater net operating income when compared to other business units. For this organisation, overall climate correlated 62 percent with net operating income. The business unit with the poorest climate undertook a significant climate change initiative. In fewer than six months it moved from being the worst performing business unit to the best. In another example, the authors reported a 50 percent variance between the lower and higher performing groups amongst top life insurance corporations in America based on climate results.

Atkinson (2004) found that healthy positive cultures displayed:

• A long term perspective
• A focus on tactics to resolve immediate short-term problems
• Behaviours that supported and rewarded cross-organisational working

Atkinson found that when these factors weren’t working well for a company it can cost by failing to actualise at least 20 percent of the operating costs of the business.

Hubbard et al. (2002) described the following as the ‘winning framework’ for organisations in Australia:

• Effective execution
• Perfect alignment
• Adapt rapidly
• Clear fuzzy strategy
• Leadership, not leaders
• Looking out, looking in
• Right people, committed and proud
• Manage the downside
• Balance everything

Hubbard et al. (2002) believe that an organisation which practices these principles over the long term will be ‘well-placed to succeed, whatever its industry and are more likely to recover from setbacks or challenges than new organisations which have never faced adversity or change’. Likewise Kotter & Heskett (1992) suggest that the results take a long time to achieve and rely heavily on the personal impact of the senior leader if the process is to be accelerated. They found that ‘strong cultures’ can act as an obstacle to change and those cultures valuing customers, shareholders and employees ‘equally’ over the longer-term consistently deliver higher performance. This reflects the ‘balance everything’ findings from Hubbard et al. (2002). Watkin & Hubbard (2003), however, did observe that cultural change can be achieved in six months or less under certain conditions. The process for cultural transformation can be accelerated; however, it relies heavily on the role taken by senior leaders (Juechter et al., 1998; Kotter & Heskett, 1992; and Goleman, 2001).

What are the benefits of a high performance culture?

Before one gets exclusively focused on financial measures as an indicator of success, it’s useful to consider what other measures constitute ‘high performance’.

Denison’s definition of performance encompasses:

• Profitability and ROA
• Sales and revenue growth
• Market share
• Product development and innovation
• Quality
• Employee satisfaction

While Hubbard et al. (2002) consider that ‘winning’ (in an Australian context) is not about:

• Vision and mission statements
• Big Hairy Audacious Goals (BHAGs) – a reference to Collins & Porras
• Great breakthrough ideas
• Charismatic or high-profile leaders
• Profits alone
• Formal organisational structure
• Marketing promotion
• High pay levels

Clearly financial performance is important, however, other outcomes are equally critical if one is to avoid the risk of becoming overly short-term focused and/or catering to the interests of minor, yet vocal, stakeholders. Many companies have achieved outstanding short-term financial results, however, these have been unsustainable in the longer-term (e.g. Ansett, One-tel and the Coles Group to name a few).

The relevance of Hubbard’s (2002) research is the key findings that relate to execution, alignment and adapting rapidly to changing conditions. People and dispersed leadership are equally emphasised in the research as is the principle of achieving balance in the process. This includes balancing various stakeholder expectations. Finally, the avoidance of a focus on profits alone, high profile leaders and grand vision statements have gone to support the success of companies like Qantas, Macquarie Bank, and Woolworths which are included among Hubbard’s wining eleven.

How do you develop a HPO?

Atkinson (2004) proposes that ‘culture change is about developing a strong competitive advantage, developing core competencies, and attracting and retaining the best people’. Developing a HPO often necessitates challenging the status quo and transforming the culture of the organisation in the process. Leaders at all levels have a crucial role to play.

Juechter et al. (1998) considered the following conditions to be essential if cultural transformation were to occur:

• A relevant focus
• Driven from the top, but ‘fuelled’ throughout
• Leader’s commitment
• Comprehensive involvement
• External coaches

Developing a HPO requires a focus on the key principles that relate to cultural transformation as highlighted in the research. In summary, critical success factors include:

• Leadership capability – successful organisations focus on getting the right people into the right roles at the right time. Leaders are critical to achieving this and the senior leadership team often sets the tempo and direction for the change agenda. The direct impact of leaders role modeling change-orientated behaviours should not be underestimated.
• Clear mandate for change – successful organisations focus on the long-term objective for achieving high performance whilst balancing short-term gains. Setting and maintaining a direction for change while mobilising stakeholder commitment is a key leadership behaviour.
• Employee commitment – leaders are responsible for ensuring employee alignment with the vision as well as maximising motivation while supporting and encouraging a culture of innovation (e.g. through involvement and appropriate reward and recognition activities). Employees who feel their opinions count are more committed and aligned to the goals of the organisation.
• Team work – innovative ideas and productivity gains are achieved via collaboration within and across various work groups. Effective leaders build high performance teams that function to identify and solve the problems that get in the way of high performance.
• Execution – organisations that are flexible, adaptable and open to both internal and external feedback are able to capitalise on changes in the marketplace. A sound organisational strategy is worthless without effective implementation and alignment with organisational values, beliefs and behaviours.