You may have delivered a record-breaking profit, turned a floundering business around and restored its fortunes, your business may be an employer of choice or a market darling with an unexplainable share price – but there is a level of business performance that out-paces all of these results.
Active Knowledge Question:
In growing your business and striving to lift its performance, what are you actually seeking to achieve? What does outstanding performance really look like?
What Is Business Performance?
Is business performance simply measured by the profit that a business delivers at the end of the year? Are all the other things we speak about (such as customer satisfaction, creativity, supply chain efficiency etc.) just elements that allow a profit to be earned? How simple or complex is the question of performance? Does it vary according to whose eyes the question is being viewed through?
As a business leader if you can’t get a tight handle on what business performance is, well, what hope do you have on delivering on it?
Authors and researchers Ready and Mulally, in their work published in MIT Sloan Management Review, titled, ‘How To Become A Game-Changing Leader’, believe that business leaders must now be able to build companies that are simultaneously purpose-driven, performance-focused, and principles-led.
They believe being performance-driven is essential to success and necessary in response to continuous disruption, rapid technological innovations, and turbulence. Leaders must build agile organisations with resilient employees in order to achieve superior performance.
Ready and Mulally also believe that focusing on results is not enough as employees now demand a set of operating principles characterised by core values such as transparency, trust, inclusion and real-time collaboration. All of which is driven by employees who have become deeply motivated by CSR and a compelling sense of purpose.
In Ready and Mulally’s view:
- Purpose is about engagement with employees to inspire them.
- Principles are about values that employees believe are important to them.
- Performance is about profit.
Put all of this together and you arrive at what the authors see as the essential need for alignment across purpose, performance and principles. They identify tensions that must be reconciled between, for example, purpose and profit, and the need to reconcile conflicting goals.
I believe many business leaders have arrived at the same conclusion as these authors and many businesses are struggling with reconciling the tensions between these elements. A current example of reconciling tensions is Google and their decision to not renew their contract with the Pentagon arising from a ‘rebellion’ by some employees.
However, I believe there exists a simpler and more powerful view of performance.
Performance Is Capability
The simplest analogy I can provide is that of a great athlete. This is someone who excels in their sport and has done so over an enduring period of time. It’s not a single medal or record they’ve achieved but rather a compounding series of outcomes where they have set, broken and set new results that have amazed the world. What they have achieved, no one else has previously done.
What allowed them to do this is the capability that they have developed within themselves. It is a capability that has been built over time through hard work. A relentless focus and continual improvement that lifts their strengths to the forefront in a way that allows them to out-compete everyone else in their field and win time and time again.
Yet their focus was not on winning medals or setting records, their focus was on building the capability that may allow them to do it. There is a significant difference between the two areas of focus.
Switching back to business, the focus is not on the outcome but the capability to deliver that outcome. The focus is not on profit but what it takes to out-compete others, one result of which is profit.
In business, we compete around the value a business is able to deliver to its customers – that value is determined by the customer not by us. The business that can constantly deliver greater customer value will win. The business that has built the capacity to perform continuously at that level will outcompete others in their market.
When you think about performance you think about the capability to compete. That capability is determined by the strength of a business’s competitive engine.
An entirely new level of performance is the strength of a business’s competitive engine. It is how competitively fit your business is.
These traits should be seeded in your business before it is even formed.
Elements Of Performance
The core competitive strength of any business is determined by the following five elements:
- Purpose
- Worthy leadership
- Trust between leaders and employees
- Culture
- Vision
Purpose
Purpose is formed when the business is created and is solely a representation of the quintessential nature of the customer need a business seeks to fulfil. It is the answer to ‘why’ it was created.
Business do not exist to profit, they are made to compete. If they do this well then profit will be one of the outcomes.
This defining purpose is the cornerstone of future growth.
Worthy Leadership
The success of a business rests singularly with its leaders. But these persons must be worthy and that determination lies in their personal character and reflected in their motive for being a leader. It starts with humility and gratitude and grows out from this core.
It is the quality of character that businesses must seek in their leaders. The strengths sought in a leader are:
- Courage: to act and take the risks the business needs to achieve its goals.
- Discipline: to enforce rules within the business in pursuit of the vision.
- Sincerity and humanity: so that everyone in the business knows that you are authentic, committed to the purpose and vision of the business, and that you will support and reward them for their efforts and understand their needs as people.
- Wisdom: to enable you to quickly recognise circumstances in the business environment and lead necessary change expediently.
It must be remembered that when it comes to competitiveness, the key relationship a leader has is with their employees – not their shareholders, bankers, creditors or other stakeholders. Their prime responsibility is to their employees and it is against this relationship that the measures of trust, loyalty and the like are made.
Trust between leaders and employees
In today’s marketplace when we refer to employees, you should be including everyone who works with or within your business. It is likely a wide and diverse community with many different backgrounds, cultures, needs and working relationships.
The first question that you must succinctly answer is: Are your ‘employees’ a cost or the most important source of competitiveness in your business?
The starting point in creating competitiveness through employees is to change the paradigm of what employees represent in your business. Only then can you move forward to building a bond of trust and, thereafter, engagement.
Trust must be the foundation of the relationship you build with your employees. This will activate their ability to contribute effectively to your business.
What does it mean to trust someone? Well, if you trust someone you believe and have faith in that they do and will act with your interests at the forefront. That they will act with honesty and sincerity. They will not put their own personal interests ahead of yours.
Culture
Culture is who your business is, if it were a person. Culture allows you to do some things well and others poorly. Culture is your personality, traits and attitude. It must be crafted to support your purpose as a business and to enable it to compete to its greatest capacity.
The responsibility for culture starts and finishes with leadership.
It starts and finishes with the way they act and the culture they allow to exist. It has nothing to do with the public statements or public policies that are put in place. It has everything to do with their actions and what they allow to occur on their watch. It has everything to do with the people they appoint to leadership positions and the personal character of those people.
The agents that form culture may be found in its history, the world views that are held, motive, what success is, and how that business has come to operate through its systems, processes and design.
Motive is the most dominant of these agents.
Vision
A vision is a clear image of where the business must move to and is fuelled by a conviction that this is the best outcome to be achieved.
Vision is best seen as the ‘quest’ of your business. It is your call for others to join you on this journey.
Purpose and vision go hand-in-hand but fulfil different roles:
- While purpose will tell you why you are here, vision will tell you where you must go.
- Purpose gives you a reason for being, vision gives a reason for moving.
- Purpose connects you with customer need; vision connects with the future of that customer need.
- Purpose is your anchor or cornerstone; vision is your beacon or lighthouse.
One without the other weakens your business.
Focus On Competing
Yet of all these elements, purpose is the cornerstone, and it should be to meet the needs of customers, and nothing else.
Businesses are made and exist to compete. Performance is about your ability to compete. To compete around the value you deliver to your customers. Do this well, better than anyone else, and profit will flow.
An entirely new level of performance is attained by being able to focus on truly competing. Your ability to compete and build this without distraction. Great athletes are not made through distraction, they are made through a single-minded focus. Great businesses are the same.
Your business was formed for a purpose – to meet a customer need. Do this better than anyone else. Make this purpose known and require everyone who works with or within your business to carry that same commitment and absolute focus.
Get this right and success will be there every day, and you will be amazed at what you can achieve.
An entirely new level of performance.
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All the best in the success of your business,
Richard Shrapnel
