In business, there can be many barriers to a business achieving the level of performance it is capable of. Most of these barriers are self-made and arise from the way the organisation ‘thinks of performance’. But provide a new framework through which to understand and influence performance, and these barriers will no longer exist.
Active Knowledge Question:
How does your business assess its performance?
So How Did You Perform?
If asked how is your business performing, what would be your immediate, unfiltered, response?
Many business leaders would answer by pulling up their financial data and comparing actual against budgeted results. And if a public company, the impact that result may be having on its share price.
This is a natural response as you are comparing what you were hoping to achieve as an outcome against what was delivered. But it actually tells you very little about your business’s performance.
What you expected/hoped to achieve by way of a profit result is one outcome. It was a forward-looking ‘guestimate’, likely based on history and adjusted for what you thought may or hoped would happen.
You could say that it was more than just a ‘guestimate’; it was a target that the business was geared and resourced to achieve. But should the result have been much better? Or could it have possibly been much worse given the events that occurred?
Looking to financial results as a measure of performance does little to inform you as to how well a business actually performed and how that may be improved.
There is, of course, balanced scorecards in all their various forms, that seek to unpack financial performance objectives across a range of influencing factors and build relationships between them and the financial outcome sought. Again, I am not sure how well monitoring results geared toward a financial result actually deliver improved performance.
Much of what we think about when considering performance is backwards-looking and looking from the outside-in. And by that, I mean, looking from the expectation of what one hoped to achieve and trying to see the reasons why it was not achieved. Looking from the outside-in tends to be mechanical and mathematical – we didn’t get these sales, the costs blew out, we didn’t get this project delivered on time etc.
What is Performance?
When I think of performance, I think about how I competed on the day, and in business that is every day across all parts of the business. Did I bring the best l can offer to the forefront and if I did, was the result to outcompete all competitors?
Businesses are, in reality, no more than the sum of all those who work within and with them. It does not matter what tangible or intangible assets a business may own; without human interaction, they will go nowhere.
Given the presence and essential nature of people within a business, the performance of any business will come down to the quality of the interaction that is built between people, including leadership, who work within and with a business.
How is your business’s performance? The answer lies in how competitive it is. And that competitiveness will determine its profitability.
In today’s competitive marketplace, when you think about your business’s ability to compete, you should be thinking in terms of agility, responsiveness, forethought – fighting to win. Win not just today but tomorrow. To leave your competitors in the dust behind you, with them wondering how you are managing to achieve what you achieve.
If you were to think of a great athlete, you would likely think of someone who has outperformed all others and set new records, year after year for an enduring period. Someone who everyone looks to and admires in their ability to compete against all others, and importantly themselves. They did not achieve this by chasing medals or prize money even though they are the apparent outcomes which many look at from the outside-in.
To understand how someone becomes a great athlete and achieves outstanding performance, you must look from the inside-out.
When striving to achieve optimal performance in your business, I believe understanding the concept of perfect health will assist. Note, I used the language of optimal performance to counter the belief that performance is about going as hard as you can day after day. That approach typically produces some results for a short period of time and then falls apart.
Perfect health is more of a traditional eastern philosophy than a contemporary western one. The object of perfect health is quite simply not to become ill. To recognise imbalances in your body and correct them before they give rise to illness.
To achieve perfect health, you must look from the inside-out. You must understand the dynamics within your body and how it responds to its outside environment, and with this understanding, correct any elements that will likely give rise to imbalances and if not addressed will then evolve into disease.
To look from the outside-in is to wait for the disease to manifest itself and become obvious from the outside. It’s a bit late then in my view, even though a cure may be readily at hand.
Why this analogy? If you think of and view business performance in terms of the results it produces, then you are looking from the outside-in. You are waiting for ‘disease’ to manifest itself and impact the health of the business before you respond. You are waiting for the declining profit result before you act.
Applying perfect health to business performance means you are looking at the elements that influence and produce performance and seeking to detect any imbalances before they manifest themselves.
And when elements that may lead to an imbalance are detected, you remedy them before performance is impacted.
Through the lens of perfect health, you are seeking to achieve optimal performance every day. And with that approach, you are maximising the profit outcome as well. Your focus is on the real catalysts of profit and not on the sums that calculate profit.
There is a range of agents that exist in any business that significantly and directly influence and impact the performance of its people and, therefore, its competitiveness. Recall the fundamental premise that the core competitive strength of any business is the combined talent and effort of all those who work within and with it.
These agents exist and operate with or without leadership’s influence. In fact, the way the leadership act is one of those agents.
These agents represent the elements of the competitive engine and set the floor and ceiling to the success of your business. They determine more than anything else in your business, its performance, success and future prosperity. Given they operate with or without your influence, it is better that you seek to understand them and influence their impact on your business.
From the above diagram, you will recognise the title of most of these elements but what is important is to understand their ‘right character’ and influence. Recognising is one thing but understanding and being able to correctly influence them is an entirely different skill set.
Business performance must always be viewed from the inside-out, and through this lens, you will be able to see those subtle, and sometimes not so subtle, elements that are forming barriers to performance, and then correct them before results in the marketplace are impacted.
How is your business performing? We are competitively fit, getting stronger every day and winning in our marketplace. And of course, with that, profits are great.
An entirely new level of performance.
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All the best in the success of your business,