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Wednesday, October 04, 2006

Organizational Excellence

A new study by strategy consulting firm McKinsey suggests that an organization is much more likely to improve its current performance and underlying health by using a combination of complementary practices rather than any one of them alone.

This research, resulting from the past four years, shows that strong organizational performance is really fueled not by isolated interventions, but by a combination of three or four carefully selected complementary ones—what they call management "practices."

Three main conclusions stand out from their research

  1. Executives should not look to simplistic organizational solutions. When applied in isolation, popular techniques such as management incentives and key performance indicators (KPIs) were strikingly ineffective.
  2. High-performing companies must have a basic competency in all of the available practices.
  3. Managers should concentrate most of their energy on a small number of practices that, introduced together, typically produces the best results.

Which combinations of practices are most effective at creating high levels of near-term organizational performance and longer-term organizational health—meaning the ability to create sustained performance year after year?

Careful selection is crucial because the complementarity among practices (the additional impact they have when applied together) is what creates organizational excellence.

What is this proven combination of practices?

  • Accountability, clear direction setting, and a strong culture as the main foundations of a high-performing company.

BOTTOMLINE: To achieve these outcomes, leaders must:

  • Provide for clear roles within a structure matched to the needs of the business (accountability), articulate a compelling vision of the future (direction), and develop an environment that encourages openness, trust, and challenge (culture).

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