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Organisational development

One of the consistent challenges that we face is an understandable pressure from clients in organisations large and small for certainty over their return on investment in people issues. This is easy for us to respond to in generalist work – managing risk and delivering savings are easy to see – but in Organisational Development, those projects concerned with the qualities, attributes and actions today which help sustain performance tomorrow – there is a lack of definite outcomes on business performance which cause frustration all round. Some of this is because we are looking in the wrong places for the measures of success (see ‘For the pattern is new in every moment’ available on the West website), but we were fortunate last month to hear the views of Colin Price, Head of Organisation Development Consulting at McKinsey and someone who has worked with leading global companies for more than twenty years and to be able to compare his experiences with our own.

The challenge of sustainable performance

Anyone concerned with outcomes has got to be worried by a lack of reliability in predicting the future performance of businesses. All managers writing next year’s budget know that everything is subject to change and some of the success of small organisations lies in their more rapid ability to respond to unforeseen changes when they come up. In large organisations we have seen big studies (Peters and Waterman’s ‘In Search of Excellence’ and Jim Collins’ ‘Built to Last’) aimed at nailing the practices which would determine long-term success, but a look at the organisations that they have studied shows that they are, in general, no more likely to succeed in the long run than anyone else.

Colin Price’s analysis supports our own experience in demonstrating that there is no relationship between current financial performance and that in the future. For every stock market darling in the big studies, we can point to twenty smaller businesses where a strong profit in one year was followed by a (sometimes fatal) crash, often some years later. It seems that a strong current financial performance can be delivered at the expense of those projects which would make future performance even better – a finding consistent with one of the definitions of management as being about delivering today’s bottom line whilst at the same time making tomorrow’s easier to achieve.

In Colin’s findings, and in our own, this is not solely attributable to a lack of ‘best practice’ initiatives in the firm. We have seen plenty of organisations with values statements and Investors in People Status adopting a ‘check list’ approach to people practices without delivering the engaged and motivated workforce that will drive the future of the business. On a larger scale, a current investment in outsourcing, supply chain management and lean operations can inadvertently serve to reduce the future resilience of the business; an investment in ‘talent management’ (the current consultancy-led trend) without placing good people in good environments and a ‘me too’ approach to leading people practices may only serve to reduce the uniqueness that made the organisation what it was in the first place. There seems to be no universal recipe for long-term success no matter how hard we or many others have looked.

Organisational Health

Colin’s answer, based on some impressive data and considerable brain power, is the concept of organisational health. Put simply, this identifies five characteristics of healthy companies as follows:

Each of these characteristics drill down to a number of defined areas such as leadership, motivation, accountability and coordination and control – so far, so predictable, since there is nothing in this list of desirable practices which would surprise any reader of In Search of Excellence or Built to Last. What is distinctive about the McKinsey work, however, is the observation that there are a suite of exceptional practices where the highest correlation is found between current business success and future development. To this list of exceptional practices is added the finding that some practices have a time and place in their ability to deliver return on investment to the organisation. For instance, concentration on values and the organisational environment will only produce a worthwhile return for organisations who are already performing above average in their current people practices. The McKinsey idea, then, is that the right investment in Organisational Development practices at the right time in the life cycle of the business will drive future value for the organisation and can be used as a leading indicator of long term success.

While there are some differences in the detail, this once more chimes with our own experiences. In general terms, the five characteristics of a healthy company are ones which we would support as being in evidenced in those successful businesses we have worked with over time. We also have plenty of experience of businesses where the implementation of the latest trend has not only been ineffective, but has also created a climate of mistrust and disillusionment in the very people it was meant to inspire – inappropriate flirtations with vision and values springs to mind. In businesses large and small it seems to us that it is as much the spirit in which initiatives are implemented as it is the objective with which they start which brings success – once more, we have seen plenty of good ideas fail to land the performance expected because of a perceived bad faith or reluctance on the part of the business launching the changes with their people.

Applying Colin’s five characteristics to what we have seen with our clients over the years gives rise to the following – not a recipe for success, just things that might work if done well and done at the right time:

• Make sure all the messages your people receive are consistent – don’t launch anything new in people practices without checking how it fits with everything else. If it doesn’t fit, wait to do it until you can bring everything else in line and don’t be led into adopting fads – go your own way, it’s probably better.
• Never adopt a people practice which stifles change. Break every rigidity that you can in people’s work practices and build flexible processes around good people rather than slotting good people into fixed practices. Be prepared to change anything, anytime and demand change from your people fast, even in the face of resistance from your administrators and planners.
• Make sure that everyone knows what the right things are for the long-term interest of the business. Constantly challenge your managers to make sure that everyone in the firm is doing the right things for the success of the business (especially the HR department) not getting in the way, no matter how well-intentioned they may be.
• Be better at doing than anything else. Whenever you can, invest in doing before thinking, planning, administrating or monitoring.
• Make sure that your people will stick with you when it gets tough. Put every cost that you can on a variable basis rather than a fixed one and fight as hard as you can to keep the core of the business intact.

Of course what lies behind all of the McKinsey work and our own observations is a simple experience from us both – investment in Organisational Development may be frustratingly imprecise but it is also a requirement if you expect your business to be around in a few years time.