A well-functioning organization is an essential platform to successful strategic transformation. But when an organization is dysfunctional it creates a profound drag on the company's performance and sabotages its ability to transform.
During Attaine's extensive number of client engagements, many expressions of dysfunction have been observed. Seven types of dysfunction directly relate to transformation success and are discussed breifly here.
Is your organization transformation ready?
Dysfunction #1: A lack of definition and unity about what matters most
Success Today Is Defined By The Triple Bottom Line – Financials, Sustainability, And Values
Highly successful companies clearly define and develop unity about what matters most, standing for something beyond making a profit. A well-developed set of values defines what’s most important to a company and how it functions, is the basis of its purpose, mission, and vision, drives company culture, and triggers employee passion. A well-developed set of values should also be comprehensive including the company, employees, customers, shareholders, and the community. Highly successful companies give as much emphasis to core values as they do to strategic goals.
Values play another critical role. They determine identity and reputation that are at the heart of branding. And when branding aligns with reality the company has integrity. Building shared values — clear definition and unity — across the enterprise is a powerful competitive advantage.
Companies that clearly define and tenaciously live by their values, weaving them into the very fabric of their organization, outperform those that don’t on a variety of strategic success measures — values have both top- and bottom-line impact. Values are a key enabler of successful strategic transformation.
Dysfunction #2: A broken or never developed leadership pipeline
Does Your Company Have The Leadership To Deliver This Year's Strategic Promises?
It’s impossible to successfully realize your company’s strategic transformation or deliver this year’s increasingly ambitious strategic promises without a continuous flow of proven leadership.
While a great deal of attention is given to leadership, there's a desperate need for more effective leadership across the enterprise — including the board of directors. Leadership succession is often poorly planned, managed, and unable to keep up with the need for new, competent leaders. And the leadership deficit is growing rapidly.
Often, leadership is defined by position instead of ability. High potentials, instead of proven performers, are promoted into positions before demonstrating their ability to lead successfully in the new assignment. And once in a new leadership position, there are few mechanisms in place to repair bad selection decisions, before irreparable damage is caused, or to effectively enable leaders to achieve their full potential.
Considerable visible and invisible cost is incurred for failing to effectively develop leaders. With poor leadership, strong performance and growth is always a burden. And with poor leadership it’s impossible to engage employees' hearts and minds, keep the organization focused on strategic goals, and maintain momentum during growth.
Dysfunction #3: Strategic Chaos
Strategy — The Least Understood Aspect Of A Business
Everyone talks about strategy and you would think that a company’s strategic direction is one of the most well understood aspects of the company. Actually, the opposite is often true. As much as ninety percent of employees are unaware of or don't understand their company's strategy.
Often a company’s strategic direction is a mystery to its employees resulting in strategic chaos. Employees may have heard of or read about the company’s strategy but don't know enough about its strategy to align their day-to-day work to it. This is disastrous! You have to wonder how much money the company is leaving on the table.
Weak strategic performance or failed strategic transformation is often the result of poor execution rather than a poor strategy. It's impossible to execute what you don't understand! And it's impossible to be a high-performer when your talent is pushing in different directions.
The cumulative impact is that with a poorly understood strategy it's impossible for a company to remain viable in a global, rapidly changing marketplace. Performance, growth, and strategic transformation will always be a challenge.
Dysfunction #4: The Organization Isn't The Strategy
Your Organization Should Exist For One Purpose — Executing Strategy
Even with a compelling product, exciting mission and vision, and well-thought-out strategy, execution can still go badly. Often today, the difference between a company and its competition is the ability to execute. If your competitors are executing better than you are, the financial markets won't wait to see if your strategy plays out.
The key measure of your organization's success is its ability to successfully execute your company's strategy. Can every unit, department, work-group, team, individual, and program and initiative manager measurably demonstrate their alignment with and contribution to the achievement of your company's strategic goals? If not, your organization isn't the strategy.
A key barrier to effective execution and strategic transformation is that companies often expect strategically aligned efforts from their employees but the organization they provide is strategically out of alignment. Pit highly talented people against a poorly aligned and poorly functioning organization and the organization wins every time.
Someone visiting a strategy-driven company, even though not familiar with the company, should be able to determine the company's strategic direction by observing the organization and how it functions.
Dysfunction #5: Under-Leveraged Intangible Assets
Are Your Most Important Assets Generating Revenue?
Intangible assets account for an average of seventy-five percent of a company's market value. The ability of a company to mobilize and develop its intangible assets — talent, intellectual capital, brand, etc. — has become far more decisive to its success than investing in and managing physical, tangible assets.
Readiness of intangible assets is analogous to liquidity — the lower the state of readiness the longer it takes for intangible assets to contribute to strategic success. The core of a company's intangible assets is its talent, yet research shows that this most critical asset is often wasted. Does your talent have the resources, tools, organizational culture, well-functioning teams, management, and leadership, shared learning, skills, opportunity for development, and so forth essential for success? Do managers take a personal intertest in their individual team member's success?
On average, companies invest a third of their resources in their employees, but few know how — or even seriously try — to effectively manage or measure the value or impact of that investment. Another reason why many companies can't get there from here.
What's the readiness level of your intangible assets? The higher the level of readiness, the more successful you'll be at turning intangible assets into strategic growth and revenue. A high level of readiness is a key enabler of strategic transformation.
Dysfunction #6: Not Learning As Fast As The Competition
The Rate, Depth, And Agility Of Learning May Be The Only True Competitive Advantage
Success is a moving target. Only those companies that continuously innovate, reinvent, and or disrupt — significantly increasing customer value — will continuously achieve and accelerate market leadership. The goal is successfully managing the creation, flow, and implementation of new ideas throughout the enterprise faster than the competition.
Challenging deeply held assumptions is at the heart of transformational learning and innovation. "Clearly, transformational learning requires something much more than profound individual learning. True transformational change is rare — where the organization gets to the point of eagerly challenging deeply held assumptions about its strategies and processes. Rather, most people do the same things in superficially tweaked ways." (Edgar Schein)
Learning faster than the competition is about much more than new products and services. In fact, learning and innovation may have nothing to do with technology and can include reinventing business processes, bringing new ideas to market in record time, rewiring the company for creativity and growth, realigning the enterprise with the new strategic direction, each employee enhancing how he or she conducts the company's business, and so forth.
Is your company's learning-velocity fast enough to remain competitive or stay in business?
Dysfunction #7: Unable to Successfully Transition to a New Vision and Strategy
The Beginning Of A Downward Spiral
Incremental strategic change is no longer enough to remain competitive or a market leader. Without periodic structural, discontinuous, or even disruptive strategic change, a company will plateau and eventually enter a downward spiral.
Yet, successfully transitioning the enterprise from the current to a new strategic direction is one of the more difficult challenges facing companies today. Although difficult, a failed transition will no longer be tolerated by stakeholders, customers, or the marketplace, leaving companies unable to significantly increase revenue and growth.
While tactical changes may have worked in a less competitive marketplace, only decisive transformation matters today. Companies that can successfully transition to a new strattegic direction will thrive — those that can't won't.
Your company may be a success today, but success has a short shelf life — and it's getting shorter all the time. It's the ability to continually innovate and reinvent that maintains competitive advantage and market leadership.