The 4 + 2 Formula (adapted from What (Really) Works by William Joyce et al

What if you evaluated 160 companies over two consecutive five-year periods (1986-1990 and 1991-1995) and classified the performance of these companies based on total return to shareholders?  This is what the authors of What (Really) Works actually did.  These researchers wanted to find a demonstrated cause-effect relationship between superior performance and 200 different management practices.  What they found surprised me.  Most of the 200 practices studied were largely irrelevant to corporate performance.  (Note—not that the practices were counterproductive; they just were not essential to achieving superior performance.)

They did discover eight practices that the data connected to excellent performance and they classified these eight practices into two categories:

·        primary (strategy, execution, culture, and structure)

·        secondary (talent, leadership, innovation, and mergers/partnerships)

Companies with high scores on each of the four primary areas and any two of the secondary areas had a better than 90% chance of superior performance.  This led the authors to a 4 + 2 formula for success.  We’ll discuss the PRIMARY management practices in this Weekly Insight.  As we discuss each one, rate your own company on its ability to perform (low, average, high) on each management practice. 

PRIMARY

Strategy

Winning companies stay focused on growth of their core business through a clear and focused strategy.  Customers are offered a clear value proposition that is based on both customer needs and company capabilities.  Although internal instincts are taken into consideration, what customers, partners and investors say and do are more important when setting strategy.  The company monitors the marketplace continuously and adapts their strategy to emerging trends.  The company then clearly communicates the strategy to both internal and external stakeholders.  Lastly, the superior-performing companies achieve growth by focusing on their core business.  If they do decide to grow by entering other businesses, they do so before the core business growth potential has been exhausted.

Rate Your Company on Strategy:  __________ (Low, Average, High)

Flawless Execution

Operational excellence leads to consistently meeting customer expectations (and thereby builds trust).  Empowering employees on the front line of customer contact allows each employee to respond to customer needs in real time.  Superior-performing companies also make sure their best employees are in those front line positions.  Every customer touch point counts.  The best companies also worked hard to eliminate waste and inefficiencies throughout their organization and to redeploy those resources on processes most important to meeting customer expectations.  (And, by the way, those expectations change over time.)

Rate Your Company on Execution:  __________ (Low, Average, High) 

Culture

Winning companies create a culture where each person in the company is dedicated to improving his/her performance to better serve the customer.  These companies create and support a culture where every employee (not just managers) is held responsible for corporate success.  While praise and pay are used to reward achievement, the company constantly raises expectations.  In developing this high-performance environment, the company makes the work challenging, satisfying, and fun (thus reducing the “high-anxiety” potential of the culture).  Core values are also highly esteemed as the company leadership presents, lives and makes the company values part of every communication with employees. 

Rate Your Company on Culture:  __________ (Low, Average, High) 

Structure

These superior-performing companies eliminate unnecessary bureaucracy.  Leaders work to reduce redundant layers and the behaviors that create and sustain these inefficiencies.  Winning companies share information across all levels of the organization and stress (and reward) cooperation among work groups (no fiefdoms!).  These companies place their best employees in positions where their decisions can make a real difference in corporate performance.   

Rate Your Company on Structure:  __________ (Low, Average, High)

As you finish reading this Weekly Insight, review your scores in Strategy, Execution, Culture and Structure.  Where are your strengths?  Where are your weaknesses?  As always, Daystar Consulting stands ready to help you make improvements to your strategy, execution, culture or structure that will lead to superior performance in your company. 

Keith 

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