The Highland Group's Corporate Equation®
Alignment: The correct relative positioning of important variables so people at all levels know what is expected of them and are willing to expend energy to meet organizational and individual goals.
The first element of the Highland Corporate Equation® is Alignment – which means bringing all-important factors into a correct relative position. The alignment of goals at all levels in an organization is an important starting point. The first step is to have clearly stated corporate goals. After the corporate goals are stated, it is key to adapt – or “translate” – those goals to map to individual performance expectations.
Communication of these goals throughout the organization, it is comparable to having a sturdy rudder to guide a ship through a variety of calm and treacherous seas.
Human effort in organizations can be said to be aligned when all employees at all levels:
- Know what performance is expected of the entire organization
- Know what performance is expected of them individually
- Are willing to expend energy to achieve both individual and organizational goals
What this means is that one should be able to ask any member of an organization what the goals of the organization are, and he or she would be able to tell you! He would also be able to tell you what the goals mean individually and what he has to do in his position, what ever it is, to enable the company to achieve these goals.
When a company is aligned, every person and department in the organization is pulling in the same direction. A critical part of alignment is that individuals are willing to work with others in the organization to ensure that the organization meets its goals.
Goals Must Be Translated With Employees At All Levels So That:
- Their efforts are aligned with top level organizational goals
- Goals are meaningful to them
- Progress toward goal achievement can be measured
- Recognition can be given for progress made
- Achieving translated goals at all levels assures organizational goals will be achieved
- Managing goal translation, documenting translated goals, measuring and documenting progress and recognizing employees as they make progress, is a key function of management at all levels.
The “Key” to Goal Alignment is that everyone in the organization knows what is expected and how their effort fits into what the organization plans to accomplish.
Corporate Culture: The attitudinal and emotional structures and intellectual manifestations that characterize an organization.
Corporate/Organizational culture is ever present, largely invisible, difficult to describe, long to develop and slow to change. One may think of culture as the “personality” of an organization. On any day, at any one time, different people can experience organizational culture or personality in different ways. One person may find compatibility, creativity and comfort. Another may at the same time experience pressure and a non-caring atmosphere. Just as people experience another’s personality in a variety of ways, they can also experience an organization culture differently. Each of us sees something different based on who we are, what is happening at the time and what we want or need.
Notice that in The Highland Group Corporate Equation® that “C” or Culture is at the very beginning of the equation preceded only by “Alignment”. All that happens in an organization must be aligned with the culture.
Where does culture come from? How is it developed? At The Highland Group, we say that culture evolves as the distillation of the dominant executive or management style of those who have led and presently lead the organization. Each leader leaves a mark to preserve and/or influence change, usually ever so slightly. We also believe that reward and recognition practices are at the core of organizational culture. By understanding the reward and recognition practices, one may quickly understand the culture.
One way to think of culture is as a “screen” through which the attributes of the organization must pass. This “screen” will largely determine who is hired or promoted, who is or is not rewarded, who is or is not empowered, what products will be developed and what markets served. There is little tolerance and often-considerable resistance for any idea or suggestion that does not easily glide through the “screen”.
This “culture screen” tends to make a culture self perpetuating and often difficult and slow to change. For example, only those who “fit” or pass easily through the screen become senior executives. And remember, it is the distillate of the styles of the senior managers and executives that perpetuate or alter the culture. If only those who pass through the “screen” get to senior positions, the culture is almost assured of stability or very little change.
Successful change efforts must also pass through the “screen”. Change efforts must fit the norm or be within the comfort zone of the decision-makers in the organization. For example, in a culture that truly values the development of its people, the creation of a “Learning Organization” will be readily accepted, will thrive and be highly successful. On the other hand, where only lip service is given to “the most important asset is our people”; management support, budget, and recognition for individual development needs, will also get only lip service.
There is no sure-fire test to identify culture. However, by listening to those who live and work in the culture, the primary attributes of the culture can be determined. Since people see and experience the culture differently, always ask many people and develop a description of the culture that represents what most people experience most of the time.
To successfully lead or introduce a change to an organization, first take time to accurately determine the culture. Then make sure the proposed change will pass the “screen”. Successful, long lasting change usually happens by evolution, not revolution. Understanding culture is a critical step for developing a plan to bring about change. Diagnose thoroughly, plan change consistent with and aligned with, the culture, move ahead purposefully, pass through the “screen” and you are likely to be successful.
Reward & Recognition: The public and personal sign of approval and appreciation for successfully attaining goals.
The third element of the Corporate Equation® is Reward & Recognition. It is an essential element in every organization and reflects the corporate culture. The key to Reward & Recognition is to understand that people do what they do because of what happens to them when they do it. In other words, the consequences of what people do have an enormous influence on the actions they take.
Results of a survey by the Council of Communication Management confirm what almost every employee already knows: that recognition for a job well done is the top motivator of employee performance. Yet most managers do not understand or use the potential power of recognition and rewards. This is true even though 33% of managers themselves report that they would rather work in an organization where they could receive better recognition.
When a manager is apprised of the importance of this fundamental principle of human behavior, the typical reaction is to insist that employees would appreciate only rewards and forms of recognition that directly translate to their pocketbook – raises or promotions.
While money is important to employees, what tends to motivate them to perform – and to perform at higher levels – it is the thoughtful, personal kind of recognition that signifies true appreciation for a job well done. The motivation is all the stronger if the form of recognition creates a story the employee can tell to family, friends and associates for years to come.
Both informal and formal recognition and rewards are important. “Formal” means a part of a predetermined program; “informal” means that which is more spontaneous.
The guidelines for effectively rewarding and recognizing employees are simple:
- Match the reward to the person. Start with the individual’s personal preferences; reward him or her in ways he or she truly finds rewarding. Such rewards may be personal or official, informal or formal, public or private, and may take the shape of gifts or activities.
- Match the reward to the achievement. Effective reinforcement should be customized to take into account the significance of the achievement. An employee who completes a two-year project should be rewarded in a more substantial way than one who meets a short-term goal. The reward should be a function of the amount of time you have to plan and execute it and the money you have to spend.
- Be timely and specific. To be effective, recognition and rewards need to be given as soon as possible after the desired behavior or achievement. Rewards that come weeks or months later do little to motivate employees to repeat their actions. You should always say why the reward is being given – that is, provide a context for the achievement. Once you have consistently rewarded desired performance, your pattern of recognition may become more intermittent as the desired behavior becomes habitual with employees.
Management Style: The way people treat each other while performing the management process.
The fourth element of the Corporate Equation® is Management Style. Management is the basic integrating process of organizational activity that surrounds our daily life.
Management can be defined as that process by which managers create, direct, maintain and operate organizations through systematic, coordinated human effort. Management Style relates to how managers use themselves as they manage. Personal orientation toward making assignments, solving problems, making decisions, taking risks, standing by one’s own convictions, coaching and mentoring others, handling interpersonal conflict, giving reward and recognition, and expressing humor all are at the core of managing.
Management theorists for the past fifty or so years have studied, observed and defined Management Style that is the composite of observed behavior as a person discharges his or her management responsibilities. Early theorists categorized management style as:
- Autocratic – highly directive with little regard for input from others
- Democratic – consultative but deliberate
- Laissez-faire – hands off, let employees self manage with little to no direction
Of course, it was proposed that the “Democratic” style promoted both productivity and satisfied employees while the other two styles have serious downsides.
Through the years other theorists put forth a variety of schemes to describe and explain Management Style. Theories of human motivation were also developed which focused on employees and how they were likely to respond and feel as the result of the style by which they were supervised and managed.
The years of research, literature publication and observed practices seem to describe an excellent manager as one who:
- Cares about self and others
- Listens well
- Includes others when appropriate
- Sets a positive example
- Is fair
- Is honest
- Communicates often and freely
- Makes sure the vision for the organization is clearly communicated
- Makes sure all employees at all levels have goals that are aligned
- Delegates authority and responsibility to meet goals
- Promotes employee growth and development
- Appropriately dispenses reward and recognition
- Laughs and has fun
- Shows appreciation of others every day
What do we call that style? Call it whatever you like – however all of us can easily identify and appreciate that Management Style. It’s the style most people say they want their managers to exhibit in order for them to be optimally effective.
Sub Strategies: Plans for each Division and Department to assist the organization to achieve its mission and goals.
The sixth element of the Corporate Equation® is Sub Strategies. These are the plans for each Division and Department to achieve the corporate mission and goals. The Goal translation and roll-down process assures alignment of all goals.
As stated in Strategies, no business succeeds in the long term without sound strategic positioning. Strategic positioning can be divided into the following five components:
- Driving Force (the corporate philosophy)
- Mission Statement (the internalized culture)
- Strategic Theme (market perception)
- Major Goals (Strategic Business Units, Divisions and Departments)
- Targeted Milestones (critical achievements)
In Sub Strategies we are focused on components four and five:
Major Goals (Strategic Business Units, Divisions, Departments)
Major goals for sub-organizations should flow down from corporate goals and should be quantitative. These goals should be developed during the goal translation and roll-down process. Goals will be developed in at least the following areas:
- Product Development and Products Available
- Support Services
- Marketing and Sales
In order to check whether your major goals are correctly stated, ask yourself the following questions – Are your goals?
- Require Stretch
- Time Based
An example of a sound marketing and sales goal would be “reaching a specific turnover by the end of the second year in business.” On the product side, a sample goal could be “achieving a stipulated level of customer satisfaction on a designated index.”
Targeted Milestones (continual achievements)
Targeted milestones (sometimes called “action plans”) relate to activities needed to create short-term momentum in the organization within a period of no longer than the following three months. The advantage of setting these milestones is that they help you to do the right things at the right time and for the right reasons. A comprehensive strategic plan should comprise no more than a few pages which can easily be read over a cup of coffee."
Corporate Strategy: The plans that are developed to achieve the corporate mission and goals.
The fifth element of the Corporate Equation® is Corporate Strategy – the plan that is developed to achieve the corporate mission and goals.
No business succeeds in the long term without sound strategic positioning. Strategic positioning can be divided into the following five components:
- Driving Force (the corporate philosophy)
- Mission Statement (the internalized culture)
- Strategic Theme (market perception)
- Major Goals (Strategic Business Units, Divisions and Departments)
- Targeted Milestones (critical achievements)
Driving Force (corporate philosophy)
The driving force of the company expresses the underlying purpose motivating employees to pursue specific goals. Briefer than the mission statement, It usually takes ten years for a driving force to go full cycle. Some examples:
- "Continuous excitement from start to finish." – Steven Spielberg
- "We have one ambition - to be the best." – Lee Iococca
- "Conspicuous, superlative value." – Dr. Peter Johnson
Values naturally differ from company to company. It is important to review, and if necessary, change the driving force statement of a company every few years to be sure the statement of corporate philosophy is in keeping with the internal and external realities of the day.
Mission Statement (internalized culture)
The mission statement of a company should be a truth told in advance. The mission statement defines the future direction of the organization, its efforts and activities in broad terms. Designed only for internal use, it should be superlative, lofty and goal oriented. Remember nevertheless, to keep it short and no longer than one paragraph." Don't restrict the vision to present limitation. Think like Lee Iaococa, envisioning what could be possible five to ten years down the line.
An American bank phrased their mission statement as follows: "To clearly establish and maintain a positively recognized and respected reputation as THE BEST, full service financial institution providing the very highest caliber of market oriented products and backed by the finest team of responsive service professionals available anywhere in the United States today."
Strategic Theme (market perception)
The strategic theme of the company conveys to the public the essence of its driving force and mission statement. It is the expression of a distinct, unique and visible market position and can sometimes be communicated to consumers in the form of a jingle, slogan or tag line, such as: "The Pepsi Generation"; "It will be there in the morning"; “It may cost a little, but it's worth a lot"; "We may be No. 2, but we try harder."
Strategic themes may not necessarily be 100% true, but they should always be believable. For example, when Avis coined their No. 2 slogan, they were actually No. 6, but the public still bought their runner-up line."
The last 2 components – Major Goals and Targeted Milestones – are explained in depth under SS – Sub Strategies.
Core Technology: The organization’s basic technical and human processes (chemical, mechanical, human and physical sciences) for producing goods or services.
The seventh element of the Corporate Equation® is “Core Technology”. This is the utilization of the company’s basic processes for producing goods and services and equals core competency. A competency is a bundle of skills and technologies rather than a single discrete skill or technology. For example, a competence in “rapid” cycle time production rests on a broad range of underlying skills, including product design, disciplines that maximize commonality across a product line, lean manufacturing, sophisticated order-entry systems, inventory management and supplier management.
A core competency represents the sum of learning across individual skill sets and individual organizational units. Thus, a core competence is unlikely to reside in its entirety in a single individual or small team.
How many core competencies would one expect to find in a highly successful business organization? The most useful level of aggregation is typically one that yields somewhere between five and fifteen core competencies.
To be considered a “core” competency, a skill must meet three tests:
- Customer Value: Core competencies are the skills that enable a firm to deliver a fundamental customer benefit, even though these skills may not be visible to the customer.
- Competitor Differentiation: To qualify as a core competence, a capability must also be competitively unique. In any industry there will be a number of skills and capabilities that are prerequisites for participation in the industry, but do not provide any significant competitor differentiation. There is a difference between “necessary” competencies and “differentiating” competencies. It makes little sense to define a competence as “core” if it can easily be found in other organizations or is easily imitated by competitors.
- Extendability: A core competence is truly “core” when it forms the basis for entry into new product markets. Over long periods of time, what was once a core competence may become a base-line capability. Quality, rapid time to market, and quick response customer service – once genuine differentiators – are becoming routine advantages in many businesses.
The goal of successful companies is to acquire or develop the skills or technologies that make up a particular core competence. Management must continually remain aware of its core competencies, which ones are eroding, what new ones are required and manage the process of acquiring or building core competencies to be successful in the ever-changing marketplace.
Information Technology (IT): Systems for providing the right information at the right place at the right time for people to do what is expected of them.
IT is the eighth element of the Corporate Equation®. Information Technology is having the right information at the right place at the right time for people to do what is expected of them. In today’s world to make this happen with the technology that is available often takes considerable effort on the part of the IT professionals. In today’s business environment an effective IT organization should:
- Provide integrated systems and procedures to:
- Process day-to-day transactions on a timely basis with high productivity and high quality.
- Provide information to executives and managers to enable effective management of the business – trends, exception reporting, etc.
- Enable the business to compete effectively in today’s business environment such as e-commerce, outsourcing, shared services contract management, data mining, etc.
- Create a secure environment – effective disaster recovery, day-to-day back up for all-important information including data residing on PCs.
- Enable a productive and cost effective organization by providing the necessary tools, facilities and training. (Report writers, query processors, etc.)
Even with all these elements in place, the responsibility rests with management to make sure that all people in the organization know what is expected of them. In other words, the organization has to be aligned as stated in the first element of the Corporate Equation.
Alignment means that “People at all levels know what is expected of them and are willing to comply.” Information technology can and does facilitate satisfying that important need.
Support Systems: The various functions required to support those who directly produce goods and services.
These are the various functions and activities which are necessary to ensure quality, customer service and cost control and to support the many employees who directly produce products and services. These functions are sometimes referred to as “non-value added.” This means that the work accomplished by these groups of employees does not directly become a part of the product or service being offered by the organization. However without the work of Finance, Human Resources, Accounting, Information Technology and the many other support organizations, the product or service could not be produced.
In evaluating the effectiveness of Support Systems, the focus must be on the alignment of the required services with the needs of the total organization. Sometimes a support system can lose sight of its goals. When this happens Support Systems can become “self-serving” rather than “total-organization serving” and become too costly and inefficient. Support Systems in effective organizations must be closely aligned with the production of products and services and be as lean and efficient as possible.
Work: The complexity and presentation of the work to be done.
Work and Worker are the last two abbreviations within the parenthesis of The Highland Group’s Corporate Equation®. These two components of the workplace must be aligned with all of the other variables in order for the organization to be optimally effective. Obviously both work and workers have changed dramatically over the years.
At the beginning of the last century the majority of America’s workers were engaged in some form of agriculture. The industrial revolution was well under way with increasing migration to cities for work in factories. The majority of the population lived in rural areas. They were devoted to producing food for themselves and others. Farming was hard labor and mechanization was primitive. Work called for long hours and a strong back. The same was true in most factories. Workplaces were hot, many times filled with smoke or steam, and not very pleasant. Workers were paid little for the most part, and were expected to tolerate these substandard conditions while working hard at usually monotonous jobs.
Although many technological advances were made during the first forty years of the twentieth century, it was World War Two that brought on rapid change. Work and work processes, were rapidly modified as our country played “catch-up” to get us ready for the war. Many psychological studies were conducted to determine how to relate work and the worker in order to increase productivity and quality.
After WW II, advances made in the workplace during the war were applied widely in business and industry. Human motivation to work was studied. Work simplification, new tools, new methods, computers and even new ways to reward performance were put in place. The field now called “Organization Behavior” was founded, and the study of work and worker relationships accelerated. During the next thirty years, literature exploded with theories of motivation and leadership. Management seminars and training hit its stride. All were asking the same question: “How can people be optimally efficient, and what work conditions are required?”
As our industrial society continued its transition to the “Technological” and “Information Age” in the 1980s and on through the century, both work and workers continued to change. Only about three percent of the American population works in agriculture. As a matter of fact, we actually have an excess supply of food in our country. Fewer people work in factories due largely to automation and massive importing of products of all kinds. However, more and more workers are engaged in “soft work” at a computer station or ‘Information Age” related work. What are some of the implications?
American workers are largely employed in today’s “Service and Information” society. Computers dominate our lives. Communication is instant. Cell phones abound. We can quickly and easily become informed on almost any subject. We are experiencing full employment. That means there are jobs for almost all who want to work. Employers are perplexed as they attempt to create meaningful work and reward systems that will meet the needs of a population that has many choices. People can change jobs “at the drop of a hat” if they are not happy with their present job. Hiring and keeping “good” people is a major concern of employers everywhere.
Continued in Worker…
Worker: The skill, knowledge and willingness of people to do the work.
Workers want what workers have always wanted: A safe clean and pleasant working environment, challenging work, good pay and benefits, opportunities to grow and progress and appreciation for a job well done. Some behavioral scientists say that the most universal need of workers is to be appreciated. Sometimes a simple “thank-you” will do the trick. Remember most of us work because we must. We work to provide for ourselves, and our families, and to save for retirement. However, we do expect our income and human needs to be met in the workplace.
Our consultants are frequently called upon to deal with dilemmas concerning work and workers. We are often asked to “rationalize” work assignments so “non-value-added” or “low-value” work can be eliminated. Everyone wins when those projects are successful. The employer enjoys higher productivity and lower costs. The worker enjoys more meaningful work.
Our ongoing challenge is to create “Value-added” work, select appropriate workers to assign to that work and to manage and reward workers for a job well done. This challenge exists in every aspect of business, government and industry.
As with many other things, creating “value-added” work is easy to say and difficult to do. However, when the work and the worker are aligned, not only with each other, but with all the other variables in the Corporate Equation®, we can expect performance and profits that will excel in the marketplace and workers who will be job satisfied.
Management Process: The system by which managers lead and direct their people.
Management Process is the final variable in The Highland Group Corporate Equation®. It is defined as the system by which managers lead and direct their people. We install and/or help refine the systems for managing in most of our client engagements. In order for employees to be both efficient and effective, they must know the answers to some fundamental questions. Basically they want to know who does what and when, the sequence, duration and timing of their assigned tasks, as well as the quantity and quality expected.
There are several practices to enable a smooth and effective management process. The most fundamental system is often referred to as “Plan, Do, Review”. Sometimes that is expanded to “Forecast, Plan, Do, Review”. When utilized, this system facilitates a rational, orderly and effective management process.
A practice that produces role clarification and also facilitates the management process is known as “RACI” which translates to:
For any result to be achieved effectively, the roles of those involved must be clear. Only one person can be ACCOUNTABLE. Several people may have RESPONSIBILITIES for achieving the result. Those who need to be COMMUNICATED with need to be identified and be part of ongoing two-way communication. Finally, those who only need to be INFORMED must be identified and kept abreast of progress. The RACI process is utilized on most of our projects.
These two examples are representative of the many practices useful as you develop an efficient and effective management process. As shown in the equation, when the other organizational variables and the Management Process are well established and aligned, results are typically positive.
Click on the letters above to explore the Corporate Equation® in detail.
Human beings are the most complex of all living creatures. Put them together in a small group or an organization of any size and the complexity multiplies beyond our comprehension. Those who employ others have sought for centuries to understand the dynamics of people at work so they could be utilized to produce goods and services for profit. Obviously there are many physical, psychological and social variables within any individual and more so with people in organizations.
We have developed a multivariate equation that attempts to identify the most critical variables effective managers must understand and positively impact in order to lead and manage successful organizations. Each variable is unique and at the same time is related to and impacted by the other variables. An understanding of these variables will provide insight into the task of managing a successful business enterprise.