Developing a strategy that fits the market place is essential to successful organizations, but it is hardly sufficient. It can only be implemented by pulling together the necessary resources -people, equipment, raw materials, capital- and by arranging these resources in a form that facilitates rather than impedes the chosen strategy. The (operational) structure of an organization performs three functions (Strikwerda):

1. Steering function: the structure makes it possible to translate (changes in) objectives (due to changing conditions) into well-coordinated processes and resource allocation
2. Competence function: the structure sets the conditions for developing and exploiting specialist knowledge and competences that are an intrinsic part of the individuals and (specialist) groups.
3. Efficiency function: a structure makes explicit the contributions of individual staff and departments to the overall mission and objectives

No one size fits all. Successful, high performance organizations are able to shift to the right form, also called operating logic, to facilitate strategy execution. They do this by continuously balancing the external market opportunities and the efficiency of internal resources. Organizations with a structural misfit or minimal fit are heading for failure or will at best struggle to even get mediocre results.

How different strategies require different structures can be explained by making use of two examples. In the Miles & Snow definition of corporate strategy organizations can choose a "defender" strategy aimed at defending their current market positions with a limited, but stable product line. These companies usually are focused on cost efficiencies through economies of scale, are coordinated centrally based on a plan. In terms of operating logic these companies for which economies of scale are more important than the economies of scope (actively searching for new market opportunities) a functional organization structure will be best suited. On the opposite, a "prospector" strategy, aimed at actively looking for new markets and new (product opportunities) not so much the economies of scope, but the economies of scale are more important. A centralized, planned, functional structure in this case will not work; it will hinder the responsiveness needed to be first in new markets. "Prospector" strategies are best supported by an operating logic that is characterized by decentralized decision making, managed primarily on performance (not cost efficiency), with highly flexible and adaptive processes and more geared towards learning.

Although all of this makes perfect sense, how come not all organizations have a fit to (new) strategy structure? Next to coordination function a structure also has a social function. There is a natural tendency where people identify themselves with the position (of power) that they hold in the structure. When changes are needed due to a change in conditions and strategy, these people will fight change in fear of losing this position. A second reason is the fact that some structures are in place, not because of the economic logic, but to deal with personal issues between staff members. In this case the problem between two or more staff members has created a structure that (partly) resolves this problem. The structure has been created to resolve an internal problem, not to serve opportunities.

To be a high performance organizations means that management has to continuously ensure a tight fit between the market opportunities and the resource efficiency. Management of high performance organizations understand the impact of structure and are capable of aligning this structure based on the economic rationale, irrespective of personal issues within the organization.

Culture is a powerful factor within organizations since it influences the behavior of all people within the organization. Culture is not created singlehandedly, it is a collective programing based on strong basic assumptions. These assumptions are formed as a result of influences both from inside and outside of the organization. They are almost never explicitly known; this is what makes it difficult to fundamentally change culture.

Culture develops based on business success, shaping the perception of what works well. What happens then is that culture finds its way into the management system of the organization. What has worked well so far is integrated into the vision and strategy, company values, reward systems, organization/accountability structure etc. It starts to actively influence people's behavior. This makes it very difficult to challenge the basic assumptions. The risk of not challenging these basic assumptions makes it more and more difficult to develop new business models when the old one becomes obsolete.

Key in the survival of high performance organizations is to first be aware of the impact and working of culture in the organization. Second, in order to align the organization and its culture with new opportunities, the management system needs to be purposefully redesigned. Strikwerda (Holland Management review #135) makes reference to a three step approach:

1. Making explicit why the current business model is no longer valid. This can be done by stating the basic assumptions of the old model, why it has been successful in the past and why the basic assumptions are no longer valid.
2. Next step is to clarify how the old business model is translated into the management system (structure, information, budgeting etc)
3. Thirdly, the new business model needs to be fixated into the management structure; in effect the management system needs to be redesigned in order to adequately support the new business model.

High performance organizations need to master the process of identifying old and obsolete business models and implementing new ones through purposeful redesign of the management system.

An interesting presentation on High Performance Culture:

A lot of the performance management focus is on IT, having supportive information systems in place. These systems need to provide information on actual performance (performance measures, (K)PI's) as well as input for analysis and decision making. In many organizations numerous efforts are made to implement the latest in ERP systems, data warehousing and reporting solutions, all to support the daily operations and decision making.

In many organizations the implementation of these systems is factually run by the IT department, although formally the business is responsible. These efforts mostly result in an operational IT system, that does not (fully) meet the information requirements of running a performance driven business. The new systems still provides one-sided information (backward looking, financial and some operational). The vast amount of data results in a data overload for decision makers, and the information provided does not fully match the information needed. Most of the time this results in a re-definition of the performance measures in line with the limitations of the system, not to a change in technology.

What is happening in many less performing organizations is that information management is viewed as Information TECHNOLOGY management. This results in a technology driven approach to information management that takes technology as a given, instead of information requirements. High performance organizations understand that the information layer is separate from the hardware and applications and needs to be managed separately. For the actual information management to work technology is needed and this technology should be aligned, based on the information layer.

High performance organizations are capable of having the business information needs clearly defined by the business. Information needs are meticulously defined in line with the business model, operating logic and operations. The need for Information Technology (hardware and applications) needed for now and in the near future is then carefully defined by the IT specialists together with the business information specialists. Ultimately it is the business that decides on the technology chosen to limit any deviation from the originally defined information needs. Doing this is far from easy; that is way a high performance organization employs highly trained business staff, that have business experience, are well-trained in information management, and are able to clearly communicate with the hard-core technology staff.

Performance in the end is achieved through action. In the case of organizations it is done through processes. Performance is reached by operating effective and efficient processes. This is why high performance organizations focus on continuously improving/adjusting their processes in a systematic way.

High performance organizations have a business process management system in place that is aimed at defining, measuring, monitoring and improving processes. High performance organizations have clearly assigned accountability for key end-to-end (cross functional) business processes to business process owners. These process owners are capable of organizing skills, knowledge, tools, techniques and supporting systems in such a way that they can maintain and support this continuous improvement cycle.

I am not advocating the use of Lean or six sigma techniques per se. This would be only part of what needs to be organized. Rushing into yet another Lean/Six Sigma initiative will only temporarily improve your processes, it will not automatically result in long lasting high performance processes. What needs to be done first is to clearly set process ownership and to organize the continuous improvement process; this means getting the right skills and knowledge on-board and defining the improvement process. Only once this has been done, can one start with selecting a supporting technique and tool set. High performance organizations master this process.

So summarizing the approach to high performance processes:

1. Assign end-to-end (cross functional)business process ownership
2. Define a Process Management approach
3. Gather process knowledge and skills by engaging key staff
4. Select the most appropriate tools and techniques (e.g. Lean/Six Sigma) to support your Process Management Approach.

Leadership has been a buzz word for the last few years. In the past four to five years leadership has been a recurring theme in many management publications, including the Harvard Business Review. This indicates that leadership is viewed as a key ingredient to making an organization excel and perform, especially in times of crisis. It is especially during these difficult times that staff are looking at senior management to show leadership and guide the organization towards a more prosperous future.

Instinctively there appears to be a difference between management and leadership, or between a manager and a leader. Although there is certainly an overlap there are a distinct differences in leadership and management in the true sense of the word. One difference is that leadership always affects (a group) of people, where management need only to be concerned with the management of things (e.g. management of IT, management of treasury/money, management of sales). Of course many managerial roles include a responsibility for people management, management doesn't necessarily include a responsibility for people. Second, management and management responsibility are closely linked to the formal structure of the organization, it's role and related power is formalized and person independent. Leadership on the other hand is intrinsic, part of person and not formalized.

Next to these differences some people claim that there is a significant overlap in leadership and management: good leadership always includes responsibility for managing. This states that (a responsibility for) management is part of leadership, but not vice-versa. When managers start developing leadership (by influencing, guiding people not merely based on the power relationship) the clear line between management and leadership start to fade.

What does this all mean for a high performance organization? In the case of performance in organizations good management should be able to get from bad performance to good performance by copying others, implementing best-practices. However to get from good to great performance, some key leadership qualities are needed. Warren Bennis has listed some of these key ingredients:

• Guiding vision: a leader has a clear idea of what he or she wants to do and demonstrates the ability to visualize it and make it clear to others
• Passion: a leader has a passion for what he or she does. Passion is an internal drive to reach certain goals. Passion is a powerful motivator also for others. It also helps the leader to persevere.
• Integrity: leaders act on the basis of self-knowledge, candor and maturity. A leader knows his strengths and weaknesses and acts accordingly. Leaders knows about his faults and assets and deals with them directly. Candor is based on aligning ones actions with ones beliefs, convictions and principals. Leaders will never sell out on their core beliefs to please another. Leaders need to mature. They mostly mature form having learned to being a follower, having learned to be dedicated, observant and capable of working together and learning from others.
• Trust: trust is a basic ingredient for being a leader. Trust is not so much of an ingredient as it is a product of leadership. Trust needs to be earned from the followers; without trust a leader cannot function.
• Curiosity and daring: Leaders have a natural tendency to wonder about everything, want to learn as much as they can, are willing to experiment, try new things and take risks. Leaders are not worried about failure, the embrace failure as an opportunity to learn.

It is leadership that makes the new possible. As we have seen in other parts of the framework, continuously looking for new opportunities and adjusting the organization accordingly is what brings organizations actual performance. Leaders are not necessarily born as leaders. Leaders are made, most of the time self-made, propelled by a strong passion and strong personal qualities, having learned from successes but mostly of actions that did not turned out well.

High performance organizations firstly understand the power of leadership; second they have the ability to clearly identify leadership potential and develop it to the desired level of maturity.

For some further reading click here

The title of this section might not be covering all that I would like to stress as being important for high performance. I do not want to claim that teams need to be the only way to organize. Instead of teams as a way to structure I want to clearly state the importance of the people within the organization. It are the people, their skills, capabilities and them working together in such a way that (performance) objectives are reached.

To remain successful organizations need to be able to shift in speed and direction rapidly. This implies that staff efforts need to be (re-) directed quickly. This requires HPO's to organize the following:

• Fluid/flexible working relationships: HPO are focused on adapting quickly to the changing environment. One way of doing this is organizing staff and their capabilities fluidly. This means that staff with the required capabilities can be freed up immediately and work together with others on initiatives. HPO's do not have strict functional boundaries or silos; people move freely from one (temporary) position to another.
• Learning organization: HPO's are organizations that actually practice active learning. They have implemented a solid learning and knowledge management system. This system captures the lessons learned and make them available to all people within the organization. Furthermore HPO's have a learning system based on the knowledge needs of tomorrow, ensuring that staff is ready to deal with the new situation effectively.
• Delegated authority: within HPO's staff is trusted with making their own decisions. Staff is much closer to the daily operations and to seize opportunities and resolve issues. People are trusted to make the best decision since they are adequately trained and have quick and easy access to all available knowledge.
• Shared values & identity: in HPO's change is a constant. Since objectives and results change, people need to have a solid anchor point to guide their behavior. Using shared values and maintaining a clear (common) identity helps to continuously align staff behavior and stimulates people to actively working together, learning from each other and helping each other in completing certain tasks.

In order to transform ideas and good intentions into tangible results, some investment will be needed. Next to investments in tangible assets such as property, plant & equipment or stocks, also investment in intangible assets is needed. For most new strategic initiatives success will depend on having the right capabilities in place to change the organization, its products or services and its management system.

New strategic initiatives require investment and those strategic initiatives need to be monitored to ensure the money is well spent in that it delivers the expected results at the estimated costs. So next to having the actual money available to invest, a high performance organization needs to implement a method of tracking the business case for change. The way that current accounting systems are set up do not easily facilitate this kind of monitoring. All costs are either charged to certain cost accounts, as operational expenses (OPEX) or capitalized (CAPEX). As a consequence strategic initiatives are started but prove to be difficult to control. What is needed is a system of tracking the costs and benefits of these strategic initiatives separately.

In their book "The Execution" premium Kaplan and Norton introduce "STRATEX" as a separate expense category, next to OPEX and CAPEX, to monitor all expenses for strategic initiatives. STRATEX is introduced as a way to rigorously track the investment in new or adjusted strategic directions (both in terms of expenses and benefits). On the expense side this results in a third type of budget, next to operational and capital expenditures. It results in more cost transparency and will give management more control over the company's funds and fund allocation. When measuring the actuals against the STRATEX management is able to adequately respond and make necessary changes in case the STRATEX budget is being exceeded. This type of monitoring enables management to pro-actively manage its strategy/strategic initiatives.

I am not propagating to introduce STRATEX in all companies. What I am stating is that all high-performance organizations need to monitor the (financial) success of their strategy and strategic initiatives, as they do with their current CAPEX. This can only be done when a system is in place that collects all data on investment and progress and is used by management to adequately steer the organization towards its goals. Having this third type of expense category will mean that some strategic expenses now being invisibly included in OPEX and CAPEX will need to re-allocated. The process itself will work along the same lines as budgeting for operational and capital expenditures. First the strategic initiatives will need to be identified and defined. This means that will need to be broken down in phases and tasks. Next, estimates of both the expenses and benefits will need to be made. Expenses will need to be classified into specific sub categories. This is a more bottom-up approach. A top-down approach could also be opted to set a budget. Based on experience management could determine the STRATEX budget based on a certain percentage of total sales. This budget can then be used by various strategic initiatives.