A new study was recently published by the global management consulting firm, Boston Consulting Group (BCG). In partnership with 12 worldwide management organizations like The Conference Board, American Management Association, the Chartered Management Institute and others in Europe, Asia, and other countries, the survey sought input from 1,600 senior executives on 20 organizational capabilities. This framework covers six core areas: Structural Design, Roles and Collaboration Mechanisms, Processes and Tools, Leadership, People and Engagement, and Culture and Change.
The study correlated revenues and profit margins with the companies organizational practices:
“The correlations showed that all 20 types of organizational capabilities have an impact on overall performance — though clearly some have much more influence than others. ‘There’s a definite bias toward behavioral factors — in particular, leadership, employee engagement, and cross-functional collaboration,‘ said research leader Fabrice Roghé, a Duesseldorf-based partner at BCG. ‘But the best performance comes when those traits are backed by structural capabilities, such as a strong organization design and rigorous business processes and controls.’
Christopher Kinsella, Acting Chief Executive of Chartered Management Institute, said, ‘This research confirms the importance of strong leadership, high employee engagement, and a collaborative approach to work within an organization — all of which depend on key leadership behaviors.‘”
Respondents were also asked what they felt were the key organizational capabilities needed for the future. 77% saw behavioral themes as very or extremely important. More than 80% believed change and flexibility would become more critical. And 82% listed “employee motivation” increasing in importance with 83% topping the list with “leadership performance.”
The “soft skills” of leadership and culture are clearly critical. But — as we’ve found time and again in our work — these researchers “found a significant correlation between structural and behavioral capabilities.”They concluded that “structural levers” like management processes and systems were most effective when they followed and supported effective leadership behaviors.
This is not the common practice of many executives. Way too often executives will use organizational restructuring (often including mergers and acquisitions), implementing new systems — especially technology, tightening policies and procedures, or introduce programs like Lean/Six Sigma, safety, or cost cutting to drive organizational change. “Change management” is then used to bulldoze these efforts down through the organization and overcome “resistance to change.”
This heartless, heavy-handed, and top-down approach is what’s creating our growing morale mess. It’s disempowering and disengaging frontline people at the very time we desperately need their hearts, minds, and energies to build more flexible and adaptive organizations. As the study found: “far from becoming more engaged at work, employees increasingly indicate that they feel discontented and less comfortable in their workplaces.”
So what’s the way forward? What capabilities must be built and actions taken?
“A new approach to organizational performance is required. Our findings point to three priorities that, when assessed and appropriately acted upon, will produce significant gains in performance: bringing behaviors to the fore; aligning and improving people practices; and ensuring that the company’s structure (which would include processes and systems) is aligned with its business strategy.”
The timing of “Organizational Capabilities Matter” coincides very nicely with our plans for The Changing Workplace: Are You Ready? on April 18 in Toronto. Our line up of experts and panelists will be addressing many of these organizational capability issues. As conference leader, I’ll be opening and closing the Conference while connecting the critical leadership dots throughout the day.