The first installment of this article looked at how the theory of business relates to the tasks, practices and skills an executive needs to effectively organise a business to focus on delivering value to its customers.
It also concluded that the effectiveness of an executive can be achieved when the theory of business is used as the foundation to execute tasks that deliver the objectives, enabled by skills and practices that can be acquired and applied. Through this, the executive becomes a true leader in the organisation.
However, these were the internal aspects of an organisation. In this installment, we will consider the all-important external aspects. In particular, what are the drivers of organisational results and performance as these are important measures of customer satisfaction.
The Spirit of Performance
An executive’s main task is to deliver results. Financial and business objectives along with a performing workforce are the key tasks that an executive needs to execute. The output of these tasks in combination reflects the organisation’s results.
In the spirit of performance, the executive has to strive for the best possible economic result from the resources currently employed or available. Along with this, it is also expected that with sound financial and business performances, executives need to innovate, develop a workforce that is driven by the right values and also deliver corporate social responsibility goals for the common good .
There is no single measure of performance. Manufacturing outputs or annual gross profits alone are not an adequate measure of performance. A company needs to measure the performance of various aspects of the organisation, for example the percentage of market shares, innovativeness, productivity, talent development, operational excellence and quality as well as satisfactory financial results.
These diverse measurements of performance are all crucial to an organisation’s results and to its survival. Ultimately, the most important aspect of organisational results is the view from the outside - that of a satisfied customer.
Executives acquire skills and knowledge through experience as well as practicing leadership principles throughout their career. These in fact become essential requirements not only to formulate the theory of business but also to drive and deliver the agreed outputs as the organisation’s results.
These results are not only important for the management team but also for the workforce to drive and motivate them towards performance excellence; for the stakeholders such as the customers, shareholders, the board members of the organisation as well as the public. This drives positive social impact that serves the common good.
To achieve all of these, an effective executive must be a person that can focus on results and build on the strengths of the team and lead everyone in the organisation by having integrity of character and exhibiting ethical code of conduct, always.
The executive therefore has to develop an organisation that inculcates the spirit of performance in its DNA and leads by example, doing the right things and getting them done right (possibly the first time). The executive can use the theory of business to create a sense of urgency and formulate the organisation’s vision and mission, focusing on objectives, executing tasks that will deliver the results and driving change where required through an exemplary demonstration of leadership.
A competent leader will be able to perform all internal and external aspects of an effective executive.
An organisation that practices the spirit of performance would be an organisation that builds itself on its strengths, overcoming its weakness through knowledge and development and converting them into opportunities and minimising threats with the strengths and pursuit of opportunities.
All efforts to become a performing organisation start with making the right decisions, clearly communicating them throughout the organisation and assigning resources that are responsible and accountable as well as having knowledgeable peers available for consultation and a management team that is fully informed of important activities in the organisation.
An executive, therefore is also a leader that establishes the development of leadership at every level of an organisation, where leadership is indeed the effort to lift an individual’s vision and outlook to a higher plane, raising performance to a higher standard and developing the necessary skills and practices that are the required characteristics of a leader.
Innovation and Entrepreneurship
Let’s just quickly take a broad look at organisations that have been established years before the 1990’s (for example General Electric, Ford, IBM and Apple) and organisations that established themselves, say, somewhere around the 2010s (for example Tesla, GRAB, Netflix, Flexport, TaoBao). We can quickly agree that there is a common factor for both categories of organisations, as shown in the diagram below.
In both categories, organisations are established through the tremendous strength of entrepreneurship and through this sheer strength, it could survive in the first ten years of establishment. The entrepreneur is seen as the leader that drives the organisation towards growth and sustainability and the successful ones can even achieve celebrity-like status in the business world. Good examples are leaders such as the late Jack Welsh and Steve Jobs or leaders like Mark Zuckerburg and Elon Musk.
The website Investopedia defines an entrepreneur as ‘an individual who creates a new business, bearing investment risks and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures’.
Entrepreneurs play a key role in any economy by growing the small and medium industry sectors of a country. An entrepreneur uses ideation, skills and intuition where necessary to anticipate needs and bring good new products and services to market. Entrepreneurs who prove to be successful in taking start-up risks are rewarded with profits and continued growth opportunities. Those who fail, suffer losses and become less prevalent in the markets. Commonly faced with obstacles, entrepreneurs need to continuously solve problems whilst building their companies and achieving the performance goals that can leapfrog them to the forefront of the market that they compete in. The three that many of them cite as the most challenging are as follows:
- Overcoming bureaucracy
- Hiring talent
- Obtaining financing
Conventional wisdom asserts that entrepreneurship and innovation go hand-in-hand. The reality is that in organisations this doesn’t exist, and growth may stall. Therefore, this perception is only applicable to a select few organisations, led by innovative entrepreneurs who are able to achieve phenomenal growth.
Peter Drucker’s opinion is however to the contrary. He theorises that entrepreneurship, innovation and improvements are tasks and duties that every organisation can and must perform. These are skills and practices that can be learnt, acquired and applied.
The question is therefore how an established organisation can be entrepreneurial and both innovative and striving for improving simultaneously. This points back to the Theory of Business that was explained in the previous installment, where an executive establishes focus and with the entrepreneurial spirit , drive growth through innovation and/improvement. Through focus, a structure can be established. With focus, efforts can be driven and plans executed.
Without a clear structure in an existing organisation, the focus will be diluted by the demands of daily operational needs and execution to deliver products or services to customers.
Should innovation be the focus, the structure should enable a team to focus on innovating products and services without having the burden of solving problems that impact the existing customer base.
If improvement is the focus, the structure should enable a team to focus on improving existing products and services while being free from day-to-day operational problems that the company faces in order to deliver the products or services.
The structure, as simple as it may seem, gives room in terms of time and effort for resources to focus on the objectives to innovate or improve and the outcome of that would then require the entrepreneurial skills to convince the stakeholders (both internal and external) and execute the changes that will bring about the growth and satisfaction that is expected by customers.
If such a structure is not established, then an organisation will always be in ‘crisis’ or ‘fire-fighting’ to deliver the goals and objectives and that in most events are near term objectives.
Such a structure should also be established in a way that the leaders responsible for innovation and improvement reports to the highest authorities within the organisation. The leader chosen to be responsible has to function as an entrepreneur, working towards the future of the organisation whereas the leaders responsible to deliver products and services based on existing offerings have to be management focused, sustaining in the present business environment.
Two good examples that come to mind, the first being IT giants such as Microsoft and Apple, who have teams that lead and drive innovation and new product development and the second is Toyota or General Electric, who are improvement-driven and have dedicated teams focusing on continuous improvements. With the right structure in place, an organisation can establish the right measurement, execution and resource plans ensuring that in all aspects of focus, the spirit of performance and value creation for the customer is always maintained.
Social impact and serving the common good
Every organisation that is established, regardless of sise and stature, has an impact on society and can for that matter serve the common good. Larger organisations that have clearly defined visions and mission statements will also incorporate their corporate values into how they choose to serve this common good.
These corporate values are one common way an organisation demonstrates its commitment towards social impact and the common good. Peter Drucker, in his work, summarised that there are two types of social impact:
- Negative ones that an organisation creates
- Social ills that are turned into business opportunities
Both types of impact are important; the first deals with what an organisation does to harm society, and the second with what an organisation can do to help society. Organisations need to understand and address situations wherever either occurs. These can range from an internal management evaluation of social impact to a larger extent where a legal evaluation has to be taken.
The first type of impact is where., in most cases, leaders ignore their corporate responsibility and act in a manner that results in negative social impact. We have seen and read about leaders that deceive entire organisations, resulting in the collapse of the entire company and the loss of livelihood of its employees.
One example is the collapse of Enron, once hailed as the most innovative organisation by Fortune magasine, where the leadership of the organisation then consciously developed and allowed for an unethical culture to thrive and led to its demise. Similar examples were also seen in organisations in the ASEAN region.
Organisations must focus on their mission while eliminating negative social impact, and take a proactive interest in the common good. Take lessons from organisations such as General Electric or Johnson & Johnson’s where the leadership is groomed to understand their impact to society and to the common good.
A quote from Jack Welch sums up this philosophy:
An organisation’s culture is not about words at all. It’s about behaviour and consequences. It’s about every single individual who manages people knowing that his or her key role is that of chief values officer.
On the second point, the best example that comes to mind is the success of new businesses such as Grab and Uber. These are businesses that evolved due to social ills, here being the unscrupulous and unethical owners of taxi companies that have little regard for the satisfaction of their customers. This frustration can be felt worldwide and many individuals collectively felt not just unhappy but also unsafe with the incumbent service providers due to the lack of values and consideration of their impact on society and the common good.
Companies like Grab and Uber were able to disrupt the industry by introducing a platform that connected customers to service providers whilst improving the overall service performance and reducing the risk to customers. This inadvertently changed the behaviour of taxi drivers and their attitude in terms of service performances to the customer. Today, these companies are household names and their presence in the region has shown how social ills were seen as opportunities to be improved, forever changing the industry globally.
Expanding on the realms of creating and serving the common good is an organisation’s corporate social responsibility (CSR) effort. The COVID-19 pandemic has shown how many organisations in the supply chain and logistics sectors have taken the lead in supporting the healthcare sector by ensuring the timely procurement and supply of personal protective equipment globally.
Management of these organisations made critical decisions to support the common good by helping the community. Many organisations volunteered their time and the time of their workforce, supporting the work of for the community by lending their executive expertise to help communities to address the impact of the pandemic.
The Change Constant
Executives that lead an organisation by upholding the spirit of performance, with an emphasis on results that impact the customers, whilst establishing an organisation that is structured by managers that ensures the performance of current products and services are delivered.
The only constant in life is change ~ Heraclitus.
Executives must not only focus internally on the theory of business but also on external drivers of results, where the end product or service experienced by the customer is what ultimately matters. Most importantly, the effective executive needs to take the opportunity to be proactive, understanding and seise advantages of emerging business and environment trends. By doing so, they become an effective change leader and driver of change.
Executives need to demonstrate leadership and adopt practices that enable adaptation to new realities of a global, knowledge-based, information-saturated society and simultaneously strive to achieve a high spirit of performance.