In this article featured in The McKinsey Quarterly published by McKinsey & Company, Colin Price explains why senior executives will better balance people and priorities by embracing the paradoxes of organizational life. Here is a brief excerpt from it. To read the complete article, check out others, and sign for email alerts, please click here.
Source: Organization Practice
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I often ask business leaders three simple questions. What are your company’s ten most exciting value-creation opportunities? Who are your ten best people? How many of your ten best people are working on your ten most exciting opportunities? It’s a rough and ready exercise, to be sure. But the answer to the last question—typically, no more than six—is usually expressed with ill-disguised frustration that demonstrates how difficult it is for senior executives to achieve organizational alignment.
What makes this problem particularly challenging is a number of paradoxes, many of them rooted in the eccentricity and unpredictability of human behavior, about how organizations really tick. Appealing as it is to believe that the workplace is economically rational, in reality it is not. As my colleague Scott Keller and I explained in our 2011 book, Beyond Performance, a decade’s worth of data derived from more than 700 companies strongly suggests that the rational way to achieve superior performance—focusing on its financial and operational manifestations by pursuing multiple short-term revenue-generating initiatives and meeting tough individual targets—may not be the most effective one.
[Note: Please see Scott Keller and Colin Price, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, Hoboken, NJ: John Wiley & Sons, 2011; and “Organizational health: The ultimate competitive advantage,” mckinseyquarterly.com, June 2011.]
Rather, our research shows that the most successful organizations, over the long term, consistently focus on “enabling” things (leadership, purpose, employee motivation) whose immediate benefits aren’t always clear. These healthy organizations, as we call them, are internally aligned around a clear vision and strategy; can execute to a high quality thanks to strong capabilities, management processes, and employee motivation; and renew themselves more effectively than their rivals do. In short, health today drives performance tomorrow.
Many CEOs instinctively understand the paradox of performance and health, though few have expressed or acted upon it better than John Mackey, founder and CEO of Whole Foods. “We have not achieved our tremendous increase in shareholder value,” he once observed, “by making shareholder value the only purpose of our business.”
In this article, I want to focus on three other paradoxes that, in my experience, are both particularly striking and quite difficult to reconcile. The first is that change comes about more easily and more quickly in organizations that keep some things stable. The second is that organizations are more likely to succeed if they simultaneously control and empower their employees. And the third is that business cultures that rightly encourage consistency (say, in the quality of services and products) must also allow for the sort of variability—and even failure—that goes with innovation and experimentation.
Coming to grips with these paradoxes will be invaluable for executives trying to keep their people and priorities in balance at a time when cultural and leadership change sometimes seems an existential imperative. Just as a circus performer deftly spins plates or bowls to keep them moving and upright, so must senior executives constantly intervene to encourage the sorts of behavior that align an organization with its top priorities.
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Colin Price leads the firm’s global Organization Practice. For more than 20 years he has helped executives tackle their most important organizational challenges, including performance transformation, behavioral change, post-merger integration, and organization design. He has advised some of the world’s largest corporations and major public-sector organizations.
Colin’s has directed multiyear change programs and turnarounds that have substantially improved companies’ financial performance and underlying organizational health; supported major mergers that have achieved much greater synergies than anticipated; delivered significant savings through cost-cutting and reorganization efforts; and worked with one of the world’s largest health systems to design and implement a large-scale “social movement” to galvanize the system behind a quality strategy.
In addition to his McKinsey roles, Colin holds a visiting professorship at Bath University in the UK, focusing on organizational behavior and leadership, and is an associate fellow of Oxford University.