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Michael Mankins and Dan Schwartz are partners with Bain & Companys Organization practice. They are based in San Francisco and Washington, DC, respectively.
Sustained business success requires a high-performance organization. For most executives, the challenge in building such an organization is determining where to start.
Should a company begin by setting clearer priorities? Or would it get better returns from hiring new talent, creating new incentives or changing decision-making processes? Any one of
these efforts might work, but each would consume time and other scarce resources.
In our view, the starting point depends on three
factors: the organizations current performance,
its long-term objectives and its competitive situation. In the price-sensitive agricultural commodities industry, for instance, success requires
that an organization be tuned to keeping costs
low. In computer software and services, on the
other hand, customers care less about low prices
and more about customization and ease of integration with their other systems. A software organization that consistently delivers innovative
and distinctive products will generate higher
levels of profitability and growth.
scope
Figure 1: Theres a direct relationship between organizational outcomes and business performance
More outcomes in the top quintile raise the odds
of business performance leadership
60%
60%
52
40
40
20
20
23
Average:
17%
9
0
No outcomes
No outcomes
Note: Business performance leaders are defined as companies that are consistently in the top 20% over a five-year period in terms of growth, profitability and shareholder returns
(or an equivalent metric for private or unlisted companies)
Source: Bain Organizational Navigator Market Research Survey, 2015 (n=665)
that has zero outcomes in the top quintile. Similarly, a company that has no outcomes in the
bottom quintile has a significantly higher chance
of being a business performance leader than a
company with some outcomes in the bottom
quintile (see Figure 1).
Even with a great strategy, a company wont succeed unless it executes well. An organization
has to align closely with its strategy, and this is
particularly important when the strategy changes.
To bring about Ford Motor Companys remarkable turnaround starting in 2006, the senior
management team under new CEO Alan Mulally
set a strategic path that included divesting or
shedding noncore brands, such as Aston Martin, Jaguar, Volvo and Mercury, and accelerating
development of common vehicle platforms for
global markets. Mulally realized he would need
to realign Fords organization to execute the
new strategy.
To consistently grow, companies are often required to adjust their organization to a dynamic
and competitive environment. The best organizations are able to adapt quickly.
Figure 2: RAPID clarifies decision accountability by assigning owners to one of five key roles
Input
Recommend
Recommend a decision
or action
Decide
Make the decision
Commit the
organization
to action
Agree
Perform
Cost leaders understand how to streamline and minimize complexity in their organizations. They take steps to simplify the
management structure where possible
and streamline core processes, all with
an eye to efficiency and productivity.
Accelerators
Foundational
41
Aligned
Our organization
allows us to
realize our
strategic objectives
and purpose
38
Adaptable
... is externally
oriented and able
to adjust to
changing business
requirements
Capable
... deploys people,
processes and
technology to
create competitive
advantage where
it matters
43
Efficient
... is streamlined
to realize
benefits of scale
and scope, with
minimal
complexity
38
66
Effective
... allows us to
make and
execute critical
decisions
effectively
80
Engaged
... inspires our
people to go the
extra mile for our
customers and
colleagues
ies did not align with how the company actually created value, causing confusion and dysfunctional behaviors, and resulting in
duplication and excess overhead.
Asia-Pacic
Europe,
Middle East
and Africa