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Companies don’t grow until its people grow.  We need to think about companies as delicate eco systems where we intentionally cultivate a trusting adaptive culture of growth, creativity, and innovation.  A place where everyone feels safe to make suggestions, question the status quo, make mistakes, learn from them and grow.

Organizational Culture represents a great opportunity for competitive advantage because it is a product of the attitudes, behavior, and practices of that unique group of people.  Business processes, products, and services can be copied but the prowess of execution is directly linked to the people who carry them out and is impossible to replicate.  A highly functional and adaptive team can overcome the challenges that are thrown at them and that’s the kind of example that Southwest Airlines demonstrates.  They were the first to recognize the importance of airplane “turn-around time” at the gate to their overall performance.  Now it’s a Key Performance Indicator (KPI) used by the entire industry.  Because of Southwest’s unique culture, none of the major airlines outperforms them on this performance measure (or overall profitability for that matter).

In start-up companies, the culture can be directly linked to the founder but as it grows those values and priorities can be diluted or lost.  If the organization doesn’t actively cultivate the desired culture, it can become dysfunctional and toxic.  In situations where dysfunction is widespread, then it doesn’t matter how good the strategy or business model are because the organization will not be able to execute the strategy or meet its goals.  The saying that culture eats strategy for lunch is true.

The goal is to nurture an organizational culture that is effective (doing the right things well) and high performing.  As leaders it’s our responsibility to empower our people to be their best selves.  To be engaged, enthusiastic, and committed to our cause.  To evoke this type of behavior, we have to understand more about what makes people tick.  To trigger the desired behavior we need to tap into our emotional energy.  For example, Advances in neuroscience have enabled researches to clearly identify three management practices, as explained in a July 14, 2014, Strategy + Business Journal article entitled “Three Secrets of Organizational Effectiveness.”

  1. Give frontline workers more autonomy.
  2. Clearly explain “why” the work they do is important.
  3. Improve the recognition and rewards for employee contributions to acknowledge that we truly value their work.

Autonomy is important because micromanagement, the default behavior for many managers, puts people in a threatened state.  Those feelings of fear and anxiety puts employees in a fight-or-flight state and interferes with their performance.  This highly threatened state causes them to react quickly and emotionally without thinking things through.  Employees experience a reduced ability to control their own behavior, pay close attention to their work, develop creative ideas, plan, or effectively solve problems.  The research found that even having the perception of increased choice activates the reward-related circuits in the brain making people feel more at ease.

Understanding why their work is important helps to evoke empathy that improves customer and colleague relationships.  It enables employees to intellectually connect with the organizations goals and improves their follow through.  It also helps companies deploy the cognitive power of altruism, which research has shown makes people feel happier thereby expanding their sense of intrinsic motivation.

Celebrating a job well done, while keeping the bar high.  It is important to recognize employee success in a personalized, skillful, and considered way.  Neuroscience has shown that when a manager publicly recognizes an employees’ achievements, it lights up the same regions of the employee’s brain as would wining a large sum of money and makes us feel good.  Rewards of all kinds tend to release the neurotransmitter dopamine, which makes us feel good and encourages us to repeat the behavior.

Of course these are just three management practices, when there are a whole host of other issues that must be addressed in running the day-to-day operations of any organization.  Businesses need a comprehensive framework in which to operate.  One that provides a holistic solution.

McKinsey & Company defines organizational health as the ability of an organization to align, execute, and renew itself faster than its competitors.  They call it the ultimate competitive advantage.  As you might imagine, given that their client base is made up of big companies that can afford to pay consulting fees that are six figures and higher, their approach to organizational health is comprehensive and fairly complex making it difficult to apply to smaller organizations.

Instead, I’ve developed a framework that is more concrete and designed with small to mid-sized companies in mind.  When combined, all of the components are designed to accomplish the same results and easier to apply.  The capacity for self-renewal is key for long-term organizational success.  It means transitioning to a mindset of perpetuity which is dramatically different from living for short-term rewards.  The base of the framework includes components that ignite the power of the human spirit and ensure a strong organizational health foundation and an effective high performing organizational culture.

For example, the framework recognizes, at it’s core, the need for Trust above all else.  It also acknowledges the necessity to be Customer Centric, without it here is no point in starting up a business.  Additionally, if you really want people to show up for work with their hearts and minds engaged, then tap into their sense of purpose and desire to make our world a better place, which is the driving force behind the Direction Motivates component.

The Organizational Framework component recognizes that how we organize people matters.  The traditional “top down” organizational chart has been proven to create information and resource silos and ongoing power struggles that amount to varying degrees of civil war.  Instead, we propose a horizontal structure that emphasizes the importance of a perpetual customer feedback loop.  It puts decision making power in the hands of front-line employees.  It promotes sharing information, while making the overhead components of the business as lean as possible and encourages outsourcing functions that can be better served by external experts.  Additionally, it positions the C-suite team to objectively evaluate the organization’s resources and identify, seize, and redeploy those resources as appropriate to ensure their long-term success.

The MIT Center for Collective Intelligence has reported that the number one way an organization can increase its collective intelligence is to increase their overall level of social perceptiveness or social intelligence.  Suggestions included elements of organizational design – how you group and link tasks, and how you motivate people – including nonhierarchical designs.

The Management Methods component incorporates proven approaches for engaging and developing employees to realize their full potential.  The underlying concept is that companies don’t grow unless and until its people grow.  The myriad of management processes are designed to help employees stretch their capabilities and flourish within the organization.  It recognizes the importance of the individual and the need for personalized support.

In a Forbes article, they quote a Gallup report that estimates that actively disengaged employees cost US businesses between $450 billion to $550 billion per year in lost productivity.  Overall, the findings indicate that 70% of American workers are not engaged. The article ends with a quote from Gallup CEO Jim Clifton: “…The single biggest decision you make in your job – bigger than all of the rest – is who you name manager.  When you name the wrong person manager, nothing fixes that bad decision.  Not compensation, not benefits – nothing.”

Inc magazine gives us an answer for that with a quote from Kevin Kruse, author of Employee Engagement 2.0: “If you want to drive employee engagement, you need to hire managers who communicate well and are able to create a culture of growth, recognition and trust.”

The importance of using progressive management practices can’t be overstated.  Micromanagers and other poor performing leaders prevent their teams from doing their best work.  As a result, their teams begin a downward spiral, pulling the rest of the organization down with them.

The Lifelong Learning component recognizes that our world is constantly evolving and for the organization to not only survive but thrive depends on every person in the organization continuously enhancing their skill sets.  This component is another essential ingredient in the foundation of the framework that supports the organizations self-renewal capabilities.   A high level of commitment to learning has been positively associated with dynamic capability development.

In addition to the need for continuous learning, the entire workforce must have an Adaptability Mindset.  Inability to change or adapt is a kiss of death to any species, including businesses.  This component is another essential ingredient in the foundation of the framework that supports the self-renewal capabilities.

Creativity & Innovation is the lifeblood of any organization.  It relies on all of the other organizational health foundation components already being in place for employees to have the confidence and mental clarity necessary to be creative and take a chance that any given innovation effort isn’t fruitful.  When people are in fight-or-flight mode, they literally lose the creative and logical functions of their brains.

Evolve or die!  If you examine the history of a company that is 100 years old or more, often you will discover little similarity between the products and services that they offered initially compared to their current offerings.  To remain relevant, organizations must change at the pace of the world around it.  These days the rate of change is exponentially faster than ever before leaving very little margin for error.  Small companies like Netflix can make corporate giants like Blockbuster become extinct.  There are no sacred cows.  Every organization is at risk.

Together these components not only lay a strong organizational health foundation that empowers its workforce to stretch its capabilities and flourish in good times and challenging ones too.  It also empowers it’s leaders to consciously and deliberately cultivate an organizational culture that will thrive.  The Business Design 2.0 framework provides a type of checklist so that all essential elements are addressed and can be easily reevaluated to ensure the organization stays on the right track rather than be derailed because they were so busy that they didn’t realize they had taken an unwanted detour.

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