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The Illusion of Performance

October 9th 2009

Succes

What if I told you that I found the recipe, the exact methodology to drive your business to success by titillating you with some simple yet powerful principles?

Chances are you would stay tuned to find out more, since who could resist an opportunity to enable your business to tower above the rest? Understandably, who would not embrace such an ideal?

But is there truly such a formula? That is a question Dr. Phil Rosenzweig examined in his book entitled “The Halo Effect”.

Following on the heels of “In Search of Excellence”, “Good to Great”, and other “Bestsellers” on the same subject, I was expecting a host of strategic formulas one could use to achieve the ultimate goal: business success.

I devoured this book once I became aware that the author approached the subject from a completely different angle, unlike other books on the matter.

I recommend this book to any executive intent on bolstering performance but who does not believe in made-to-order, quick fixes or any formulas at all for that matter. Everyone will draw their own conclusions after reading it.

Based on this book, I would like to share my opinion on the subject of performance and possible biases when examining business success. I would like to offer a brief reflection on three themes:

  • Operational inertia and the lull between action and results

  • Determinism and chance

  • Performance as a competition between businesses as a whole

Operational Inertia

Let's begin with the popular equation of "Quality CEO = Successful Business". Let's now reverse the equation with "Successful Business = Quality CEO" to get you thinking. It is already a hint of what could lead to a distorted analysis and business perception.

A successful business must automatically be headed by a high-quality leader or management team based on this type of affirmation. However, an immediate association of "Success=Exceptional Management" is, in my opinion, a seductive and straightforward explanation of a business find that is centred on hindsight once the facts have been established.

I am not convinced, for example, that a CEO, regardless of reputation, can remedy significant management damage, any more than a lacklustre CEO can contribute to the sharp decline of a thriving business over a short period of, say, one year, for example. Obviously, it all depends on the company's size and the management environment when the new CEO took over.

For example, here's a reversed scenario: the arrival of a new CEO, who took over less than one year ago, suddenly coupled with remarkable business success credited with, over this short period, propelling the company to the pinnacle of success in its sector.

However, what is often overlooked is that the new CEO replaces a former CEO, who over the previous five years implemented strategic market changes and a significant restructuring of operations, to the point where his popularity fell below a threshold where the only logical solution was to fire him.

Who should be credited with the business' meteoric rise? The new or former CEO? Good question.

These examples convey the first principle to bear in mind when zeroing in on specific business rules or strategies that led to a company's success: the actual business environment and situation in the sector when a transition took place and the arrival of new management must be put into perspective.

One must always assume that a business result is the product of a series of structured actions that preceded it, a sequence of steps that is not necessarily the result of decisions made by the executives who were at the helm when the success came to light.

If there were no structured actions beforehand, this is a fortunate, or even disastrous, turn of events—another interesting perspective.

Consequently, be it large or small, there is always a lull between introducing a strategy, carrying out a plan of action under the strategy, and a measurable result.

A success analysis must factor in this lull to draw conclusions based on the true roots of success before introducing the same courses of action in your own business.

Determinism and Chance

Another component to examine: a constantly shifting business environment that requires company management to monitor changes constantly.

A fast-changing business environment usually places a manager in an open frame of mind "everything true yesterday may no longer apply today" or "the past is no guarantee of the future".

That is where the notion of strategic vision naturally springs forth, and it's another key component: a window on the market or a window of opportunity.

Obviously, the further ahead an executive has to look forward to a clear future, the easier it is to recognize well-established trends in the sector and, in theory, the better a strategic plan of action can be synchronized to maximize success.

However, suppose a plan of action is implemented over a long period of time in an environment of continuous market shifts. In that case, the window of opportunity also shifts quickly or could disappear altogether, with the result that the likelihood a strategic plan will succeed can vary enormously over time.

It was not by "chance" that I mentioned "chance" in the section above. Because in the case of some business successes, chance may play a major role and the notion of probability of a successful plan of action becomes the only reasonable means of actually detecting or accounting for a business' success.

From a probability perspective, it is then challenging to suggest there is a formula for success. The term "formula" is commonly viewed as a structured series of resources and methods.

At the most, one can suggest supervised opportunism and, from there, attribute success more to business attitudes or behaviour that promote success. In other words, introducing a corporate mindset that helps develop conditions that maximize a company's opportunistic behaviour.

The key to success is no longer only the quality of a strategic vision that enables perfect "timing", but, more importantly, a way of thinking. And this comes back to a corporate culture.

My point is not to deny the importance of strategic vision; in fact, quite the opposite. I am only challenging the concept of "formula" viewed as an absolute value that goes on to become, in my opinion, an unpredictable concept for a manager.

When analyzing a business's success, the second principle is to find a few things you can use within your own company: the culture, container, corporate framework in which a formula was implemented may be entirely different from your own, so the same formula will not produce the same results. An identical formula may even cause your situation to deteriorate rather than improve it.

Take, for example, two successful companies operating in the same sector. One where the product culture is an extreme refinement of its characteristics before marketing it and the other where the culture is "penetrate the market with basic features, and we'll complete the rest later on".

Suppose these two companies can generate enormous success and take turns being first in their sector. In that case, there is little likelihood that they could swap their respective corporate strategies and generate the same type of success.

A Machine Combat

A third aspect, let's start with the fact that many competitors populate the business environment in which a company develops. Business success is measured based on its ability to outperform and provide better offerings than its industry competitors.

In this simple context, one can honestly speak of business performance, namely business performance rooted in a close view of a company's market position compared to competitors. We are speaking of, more specifically, the performance of an entity as a whole.

Hindsight analysis of business success is often placed in the hands of specialists in specific fields (marketing, engineering, etc.). At this level, serious biases can interfere when you cross a vertical analytical approach with a business result linked to overall organizational performance.

The Cartesian approach all too often requires us to examine a company's success from a specific, segregated and isolated angle to decipher the management mechanics that are part of the actual context in which they contributed to the business's success.

A business is a multidimensional organization (R&D, marketing, financing, etc.), and it is in the form of an organization that a successful business truly manages to beat its industry competition.

Everything comes down to a machine combat on the business playing field, a whole, whose optimal design of organizational components becomes the key to achieving success.

Third principle: When analyzing formulas that led to a company's success, individual organizational components cannot be isolated and methods extracted from it without completely overlooking the actual dynamics that generated success.

This type of approach could lead to implementing a method that might be negative in your context because the other aspects of your organization may not be at the same developmental phase as those of the company you are analyzing.

The organizational development phase is another fundamental concept required before a strategy that worked in another company can be put into perspective. Its application and potential to improve your company can be assessed.

Lastly, in the commercial arena, a business competes as a "Whole" organization, an organizational "Whole" (culture, technology, strategic vision, methods, ability to adapt, etc.) that a skilled executive must always maximize to accentuate and improve a business' speed of development.

I like using the analogy of a car rally to illustrate how businesses move at different speeds.

Which car poses the most significant threat from your position as a driver if you are travelling at a speed of 120 km/h? The vehicle one kilometre ahead of you travelling at 100 km/h or the vehicle one kilometre behind you travelling at 150 km/h?

Obviously, you will eventually overtake the car ahead of you. However, by then, you will also have been overtaken by the vehicle behind you.

Therefore, constantly improving an organization's speed becomes a prerogative to performing well and implementing the conditions favourable to success.

It should be noted that the car ahead of you was a symbol of success and performance at some point during the race.

This just goes to show that performance can sometimes be an illusion!

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