What would you include on a wish list of business success?
- Profitability and shareholder returns
- Commercially reliable and sustainable
- Successful innovation and change
- Environmentally and socially positive
- Regulatory compliance and safe
- Forward looking with outstanding leadership
- Collaborative teams and colleagues
- Great employer reputation
- Inspiring working environment
- Purposeful and rewarding place to work
My experience is that very few businesses have been through this exercise, very few businesses have really articulated what success looks like, much beyond short term profitability and share price growth.
This is a problem because, the single minded pursuit of short term gain, creates medium and long term risks.
Risks such as: reduced reliability of operations, lack of adaptability, externalisation of costs to society or the environment, regulatory and HSE corner cutting, suboptimal leadership and culture. All of these are risks because failure to put sufficient focus on them will lead to failure.
These risks are not just risks for the businesses, but they are risks for all stakeholders, including society at large and capitalism as a whole. If businesses cannot be successful without compromising the future of society, ultimately it raises questions about capitalism as a model.
Balancing long and short term is a challenge and a discipline, but many of us do master it when we train for sports or learn a language or musical instrument.
The big question is, how do we apply this discipline to business?
How do we create businesses that deliver sustained success, for all of their stakeholders from employees to society? More particularly, how do we create this in shareholder owned businesses?
At Holos we have been working on this question for years, while at the same time studying business from very close up indeed, as we run leadership and team development sessions for some of the largest businesses in the world. We have been able to observe similarities and themes that lead to success, and those that lead to failure. These ideas have been formed not through academic research or theory, but in the crucible of reality.
We have developed a narrative we call the Positive Spiral of Performance. If as a business you can get the things at the bottom of the spiral right, the outcomes will include all of the items on our success check list. And more particularly, for businesses under pressure from shareholders, the profitability and growth will exceed that which could be achieved by more conventional means.
This is the secret that enables some businesses to profit and grow for years on end.
The first items at the bottom of the spiral are “forward looking and outstanding leadership” and “effective intentional culture”.
Whatever performance an organisation achieves it is achieved through the agency of the culture. It is the people and their habits of interaction that will differentiate between safe and risky, innovation and stasis, growth and decline, profitability and loss. People who are excited, focussed, collaborative and open will be more productive and reliable than those who are not.
Culture happens. Put any group of people together for a period of time and we will form a culture. That culture will be disproportionally defined by the dominant individuals in the group – the leaders. Whether that culture is appropriate for the kind of performance your business needs or not will depend on whether that culture is accidental or intentional.
An intentional culture is one that has been deliberately created and curated to achieve the purpose to which the organisation is dedicated and whose leaders are specifically tasked with and skilled at leading culture in order to deliver performance, rather than leading performance directly. The culture of an organisation is articulated through the values and behaviours, or code, that it both lives and aspires to maintain. An example of a really detailed intentional culture “code” is the Netflix culture deck .
At this point it is also worth making clear the distinction between management and leadership. Fundamentally the difference is change. Leaders have the ability to get individuals and cultures to change. Change the way they think, behave and interact. Managers on the other hand work with what they have to get as close to the required results as they can. Both are important in business and both are roles that each of us individually can play.
Leadership is also a choice, you cannot be appointed to leadership, you have to choose to take on the challenge, you have to study it and practice it to become good. Leadership is also non hierarchical, you can lead anyone in any direction in a system, however you can only lead if you can get people to follow.
Which brings us to another of the the foundations of our spiral of performance, “Purposeful and rewarding place to work”. For an organisation to enjoy the benefits of the spiral it must have a purpose and that purpose must offer some external social or environmental benefit. This idea of “purpose beyond profit” is not some hippy idealism, it is the clear foundation of high performance organisations.
The biggest reason why “purpose beyond profit” matters is trust. As Steven Covey puts it – high trust organisations enjoy a “Trust Dividend” where low trust organisations pay a “Trust Tax” (see section titled “organisational trust”). In low trust environments, everything takes longer and is diminished. In high trust environments performance increases.
If we put purpose into the trust equation we can see why it makes such a big difference.
For a business where the purpose is short term profit only:
Trust = reliability+competence+intimacy ÷ self orientation
For a business that has a purpose with social or environmental benefits:
Trust = reliability+competence+intimacy x other orientation
Purpose is the compelling and inspiring “Why” the businesses exists and as Simon Sinek says – successful businesses start with Why. A purpose beyond profit is the social or environmental challenge that the business exists to solve.
For this to work the purpose must also be sincere and fully integrated into the business. This means it must also be measured and a key part of the reward system.
I remember being in a meeting with a senior executive of a drinks company, which had a stated purpose of “helping people celebrate life every day.” He was introducing us to the business and had given all sorts of financial and distribution figures for the European business. At the end I referenced the purpose and asked him how many celebrations of life they had helped to create over the same period, he said he didn’t understand the question.
Purpose alone is not enough, sustainably successful organisations will also have an inspiring vision and a clearly stated mission as well. These terms “purpose, vision and mission” are often used interchangeably, but they have important, separate and distinct meanings and we need to have all three, to give an organisation a “cause”.
A vision is a picture of the ideal destination for the organisation. Critically a vision is not bounded by what we believe to be possible – it is just the place we want to get to. It is the tangible effect of delivering on our purpose.
A mission is the financial, physical and human resources that the organisation will need to have or to acquire in order to achieve the vision and deliver on the purpose. The mission might well include quantification of scale, revenue or profitability.
According to Elon Musk at the launch of the Tesla Model 3 recently the purpose of Tesla Motors is: “To accelerate the transition to sustainable transport”. This statement includes both vision (sustainable transport) and purpose (to accelerate the transition to…) it is easy to see that Tesla will need a certain level of scale and financial success in order to achieve these things – this is the “mission” part of their “cause”.
This “cause” is inspiring enough to engage employees to incredible creativity and dedication and to persuade hundreds of thousands of people to place deposits for a car they probably won’t see for two years. It is also enough to persuade investors that a car company that has only just sold over 50,000 cars in total, has such a bright future that it should have a market capitalisation of about half that of Ford or GM – both of which sell that many cars in a couple of days.
If we put all of this together the secret to having it all in business is:
- A strong “cause” – purpose beyond profit, vision and mission.
- An intentional culture explicitly defined by a “code” – values and behaviour.
- The leadership and processes to make it happen reliably and consistently.
The “how” for all of this is contained in the Holos “Sustained Success Matrix” which helps organisations understand where they are culturally in order to understand what they need to be focussing on in order to get from where they are to a place of sustained success. You can see more on sustained success in this blog post.
At Holos we have been studying change leadership and leadership training in the crucible of reality for years. We know what great leadership looks like and we know the journey to achieve it. We have developed a suite of diagnostic tools to understand where companies and teams are on this journey and how to take them from there to sustained success.
Holos has a wealth of specialist leadership and culture coaches and consultants with decades of experience working with a huge variety of leaders. Holos can help you or your organisation to upgrade it’s leadership to flourish even in a challenging business environment.
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