“Have you talked to [So and So], they are definitely into High Performance Organizations.”
“Did you know [XYZ Company] is also doing HPO now? You should check them out.”
“Well [C.D.] does High Performance – are you working with him?”
Actually those were word-for-word comments I heard at a conference recently. I do know Mr. So and So, also XYZ company, and C.D. and I know that none of them have the statistical data to prove their theories produce bottom-line high performance.
Is there a common definition of an HPO, or common understanding of what an HPO looks like or acts like?
Here are some attempts at an HPO definition:
“A High Performance Work Organization is one that is INTENTIONALLY DESIGNED to bring out THE BEST IN PEOPLE and thereby produces ORGANIZATION CAPABILITY that delivers sustainable LEADERSHIP BUSINESS RESULTS”
“A high performance organization is a company that is considered more successful than its competitors in areas such as profitability, customer service, and strategy.”
“Organizational and people capabilities drive performance and enable strategy.”
Each of the above statements is well worded, thoughtful, maybe even brilliant – but where are the statistics to prove what they are saying is true? There are as many definitions for “High Performance” as there are consultants on the subject. Today’s claims need to be backed by data beyond any personal case studies each of these parties can produce.
Other researchers have written about high performance, but have based their studies on financial performance and compared their findings against the competitors that did not fare as well. There is also a multitude of ways to look at financial data. Is the research comparing the same financial parameters for each company studied?
Another weakness: financials can be skewed to look good for the stock market. I know of one CEO who asked all mangers of all divisions to report any results in excess of the current year’s budget to the following fiscal year – coincidentally what was to be his first full fiscal year as CEO. Downsizing and re-engineering also may immediately increase the bottom line, but do not account for the lost morale, weakened culture, customer service erosion, or employee attrition that follow in the aftermath. And most importantly, longer term downsizing nets out with no bottom-line improvement to most companies. Much of this research ignores the intangibles of an organization, which also determine the sustainability of organizational performance.
Where are the facts that explain High Performance and prove sustainability?
In an effort to understand this phenomenon, Dr. André de Waal, academic director of the HPO Center and associate professor at the Maastricht School of Management, conducted a study of more than 290 international studies published over a period of 30 years. The most often observed characteristics from these studies were then tested world-wide in another study of 1,470 organizations. For a very comprehensive look at the scientific methodology and academic responsibility behind the research, go to HPO Center Study Academic Responsibility .
This exhaustive study determined that there were five factors and 35 sub-factors associated with high performance. Not surprising is the relationship between these factors and the intangible factors NYU’s Baruch Lev has researched relating to shareholder value (Intangibles: Management, Measurement and Reporting, Brookings Institute Press, 2001).
Here are the results of the de Waal study:
The Five Factors (correlating with the superior bottom-line results listed below)
- Quality of Management
- Openness and Action Orientation
- Long Term Orientation
- Continuous Improvement and Renewal
- Quality of Employees
The Bottom Line Results (the range between HPOs and others in the study)
- Revenue growth +4-16%
- Profitability +4-40%
- Return on Assets (ROA) +1-12%
- Return on Equity (ROE) +9-25%
- Return on Investment (ROI) +15-26%
- Return on Sales (ROS) +2-18%
- Total Shareholder Return +4-42%
Non-Financial Performance (reported by HPOs in the study)
- Higher Customer Satisfaction
- High Customer Loyalty
- Higher Employee Satisfaction
- Higher Quality
- Better Complaint Handling
Because of the research done and the careful methodology behind it, a High Performing Organization may be defined as follows:
“High” can be denoted only when a company is compared to its peers, competitors, or a comparable organization.
“Performance” needs to be over a long enough period that the company can sustain itself through the good and bad. Five years was chosen because the normal life span of a company is 12 years. Also, a company can have a lucky strike of several years, but cannot sustain itself consistently through the environmental ebbs and flows.
The proof of this statement is validated by real data.
For a more in depth look at the statically validated study visit the HPO Center. The about us tab has much of the information.
For a whitepaper that includes a whole systems look at the HPO Framework principles, and the processes for results please go to HPOs Today by Dave Hanna, André deWaal and Jeff Liker.