Measuring Excellence
There are three critical components of Excellence in a business context – STRATEGY, LEADEARSHIP AND CULTURE. These combine to provide an indicator of the relative position of the organization in journeying on the road to excellence. It is widely acknowledged that perfection is unattainable, so excellence is striving to be the best version of yourself every day.
The relationship between these is in most organizations is complex with multiple variables and moving parts. One way of understanding the interactions is to compare Excellence in business to a sailing vessel. When you see a sailing vessel moving in the sea it would appear to have wind in its sails, a direction to move and someone steering the ship. This is not unlike any business. The vessel would appear to be excellent – making the best of the conditions on that day to be the best version of itself.
The three components are represented by the three intersecting circles of LEADERSHIP. STRATEGY and CULTURE.
Breaking the individual interactions into separate ideas and reverting back to the analogy of the sailing vessel – consider the interaction between LEADERSHIP and STRATEGY in the absence of a great CULTURE.
When you have great LEADERSHIP combined with a solid STRATEGY and there is a toxic or nonexistent CULTURE then you become BECALMED. In sailing terms this is when there is no “wind in your sails”. The greatest ship’s captain can do nothing when there is no wind filling the sails. The vessel is essentially stuck with no way of moving. Extensive research has shown that in the organization, the great leaders with a clear vision and direction struggle to get organizations moving when the culture is missing or toxic.
When you have a great CULTURE and strong LEADERSHIP operating in the absence of a clear STRATEGY then the vessel is DIRECTIONLESS. The STRATEGY component of excellence in an organization is critical as it provides a direction for the team. There is an old saying that says if you “fail to plan then you plan to fail”.
Unfortunately, many large organizations tried to make planning a stand alone activity unrelated to actual events around them. This led to many “annual strategy” sessions yielding a long winded plan that gathered dust on employee shelves from year to year whilst management ticked the box to say “strategy done”.
STRATEGY in an organization needs to be a living working snapshot of the general direction of movement whilst being flexible and adaptable.
Using the sailing vessel idea, and organization operating without a strategy is relying on leadership to steer the ship when they are unsure of the direction in which to head.
Unfortunately, many large organizations tried to make planning a stand alone activity unrelated to actual events around them. This led to many “annual strategy” sessions yielding a long winded plan that gathered dust on employee shelves from year to year whilst management ticked the box to say “strategy done”.
STRATEGY in an organization needs to be a living working snapshot of the general direction of movement whilst being flexible and adaptable.
Using the sailing vessel idea, and organization operating without a strategy is relying on leadership to steer the ship when they are unsure of the direction in which to head.
The last of the three intersections occurs when organizations have a clear STRATEGY and a rich and robust CULTURE with an absence of LEADERSHIP.
In the sailing vessel terms, this ship would be rudderless. The team all understand the direction of movement (the STRATEGY) and all buy into the idea (CULTURE) but lack the means to move the vessel (RUDDERLESS).
It is the role of LEADERSHIP to steer the ship in the intended direction whilst following the strategic direction and bringing the team along for the journey. When this is missing, the greatest strategic plan and the most engaging committed teams cannot steer the organization in the correct direction without the input and management of the LEADERSHIP.
When all the three components, LEADERSHIP, STRATEGY and CULTURE align with one another that is where the magic happens. When seeing a sailing vessel moving along a path with clear direction and control with wind in its sails then it is excellent.
Organizations that can combine the elements of excellence together get to consider the central crossover between these components which is “RETURN ON EXCELLENCE”.
Jack Welch is often quoted as saying “The soft stuff is the hard stuff”. There have been many authors who have written about the difficulty of measuring the “soft stuff” in business. The BEI is a tool that provides a measure of the “soft stuff”.
Most organizations have quite extensive financial reporting systems (the hard stuff), whilst very little to report on the journey to excellence (the soft stuff). The most common measure of performance is financial. The challenge with financial measures is that they show a point in time that is often unrelated to the activity that brought the organization to that point.
What does that mean ? Most businesses have sales cycles that are not instantaneous. Typically, this could be 6-12 months of activity before getting the sale and the corresponding revenue. The financial measures at the end of the sales period reflect activities that took place 6-12 months prior. If there is now a decline in revenue and profits, actions being taken now may only yield results in 6-12 months’ time. These are often known as lagging indicators due to the time lag between activity and result.
The Business Excellence Indicator measures non-financial aspects of the business that are seen by many as a leading indicators of company health and performance. The areas measured would indicate on a relative scale the current “health” of the business and areas to potentially improve to increase the leading indicators. The idea of using leading indicators of performance is that improvements in these should “lead” the financial or “lagging” indicators and bring them along for increased future performance.
