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June - 2005 - issue > In My Opinion
Developing a high performance organization
Dev Ittycheria
Tuesday, May 31, 2005
In real-estate, there’s a common saying that the three most critical factors that drive value of any property are location, location, and location. In building a business, the corollary is that it’s all about the people, people and people. Lou Gerstner, the former CEO of IBM, states that there are four kinds of people in this world:

1. Those who make things happen.
2. Those to whom things happen.
3. Those who watch things happen.
4. Those who don’t even know
things are happening.

In my view the critical success factor for any business, small or large, is the capacity of its leaders to develop a high performance culture that is intrinsic to the organization.

The organization must create an environment where people in the first category are recognized, encouraged and amply rewarded. To be clear, there are people in the first category that can be a negative force in a company – they fiercely resist change and actively work against the goals of the organization. These people must be quickly identified and eliminated. That aside, a company that can attract, develop and retain a disproportionate number of people in the first category will produce outstanding results.

A high performance organization is an environment where employees go beyond the traditional parameters of the employee-employer structure. In a high performance organization employees are insanely dedicated to the success of the company, deeply passionate about winning, upset when they lose, and do whatever it takes to get the job done. Simply said, it is an organization that wants not to just do the right things, but to do them faster, cheaper and better than the competition. Now this probably sounds like I’m stating the obvious. Frankly, I am. But in reality saying and doing are two very different things, and the latter is far more difficult.

The primary obstacle to developing a high performance organization is tolerating mediocrity. While no one will ever stand-up and say they will accept mediocre performance or people, the reality is that it is easy to let mediocrity seep into the organization. Let me provide a few examples:

The protected employee: Most of us have witnessed a situation where a founder or key employee, by virtue of their relationship and history with the company, is managed by a different set of rules versus everyone else. This does wonders for morale across the organization due to the lack of integrity in objectively evaluating performance.

The sales person who always promises to get the big deal next quarter: Sales is the easiest function by which to dispassionately measure performance. However, sales people have an innate ability to generate fantastic reasons for why they did not make their number. Unfortunately, management, with their own pressures to deliver the number, tends to aggravate the issue as they believe there’s no chance to close the big deal if they fire the sales rep, hence it’s safer to hope for a turnaround versus starting from scratch with someone new. The sad truth is that in most cases there never was a chance to close that big deal, and the employee is ultimately fired many quarters too late, eating into cash and compounding the negative impact on the business.

The middle-manager who spends more time “managing up”: It is human nature to like employees who praise you and tell you what you want to hear. However, it’s disastrous if you let that person believe managing up is more important than managing their department and delivering on the commitments the company expects. The manager’s employees will quickly realize that this person is not motivated by the success of their team and the larger organization in general, but rather by their own self-interests. A manager who loses the confidence of his/her people will never build or contribute to a high performance organization.

A compensation plan that does not reward outstanding performance: If there is a marginal difference in pay between adequate and outstanding performance, then the organization is preordained to deliver mediocre results. Employees in the first category always thrive to work in an environment where they are encouraged and paid to overachieve.

If mediocrity is tolerated, then it will quickly seep into the organization faster than anyone can expect. The organization will lose the employees they most need to keep, because nothing is more discouraging than working in an environment that does not foster a culture where a winning attitude is pervasive, excellence is praised, and opportunities for leadership are boundless.

At the end of the day the responsibility for developing a high performance organization sits with the CEO. Everyone in the company will take cues from the CEO. The CEO must be able to communicate a sense of urgency, demand so much of the organization to the point it almost becomes unreasonable, hold people accountable, make certain that there is high integrity in how people are treated and evaluated, and devise a compensation plan to exponentially reward outstanding performance.
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