The Hudson Highland Center for High Performance recently completed the largest and most in-depth global study ever done of the factors that accelerate or stifle high performance. The alarming conclusion: only 10 percent of knowledge workers are part of a high-performing workgroup, one that makes money for the company and is creating a new product or service.
Contagious Success reveals Susan Lucia Annunzio's proven strategies for identifying, nurturing, and replicating business units that are already high performing. These workgroups tend to be ignored while senior management focuses on fixing its lowest performing units. But Annunzio argues for the opposite strategy: Focus on the groups that are doing the best work in the organization, learn their secrets, and help spread their expertise to the average groups.
Annunzio focuses on groups, not individuals, because even a great individual can't succeed in a weak environment. By using the high-performing groups to improve just the top 20 percent of the average performerswhat Annunzio calls “moving the middle”a company can achieve dramatic, sustainable growth in revenue and profits.
This is a book for leaders who want to unleash the hidden potential in their organizations.
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About the Author
Susan Lucia Annunzio is chairman and CEO of the Hudson Highland Center for High Performance, a subsidiary of Hudson Highland Group, Inc. The author of Evolutionary Leadership and coauthor of Communicoding, she advises senior executives around the world and is an adjunct professor of management at the University of Chicago Graduate School of Business.
Read an Excerpt
Contagious SuccessSpreading High Performance Throughout Your Organization
By Susan Lucia Annunzio
Chapter OneIt's the Workgroup
Success is contagious. That's the premise of this book.
Every company has high-performing workgroups that both make money for the business and develop new products, services, or markets. These workgroups create environments in which results are achieved and people flourish. High-performing groups adapt quickly to changes in the marketplace, understand their customers, and know how to get the internal resources they need to accomplish their goals.
If you spread the secrets of these groups, you can improve the overall performance of your company.
Just as the leaders of Wal-Mart think of their highly successful company as a series of individual stores, you can think of your company, regardless of size, as a series of workgroups. As Robert Slater wrote in The Wal-Mart Decade, "... the only way to manage such a large and complex organization is to think of it not as large and complex, but think of it as simply a series of individual units, that is, the stores. 'We run the business a store at a time,' said [David] Glass [president and CEO from 1988 to 2000]. 'How do you run a $240 billion retail business? I don't have a clue. But I know how to run retail stores.'"
How do you run a business in today's uncertain global environment? How do you improve performance in an era of tightening budgets, reduced resources, and increasing demands? The answer is to support your workgroups so they can generate new ideas to fuel profitable growth.
A workgroup can be a few people or a few hundred; it is the unit responsible for driving results. Workgroups can be formed based on functional areas (the marketing department); divisions within functional areas (the creative group); client; or product line. They can be permanent, or temporarily brought together to achieve a single purpose. Workgroups form their own smaller cosmos within the larger company. They are united by common goals and shared experience.
In this book, I will introduce you to some highly successful workgroups. Among others, you will meet:
the Green Diesel Technology team at International Truck and Engine Corporation, which played a major role in preserving the diesel industry while creating a significant growth opportunity for the company.
the People and Culture department at Microsoft UK, which helped make the company the United Kingdom's IT employer of choice, and generates 30 percent more revenue per employee than any other division of Microsoft worldwide.
the Kellogg Food Away From Home marketing department, whose efforts resulted in nearly 10 percent profit growth between 2002 and 2003. Growth due to innovation tripled between 2001 and 2003.
the Foreign Exchange Institutional Sales team at ABN AMRO, which advises financial institutions on how to optimize returns on currency management. The team was on pace to achieve $20 million in revenue in 2004, up approximately 67 percent from $12 million in 2002.
All of these workgroups have created high-performance environments that deliver exceptional results. Unfortunately, there are too few of such groups. Recent groundbreaking research on the workgroups of knowledge workers found that only 10 percent of these highly paid and well-educated respondents could provide evidence that their workgroup was high performing-that it made money for the company and introduced new products, services, or processes. The study was undertaken by the Hudson Highland Center for High Performance, which I lead. (See Appendix 1 for details on how the research was conducted.)
To increase performance, companies need to focus on the single factor that is most critical to high performance-the environment of their workgroups. According to Daniel Gilbert, professor of psychology at Harvard University, "Four decades of scientific research have shown that situations are powerful determinants of human behavior-and much more powerful determinants than most of us realize."
Gilbert continued, "We are exquisitely social animals who respond instantly to the most subtle demands of our social environments, but because those demands are so subtle, we often make the mistake of attributing these responses to internal characteristics such as motives, beliefs, traits, attitudes, desires, and intentions. We tend to think that people 'are the way they act' because we fail to recognize how much of their action is guided, shaped, influenced, and dictated by the situation in which it unfolds."
Instead of concentrating on the environment of their workgroups, too many companies focus on allocating financial capital and deploying human resources. On the financial side, their goal is to achieve the best return on investment, measured by profitable growth, meeting investment community expectations, or increasing shareholder value. Due to limited time and unprecedented pressure, senior leaders expend most of their energy managing the numbers. That often means reducing costs and limiting investments to grow profits.
At the same time, most companies want to be employers of choice, and consequently they don't ignore their people. By activities such as pay for performance, performance management, leadership development, and training, they reward performance, especially that of high-potential workers. They measure return on human capital based on how successfully they recruit and retain the best and brightest individuals for their workforce. Managing financial and human capital are necessary activities, but they are not sufficient for high performance. Most companies assume that if they provide their workgroups with reasonable financial targets and the right people, they will automatically be able to achieve a high return on their investment. But this assumption is faulty. To achieve the best return on financial and human capital investment, leaders need to deliberately create workgroup environments that can sustain high performance.
"Changing the situation and shaping the environment-that's what leadership is all about," noted Linda Ginzel, clinical professor of managerial psychology at the University of Chicago Graduate School of Business.
There's no question that individual performance does matter. People need to be trained, developed, and given appropriate rewards and incentives. It is also good business to monitor and measure performance. But individual performance is influenced by the environment. If the best and brightest people are not in the right environment, they will not do their best work. Stars in under-performing workgroups won't shine as brightly. Michael Jordan was already a star when he joined the Chicago Bulls. However, it was not until Phil Jackson became head coach that the basketball team started winning championships. Jackson created an environment in which all the members of the team could excel. When Coach Herb Brooks chose college players for the 1980 U.S. Olympic hockey team, he did not select the stars; he chose those who could gel as a team. The United States beat the highly favored Soviet team to win the gold medal, in what Sports Illustrated called the "greatest sports moment in the 20th century."
These examples demonstrate that in a team sport, an individual performer cannot win a championship alone. Business is a team sport.
Times Have Changed
The way workgroups are managed today is critically important-even more so than in the past. This is because times have changed. In the Industrial Age, the assembly line fueled economic success. Business decisions were less complex, competition was clear, and how to make money was more straightforward. Top-down, command-and-control leadership was effective; plant workers needed to follow directions and do precisely what they were told. It wasn't necessary or helpful for them to think creatively to do their jobs.
Today, that model no longer works. The business environment is uncertain, markets are saturated, capital is scarce, industries are consolidated, and products are commoditized. Customers have more choices, so companies have to work harder to understand and meet their needs.
To be sustainable, companies have to grow revenues; cutting costs is not sufficient nor is operational excellence. The only way they can grow revenues is to differentiate themselves by creating new products, services, and markets. Workers can no longer simply follow orders. Now they need to use their brainpower to foster growth.
Whirlpool Corporation, based in Benton Harbor, Michigan, expects all employees to come up with new ways to meet customer needs. "We feel like everyone from the very top of the organization to the people on the manufacturing floors can contribute to driving relationships with our customers," said Donna Samulowitz, Whirlpool's vice president of Global Customer Loyalty.
Samulowitz said that Whirlpool is not abandoning the core strengths that grew the business to where it is today. "Our trade partner relationships and our operational excellence are still critical, but they are not enough. To drive our growth goals, we recognize the importance of customer loyalty, which comes from meeting customers' needs through new products and services, and staying with the customer throughout their relationship with our brands."
Samulowitz added, "It's critical that everybody play a part in driving innovation. Unique solutions can come from anywhere in the organization as long as people have the right focus."
This approach requires leaders to act differently than in the past. The strategies that worked in the Industrial Age are no longer effective. Leaders need to be honest about their own strengths and weaknesses. They must recognize that they can't be or do everything and, therefore, should make sure the people around them have complementary strengths.
"Arrogance is out of fashion in the executive suite. So are autocratic executives who rule by intimidation, think they have all the answers and don't believe they need to be accountable to anyone," wrote Carol Hymowitz in the Wall Street Journal. She added that executives who are not willing to share authority and be more accountable "may find themselves passed over for the top job."
Since leaders can't have all the answers, they must rely on others for help. It is most likely that the answers-new services, products, and markets-will emerge from knowledge workers, people who manipulate information and use it to make business decisions.
That's why, when the Hudson Highland Center for High Performance decided to study high performance in companies, we focused on knowledge workers' perceptions of their workgroups. The goal of our research was to identify the "genes" that make up a healthy workgroup. If companies knew what genes distinguish high-performing workgroups from other groups, they would be able to clone those genes to increase overall performance. Our study of more than three thousand knowledge workers in the United States, Europe (France, Germany, Italy, the Netherlands, Sweden, the United Kingdom), Japan, Australia, Beijing, and Shanghai revealed three factors that are the biggest differentiators between high-performing and nonperforming workgroups. (See Appendix 2 for details about the results in individual regions.) We found a global standard: The genes that enable high performance are consistent around the world.
The major factors that distinguish high-performing workgroups are:
Optimizing critical thinking
Not surprisingly, when we asked members of high-performing groups to rate the applicability of a series of statements to their workgroups, they gave the highest scores to the following: "The group learns what customers want;" "our group leader knows our business well;" and "the group meets customer needs." As many experts have argued, companies need to know their business and their customers to succeed. However, that alone won't produce high performance. What differentiates high-performing and nonperforming workgroups is the environment.
The work environment is linked to customer satisfaction. The right work environment results in satisfied employees, and studies have shown a high correlation between employee and customer satisfaction. For example, a frequently quoted University of Michigan study found that the correlation between customer satisfaction and employee satisfaction is .86, with 1.0 being a perfect correlation.
A 1998 Harvard Business Review article, "The Employee-Customer-Profit Chain at Sears," discussed a business model that tracks the impact of employee attitudes on customer satisfaction and, ultimately, financial performance. According to the Sears model, improving employee attitudes by five points on the company's survey scale will drive up customer satisfaction by 1.3 points, which in turn leads to a 0.5 percent increase in revenue growth. The authors stated, "These numbers are as rigorous as any others we work with at Sears. Every year, our accounting firm audits them as closely as it audits our financials."
Other companies have found similar correlations. In a 1998 study that tracked employee attitudes and behaviors, customer satisfaction, and profitability, Xerox concluded that employee satisfaction measures are closely linked to customer results. Using data from annual surveys, Northern Telecom of Toronto found "conclusive evidence" that boosting employee satisfaction leads to more satisfied customers and improved financial results. It is logical to conclude that people who work in environments in which they are valued, can do their best thinking, and have the freedom to seize opportunities are more satisfied with their jobs.
The study provides, for the first time, quantifiable proof that there is a direct correlation between how you treat people and financial results. The best way to value people is to create an environment in which smart people are treated as if they are smart. Employees are told what the goals are; they are not told how to achieve them. In these environments, employees have the latitude to make decisions about how to achieve their goals.
At Best Software, a Georgia-based software development company, Bill Furrey's boss put him in charge of developing a new product and then got out of the way. "He let me do my job. He basically said, 'If you need anything, come and talk to me. If you don't, have fun, and go at it.'" Furrey, in turn, trusted his team to accomplish the goal. "I allowed my developers to work and do the job that they needed to do," he said. The team released the product on time, with all the planned features. According to Furrey, management was shocked, because that had never happened before. "It didn't happen on other teams. It did on ours because we really believed in the product and what we were doing."
The ABN AMRO Foreign Exchange Institutional Sales team gives its salespeople the opportunity to interact with various levels of the client organization.
Excerpted from Contagious Success by Susan Lucia Annunzio Excerpted by permission.
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Table of Contents
Preface vii Acknowledgments ix
chapter 1 It's the Workgroup 1
chapter 2 Look Within 20
chapter 3 Build It and They Will Come 43
chapter 4 Room to Grow 73
chapter 5 Move the Middle 112
chapter 6 How to Destroy High Performance 134
chapter 7 Results the Right Way 157
chapter 8 Defying Conventional Wisdom 176
appendix 1 Conducting the Study 191
appendix 2 Variations Among Knowledge Workers by Country and Region 201
appendix 3 Factor Analysis 239
appendix 4 The Global Average 241