Stakeholder Value generation vs. Meeting Expectations

I used to think, somewhat naively, that organisational “excellence” was all about meeting or exceeding stakeholders expectations. But I’ve had to realise how limited that view is. Expectations can fluctuate enormously – often on account of external factors such as the state of the economy, changes in the market, changes in government policy and so forth. Also the performance of an organisation might be consistently low, leading the stakeholders expectations of that organisation to become low. If these expectations are realised in practice is the organisational therefore “excellent”? Hardly!!  And if the performance of an organisation is generally high but something happens externally that causes the performance to drop a little below the ‘high’ expectations of its’ stakeholders, is it no longer “excellent”? No, I don’t think it necessarily is. So whilst the “expectations” of stakeholders are important to know and understand, they can be misleading if not fully understood and contextualised.

So how else can we determine the level of excellence of an organisation? On reflection it seems to me that the best measures are those related to the level of value generated, with an excellent organisation generating exceptional levels of value over a sustained period.  Conceptually, the notion of “value” is not difficult to understand, being at its simplest the difference between benefit and cost. For some stakeholders this can be quite readily measured, for example returns on investments made for the “investor” stakeholder group. (It is perhaps not surprising that the tangible nature of financial measures has led to a plentiful supply of value related financial measures such as Economic Value Add – EVA). But for others it can become quite complex, particularly where the “benefits” and “costs” are not entirely tangible but include subjective perception. This is particularly true of non financial stakeholders such as customers, employees, suppliers and the wider society. Clearly in these cases some perception related measures can be readily identified but these are only useful if the reasons behind the perceptions are identified and fully understood. However my research suggests that very little work has been done in the area of non financial stakeholder value generation measures and consequently, apart from some financial measures, very few organisations have any. If you have knowledge and experience in this area of measurement and would like to engage, I’d be very pleased to hear from you. (I can be contacted by email at markiwebster@icloud.com).

 

Do Excellence Models generate value?

If we accept that organisational excellence is all about generating outstanding value for stakeholders, then it is reasonable to apply this definition in the form of a question to the excellence models themselves. Do they generate outstanding value for their users?

From my observation over the years, this question does not have a simple ‘yes’ or ‘no’ answer. What is certainly, and self-evidently, true is that organisations do not need excellence models in order to become excellent; consider if you doubt this the very many excellent organisations whose leaders have never heard of, yet alone used, any “excellence model”.  It is also true that those organisations that do use them will not automatically become excellent.  The value, I suggest, depends upon how these models are used. Used skilfully to deliver a clear excellence related objective, then value can be generated; used poorly and with no clear purpose, and it would be better if the organisations concerned had never adopted the use of them in the first place.

The original, and largely abiding, use to which these models are put is to assess the level of ‘excellence’ of the organisation, to identify what the strengths are on which to build, and what the weaknesses are that need to be addressed. However when used in this way these models can, in the wrong hands, become very ‘dangerous’ tools. Without a clear focus on what excellence really means, and a process of assessment that is build upon this, then unskilled assessors can not only generate no value but potentially cause immense damage.  For example, focusing on whether an organisation does all the things set out in a model or not is absurd – some of the things in the model may not add any value in the context of the organisation concerned or not be relevant at its stage of development; focusing on the strategic goals and objectives of the organisation and how well they are delivered and achieved can generate quite misleading assessment findings if the strategic goals/objectives are themselves ‘not right’, for example not focused on stakeholders or focused on only one stakeholder group. And the list of potential issues could go on….and on….at some considerable length!

So in all cases in which these models are used, the answer to the question of whether they generate value or not relates not so much to the models themselves but much more to the users of them.

The overall, short answer to the question has therefore, I suggest, got to be “maybe”!

 

Organisational Excellence – definition

When I first started this blog, one of my earliest posts was about the definition of “Organisational Excellence”.  The point I was trying to make, and feel the need to attempt to address again, was that unless the key decision makers in an organisation have a clear, shared understanding of what they mean by “Excellence”, then any attempt to achieve it will fail – probably quite significantly. This is simply because without a shared view, the chances are high that everyone will work on their own understanding of what “Excellence” means and therefore could easily end up going in different directions, with different objectives and priorities.  If you doubt this, try this simple experiment. Get 10 reasonably senior people from your organisation together and ask each to write down what  “Excellence” as it applies to their organisation, means to them. Then get them to read out what they have written. Although there may be some similarity, I suspect that most of the ‘definitions’ they provide will be quite different in detail. Some may be precise, others quite vague.

So the leadership of an organisation that wants their organisation to become and remain “Excellent” have to start at the first, essential step, which is to agree a shared definition of what “Excellence” means. Without this, anything that follows is highly unlikely to be successful.

Some organisations that have a mission to stimulate and support “Excellence” in organisations have attempted to define what they mean by it. For example, the EFQM, a European based organisation dedicated to supporting the drive for “Excellence” in organisations, has defined excellent organisations as those that “achieve and sustain outstanding levels of performance that meet or exceed the expectations of all their stakeholders”.  Not surprisingly, any organisation adopting this definition needs to be clear who their stakeholders are, what their current and anticipated expectations are, seek to deliver these and have effective measures in place to determine the extent to which they have delivered them. These measures will show how “excellent” the organisation is and whether it is becoming more or less so over time.

My own, (refined over time!), definition is similar in some respects to the example given above. It is that “Organisational Excellence is delivering, and sustaining the delivery of, outstanding value to all key stakeholders”.  Whilst the measurement of value as delivered to stakeholders is more challenging than, for example, measuring stakeholder “satisfaction” relative to their expectations, it is, in my view, a more accurate indication of success.

There is of course no ‘authorised’ definition of “Excellence” as it applies to organisations. Every organisation is able – maybe with their stakeholders – to define it for themselves, but define it they must if they want to commit to the achievement of “Excellence”. The definition drives everything – how the organisation is led, its goals, objectives, plans, what is done, how it is done, what is measured and what action is taken based on those measures.

Achieving Organisational Excellence – time and commitment

No organisation to my certain knowledge has become instantly excellent. For most if not all it requires time, determination, focus, a clear plan and consistent leadership. I thought this was summed up very well by the British Quality Foundation’s Patron, Her Royal Highness The Princess Royal when she stated recently:

“Achieving excellence is neither a quick nor an easy undertaking. It requires a long term commitment by an organisation to constantly improve everything that it does. The fruits of this commitment will be better leadership, more engaged staff, improved processes, happier and more loyal customers and, ultimately, better results across the board”.

Well done your Royal Highness! What a role model leader of excellence you are!

Leadership….

I seldom venture into controversial territory these days but something I read earlier this week so incensed me that I felt compelled to seize the keyboard and tap out something on the subject of leadership. The article – a blog actually – that I read inferred that the writer considered that we, as people,  do not need leadership or management….to quote his words, “animals are led”, “machines are managed”! My first thought was to dismiss this as the rantings of a lunatic, and I would have done so were it not for the fact that the writer has a ‘following’ and sells books.

Now of course there are almost as many different definitions of leadership as there are grains of sand in the desert so I can only draw on my own experience….something which I wish the writer of the offending blog had done.  The best line ‘manager’ from my perspective that I had as my ‘boss’, (of about 14 over a nearly 30 year period), quickly recognised that I needed little “management”,  as by then I was not only fairly competent at my work but in many respects had become almost certainly unmanageable. Rather he recognised that what I needed from him was effective leadership – a clear and shared vision of where we were going, what we were trying to achieve and why, and support and encouragement on ‘the journey’ there. Also timely recognition of the sort that he knew I appreciated best – the simple “thank you; well done” variety. And that experience, for me, encompasses what true leadership is all about – establish a clear picture of what we are trying to achieve, why and by when, communicate and gain understanding and buy-in to it, show people how and where they contribute to it; support, encourage, and stimulate them on the journey to achievement; provide timely recognition along the way where deserved.

The wisest king so far, Solomon, one whose achievements were widely recognised throughout the world, memorably said, “where there is no vision, the people perish”. He was a truly effective leader, for his vision and the achievement of it had such an effect that he was admired by all, including those who implemented it – the ‘subjects’ of the kingdom. One fellow sovereign who doubted the report she’d heard about him came to see for herself. What she found was that “the half had not been told her” and all those who today we would call stakeholders, including the kings’ subjects and other sovereigns with whom he had formed alliances, (partnerships in todays’ business language!) were content and happy. When was this? 10 years ago? 25? 100? No! Nearly 3000!!  True leadership – of PEOPLE not animals – what it is and what it achieves, hasn’t changed much over the centuries………

Organisational/Business Excellence

I have recently been reading the latest issue of an excellent business management journal.  The main focus in the issue I was reading was on “Excellence Models”, and one in particular. As someone familiar with the model concerned and a strong supporter of its purpose and use, I enjoyed reading the articles on it. But…..nowhere did I see any reference to, or attempt to define in any cogent way, what “Excellence”, in an organisational or business context, is. No doubt the articles were appreciated by supporters of the model concerned, but to those seeking enlightenment on what we mean by “Excellence”, or needing to become engaged with and committed to it, including using the model to which the articles referred, there was little by way of insight provided. Would you buy a tool if you were not clear what it was intended to help you achieve? I was reminded afresh how easy it is for enthusiasts of certain management ‘tools’, ‘frameworks’, ‘standards’ and so on to try so hard to sell them to others and become downhearted and disillusioned when “management” do not seem interested. As any salesman would tell us, “sell the benefits of the product/service, not the product/service itself”.  So to sell an Excellence Model necessitates, as its name suggests, selling firstly the concept of “Excellence” and the benefits of committing to achieve it, and then how the Model can help that achievement. If we are unclear about, or forgetful of, what we mean by “Excellence” how can we ever begin to sell a Model that is intended to help deliver it?

So let’s start by being clear about what we mean by “Excellence” and uniting behind a simple and clear definition of what it is. In an earlier post a few years ago I set out a few thoughts on what it is, and quoted one of my favourite definitions, one that incidentally was defined by the same organisation that developed the model about which I was reading. My thinking has developed a little since then and in a future blog I will try to explore the concept of ‘delivering value’ to stakeholders as lying at the root of what we mean by “Excellence”.

Meantime let’s all try and avoid the mistake of trying to sell or, (worse), trying to use something, the purpose of which we don’t know, or simply just overlook.

Assessing the excellence of an organisation

Nowadays the volume of assessment activity aimed at determining the level of excellence of organisations is increasing all the time.  Excellence awards are multiplying across the world, an increasing number of organisations carry out self-assessmnets and there is a large industry of professionals offering assessment services.  So what should assessors find out about an organisation when they seek to determine how excellent it is?

Surely we must start with what we mean by “excellence” as it applies to organisations.  My preferred definition, adopted by several of the main organisations promoting “excellence”, such as the EFQM in Europe, is: “Organisation Excellence is delivering sustained superior performance that meets and where possible exceeds the expectations of stakeholders” – see post dated 31/08/2011 headed “So What is Organisational Excellence?” for more detail.  If we accept this definition, then what assessors need to find out becomes fairly obvious. A simple list of key questions to address, presented here in a what is, hopefully, logical order would include:

  • Has the organisation identified its key stakeholders?
  • Does it understand what the current expectations of these stakeholders are, and what these are likely to be in the future?
  • Does it balance the diverse and potentially conflicting expectations of its stakeholders to arrive at clear stakeholder focused goals and objectives?
  • Does it have plans and approaches (initiatives, policies, processes, activities) in place that are specifically developed to achieve these goals and objectives?
  • Does it implement these plans and approaches?
  • Does it measure performance achievement?
  • What do the results show?
  • Does it review the results, learn and improve where needed?

Of course assessing involves more – in detail – than this but I would suggest than unless assessors keep these 8 questions in their ‘minds eye’ and obtain real and useful answers to them, they will not only fail in the task but run the risk of ‘getting lost in the detail’.  If you are an assessor, do you address these questions, and in the order shown?