A HARD Look at the SOFT Factors Driving Business Performance
How much do the 'soft factors for an organization, contribute to it's ongoing business success.?
You know, those factors like trust, respect, purpose, values, alignment, team morale and enthusiasm, communications and leadership...the list goes on by you get the idea.. Do they 'really' help you outperform the competition, or is it all just fluff?
The answer might surprise those who focus primarily on the “hard,” factors, like sales pipeline, key lead to quota ratios, number of calls or meetings, conversion rates, win/loss metrics, quarterly growth and more. Why surprising?
Because the soft factors matter more than ever!
The 'intangibles' continue to climb in the importance of a companies success, particularly at a time when job satisfaction continues to erode after steadily declining over the past 40+ years. (as shown in the chart).
According to one of the largest management studies ever undertaken, organizational health can account for up to 54% of the variation in performance.
That study also found that two-thirds of today’s high-performance companies will start slipping and fading in the next decade if they ignore overall organizational health. (The study was conducted by Scott Keller and Colin Price, senior partners at McKinsey and authors of "Beyond Performance".)
And yet the 'soft stuff' – is still less referenced, understood, or monitored by most companies than the hard factors. Think about your regular executive staff meetings. When was the last time someone referred to working climate, trust index, or alignment around strategic direction in the same context as the bookings, the sales pipeline or win/loss metrics?
It seems so obvious: like an individual’s health, a company’s good health should be reviewed regularly and holistically. But much like health sometimes if it is ignored when you finally find out what’s wrong it may be too late – damage done.
But many studies, including our own at Revenue Factors with a panel of 75 CEOs, showed that fewer executives seem to ‘walk the talk’ about organizational health, measure it, or overtly try and shape it than you might expect. Organizational health can’t be put in place overnight and it is not easily measured. Yet well-documented studies show that many of these “soft” factors will be clear differentiators.
What organizational health is, and why you should pay more attention to it. Most companies have an abundance of smart people, smart systems, smart/big data, smart web sites and smart strategies, with more or less the same resources. So what we normally think of as market differentiators (product, services, price, brand) are now more readily available to all companies competing in the same market. These attributes become just the ante to be in the game for both in growing the business and in attracting and keeping the best talent.
In fact, as the war for top-notch employee talent evolves, sought-after candidates will be less interested in compensation and what tasks or projects they’re working on, than in the company’s environmental factors, character, and purpose.
The condition of the organization itself is becoming what really differentiates and provides the strong foundation for sustainable success. Those squishy of the squishy factors like trust, respect, alignment, and so on are the glue that holds the organization together through good and bad times. Some companies pay attention to this, but many do not.
Scott Keller and Colin Price say it best in their revealing and excellent book on this topic “Beyond Performance – How Great Organizations Build Ultimate Competitive Advantage”.
“In this age of informational ubiquity and nano-second change, it is no longer enough to build competitive advantage based on intelligence alone. Organizational health provides a foundational construct for maximizing human potential and aligning an organization around common objectives. The seminal difference between successful companies and mediocre ones has less to do with what they know and how smart they are and more to do with how healthy they are.”
What you can do. If you Google “organizational health,” you’ll find plenty of reading material. From a practical viewpoint and after working with several companies on this issue, here are my recommendations:
As an executive team, discuss, define, and align on what you see as a good organizational environment that delineates the values, culture and atmosphere that you want to collectively promote.
Complete an honest assessment of what is and isn’t working within that context.
Define the metrics that will indicate progress toward that goal and the frequency of measurement.
Take this issue seriously and be innovative as to how you will define, nurture and cultivate a more productive environment.
Measure organizational health right along with the hard factors like quarterly growth, lead flow, forecast accuracy, deal pipeline, and lead conversion rates.