Knowing what works

With all the theories and business formulas promoted by business gurus, it is difficult to sift through the clutter and know who to listen to and what to follow. Many theories that were once popular have proven over time to yield little results.

In a massive five-year study called the Evergreen Project, consultants and business school professors at top universities analyzed data on 160 companies, and examined over 200 management practices to discover what really works. The research investigated why some organizations consistently outperform their competition, and what business owners and managers at the best companies accomplish to maintain a competitive advantage.

Authors William Joyce, Nitin Nohria, and Bruce Roberson share these discoveries in their book, What Really Works. What we found most interesting is that many of the latest management fads were found not to contribute significantly to an organization’s performance. There are, however, eight management practices that directly correlate to superior performance—which is measured by total return to shareholders. In a separate study by Dr. Harvey Wagner, he found that organizations that scored well on their total return to shareholders were also high-performers in almost every other meaningful measure of operating performance. Of the eight management practices, there are four essential or core practices, which include:

Create and maintain a clearly stated, and focused strategy. Strategy can be defined as your intended decisions to efficiently allocate limited resources to take advantage of opportunities in the environment so you can most effectively reach your goals and gain a competitive advantage.

Develop and maintain flawless operational execution. Winning companies may not always delight their customers, but they consistently meet their expectations by delivering more than what is expected. Operational costs must be constantly trimmed, while at the same time improving productivity.

Develop and maintain a high-performance culture. This means that successful organizations establish universally accepted standards to encourage high performance, and weed out those that do not pass muster. These companies also have a set of values that are used to make decisions and guide everyone’s performance.

Build and maintain a flexible and flat organization. A useful criterion that can be used to reorganize your company is to ask what changes would result in a simpler and faster structure to reduce bureaucracy and simplify the critical work.

In addition, the Evergreen Study identified four secondary management practices. Adding any two to the above four practices will give your business the critical edge to sustain growth and profitability. Here are the four to choose from:

Hold on to your talented employees and find more like them. We have worked with companies that only hired the best people and trained them to be even better. These employees could have worked anywhere, but they chose to remain with those companies that treated them the best.

Have leaders who are committed to the success of the business. Without the commitment of your people, it will be very difficult to implement the program in a manner that improves your performance.

Generate innovations that are industry transforming. As rapid as things are changing, you need to innovate by finding new and better ways to serve the customer, and offer products that meet the changing needs of customers better than the competition.

Use partnerships and mergers to accelerate growth. All of the above practices stimulate internally generated growth. Partnerships and mergers create external growth that can also help a company be more successful—even if only small deals are done on a consistent basis.

Can it really be this simple? Can implementing the four primary practices, along with any two of the secondary practices really improve your organization’s performance? According to the Evergreen Study, companies that follow such a plan have a 90 percent chance of becoming “winners.” Whereas, those that fail in any one of the primary areas or more than two secondary practices will struggle and become “losers.” They have found these factors to be very reliable to determine why a company consistently wins in the marketplace. It is not some guru’s theory, but the first proven set of approaches that identifies precisely where you should focus your organization’s efforts—and just as important, where not to. So how do you rate on the above practices, and how could you improve?

(Rik is a business instructor at NMC and Janel is the owner of Positively Outrageous Results. They have consulted with over 400 businesses in 40 different industries, and can be contacted at: biz_results@yahoo.com)