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Research shows only 4 things really matter in business

A groundbreaking five-year study has separated the facts from the fads and found the management practices that truly produced superior results.

The study, reported in the Harvard Business Review (July 2003), examined over 200 well-established management practices over a 10 year period by 160 companies. It found that most of the management tools and techniques studied had no direct impact on superior business performance.

However there were four that mattered. Without exception companies that outperformed the industry excelled at:

  1. strategy
  2. execution
  3. culture and
  4. structure.

In addition they supplemented their great skill in these 4 areas with mastery of any 2 of four secondary management practices: talent, innovation, leadership, and mergers and partnerships.

THEY CALLED THIS THE 4 + 2 FORMULA.

The impact of using the 4 !2 formula is significant compared with those that don't. If an individual invested $1 in a portfolio of 4 2 companies they would have received approximately $11 by the end of 10 years compared with only $1.50 in other companies.

First lets look at the 4 must-have management practices one at a time:

Strategy

Devise and maintain a clearly stated focused strategy. The key to achieving excellence in strategy is to be clear about what your strategy is and consistently communicate it to customers, employees and shareholders. It begins with a simple focused value proposition that is rooted in deep, certain knowledge about your company's target customers and a realistic appraisal of your own capabilities.

Execution

Develop and maintain flawless operational execution. It's not so much what you execute that matters but how. Winning companies are realistic. They recognise that there is no way they can outperform the competitors in every facet of operations so they determine which processes are most important to meeting their customers' needs and focus their energies and resources on making these processes as efficient as possible.

Culture

Develop and maintain a performance orientated culture. The study made it clear that building the right culture is imperative. This is one that champions high-level performance and ethical behaviour, where everyone works at the highest level, encouraging outstanding individual and team contributions and holds everyone (not just managers) responsible for success.

Structure

Built and maintained a fast, flat and flexible organisation. Procedures and protocols are necessary for any organisation to function, but too much red tape impedes progress, dampens employees enthusiasm and leaches their energy. Winning companies trim every possible vestige of unnecessary bureaucracy; extra layers of management, unnecessary rules and regulations and outdated formalities. They strive to make their structures and processes as simple as possible, not just for their employes but also for their supplies and their customers. The study shows that it doesn't matter much whether they are organised according to functions, geographically or by products.

Now lets look at the secondary management processes from which you need to choose 2:

Talent

Hold on to the talented employees and find more. The study found that the best sign for talent was the ease with which any executive who was lost from the organisation could be replaced from within. The winners found their new CEOs inside twice as often as the losers.

Innovation

Making industry transforming innovations. The study is not talking about marginal improvements but new product ideas or technology breakthroughs that have the potential to transform the industry.

Leadership

Find leaders who are committed to the business and its people. Certain C.E.O. skills and qualities matter. One is the ability to build relationships with people at all levels of the organisation and to inspire the rest of the management team to do the same. Another important quality is the leaders ability to spot opportunities and problems early.

Merges and partnerships

Seek growth through mergers and partnerships. The winners in the study didn't treat acquisitions and partnerships casually as one-off deals. Rather they invested substantial financial and human resources in developing efficient an ongoing processes for making these partnerships work.

Bruce Holland

Helps large organisations be focussed, fast and flexible. Places where people have more meaning, depth and connection.

Expert in Strategy, Structure, Culture and Leadership Development.

One of NZ's most experienced change agents.

Liberating the Human Spirit at Work
 
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