High Performance Starts and Ends with Mission

Advantages of Partnerships

Lesson 10: High Performance Starts and Ends with Mission

I have yet to find a RAND study that does not deal directly or indirectly with mission. Just as RAND and its researchers are not interested in uncertainty for uncertainty’s sake, neither are they interested in organization for organi- zation’s sake. Either organization matters to the mission or it does not.

Thus, when asked specifically what the words organizational effectiveness meant to them, the 126 survey participants focused almost exclusively on mis- sion. “It means carrying out its intended missions,” one typical participant replied. “It includes an organization’s capabilities to take action, its knowledge base to make that action effective, and its potential to learn and adjust to mold its efforts to a changing external context.” Another defined the term as “the ability of an organization to do the right things to achieve its goals and con- tribute positively to the welfare of society in both the long-term and short- term.” Still others defined it as “the ability to efficiently and effectively plan, implement, and complete tasks that advance the core goals of the organiza- tion,” “the ability of a group to work together toward a common goal or vision—the key element is leadership that establishes a clear goal or vision,”

“an organization that is proficient in executing the present, while simultane- ously positioning itself to be relevant in the future,” “an organization that is successful at developing jobs, processes and related structure to support its stated vision and goals and to motivate its workforce toward obtaining this vision and goals,” “having resources, plans, and results match expectations over a long period,” and “meeting clients’ needs, not their wants.”

RAND is not interested in just any mission, however. Its work has long centered on the kind of “big hairy audacious goals” made famous in Built to Last, goals such as stopping the spread of HIV/AIDS, preventing nuclear war, reducing domestic violence against women, increasing educational achievement among poor children, and improving health care quality.²⁵Nor are RAND researchers strangers to stretch goals, either—many are quite comfortable with the zero-tolerance standards that many organizations use for improving quality, workplace safety, and customer satisfaction.

At the same time, RAND and its researchers have learned to ask hard questions about the promises organizations make. Although they are quire willing to embrace audacious goals, most of the RAND researchers I met also believe in setting realistic expectations for progress. Hope as they might for audacious impacts, R AND researchers are mostly pragmatists who urge organizations not to promise more than can be delivered.

Part of the caution comes from RAND’s collective experience com- paring the rhetoric of audacious goals and the difficulty of lasting

improvement. Indeed, RAND’s education division even published a book titled Rhetoric versus Realityprecisely to draw the distinction between the promise and performance of the promises embedded in the calls for school reform. As RAND’s four-person team writes of tuition vouchers and char- ter schools, both reforms promise audacious returns, particularly for poorly performing students, but often yield less-than-stunning change.

The evidence, or lack thereof, suggests a much more cautious stance toward reform. Although there is some evidence that both reforms produce gains in parental satisfaction, there is very little proof that the reforms actu- ally improve performance, which is, after all, the audacious goal. “The brevity of our list of knowns should send a note of caution to supporters and oppo- nents of choice,” the RAND team notes. “For most of the key questions, direct evaluations of vouchers and charter schools have not yet provided clear answers, and the list of unknowns remains substantially longer that the list of knowns.”

These researchers are not making a case for the status quo, however.

They clearly embrace the goal of better performance. But they also know that it is one thing to adopt a grand mission, and quite another to create the small wins that eventually add up to sustainable impact. Hence, the healthy dose of realism that most R AND researchers bring to the conversation about organizational mission.

Even with a realistic mission, RAND researchers might add that suc- cess depends at least in part on luck. “The U.S. has been very fortunate in having some adversaries who are not the sharpest knives in the drawer,” says Stephen Hosmer.

Milosevic made some terrible blunders during the crisis over Kosovo, particularly in believing that the massive ethnic cleansing of the Kosovo Albanian population would help his cause rather than hurt it. And his conceit was such that, at the end, he didn’t listen to his advisors who warned him against calling an elec- tion. He believed he could win and had no sense of how far his political standing had eroded.

Even with such a weak adversary, however, the U.S. and NATO were unable to drive Milosevic to the negotiating table until the ethnic cleansing was almost complete.

As Hosmer continues,

Saddam Hussein proved to be another less than bright bulb as far as strategy was concerned. He invaded Iran, but stopped short of occupying the Iranian oil fields, which would have given

him great leverage in that conflict. Then he invaded Kuwait before he had acquired a nuclear weapon to deter U.S. counteraction and again stopped short of occupying the oil facilities—those in Saudi Arabia—that would have given him enormous bargaining leverage. Finally, when threatened by an overwhelming military coalition led by the United States, he eschewed the opportunity to peacefully withdraw from Kuwait at little or no penalty.

In contrast, the “North Vietnamese leaders were very formidable opponents—much more realistic than our leadership about the nature of war and the strengths and vulnerabilities of the contending sides,” Hosmer says. “They were very skilled at orchestrating military, political, diplomatic, and information operations to fight a total war.” In that case, it was the U.S.

leadership that made the mistakes.

We didn’t understand our enemy, particularly the North Viet- namese, and failed to develop the expertise needed to improve that understanding. At the strategic level, we mistakenly believed that South Vietnam could be successfully defended without permanently blocking the North Vietnamese infiltration routes through Laos. We also erroneously assumed that our public opinion would hold up over the length of the conflict, and that the Vietnamese communist forces wouldn’t be able to sustain the attrition rates they were suffering. Thus, we underrated the enemy’s capacity and overrated our own. Finally, and perhaps most important, we erred in starting the Vietnamization process too late and in failing to effectively posture and support our South Vietnamese allies to fight a protracted war on their own.

In short, even a high-performing organization cannot succeed with an impossible mission. It may have all the right components—a highly committed workforce, talented leaders, and more than enough resources to succeed—

but it also needs a mission that is within reasonable reach.

CONCLUSION

The winnowing process discussed here is interesting for several reasons.

First, it confirms some of the core findings of other research-based books such as Built to Lastand Good to Great(neither of which I ever saw on a

RAND bookshelf ).²⁶Charismatic leaders turn out to be just as unimportant to the high-performing organizations identified by RAND as they were to the high-performing organizations that James Collins and his colleagues picked, for example, while participatory leadership turned out to be just as important.

RAND and its researchers are certainly not cut off from the rest of the world—they spend more than enough time in and out of organizations to have significant insights into what works and what does not. At the same time, RAND and its researchers spend relatively little, if any, time paging through the business best-sellers. They may know a great deal about who moved the ammunition, but they almost certainly know nothing about who moved the cheese. Thus, to the extent that organizations hunger for some kind of independent validation of the prevailing wisdom in such books, this winnowing process provides it.

Interesting though this information might be for confirming simple truths about what really matters to high performance, readers are right to ask just what kind of organization should care. Are the characteristics just as relevant to McDonald’s as they are to the Air Force? Just as on point for IBM as for Intel? Just as important to chemical companies as to research firms?

Given the organizations that RAND knows best, the answer depends almost entirely on the level of external turbulence. Organizations that face a relatively calm, predictable future can cull from the pool of characteristics at leisure.

But as the next chapter will suggest, organizations that worry about sustaining high performance might want to pay closer attention. As already noted, the winnowing process produced more than just a random assort- ment of interesting characteristics. It also produced a common statistical portrait of organizations that perform particularly well in turbulent times—

those that are alert to changing circumstances, agile in addressing vulnera- bilities and exploiting opportunities, adaptive in creating new strategies and products, and aligned to achieve their mission. In short, the winnowing pro- cess produced an outline of what I call the robust organization. In a word, such organizations are robust.

NOTES

1 Katie Hafner and Matthew Lyon, Where Wizards Stay Up Late: The Origins of the Internet, New York:Simon & Schuster Touchstone, 1996, p. 55.

2 Hafner and Lyon, Where Wizards Stay Up Late, p. 57.

3 Hafner and Lyon, Where Wizards Stay Up Late, pp. 59–60.

4 Hafner and Lyon, Where Wizards Stay Up Late, p. 63.

5 Chuck Lucier, Rob Schuyt, and Eric Spiegel, “CEO Succession in 2002:

Deliver or Depart,” strategy+business, summer 2003, accessed at http://www.strategy-business.com, March 10, 2004.

6 Chuck Lucier, Rob Schuyt, and Junichi Handa, “CEO Succession 2003: The Perils of Good Governance,” strategy+ business, summer 2004, accessed at www.strategy-business.com.

7 The study was conducted by Elisa Eiseman, Gabrielle Bloom, Jennifer Brower, Noreen Clancy, and Stuart Olmsted, and is cited in the bibliography.

8 The study was conducted by Debra Knopman, Susan Resetar, Parry Norling, Richard Rettig, and Irenee Brahmakulam, and is cited in the bibliography.

9 These quotes came in response to an e-mail I sent in March 2004 asking a handful of senior researchers for their insights concerning the findings described here.

10 I am grateful to RAND senior researcher Sandy Berry for fine-tuning the survey to ask respondents about a single organization, high-performing or not, instead of a group of high performers.

11 The first-round survivors were identified through simple Pearson correlations, which measure the degree of association between two variables, which in this case were the 34 separate characteristics and performance. A correlation can run from -1.0 to +1.0. For this analysis, a correlation of approximately +/-.175 is significant at the .05 level, which means that readers can be 95 percent confident that the association is other than random.

12 The second-round survivors were identified through nine separate ordinary least-squares regressions of the 29 surviving characteristics from the first round.

Characteristics had to produce a significant predictive impact on performance within their respective category to remain in the pool.

13 The third-round survivors were identified through a single ordinary least-squares regression of the 13 surviving characteristics from the second round. Access to information was the number one predictor of performance, with a significance of .003, followed by having the funding to invest in new ideas at .005, having a clear mission at .005, delegating authority for routine decisions at .007, creating strong incentives for high performance at .008, fostering open communication at .015, and measuring results at .032.

14 This second look involved a factor analysis of the 13 second-round winners using principal component analysis with varimax rotation. The four factors covered 64 percent of the variation among the 13 characteristics, with each one accounting for between 18 percent and 14 percent of the sum of squared loadings.

15 These lessons are drawn in part from the RAND studies cited in the bibliography.

16 Jim Collins, “Built to Flip,” Fast Company, March 2000, p. 131.

17 Terry M. Moe, “Toward a Theory of Public Bureaucracy,” in Oliver E. Williamson, ed., Organization Theory: From Chester Barnard to the President and Beyond, New York:Oxford University Press, 1990, p. 127.

18 The study was conducted by Russell W. Glenn, Barbara R. Panitch, Dionne Barnes-Proby, Elizabeth F. Williams, John Christian, Matthew W. Lewis, Scott Gerwehr, and David Brannan, and is cited in the bibliography.

19 My Brookings colleagues Ivo Daalder and Michael O’Hanlon titled their history of the conflict Winning Ugly, Washington, D.C.:Brookings, 2000.

20 Leland Joe draws upon Guy Norris, “Boeing’s Seventh Wonder,” IEEE Spectrum, Institute for Electronics and Electrical Engineering, October 1995.

21 The team was composed of J. L. Birkler, Anthony G. Bower, Jeffrey A. Drezner, Gordon T. Lee, Mark A. Lorell, Giles K. Smith, F. S. Timson, William P. G.

Trimble, and Obaid Younossi.

22 Elizabeth McGlynn, “Sharing of Health-Care Data Needs a Tuneup,” Los Angeles Times, June 26, 2003, p. A18.

23 For a detailed introduction to the indicators, see Neil S. Wenger, Paul Shekelle, Frank Davidoff, and Cynthia Mulrow, eds., “Assessing Care of Vulnerable Elders: Methods of Developing Quality Indicators,” Annals of Internal Medicine, Supplement, vol. 135, no. 8 (Part 2), October 16, 2001, pp. 647–652.

24 See Cecily Fluke and Lesley Kump, “Innovation,” Forbes, July 5, 2004, p. 142, accessed at http://www.nexis.com, July 16, 2004.

25 James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies, New York:HarperBusiness, paperback edition, 1997.

26 See Jim Collins, Good to Great: Why Some Companies Make the Leap . . . And Others Don’t, New York:HarperBusiness, 2001.

the four pillars of high performance

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R

AND has long been considered a premier source of analysis of what organizations do, but has only recently become known as a source of insight on how organizations work. Even in its early work, however, RAND and its researchers worried about what they called “systems design,” which they defined to include everything from equipment and fuel to strategies and organizations. Why bother creating the perfect strategy if the system cannot deliver?

RAND clearly understood that some systems were better at execution than others. “Analysis is easier for strong systems,” Albert Wohlstetter wrote in 1958. “It is also easy for very bad ones.” Strategies have a high probabil- ity of success in the former, and a very low probability of success in the lat- ter. “The really bad ones don’t hold us for very long because, for example, we needn’t worry about the interdependence of a destroyed plane and a destroyed fuel system.”¹

RAND and its researchers have never believed that weak systems are doomed to perpetual failure, however. Organizations can make weak systems stronger, good systems stronger, and strong systems almost invulnerable. It is relatively easy to reduce the vulnerability of a runway by merely adding more taxiways, Wohlstetter noted. Multiplying the number of taxiways is not only relatively inexpensive when compared with other measures, it also improves the odds that at least some usable portion of runway will survive an enemy attack. “If we do this we have a taxi way-runway system which is con- siderably stronger. We can have a higher confidence in its survival.”

Then as now, the key question is not whether there is one best system—

Wohlstetter called the question “beside the point.” Rather, the question is

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how to make a given system better. As RAND’s recent study of innovation and change at the Marriott Corporation shows, there is a great difference between having some robustness and having enough. Although Marriott might have survived the market turmoil of the early 1990s, it took another path, no doubt reminded of its own mortality by the two heart attacks of its president, Bill Marriott, who had taken the reins of the company from his father.

It might have survived with its heav y debt load even if it had not changed, however. It had been opening hotels at a stunning rate in the 1980s, and was buying almost everything in sight, including fast food chains and amusement parks. Even with $1 billion in new construction a year, and a weakening real estate market, it had enough resiliency to tough it through.

But Marriott and its leadership saw the volatility ahead and decided to act by splitting the company in two in 1993. As RAND’s research team chronicles the history, Host Marriott took control of the vast inventory of properties, while Marriott International entered the hotel franchise and food services industry.²By 2004 Marriott International operated or fran- chised 2700 properties in 68 countries and territories, 47 time-share resorts, 155 senior-living communities, 26 golf courses, 19 hotel reservation cen- ters, and a food distribution system that served 7000 wholesale customers through 13 regional distribution centers. Marriott International is consis- tently rated as one of the nation’s leading corporations, and was one of the 13 companies identified by James Collins and Jerry Porras as a visionary company in Built to Last.

Marriott’s robustness does not reside in the division of responsibili- ties, however. Rather, it resides in a set of core practices that allow it to respond to continued instability without compromising its core values of customer service and quality. As Bill Marriott writes, “All of our intense attention to detail translates into consistent quality. Consistent quality leads to high customer satisfaction. Customer satisfaction translates into high occupancy, repeat business, and good room rates. Those in turn bring home good profits and attractive returns to property owners.”³

Marriott International’s continued high-performance also resides in the four pillars of robustness uncovered in the winnowing of characteristics—

alertness, agility, adaptability, and alignment.

Marriott certainly became more alert in the early 1990s, whether through market analysis of travel patterns, the balanced scorecard, or sim- ple green-light/red-light metrics that track customer satisfaction at indi- vidual hotels. Under its customer satisfaction metrics, for example, hotels that receive green lights achieve what RAND’s team calls “celebrity status”

within the corporation. “In the past, Marriott hotels had a comment card in every room, which was usually only filled out by guests who were either angry, elderly, or young,” the RAND team writes. “Similarly, employees learned to skew the system, stuffing the comment box with positive com- ments to make the hotel appear better than it really was.”

Today Marriott uses a much more rigorous guest satisfaction survey that provides reliable data on both current and potential customers—the ones who show up, as well as the ones who pick the hotel next door. In turn, the data help fine-tune a host of small-to-large decisions, from where to locate electrical outlets in a hotel room to how to greet quests at the front desk.

Marriott also became more agile during the 1990s. Although it is steady in its operating plan, its core portfolio of lodging brands such as Courtyard by Marriott, the Marriott Residence Inn, and Ritz-Carlton is highly sensitive to undulations in market demand. Because most of its hotels operate under franchise agreements, it can jettison properties as demand declines, and add new properties in growing markets. It can also acquire specialty properties such as its Le Merigot Resort in Santa Monica that enhance its visibility and prestige.⁴

Marriott also became more agile through a combination of information and Internet technologies that capture economies of scale and provide instant opportunities for adjustment. It created one of the first hotel frequent-flier programs that allows members to earn and redeem points by staying at any of the Marriott hotels, one of the first web-based reservation systems, and e-mail alerts to advertise promotions during the slowdowns that vary season- to-season across its network of properties.

This alertness and agility would have been useless if Marriott did not adapt to changing conditions, however. Although Marriott has developed standard operating procedures that assure continuity across its hotels, which assure alignment around its core values, as well as occasional ridicule across the industry as a whole, it also delegates authority to the local level where hotel managers can innovate to their heart’s content provided the change does not undermine customer service or violate proven operating proce- dures. It also diffuses innovation through its internal web site and Marriott World Magazine, which is sent to employees at every hotel.

Marriott has also worked to ensure internal alignment around its mis- sion through a mix of franchise and incentive fees based on a negotiated share of each hotel’s gross revenues, as well as heavy investments in train- ing and recruitment, frequent site visits by Bill Marriott himself, and the development of what it calls an Associates First culture that applies to all