Organizations are created to provide products and services to mankind. Growth is the sine qua non of progress. Growth, in turn, requires revenues and profits. Very often, this paradigm is seen to be more relevant to business organizations, and less relevant to non-business organizations, whether governmental or non-governmental. That is not so true. All organizations require the same paradigm, except that in certain organizations which are not for profit, investments and grants substitute profits. To achieve any of these aspects, however, any and every organization needs direction. Direction is fundamental to the establishment and growth of an organization. This is often discussed in terms of what an organization seeks to achieve or what it wants to become. Strategy literature has many propositions on this aspect, three of the more important ones being vision, strategy and execution.
Running an organization is more complex than setting a vision, formulating a strategy in pursuance of the vision and executing against the strategy. It is noted that almost all the organizations are reasonably good at one or more of the three factors, and certainly not necessarily bad at the balance factor(s). Yet, the performance differences across organizations are so great that more factors are possibly at play in, and more levers are at disposal of, organizations for differential performance. This blog post dwells on the importance of direction for organizations and the principles which enable and ensure effective directed growth. There are nine facets of this organizational paradigm, which range from vision to procedure. The author would like to call them the Directive Principles of Organizational Management. However, before considering the principles, some understanding of what direction could mean to organizations would be in order.
Direction; one too many?
Many times, direction is considered a unitary factor. People are urged often to decide on a direction and pursue it in life. “He does not have a direction in life!” is an often heard critique of people who do not meet expectations. Even organizations which are expected to accomplish many things are, often, criticized for either lacking direction or for working in many directions. Focus is often the associated or substitution buzzword for direction; ‘laser focus’ and ‘goal setting’ are more popular phrases. The fact is that rarely neither focus and goals nor executing towards the goals help organizations to the required extent. Organizations need an elaborate framework to understand direction setting and execute as per that. Given that it is not necessarily virtuous or even ideally feasible for organizations to be unidirectional, challenges tend to be even more in practice. Based on the granularity of activities, even the most specialized organizations are required to work in multiple directions, particularly as they are also mandated to grow.
All organizations can be classified into two types; the first category comprises organizations which need to operate in places where customers or users exist, and the second category comprises organizations which have customers or users coming to the organizational campuses. Product organizations such as automobile, consumer goods and industrial goods companies fall in the first category. Service organizations such as service workshops, retail marts, educational institutions and hospitals fall into the second category. That said, the total value chain for any product organization or service organization involves co-existence of both the types of organizations. For example, an automobile company with multiple design and manufacturing sites and national sales-force needs a campus based dealer service organization to cover all aspects, from product design and manufacture to customer delivery and service. Similarly, a site based organization such as a hospital or retailer has to establish itself in several geographies to serve more customers and grow. The short point is that it is inevitable for even specialized organizations to establish themselves and grow in many directions.
A general direction (or set of directions) is important for an organization. However, equally or more important is the need for organizations to be appropriately directed. Directing an organization requires a complex and well-coordinated set of principles, which occur at three levels or tiers. The first tier is one of determining the destination. This is accomplished by a combination of vision, mission and goals. The second tier is one of determining how to reach the destination. This is achieved by a combination of strategy, plan and methodology. The third tier is one of ensuring compliant execution. This is mandated by a combination of process, system and procedure. The nine approaches listed above together constitute the nine directive principles of organizational management. It is neither the quality of the vision nor the quantity of goals, nor is it the elegance of strategy or the speed of the organization, that determines the competitiveness of growth. It is the deployment of all the nine directive principles, together as a seamless cascade, in an organization that determines the success.
It is important for an organization and its leaders and team members to understand the import of each of the nine directive principles. Vision is the space that is visualized for an organization in the long term, often painting a stirring picture of growth and transformation. Mission is a credo or an objective that makes an organization to stand up, and work for, in pursuance of the vision. Goal is the definition, in quantitative and qualitative terms, of the destination or the metric of achievement. Strategy is a broad set of short, medium and long term multi-functional coordinated actions required to achieve goals. Plan is the detailed calendar of activities that are required to provide the framework for execution. Methodology is the set of methods and principles used to execute the plan. Process is both a culture and a way of doing things that is particularly characteristic of an organization. System is the broad policy framework that establishes the degrees of freedom as well as the boundary limits to carry out a task. Procedure is the detailed set of prescriptive instructions that govern execution, compliance and accountability in clear and no uncertain terms.
The above descriptions of the directive principles are not mere semantics. Each of the terms, or the guiding principles, has important philosophical connotations that can determine the performance differentials across organizations, and even set them apart distinctively. Vision is inspirational while mission is motivational and goal is aspirational. For an educational institution in India, becoming the top-ranked university in the world and becoming a global center of education is an inspirational vision. For the same institution, providing the highest standards of pedagogy and personality development is a motivational mission that makes the institution assemble the best of faculty and attract the best of students. Goals for the institution are in terms of courses, seats, collaboration, and so on. Strategy aims to develop competitiveness with reference to external and internal factors. Strategy cannot be executed without a plan. Methodology, on the other hand, is a choice of certain alternative approaches to execute a plan. For example, the university may choose to adopt a course management approach, student management approach or faculty management approach to achieve the goal.
Similarly, process, system and procedure have clear nuances. Process refers to the management’s way of doing things. For example, an organization may deliberately follow consensual processes in the way it operates. The organization may also adopt top-down or bottom-up approaches, in the alternative. The process, in many ways, determines the culture of an organization. Process is a very visible behavioral enabler as well as manifestation of an organization’s culture. For the educational institution, it could be a highly collegial approach, a chancellor-driven management or a student-staff council driven process. System, on the other hand, is a technical way of executing. The university, for example, may choose to conduct its teaching in the conventional face-to-face teaching system, pre-recorded tutorial system or in any other combination of manual and electronic audio-visual interface. Finally, procedure is a mandatory requirement of good execution and robust compliance. They provide clarity to individuals in their day to day working. Organizations tend to differ in the ways in which they are able to deploy these nine directive principles.
Not many organizations get rated equally high on all the nine directive principles of organizational management. As a result, they tend to have less sustainable or more volatile growth. For example, entrepreneurial and startup organizations tend to be high on the vision tier, average on the strategy tier and low on the process tier. Established, mature companies could display the ratings in reverse order. Truly world-class organizations that rank high on sustainable revenue and profit growth path with commitment to safety, quality, productivity and compliance, would rank high on all the nine directive principles. The reasons are not far to seek. Uniformly high ranking on all the nine principles combines innovation with conformity, long term with short term, and compliance with clarity. If, however, one principle needs to be specially highlighted for enabling the institutionalization of all the nine directive principles, it is the process. The right process determines institutionalization of all the activities in a right manner in an organization.
The directive principles require a coordinated leadership and managerial effort across the hierarchy to become institutionalized in organizations. Different levels of organization are responsible for the nine directive principles, not in terms of the three horizontal tiers (where they have natural competencies) of vision (and, mission and goal), strategy (and, plan and methodology), and process (and, system and procedure) but instead in terms of three verticals of vision (and, strategy and process), mission (and, plan and system), and goal (and, methodology and procedure). Typically, in an organization, the chief executive officer needs to be responsible for institutionalizing vision, strategy and process while the CXOs reporting to the CEO should be responsible for institutionalizing mission, plan and system and the functional heads reporting to the CXOs should be responsible for institutionalizing goal, methodology and procedure. This approach generates an appropriate competency-responsibility matrix of the nine directive principles for seamless institutionalization for sustainable organizational performance.
Posted by Dr CB Rao on October 6, 2013