More so than people, businesses must heed the oracle at Delphi, Greece: Know thyself.
Someone may live an entire life without ever thinking seriously and critically about who he or she is and why. A cynic would say most people live that way.
A business, on the other hand, must constantly examine what it is, what it does, and why. Otherwise it becomes uncompetitive, stagnates, and dies.
A recent study, based on a survey of several US and Canadian executives, provides some interesting insights into what executives, asked to examine their organizations, think.
The Economist Intelligence Unit, in collaboration with Celerant Consulting, Lexington, Mass., an affiliate of Novell Inc., conducted this study.
Celerant says that 276 executives from the US (94%) and Canada (6%), all with operational responsibilities, took part in the study during September and October 2004.
Oil and gas executives made up 16% (45) of the total group surveyed; chemicals 11%. Of all respondents, 50% represent companies with more than $500 million/year in revenues.
Of the oil and gas participants, 20% were from the ranks of senior management.
But what did they learn from the experience?
What gives?
More than 40% of oil and gas executives surveyed said, “performance improvement initiatives undertaken at their companies” over the past 3 years “failed to achieve the strategic business and financial objectives they were designed to support.”
Sounds like money wasted; right? But wait ...
Despite these disappointing business results, said the report, the executives “surprisingly judged more than 80% of their improvement initiatives a success.”
According to Barry Samria of Celerant’s Energy Practice, “The apparent contradiction between disappointing strategic business results and the high perceived success rate for individual initiatives suggests that operational improvement initiatives may often be inappropriately measured or poorly understood... . Ultimately, that means that they have also been poorly executed in terms of the strategy they are intended to serve.”
Sift through the jargon and you realize he’s saying that someone didn’t know what he was doing.
Celerant says all executives were asked to identify up to three of their most important strategic objectives that performance improvement was intended to help achieve. Of oil and gas executives, 62% cited improving operating efficiency vs. only 46% for industries overall. Of those same oil and gas execs, 60% cited increasing shareholder value vs. 49% of all those surveyed.
Improving customer satisfaction and loyalty was the third most frequently cited strategic objective by oil and gas executives at 44%, while it ranked first among industries overall at 61%.
Among those oil and gas executives there was wide agreement, as in the other industries surveyed, that “communication with frontline employees is the key ingredient in making performance improvement programs support the company’s strategic objectives.”
Sounds like the heart of yet another corporate campaign to boost morale, doesn’t it? But maybe there’s something to this. Celerant reported that some 71% of oil and gas companies said that senior management clearly communicates the objectives of strategic initiatives to frontline employees, a significantly higher figure than the 52% for all industries surveyed.
The report doesn’t say-because it can’t-whether those frontline employees would agree. It does say, however, that only 41% of oil and gas companies considered themselves successful at “capturing frontline employees’ recommendations for implementing initiatives,” roughly in line with the figure of 38% for all industries.
Samria says, “Oil and gas companies appear to be doing well at communicating from the top down but significantly less well at capturing valuable knowledge from the trenches.”
Would that conclusion surprise any frontline employee?
What’s ahead
For 2005, 53% of the oil and gas companies surveyed expect to “grow” their revenues. This year, the top three initiatives oil and gas companies expect to chase include “business process reengineering” (17%), “corporate organization realignment” (15%), and major technology “implementation” (15%).
I suspect that, if you back away from any company or industry, you’d find that most muddle through, dissatisfied with their achievements but generally satisfied with their directions.
Knowledge can be useful, if we just figure out what it means.
