Superperforming Corporate Culture is the magic elixir – the antidote for the industrial age command-and-control paradigm. Below is a mountain of evidence associating revolutionary corporate culture with outperforming return on investment, from an upcoming Corpus Optima white paper:

A study of 200 blue-chip enterprises in 22 industries over an 11 year period by Kotter and Heskett of Harvard Business School found that organizations with strong cultures had significantly higher performance than firms with rigid or weak cultures. The organizations with the strongest “adaptive” cultures saw their revenue grow four times faster, experienced job creation seven times faster, enjoyed stock prices that increased twelve times faster, and had 750 percent higher profit performance.Values guru Richard Barrett found that the return on assets and return on equity in companies with the best cultures was higher than the S&P 500 from 1991 through 1997.⁷ NIST research on the comparative performance of Malcolm Baldrige award winners against benchmark industry performance over a five-year period showed a statistically significant level of out-performance of as much as 34 percent.

Examining 950 businesses across sectors, Denison Consulting also found a correlation between strong culture and the bottom line. Such cultural traits as involvement, consistency, adaptability and mission were positively linked to operational performance measures, including return on investment, product development, sales growth, market share, quality and employee satisfaction. One Denison study found that the average return on equity for organizations with the lowest culture scores was six percent, while the average return on equity for organizations with the highest culture scores was 21 percent. Hospital Corporation of America (HCA) recently found that its 12 highest financially performing hospitals were also its 12 highest culturally performing hospitals, enjoying an employee engagement ratio of 5.68, as compared to an average of 2.44 for the entire system (173 hospitals) and 1.83 for its lowest performing hospitals. HCA also found a steadily decreasing employee turnover rate of 16.6 percent for the highest performers versus a steadily increasing turnover rate of 23.3 percent for the lowest performers.

In a 2005 article, Eric J. Sanders and Robert A Cooke, Ph.D., from Human Synergistics/Center for Applied Research, Inc., revealed more convincing findings on how “culture change initiatives can lead to real financial returns.” They found:

• Strong correlations between constructive (as apposed to defensive) cultures and business success (i.e., higher earnings/sales ratios and lower volatility).
• Retail stores with more constructive cultures showed stronger growth in revenue and higher revenue than their defensive-culture sister stores.
• Newspapers with constructive cultures had higher satisfaction, more cooperation and teamwork, lower stress, better readership, and higher profit.
• A large university medical center, over a 4-year period, was able to move its culture from defensive to constructive through leadership development and an organization-wide emphasis on culture change resulting in improved research, education and patient care performance, a 50% increase in budget, and movement from $40 million deficit to a $7 million surplus.
• A large liquid manufacturing company gained strong financial returns on their investment to redirect culture (beginning in 1996) and for eight years has reported increases in revenues, earnings before interest, taxes and amortization (EBITA), and net profit after taxes (NPAT, before significant or abnormal items).

And finally, in our own research, the Superperformance Fund, comprised of 10 organizations demonstrating not only process but also cultural out-performance, outperformed the S&P 500 over a 20 year period by a margin of five to one!

At the launch of The Superperforming CEO Book Tour & Seminar in Houston last week, Superperforming CEO George Martinez,  in “An Uncommon View” and Complexity Guru Chris Welsh in “Escape from Flatland” both shared brilliant illustrations about the experience of a paradigm shift.  Both referred to Superperformance as the discovery of a true advance in contemporary business thinking and optimization practice.

Coincidentally stumbled upon this article which furthers the story of Galileo’s invention of the telescope and its groundbreaking implications.

http://bit.ly/3pZ2mK

In the same way, the view of organization as organism (not machine) supplants the century-old Taylor model and points to the incontrovertible need for a new guiding science for organizations – we need a life science not a machine science – it must be a science of management and leadership together.  The new biophysics of optimization – Superperformance science – weds biology and physics (nonequilibrium thermodynamics) to inform the transformation of flow and the emergence of culture.

The article includes a wonderful quote by physics pioneer Max Plank, “”A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die.”

The new optimization science of management & leadership – of complementarity – control  & liberation, will surely become implicit knowledge one day.

The discovery of Superperformance introduces a shockingly simple, reliable approach to optimizing performance. This discovery identifies a steady state, a sweet spot described by complexity scientists as the location of maximum fitness in a system. This location refers to a balance point precariously perched between order and chaos. It is more of a continuously shifting space than a static location: a dynamic, energetic, catalytic space. It is the place where all new ideas, change and self-organization emerge. All of Superperformance occurs in this space – and what’s more, any system can be tuned to this higher level of organizational consciousness and operational performance.

This is why Agile is the new normal. Navigating in this zone is called surfing the edge of chaos. Here the tension between order and disorder is at the highest level possible. Too much chaos will marginalize or dilute an idea or project. Too much order is likewise unhealthy, giving rise to rigidity and stasis. Work groups, project communities, and entire organizations can leverage the edge of chaos to maximize performance and to find a way forward in these uncertain times. People in organizations are beginning to see that this disequilibrium is effective and important to organizational survival. Within this fitness state, people and projects self-organize and work achieves a flow state punctuated by agility, novelty and innovation. It may seem incredible or illogical, but superperformance is tied to tolerating and even encouraging this persistent disequilibrium.

This 21^st Century approach reinvents management and leadership and advocates for a shift away from a Machine View to an Organism View of organization. It is being applied by an increasing number of project teams, organizations, and communities to produce unprecedented customer outcomes, operational excellence, breakthrough innovation, joy in work, and shareholder return on investment.

C = f (GKC) > f SQ

Upshifting to Superperformance requires a critical phase transition. For organizations, the experience is the same as water turning to ice –or an outbreak that becomes an epidemic. It is only when critical mass is achieved that true transformation occurs and change will be lasting. This is a second order change. Why are these simple physics missing from the change management literature?

The reason is because change cannot be managed in the first place.

This problem stems from the same outdated mechanistic paradigm of what can be managed and must be led. The truth about transformational change is that it does not occur from the outside in – it occurs from the inside-out.

It is widely known that the vast majority of transformation initiatives are unsuccessful. While the literature suggests that less then 30% successfully accomplish their objectives, change agents themselves report the true percentage is less then 15%.  Clearly traditional approaches to transformation – while expedient – have not been very helpful.  The evidence of Superperformance – successful large scale change in organizations and projects of every size – points to something different.

The evidence tells us that unless the intrinsic motivation of process owners is Galvanized, and they psychologically ‘own’ the change themselves, they will be doing it because they have to and not because they want to.  This is an inevitably short-term proposition. Creating conditions that catalyze and harness the intrinsic motivation of process owners is an indispensable requirement for Superperformance, and usually the missing ingredient. There are many ways to provoke  the psychological involvement of process owners, such as appreciative inquiry, design conferences, world cafe sessions, and so on, but the fundamental requirement is to involve them in the change.

At the same time wanting to change and knowing how to change are two different problems. Knowledge for Change (knowing what to do) is where operational excellence begins. Equipping process owners with the knowledge and methods of improvement (understanding of optimization, appreciation for a system, iterative PDSA cycles, voice of the customer, methods of lean, agile, performance scorecards, use of statistical methods, and so on) as the tools of a never-ending continual improvement program is the second critical element of transformation to Superperformance.

Thirdly, Concrete Actions must be taken. These actions convert the concept of change into the reality of change, and establish the meaningfulness and urgency of the initiative. The first steps to transformation are always the hardest but if they are certain and confident they will rapidly engage a community of practice.

The Status Quo is very powerful. The force of these three previous elements must be strong enough to overcome the force of the Status Quo. It is only when the energy, information, or temperature passing through any system is increased to the place where the old system cannot sustain it, that a critical phase transition occurs, and the whole system changes, adopting a new steady state. This is the same experience in an organization system.

It will only be when the force of these three (Galvanized Culture x Knowledge of What to Do x Concrete Actions Taken) becomes more powerful than the Status Quo that transformation will occur.

Hence the formula:

C= f (GKC) > f SQ

where:

• C means the Rate of Change
• f means Force Of
• G means the Galvanized Culture
• K means Knowing What to Do
• C means Concrete Actions Taken
• SQ means Status Quo

Knowledge and human capital have made a dramatic debut in the millennium
economy. Together they signal a critical shift in organizational life to something
new and different, especially when it comes to dealing with people. The best of
any company’s knowledge and human capital walks out the door, everyday, at
5:00PM. These two forms of capital are intangible; they have not been a part of
the traditional balance sheet. Capturing and increasing the value of these capital
assets requires a new set of skills. As many have noted, in the information age
“knowledge workers” have the leverage. And they carry their means of
production with them wherever they go.

The result is that management as a professional discipline is on the verge on a
major transformation. While management’s famous guru Peter Drucker insisted
that management is the organization’s single most important “organ,” he also
declared it is not possible to manage people. Rather, he stated, “the task is to
lead.” Lloyd Provost and his contemporaries at API teach us that it is only
processes that can be managed, and only then through the purposeful application
of continual testing and learning. Esther Dyson drew from the new science of
complexity, especially in the area of complex adaptive systems, (“CAS”) to
characterize this impending transformation through a different lens. The new
management acts in a distributed way, as an “immunity,” a capacity that
everyone can (and should) participate in and practice.

Superperforming management and leadership co-joins improvement and
complexity science to create a new approach that leverages both process and
culture together. This incredible new paradigm signals a fundamental shift away
from a mechanistic view and towards a view of organizations as living
organisms.

Dave Guerra’s post in response to Chinese Scholar Sheng Zhao query on the Leadership Scholars Network, from the Academy of Management Listserve.

Sheng Zhao: “I am curious about emergence of leadership studies in the US. Looking back on the history, managers and management are the focal topics, but about two decades ago (as far as I know), leaders and leadership began to come into the front stage. What is the reason for the trend? Is it that management studies reach its end of the rope?  Or the social, technological and economical changes bewilder us and we need more direction (which way to go) than management?”

Dave Guerra: “In my opinion it all has to do with the growing revelation that what we losing our mechanistic tethering and moving toward an organic one. Organizations are alive, and as I shared with a young Chinese doctoral student, all of management and even mechanistically-based leadership theory are headed back to the future – to Bohr’s complementarity principle – to Yin and Yang. Our newtonian models have failed us – on the whole management science, much less practice, has been slow to adopt the major scientific discoveries of the last century, especially the last forty or so years. If quantum mechanics and nonequilibrium thermodynamics are true, then we should be able to appreciate them in a most ordinary and self-evident way.

After a life’s work of practical inquiry in the field, it has been my shocking discovery that there is indeed a pattern of harnessing opposites, tangible and intangible, that is the sweet spot of optimization. This is why servant leadership is the only leadership that works – because of the emergence of intrinsic motivation that it provokes – but it is also true that the control of outcomes – through statistical predictability, to quote Deming, is the only management that works – process management, that is. To my mind, if this is true, then there must be some underlying first order principle, some natural law, that is at work here. There is. It is the principle of complementarity, and it tells me we need a life science not a machine science to guide the next generation of organizational theory and practice.

Hence the current rage in leadership studies makes perfect sense, given the actual coming of age of Drucker’s knowledge economy, but my prediction is that ultimately we will find the truth is in the middle. Management and leadership must be treated as equivalent and complementary hemispheres, not separate and distinct provinces. They need eachother for completion. As Deming put it, “To manage, one must lead.”

So hence my message to my young Chinese inquisitor about “management and leadership” in the west, look backwards, from whence you came, to the harmony of yin and yang, because that is where we are headed. That’s my opinion and why ‘complexity leadership’ and ‘biology management’ are the best lens to inform us.

This is very exciting and in my experience at the front, very new.”

Dave Guerra

Sheng Zhao: “I admire greatly that a westerner can understand Yin Yan, and connect it with complexity. In fact many Chinese do not understand the deep meaning of Yin Yan. I find complexity, Yin Yan, and Budhism devle into a  similar worldview in the deep. I raised the question why the leadership studies rise in the US is out of my curiosity that the management studies in China are moving from leadership focus to manager focus, countering US’ trend.  I want to find out why they evolve differently.

Thank you for your insightful comments, and others for their contribution. All the questions, ideas, and opinions on the list help a little brain on the other side of the earth to vibrate more reasonably.”

Sheng Zhao

Bohr’s particle-wave duality. Faraday’s electromagnetism. Watson & Crick’s DNA molecule. Jung’s thinking-feeling opposites. Prigogine’s dissipative structures. Our own brains, with their left and right hemispheres – all point to the same glaring and pervasive pattern throughout all of nature — and in organizations too. Because of our mechanistic paradigm of organizations, it has been hidden before now. The Cartesian worldview is over 400 years old, and is reinforced through the almost century-old Taylor model, scientific management.

When organizations are reframed as living, complex adaptive systems (organisms), the simple heuristic of ‘manage process, lead people’ appears as the obvious and direct path to optimization. The evidence is that long-term market out-performers, i.e. Superperformers, all exhibit this pattern. The control that is called for is control of process, and the liberation that is called for is the liberation of spirit. The biophysics that guides this new paradigm weds the biology of improvement science to the physics of complexity science. Like Bertalanffy’s general systems theory, this new discovery transcends every business discipline, every domain. Performance Management, Talent Management, Project Management, Diversity Management, Knowledge Management, Change Management etc. . . . all give way, shifting in orientation from management to optimization, which joins management and leadership together as necessary and complementary hemispheres.

It is Performance Optimization, Talent Optimization, Project Optimization, Knowledge Optimization, and so on, that supplants management as the superior objective. Superperformers already know this and operate intuitively from this paradigm. Furthermore, this new knowledge recasts management and leadership: from a view of them as hierarchical locations to a view of them as distributed enterprise-wide properties, akin to your own immunity, consciousness, or nervous system.

Organizations of every type can access this new knowledge to reconstitute business strategy and transform performance.

“To manage, one must lead.”  Deming

To go from good to great is to go from project management to project optimization. The powerful evidence of “Super Projects,” those large scale capital-projects whose outcomes far outperform their stakeholder expectations, demonstrate that there is something special occurring in this category. The evidence points us to Deming’s famous call for as much project leadership as project management.

Through real case examples of Super Projects from the Oil & Gas industry here in the Gulf of Mexico and around the world, we are examining this category, its servant leadership link, and the urgent requirement for a new life science of capital projects and their optimization in dynamic, complex adaptive environments.

The Superperformance Formula works because process and culture have a complementary relationship, opposing but also in need of eachother for completion. These properties appear everywhere in nature, from the particle-wave duality, to the DNA molecule, to the management and leadership of organizations.

This startling discovery, that there is a left and right brain to project optimization, and further, that tangible evidence of a cultural phenomenon is a requisite condition of Superperformance, points to the incontrovertible need for a new management science. This new science must be as much leadership as management science to explain the phenomenon of Super Projects and organizational Superperformance. The implications are tremendous.

In these urgent times, Project Executives, Managers, Teams, and Communities everywhere can make immediate use of this knowledge to transform project outcomes.

White Paper

In the perfect complement to his groundbreaking first book, Superperformance, Dave Guerra examines the world’s most successful CEOs, unveiling a priceless set of 15 unconventional distinctions in an unmistakable portrait of servant leadership in action.

Release Date: Fall 2009

Find It Online At: www.amazon.com

Learn More about Servant Leadership and Superperformance at the 19th Annual International Servant Leadership

1 Simple Formula, 8 Simple Rules, One Billion Great Results

In this groundbreaking new book, Dave Guerra proposes a stunningly simple way through today’s complex world of work, introducing us to a new management science, showing how Superperformance springs from the intersection of an organization’s process and its passion. Guerra proposes a simple formula:

Process x Culture = Superperformance.

This book is about the phenomenal year-after-year success of companies who consistently apply this formula. It is about the simple rules that have enabled companies like Toyota, Southwest Airlines, Microsoft, Harley Davidson and others to achieve and sustain super results year after year.