Why do some businesses perform better than others?
I believe it all comes down to leadership and focus. Throughout my career, I’ve been fortunate to work with incredible leaders and be a part of amazing transformation stories—transforming companies that were not living up to their potential into high-performing organizations.
I’ve also seen some challenging circumstances.
Leaders can take any circumstance and lift an organization up, engage the people, and deliver results. They know the difference between being lucky due to market conditions and running the business well. They don’t take credit for growth driven by a strong economy. Rather, they drive growth in a down economy.
My career has taken me from small businesses to Fortune 500 businesses—privately held, publicly held, and private-equity owned. Regardless of the size or ownership structure of the organization, there is a consistency in leadership that outperforms. And without that leadership, a vacuum develops that causes the company to revert to less optimal performance.
Leadership is everything.
Leadership is the difference between a company going bankrupt and being wildly successful. The direction set by leadership determines the outcome.
To be a high-performing business, high-performing leaders must be present to set the direction and focus of the organization. It is not possible to have a high-performing business without high-performing leadership. We’ll delve into what those leaders do that is distinctive and results in high-performing businesses.
I’ll share insights about what works and what doesn’t based on my own experience, and insights from leaders I admire and businesses that have made the journey.
What Does a High-Performing Business Look Like?
You can recognize high-performing businesses initially by their outward appearance. Regardless of the industry, the facilities are clean and well lit. The office space is comfortable and conducive to work. Manufacturing facilities are well laid out, safe, and facilitate the flow of work. Facilities, equipment, and technology are reasonably up to date and facilitate the business operations.
The people are engaged and enjoy coming to work. People work collaboratively across the organization. You can walk through the business and ask any person about its purpose and goals, and you will receive an answer that is consistent across the organization.
Goals are widely discussed, people understand how they came about, and they are reported against regularly. And not just by management. People up and down the organization own their part and are accountable for results.
Customers and suppliers are engaged at a level beyond just an order. Relationships are in place at many levels across the organization and in a manner that allows for collaboration and adjustments up and down in business size. There are no surprises.
A culture of innovation and learning exists such that resources are dedicated toward business growth. They are not disconnected from the organization, but an integral part that feeds off continuous feedback from sales, operations, customers, suppliers, and market conditions. Work gets done fast. Decision making happens quickly with all relevant information considered; people move quickly to act. Systems and processes are streamlined and support the business. You’ll never hear people complaining that it is taking too long to get a decision made or that they are waiting for the system to get work done.
There is a clear focus driven by leadership around the purpose of the business and its goals. The values become part of the culture. People are responsible and accountable—they own their piece of the business. And it all starts with leadership.
Does your business look like this? Can you think of another business that does? A division of a business?
Early in my career, I was fortunate to be part of a high-performing business. I worked as a teller in a credit union in downtown Los Angeles. The team was diverse, yet cohesive, and enjoyed working together. As you can imagine in any retail location, there would be an influx of customers, and a line would form. Quickly, everyone would pitch in to make sure people were helped in a friendly and expeditious manner. Customer satisfaction was always high.
Many years later, I was a key leader in the transformation of Longview Fibre Paper and Packaging, Inc., a pulp and paper, and corrugated box business located in the Pacific Northwest. The transformation was so successful, it was considered a “textbook example” of restructuring an old-line business. According to Deutsche Bank analyst Mark Wilde, it was “the best turnaround case study we have seen in the past 25 years.”
But Longview wasn’t always that way. It took years of working on all the components outlined in this book to become a high-performing business.
The High-Performing Business
High-performing—what does that mean, and how do you achieve it? Even if you don’t hold a formal leadership position today, learning the concepts that go into such an organization will help you thrive in your area and ultimately achieve a leadership position, if desired.
Performance can be measured in a variety of ways: It could be based on the longevity of the company, financial performance, or stock price. Today, other measures, such as social responsibility and diversity, are included as well.
Investors are increasingly looking at the holistic performance of companies in evaluating performance and allocating capital. They are looking for companies having strong financial performance, as well as a positive impact on their ecosystem.
The reality is, companies that outperform know that in order to produce strong financial results, they must be the top choice for customers, have top talent that works together, and do the right things in business every day. Leadership is the means to achieving top performance.
So what does that mean in terms of evaluating performance? Should one use market valuation? Or revenue (which is what Fortune uses to determine its company rankings)? What about longevity? Or earnings per share (EPS)? How does the valuation of different sectors come into play when thinking about how to evaluate performance? And what about nonfinancial measures? The long and short of it is, there are many ways to evaluate performance.
It is helpful to get to the basics when evaluating performance. Every business needs cash to operate. Revenue without cash generation is OK in a start-up, as long as there is a path to success. But long term, a business is not successful by merely selling products or services. Its revenue must exceed the cost of running the business to generate cash and be sustainable. For a business to operate in the longer term, it needs to generate cash.
It is possible to have strong earnings and cash flow in the short term. This can be achieved by reducing costs to boost earnings or not investing in the business to support growth and ongoing operations. But the business won’t be there for the long term with this approach.
Wendy Collie defines success as follows:
- An empowered and engaged staff who feel they are thriving and have meaning in their work
- A differentiated experience that is approachable
- An approach to providing value to customers and community through connecting them in unique ways
- A positive improvement in sales and the bottom line as a result of the aforementioned
To achieve longevity, a business must continually generate strong cash flows and EBITDA (earnings before interest, tax, depreciation, and amortization). And to do that, the business must be a good corporate citizen. If the business acts unethically, harms the environment, or goes against accepted norms, it will suffer a blow. Whether it is a permanent blow or a temporary one is a matter of the significance of the infraction and how well the business works to resolve it.
So, success is ultimately about doing the right things and having an impact. When you are doing that well, you will see financial results that are commensurate with a high-performing business.
Is your organization high-performing? I designed the following assessment (see Table 1.1) to give you insight into the areas in which your organization is doing well and those that need a little more attention. The questions get at the concepts that will be discussed through the course of this book. The questions are designed to look at the entirety of your business and should be answered that way. Even if you don’t have responsibility for the entire business, there are ways you can impact it.
Table 1.1 The high-performing index
| Yes | No | |
| Every person in your business can explain what your business is about (your purpose). | ||
| You are constantly being asked by customers, industry associations, publications, and advisers to speak and give tours of your facility. | ||
| Your organization’s earnings are in the top 10 percent of your industry. | ||
| Your people are constantly being sought by other businesses and they choose to stay with you. | ||
| Your people work collaboratively across the organization to further your goals. | ||
| You have healthy debate when making decisions, varying perspectives are shared, and a decision is made and acted on quickly. | ||
| New products are constantly being innovated and introduced. | ||
| Your customers are so pleased by your goods or services, they actively recommend them to others. | ||
| You regularly share your goals and expectations, as well as how your organization is performing. | ||
| Your expectations are high, and you know your people are capable of achieving your goals. | ||
| Your earnings are constantly growing, and the dips mirror market swings and are not a loss of market share or declining margins. | ||
| Your energy is high, and you are excited to go to work every day. | ||
| You have a group of people who inspire you and who will give you frank perspectives and advice when needed. |
If you answered “Yes” to 12 to 13, including the questions about earnings, you are doing well and outperforming. Congratulations! Undoubtedly, one of your greatest traits is continuing to learn and grow. You’ll find several insights as you keep reading this book.
If you answered “Yes” to 9 to 11, including the question about earnings, you are pretty close to outperforming and have the groundwork substantially in place. There’s a bit of work to do, but you are a long way down the road.
If you answered “No” to the question about earnings and have fewer than eight questions answered “Yes,” the good news is you have lots of upside potential. With a bit of work, your company can outperform competitors.
If you want a more detailed version of the High-Performing Index assessment, go to my website www.heidipozzo.com/high-performing.
Why Does High-Performance Matter?
Over the last century, the largest sectors have changed significantly for the 50 largest companies. The best measure of size in 1917 was assets. Steel was by far the largest industry sector. By 1967, using market value, oil and gas was the largest sector. In both rankings, the automotive sector ranked middle of the pack. By 2017, the tech sector became the largest sector as evaluated by market size. Automotive no longer made the top 50. AT&T and General Electric were the only two companies on the list in 1917 and 2017.
In 1965, companies spent 33 years on average on the Fortune 500. By 2026, Fortune 500 tenure is expected to decline to 14 years. Eighty-eight percent of the companies in the Fortune 500 in 1955 (the first year of ranking companies) were no longer on the list in 2014, according to the American Enterprise Institute. The reason? Too much time was spent on day-to-day activities, and not enough time was spent on strategy and innovation.
To achieve longevity, companies must constantly reinvent themselves.
Those that have survived beyond the last half century are financial, food, consumer products, transportation, and appliances. They are in business models that have not been disrupted yet but have required innovations to stay relevant. The companies include JP Morgan Chase, Cigna, Colgate-Palmolive, DuPont, Boeing, Campbell Soup, General Motors, Kellogg, Procter & Gamble, John Deere, IBM, and Whirlpool.
While the Fortune 500 measures the largest companies by revenue, it is a good proxy for what is happening in business. You may be thinking many of the companies you know are much smaller than these, and the timelines don’t apply. It is a mistake to dismiss these statistics outright. The length of time may be extended before disruption trickles through the industry. But make no mistake, changes that happen with the largest companies will eventually trickle through to all sizes of business.
High-performing leaders see the signs that it is time to course correct. They see the plateaus and disruptions and take the actions necessary not just to survive, but to thrive. Without that type of leadership, businesses will eventually cease to exist. We’ll get to the building blocks of what they do a little bit later in this chapter.
Figure 1.1 illustrates a visual way to think about the various stages of your business.
Figure 1.1 Your business lifecycle
The conditions necessary for a business to be high-performing require the right people with the right skills and the right focus. Companies must keep this in mind and adapt over time not just to stay in business, but to outperform.
Beyond that, working in a business that is high-performing has some benefits that you may not expect:
- Engagement is high.
- It is easy to get work done.
- People know how they fit into the business.
- Customers are delighted with their products or services.
- Investors are pleased with the return on their investment.
- The community has a robust supplier of jobs, taxes, and support.
Having the right leadership matters, because everything the business touches will be impacted by how the business is run—either positively or negatively. And having high-performing leaders makes a quantum difference.
Barriers to Outperforming
Years ago, I was working with a business that had a number of challenges. Earnings were sagging, and there was no clear focus on the business. An attempt to get back to basics and focus on operational and financial drivers was balked at by a chorus of people declaring the business was different.
But the business wasn’t different. Thinking you are different and the fundamentals don’t apply is an excuse for poor performance. Being different only matters when you are doing something that is propelling your business forward in a sustainable and profitable manner.
Many of the barriers to outperforming get built into businesses over time. Slowly, a lack of insight into how other businesses operate creeps in.
Day-to-day activities begin to overwhelm the ability to get out and talk to others in the industry, to customers, or to other business leaders in the area. As a result, the ability to recognize well-run companies and emerging business models diminishes, because leaders no longer have insight into what others are doing.
There are several signs that show up on the horizon and start creeping into the business before the financials are impacted. The following barometer (see Figure 1.2) will give you a pressure reading on your organization to see what is coming.
Figure 1.2 The barrier barometer
| Bad News | Good News |
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Where is the pointer on your barometer?
The good news is that wherever you find your organization on the barometer, there are things you can do right away to move the dial. Even if you are doing well, outperforming is not a destination, it is a journey. Everything about your business will change in the next few years, so moving forward is important to your longevity.
Complacency and Lack of Focus Always Creep In
I like the Ford story, because the company has been around for more than 100 years. And in that time, we can see what has worked and what has not. We don’t just have a small slice in time. Ford has innovated, become complacent, refocused, and grown. As much as we would all like to believe that our business will not hit a rough patch, it will. And usually, it happens around a leadership change.
In 1903, Henry Ford founded The Ford Motor Company. He was a pioneer in the automotive industry. To meet growing demand for the Model T, he designed the moving assembly line. Its success led to widespread adoption. Henry Ford took another revolutionary action: He doubled the pay of his workers, laying the groundwork for a strong middle class in the United States.
After a century in business, Ford lost its way. It was 2006, and Ford was in a crisis. Market share was suffering, costs were skyrocketing, and the cycle time for new vehicle introductions was lagging behind Japanese competitors. Ford was no longer innovating. Ford had become complacent and was staring bankruptcy in the eye. The changes made by a prior leader put the company under significant strain (we’ll cover this in Chapter 8). It was time for a new leader.
Alan Mulally spent his entire career up to that point at Boeing, after starting as an engineer right out of college. After being passed up twice by Boeing to ascend to the CEO role, he joined Ford as CEO on September 5, 2006.
Mulally came to Ford when it was about to post its largest loss in history. The market had not yet crashed, yet Ford’s bonds were classified as junk, and there were concerns it was about to go bankrupt. Labor costs were $76/hour versus Toyota’s $48/hour. Ford’s brands were not doing well and required major capital infusions to become competitive again.
Within 90 days of joining Ford, Mulally raised $23.6 billion to bridge the gap to profitability. An extensive restructuring plan was put in place to reduce operating costs, shed the luxury brands that were weighing Ford down, reintroduce the flagship Taurus, and move toward lighter-weight, fuel-efficient cars. All of this required intense focus on goals and collaboration to right the ship.
Over the course of his eight-year tenure as CEO, Mulally was able to restore profitability amidst the global crisis by focusing on the nine building blocks we will cover in this chapter. You can see the impact he had on the performance of the company in Table 1.2.
Table 1.2 Ford financial highlights
| Key Statistics | Low | High |
| Stock price | $1.26 (November 19, 2008) | $18.79 (January 27, 2011) |
| Revenue | $118.3B 2009 | $172.5B 2007 |
| EBITDA | $8.2B 2008 | $17.1B 2014 |
| Net income | ($14.7B) 2008 | $7.2B 2013* |
*2011 had the highest net income at $20.2B but had an $11.5B benefit from income taxes.
Source: Yahoo Financial for stock, ADVFN for income statement.
After Mulally’s retirement, things began to stall out again. Under Mark Fields, profits and stock prices declined through his three-year tenure. Ford once again looked externally to find a transformational leader to compete in the future automobile market. It found its new leader in Jim Hackett, former CEO of Steelcase. His history of transforming both Steelcase and University of Michigan football, along with his contacts in Silicon Valley, positioned him to take the helm of Ford in May 2017.
In Ford’s case, one or more of the nine key elements (outlined ahead) were lost at each point Ford saw a decline in its business. The company lost focus and fell from being a top performer. These indicators serve as good warning signs for all businesses.
Being high-performing does not occur via a mere checklist, however. It is a state of being. It is about continual growth, innovation, and focus. When it all comes together, it is a fantastic and invigorating place to be.
Your Roadmap to High-Performance
Now that we’ve covered what being high-performing looks like, why it is important, and what the barriers are to achieving it, we’ll jump into how to achieve it.
To be high-performing, there are nine building blocks that correspond to the coming chapters:
- Finding or renewing your purpose
- Innovating to stay relevant
- Building and sustaining a high-performing team
- Identifying and engaging your following
- Keeping score and outperforming
- Setting and communicating high expectations
- Avoiding plateaus
- Being your personal best
- Identifying and enrolling personal advisers
Each one is necessary to fully achieve top-performing status and stay there. You can’t skip any of these building blocks and expect to be a long-term sustainable business.
This book is organized into four parts—the first three are about your business. The fourth part is about you. As leadership and the performance of your business are intertwined, it takes you operating at your best for your business to operate at its best. Here’s the overview:
- Part I: Purpose and Relevance: Why Your Business Exists and How to Evolve to Stay Relevant
- Part II: Your Team Extends Beyond the Four Walls of the Business
- Part III: Keeping Score and Reaching New Heights
- Part IV: You: Becoming a Leader Who Is a Fine-Tuned Machine
You can find a complete roadmap of the concepts and performance accelerators in Appendix A.
Remember your High-Performing Index score? Those questions relate to the building blocks that are in the chapters to come. No matter where you scored on the High-Performing Index, there will be insights ahead.
Let’s get started!