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Leadership & Organization Development Journal
The performance triangle: a model for corporate agility
Herbert Nold Lukas Michel
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Herbert Nold Lukas Michel , (2016),"The performance triangle: a model for corporate agility",
Leadership & Organization Development Journal, Vol. 37 Iss 3 pp. 341 - 356
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The performance triangle: a
model for corporate agility
Herbert Nold
School of Business Administration, Polk State College, Lakeland,
Florida, USA, and
Lukas Michel
Research and Development, AgilityINsights/Sphere Advisors AG,
Zurich, Switzerland
Abstract
Purpose –The purpose of this paper is to synthesize ten years of case studies and data analysis from
which emerged an organizational design that facilitates adaptability, agility, and resilience. The
resulting triangular model of culture, leadership, and systems is proposed.
Design/methodology/approach –Analysis of over 100 case studies over ten years along with
statistical analysis of survey data from 50 of those companies resulted in the emergence the triangular
model and provides quantitative support for validity.
Findings –People drive a complex and dynamic system with culture, leadership, and systems as key
factors driving organizational success in a rapidly changing environment. The critical factor in
adapting to change is designing organizations to maximize the vast tacit knowledge base within
organizations. Diagnostic tools are necessary to identify underlying strengths and weaknesses to
initiate targeted discussions and provide a baseline for measurement.
Research limitations/implications –All of the organizations were from Europe, Africa, or the
Middle East.
Practical implications –The emergent people-centric triangular model with culture, leadership, and
systems at the points along with the development of a diagnostic tool offers a methodology for
executives to gain valuable insight into critical elements of their organizations from which to initiate
constructive dialogue leading to effective action.
Originality/value –Many authors have offered theories on developing agile organizations. The
emergent people-centric performance triangle and evolving diagnostic instrument add to the body of
existing literature and lays the groundwork for practical tools and methods to yield practical results.
Keywords Decision making, Leadership, Dynamic capabilities, Adaptability,
Organizational culture, Performance, Change management, Agility, Organizational systems
Paper type Conceptual paper
1. Introduction
In the popular 1986 movie Top Gun about US Naval aviators, characters Maverick and
Goose (Tom Cruise and Anthony Edwards) declared that they “have a need, a need for
speed”in an upcoming mission. In the life and death struggle of air combat, speed gives
pilots a competitive advantage and more is better. In addition to blinding supersonic
speed, modern fighter pilots must be able to make necessary adjustments then deliver
an effective response to adversaries through a window of opportunity of seconds.
While the modern business world may not typically be a literal life and death struggle,
it may feel that way to many executives and managers. Threats appear and windows of
business opportunity open and close very rapidly. The amount of information and data
that is available worldwide is doubling every 13 months and projected to double in
every 12 hours in the not-to-distant future (Schilling, 2013).
Researchers and practitioners have observed that the rate of change powered by
this explosion of technology, globalization, and complexity has been increasing for
Leadership & Organization
Development Journal
Vol. 37 No. 3, 2016
pp. 341-356
© Emerald Group Publishing Limited
0143-7739
DOI 10.1108/LODJ-07-2014-0123
Received 9 July 2014
Revised 18 March 2015
Accepted 20 March 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0143-7739.htm
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decades (Salmador and Bueno, 2007; Sena, 2013). Business leaders throughout the
globe, like fighter pilots, are faced with continuously changing environments where
threats and opportunities appear rapidly making the need for fast, effective,
adjustments critical for success. Yet organizations, unlike jet fighters, are not
specifically built for speed and are typically unable to make the adjustments needed to
quickly adapt to changes. On the contrary, typical organizational designs are
essentially anti-change burdened with rigid leadership hierarchies, organizational
structures, information systems that are not aligned with current needs, and corporate
cultures with an inertia that resists new ideas or processes (de Jager, 2004; Scott, 1981;
Scott and Davis, 2003). The result is that identifying and implementing meaningful
change in many, if not most organizations, is more like stopping a supertanker then
maneuvering it in a small harbor rather than closing in for a kill at supersonic speeds in
a jet fighter. Executives who recognize the critical need for speed in the form of
corporate agility when confronted with strong natural forces against agility must find a
way to overcome the inertia inherent in leadership, systems, and culture in order to
prosper in the twenty-first century (de Jager, 2004; Hopkins et al., 2013). The
performance triangle represents the accumulation, analysis, and synthesis of ten years
of effort from observations gather from over 100 organizational case studies and
statistical analysis of survey data from 50 of those organizations.
2. Corporate agility defined
Haneberg (2011) defined agility as the efficiency with which organizations respond to
continuous change by consistently adapting. The process of continuously adapting to
changes in the environment results in changing the entire organization slowly without
sensing that change is taking place. Darwin (1859) proposed that species adapt to
changes in their environment over thousands or millions of years as a cumulative result
of minute changes to the species genetic makeup. Adaptation may be imperceptible at
any one moment in time but the cumulative effect of thousands of tiny adaptations
results in changing the organism to be more competitive in its environment.
Organizational agility is the ability to make countless small adaptations in response to
non-stop change that result in changing the fundamental building blocks of the
organization. Unlike evolution of species, companies do not have millions of years to
allow natural selection to drive business evolution. In today’s business environment,
companies must be agile and adaptable to respond in small increments that ultimately
change the leadership, systems, and culture allowing the firm to survive and prosper in
a different environment (Michel, 2013).
3. Existing models for corporate agility
Grantham et al. (2007) suggested that prosperity in the twenty-first century volatile
economic environment depends on a firm’s ability to continuously evaluate market
conditions, reexamine and revise corporate strategies, and reallocate resources quickly.
Continuous environmental change requires collaborative strategic management (CSM)
that describes a dynamic decision-making process designed to engage key players at
all levels of the organization. CSM describes a management model where human
resources (HR), information technology, and corporate real estate issues work together
in a unified process to identify adaptive changes needed to address today’s major
challenges; reducing fixed operating costs, talent shortages, and institutionalizing
innovation. HR as a demonstration of the organizational culture become static due to
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the inertia created by the body of shared beliefs, values, and customs of the
organization (de Jager, 2004; Schein, 2004). Similarly, the massive expenditure of fixed
costs developing information systems and real estate assets create a monetary force
against change.
Doz and Kosonen (2008) suggested an organizational model called fast strategy
intended to do much the same thing, that is, create an organization with the ability to
move quickly to adapt to continuous change and volatility. The objective of fast
strategy is to provide an organizational framework that enables the company to
maintain momentum while continuously redirecting and/or reinventing the core
business. According to Doz and Kosonen in order to become agile in today’s economic
markets enterprises must develop three key dimensions within their organizations.
Strategic sensitivity for minute changes in internal and external conditions must be
heightened and perception sharpened so that changes can be sensed and brought to the
attention of relevant leaders. The key element of strategic sensitivity is developing
processes that promote timely meaningful dialogue with a diverse collection of
participants throughout the organization from different areas of expertise, cultural
origins, age, gender, and abilities. Collective commitment is needed to allow executive
teams to avoid counter-productive politics and protectionist behavior so that decisions
can be made quickly and implemented even more quickly. Decision making under
conditions of uncertainty and high risk are difficult under the best of conditions and
securing meaningful and sincere commitment on high-risk decisions is a major hurdle
for most firms. Resource fluidity is required internally to reconfigure business systems
and processes then quickly redeploy resources there those resources are most needed.
In most firms, scarce resources are committed supporting existing operations making
redeployment very difficult. Long-term commitments such as building and equipment
leases combined with the natural inclination for managers to protect spheres of
influence adds to the difficulty of reallocating resources whether human or mechanical
for more productive uses.
Centralized controls typical of classical hierarchal structures are ill suited for fast-
paced environments (Hugos, 2009). Centralized control may yield increased efficiency in
predictable and stable business climates but in the complex volatile business world of
the twenty-first century corporate responsiveness is more critical to success than
efficiency. Many researchers have concluded that organizations designed using
traditional hierarchies with strong command and control structures are inherently anti-
change (Hugos, 2009; Scott, 1981; Scott and Davis, 2003). Hugos proposed that
responsiveness builds on efficiency but the efficiency without responsiveness may be
fatal to an enterprise. In complex organizations, identifying and implementing changes
in response to complex global changes requires increased coordination of diverse
segments and individuals with less central control; a concept which may be
counterintuitive to many organizations. Part of the typical problem in many
organizations is that senior management at the top of the hierarchy takes too long to
make effective decisions. Agility therefore requires implicit leadership that facilitates
knowledge sharing, seeks consensus, trusts people, delegates more, and provides an
environment for people to maximize inherent tacit knowledge (Nold, 2012).
Hamel (2012) suggested that innovation is at the core of an agile organization.
Leaders must build organizations dedicated to meeting human needs and values in
order to enable people to develop their full potential and creativity. Enabling
adaptability in organizations requires a modification in aspirations, behaviors, and
management systems. Organizations should be built around people to leverage critical
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thinking, innovation, and problem solving abilities. Adaptable organizations are
characterized by decentralization, emphasis on community, transparency in decision
making, leadership accountability, rewards systems aligned to contributions, peer
reviews, and enlarged self-determination (Hamel).
Recurring as an underlying, but critical, theme throughout the literature is the need
for clearly defined and effectively communicated mission, vision, and values of the
organization. Shared purpose and commitment to organizational mission, vision, and
values becomes critical components for any change effort (Hertz, 2006; Longenecker
and Ariss, 2009). Doz and Kosonen (2008) proposed strategic sensitivity and collective
commitment as essential conditions for effective change. Hugos (2009) suggested the
need for increased coordination across complex organizations while decreasing central
control. Nold (2012) identified knowledge sharing and trust as key components to
access tacit knowledge reservoirs while Hamel (2012) suggested that adaptable
organizations are characterized by decentralization, emphasis on community, and
enlarged self-determination among other attributes. Critical to effectively adopting any
change program is the need for the people to share in the goal and believe in the higher
purpose. Effective leaders are adept at describing the mission, vision, and values of an
organization in a way that people understand, visualize, and adopt.
The need for fast and effective decision making, effective use of knowledge embedded
in people, and innovation are also recurring themes throughout the literature on corporate
agility, adaptability, and change (Doz and Kosonen, 2008; Grantham et al., 2007; Hamel,
2012; Hugos, 2009). Every innovation regardless of the type requires thorough evaluation,
approval, and dedication of resources to be implemented. People are at the heart of
identifying potential innovations and navigating the decision-making process. Clearly,
determining what must be done, how to do it, and making it happen quickly demands
that organizational leaders maximize all available assets, the most important of which is
the reservoir of knowledge that resides within the minds and experience of diverse people
scattered throughout the organization (Nold, 2013; Nonaka and Toyama, 2005).
Coordinating all of these moving parts in a fast-paced, complex, and volatile environment
and doing so quickly are the essential elements of the agile organization. The speed and
quality of the decision-making process enables firms to have flexible footprints described
as the ability to reconfigure as needed to take advantage of new value opportunities as
windows of opportunity open (Maitland and Sammartino, 2012).
4. The performance triangle
The performance triangle incorporates and expands on prior models to promote
corporate agility. As shown in Figure 1, the performance triangle is composed of three
primary elements: systems, leadership, and culture. At the heart of the performance
triangle are people who power the system by contributing unique skills, expertise, and
experience. The performance triangle frames the requirements for higher agility and
speed as the measures of success in the new era.
4.1 Decision making
Superior decision making is the distinguishing capability of an agile organization
(Hamel, 2012). Essential abilities for agile decision making include sensing early
warning signs of changes in the internal or external environment, the ability to identify
and distill relevant information and react quickly to make an impact. Decisions are
made by people, which is why people are at the center of the performance triangle.
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Other key components that enable organizations to maximize potential are centered
and revolve around people functioning at all levels. People throughout the organization
are responsible and want to contribute to making the firm successful. Agile
organizations facilitate self-determination, self-control, self-initiative, and responsibility
rather than traditional command and control techniques that are rigid, inflexible, and
slow reacting (Hamel). Consider how effective that fighter pilot would be if he or she
had to get permission to bank left or climb or dive while closing on an enemy at 1.5
Mach, yet, that is exactly what too many organizations do then wonder why they are
incapable of reacting quickly.
4.2 Structure of the performance triangle
4.2.1 Success. Success stands at the top of the performance triangle representing the
ultimate purpose of management. Successful firms meet or exceed expectations by
making performance visible in the form of socially accepted outcomes. In the
performance triangle model, five attributes determine success; agility as the ability to
sense opportunities and react on them, alignment of the organization with strategy as a
prerequisite to creating value, organizational core competencies as the foundation for
sustainable competitive advantage, motivation of the team to get things done, and the
wisdom of how the organization defines and uses its boundaries. These attributes
define the primary intangible value creating elements of an organization driving
success.
4.2.2 Culture. Culture of the organization creates shared context, enables or inhibits
knowledge exchange, and defines the boundaries of collaboration. A vibrant culture
establishes shared context as the common ground with a shared agenda, language,
thought models, relationships, and purpose (Von Krogh et al., 2000). Shared context
describes a shared mindset and the behavior of individuals based on shared norms,
beliefs, values, and assumptions. The organizational culture becomes the invisible force
that, like gravity, shapes all interactions within the universe that the organization exists.
Success
Culture
People
Relationships
Purpose
Collaboration
Systems
Leadership
Figure 1.
The performance
triangle
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Organizational culture either enables knowledge sharing or is a barrier to sharing
even simple pieces of information (Nold, 2012). Becarra-Fernandez et al. (2004)
suggested that 80 percent of the total amount of knowledge in an organization exists in
the minds of people, not in databases, operating procedures, work instructions or any
other explicit form. More recently, Suppiah and Sandhu (2011) found that 90 percent of
organizational knowledge is tacit in nature. Any condition that inhibits the free flow of
knowledge between people throughout the organization acts like an infection that
diminishes the ability of the organization to use that knowledge. An infected culture is
one of the main roadblocks to knowledge transfer in an organization (Ruggles, 1998).
Similar to a virus infecting living organism, organizational traits like autocratic
leadership styles, silos, or lack of trust and respect throughout the organization
effectively block knowledge sharing. Unseen or unnoticed virus make culture an
organizational bottle-neck that constrain the amount and quality of knowledge sharing
limiting the creativity of people, their ability to act, and disrupting flow.
Collective thoughts, behaviors, decisions, and actions require direction, alignment,
and coordination. Knowledge that is not shared, exchanged, and transferred is of no
value to an organization. Similarly, knowledge for the sake of knowledge has little
value, which is why collaboration, the base of the performance triangle in Figure 1, is
critically important. The challenge for any executive is to create a culture that
facilitates people working together on tasks that add value to the organization.
Effective collaboration requires a shared problem and commitment with people
working together with shared way of doing things. Furthermore, Brannen and Doz
(2012) stressed the importance and challenges of a shared corporate language as
enablers of strategic agility.
4.2.3 Leadership. Leadership is a key component of the performance triangle.
Effective leaders in agile organizations interact with people on a personal level, relate to
others to facilitate meaningful collaboration, and establish a supportive work
environment based on trust (LaRue et al., 2006). In the broadest sense, leadership is
effective communication and interaction with others at all levels throughout the
organization. Many studies have been done and volumes have been written attempting
to distill the essence of leadership into a list of “how to”behaviors or traits (Derue et al.,
2011). Successful leadership is different in different organizations and in different
situations. A leadership style that is successful in one organization in a specific
situation many not necessarily be effective if applied in a different organization or
situation. However, the need for effective communication skills and interaction with
followers are recurring themes in the literature (Haneberg, 2011; Hugos, 2009; Ulrich
and Smallwood, 2003). It becomes essential for effective leaders in an agile organization
to develop effective communication and interaction skills that are natural and unique to
the leader and organization. Ultimately, what is important is that the individuals in the
organization adopt shared vision, collaborate in a culture of trust, and engage multiple
personalities, while leaders champion creativity and experimentation. Specific
communication and interaction strategies will vary from organization to
organization and leader to leader but the overriding, primary, objectives are for
shared vision, collaboration, and positive relationships to become integrated into the
culture of the organization.
4.2.4 Systems. In the performance triangle, systems represent the institutional
framework with rules, routines, and tools that set the stage for rigorous and disciplined
leadership. Technology-based information systems accumulate, store, process, and
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provide access to information and facilitate immediate feedback. Human systems in the
form of rules, routines, and guidelines of many types provide frameworks that give
technology structure and relevance. The roles of systems the performance triangle
context is to create meaning while balancing top down direction with bottom up
creativity. Systems support implementation with the right balance between freedom
and constraints to maintain control. To support collaboration among people, systems
make information available to assist people to find purpose and support formation of
beliefs and decisions. In addition, systems set boundaries balancing entrepreneurship
with efficiency. Using the jet fighter analogy, systems are represented by the fuel that
powers the jet engines.
4.2.5 People. Individuals perform at their highest potential by winning their
“inner game”and overcoming self-doubt, fear, biased-focus, limiting concepts or
assumptions that distort perceptions, decisions, behaviors, actions and stress that
interfere with, and diminish, performance (Gallwey, 2000; Whitmore and Gallwey,
2010). Awareness, choice, and trust help people to focus attention on what matters.
Reaching a state of flow, the state where performance and creativity are at a peak, must
be a primary objective at all levels of an agile organization (Csikszentmihalyi, 1997).
Control systems are needed to manage both evolutionary and revolutionary change
by formalizing beliefs, setting boundaries on acceptable strategic behavior, defining
and monitoring performance variables, encouraging debate, and discussion about
uncertainties, communicating new strategies, establishing targets, and securing
attention to new strategic initiatives (Simons, 1994). Unfortunately, most traditional
management systems or processes do more to interfere with people and their ability to
perform than to enhance performance (Drucker, 1957). Interactive leadership and
diagnostic systems play an important role in creating a work environment where
people succeed in “playing the inner game.”
4.2.6 Collaboration, purpose, and relationships. The result of a high-energy work
environment results an intense collaboration, a high sense of purpose and trusting
relationships. These features have a stabilizing effect on organizations known as
resilience or “robustness”(Beinhocker, 1999; Deevy, 1995). Organizations reach higher
levels of resilience through collaboration (Doz and Baburoglu, 2000), purpose, and
relationships (Alpaslan and Mitroff, 2004) as cooperative strategies (Dyer and Singh,
1998). Companies are able to reinvent themselves and find new business models while
the preserving core competencies (Coutu, 2002; Hamel and Valikangas, 2003).
5. Qualitative and quantitative emergence of the performance triangle
The concept for the performance triangle emerged over ten years from information
gathered from case studies involving over 100 organizations in different industries
throughout the world plus results from survey data gathered from 50 of the over 100
organizations between 2006 and 2011. Analysis of qualitative and quantitative
information from these multiple sources exposed intersections between recurring
themes and relationships between specific aspects of organizations that evolved into
the elements of the performance triangle.
5.1 Qualitative origins
After analyzing ten years of case studies involving senior business leader representing
over 100 firms several trends and recurring themes in discussions and stated concerns
began to stand out as significant. Three primary groupings of elements were identified
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as being essential for success in a dynamic and fluid business environment; leadership,
systems, and culture.
Several themes revolving around leadership emerged. The need for intense
interactions to rapidly address an increasingly fast-paced and complex business
environment became apparent. This observation coincided with the fact that an
increasing number of employees were hired for their knowledge and not for their
physical contributions to work. The trend toward knowledge workers and knowledge
economy has been documented by many researchers and authors for decades (Davenport
and Prusak, 1998; Drucker, 1957; Mládková, 2011). Feedback from business leaders
suggested that this changing demographic called for a different leadership style
requiring more involvement and engagement throughout their organizations. Creating
and maintaining an environment enabling knowledge workers to maximize unique and
valuable abilities required focus of attention and constant energy to maintain.
With growing organizational complexity and pressure from increased regulation
several common themes revolving around command and control systems emerged.
Business leaders in many cases indicated that traditional command and control systems
with traditional tools and methods were becoming increasingly less effective. Complex
twenty-first century organizational structures required different ways to maintain
adequate control while simultaneously enabling operational managers sufficient
authority and flexibility to make effective on-the-spot decisions. Time emerged as a
theme related to systems inthe sense that time is a scarce resource that is non-recoverable
once gone. Maximizing efficient use of leader’s time as well as reducing time needed to get
relevant information into the right decision makers hands when and where it is needed
were growing concerns. Time-related themes associated with speed and efficiency of
information and knowledge flow enabled by systems were frequent and emphatic.
The third major theme that emerged over this ten-year period was a growing
awareness of the hidden potential of intangible, human, factors permeating organizations
that shape human behaviors and responses. With increasing frequency business leaders
identified the need for shared beliefs, values, and assumptions embodied in the collective
minds of organizational members in the form of the organization’s culture. Growing
numbers of leaders identified intangible dimensions of the culture as a key factor for
unlocking new sources of profitability. Themes involving organizational culture as the
unseen force connecting systems and leadership emerged such that the culture anchored
all else enabling the organization to be successful.
Combining and visualizing these three central themes resulted in the emergence of a
dynamic triangular system consisting of leadership, systems, and organizational
culture powered by people to be successful. Perceptions are one thing but business
leaders ask what value does something bring to the organization and ask if a
recommendation is based on fact or opinion. Therefore it became necessary to test the
emergent themes of this performance triangle for correlation and significance.
5.2 Quantitative analysis
Between 2006 and 2011, responses from surveys of 50 organizations were compiled
identifying relationships among recurring themes observed from many case studies
over a ten-year period. The general research question was:
RQ1. Are there relationships between leadership, systems, culture and success?
The hypothesis for each intersection of leadership, culture, systems, and success was
that there would be a significant relationship. The survey consisted of 120 questions
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designed to provide insight into aspects of leadership, systems, culture, and success
that were consistently identified as key elements in many case studies. Senior-level
managers in these 50 organizations responded to questions asking them to evaluate
their own organizations and how they perceived the strength of the elements along a
nine-point Likert-type scale. The sample encompassed a wide array of industries, firm
sizes, countries, and ownership forms as identified in Table I.
Each theme of the survey (leadership, systems, culture, success) was broken down
into factors identified as significant components of that theme in case studies.
Questions were developed for each factor based on observations in case studies
designed to gauge the degree of influence of specific factors within the organization as
judged by the respondent. Figure 2 shows the factors within each theme and the
thematic question explored by the factor.
The objective of the study was to evaluate the perceived relative strength of
these elements in the organization as a whole. The survey was employed as a
diagnostic tool for practical evaluation of the subject organizations. It was found that
Organizations 50
Participants 895 participants; range from 3 to 80 per organization with an average of
18 participants per organization
Time period 2006 through 2011
Industries surveyed Financial services (6); manufacturing and construction (7); consumer goods
and food (10); logistics and energy (3); media and tourism (5);
pharmaceuticals and chemicals (5); public service (5); foundations (2);
professional services (7)
Firm size (number of
employees)
0-99 (13); 100-199 (17); 1,000-9,999 (12); W10,000 (8)
Country (of origin) USA/Canada (5); Central Europe (24); Middle East/Africa (6); UK (5); Asia (5);
Latin America (2); Australia/New Zealand (3)
Ownership Public shareholders (28); private/family (15); public service (5); foundations/
NGO (2)
Scope (of operations) Global (10); international (15); local (25)
Table I.
Sample
demographics
Information
Sense Making
Understanding
Agility Alignment
Intent Agenda
Capabilities Motivation Smartness Success
Aspirations Norms Culture
Strategy
Conversation
Performance
Conversation
Contribution
Dialogue
Risk
Dialogue Leadership
Strategy Implementation Beliefs Boundaries Systems
What is going
on?
What dose that
mean?
What is our
shared
understanding?
What is our
shared intent?
What is our
shared sense of
purpose?
What gets you
ahead?
What can we
tolerate? what
are the risks?
What game are
we playing?
What are our
ambitions?
How do we
succeed?
How can we
contribute?
Where are the
limits?
Why are we going
there? What have
we learned?
Are we on track?
What do we do next?
What do you need?
Do we get the
right things
done?
VV VVVV
VVVVVV
VV VVVV
+
++
+
++
+++
+
+
+
+
+
+=
=
=
=
+
Figure 2.
Factors and themes
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individuals quickly and easily understand data on a 100-point scale or as a percentage.
Therefore, it became necessary for presentation purposes to normalize responses to
each factor on a scale of 1 to 100 in order to allow executives to quickly and easily
comprehend the intensity of the themes within the organization. Values on the Likert-
type scale 1, 2, 3, 4, 5, 6, 7, 8, 9 translated into 0, 12.5, 25, 37.5, 50, 62.5, 75, 87.5, and 100
on the 100-point scale. Regardless of the scale, relationships and correlations
remain unchanged.
5.3 Survey results and interpretation
Analysis of data from responses by senior-level managers in 50 organizations with an
average of 18 participants in each company suggested the existence of meaningful
relationships between the central themes of culture, leadership, systems, and success.
Using MINITAB statistical software for statistical analysis, results indicated that the
correlations between these relationships are significant providing positive support for
the hypotheses and the general research question. Table II shows descriptive statistics
for individual themes, correlations, and the regression analysis of relationships
between themes.
Table II indicates that regression analysis performed on the responses from
the sample of 50 firms shows a significant correlation between the themes of the
performance triangle. The strongest positive correlation in the sample is between
systems and leadership giving an early indication that these attributes of the
performance triangle can drive effective decision making.
5.3.1 Culture and leadership. The relationship between culture and leadership
suggests that an organization’s leadership team can positively influence culture
through their interactions and practices. Results indicated that productive
conversations between leaders and employees on direction, performance, beliefs, and
boundaries help create a shared intent throughout the organization. Discussions
between leaders and employees on performance expectations establish a shared agenda
while individual contribution and risk dialogue influence motivation and strengthen
accountability Sense making raises the awareness for important conditions.
Themes Mean Median SD
Leadership 69.84 69.35 13.00
Systems 68.17 68.55 12.31
Culture 68.97 68.95 14.35
Success 73.52 72.20 11.49
Theme Leadership Systems Culture
Systems 0.694
Culture 0.551 0.562
Success 0.509 0.581 0.520
Relationships Correlation Y-intercept Slope F-value
Success vs culture 0.52 44.8 0.416 17.77
Culture vs leadership 0.55 26.4 0.609 30.95
Culture vs systems 0.56 24.3 0.655 22.15
Leadership vs systems 0.69 19.9 0.733 44.63
Success vs leadership 0.51 42.1 0.450 16.81
Success vs systems 0.58 36.5 0.543 24.50
Notes: n¼50. po0.001 for all results
Table II.
Descriptive statistics,
correlations, and
linear regression of
relationships
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5.3.2 Systems and culture. Strategic systems include the development and articulation
of strategy as well as strategic management. Information is accumulated through
measurement, reporting, and feedback mechanisms. Successful implementation of
strategy includes planning and performance management of organizational units. Beliefs
include vision, values, incentive systems, and tools for goal directed behavior. Boundaries
establish and define the organization’s mission and risk limits while governmental
standards and regulation establish common ground rules for all firms in an industry.
The data on the relationship between systems and culture suggests that organizations
with superior systems are likely to have a productive culture.
5.3.3 Systems and leadership. Every system is a bureaucratic intervention. Systems
are necessary to support effective management and leadership and to help establish
and maintain a healthy culture. However, a fine line exists between stifling
bureaucratic systems and supportive systems. A primary purpose of managerial
systems is to support effective and flexible leadership. The data suggests a positive
relationship between systems and leadership. Small changes in systems have a
significant effect on leadership. Effective information systems help employees and
leaders make sense of what is happening and raise awareness for what is important
thereby increasing agility. Clear, concise, and well-communicated strategic goals
help establish shared intent throughout the organization and promotes alignment
toward achieving key strategic objectives. Constructive conversations throughout the
organization surrounding implementation of strategy and performance measures
promote a shared agenda and strong belief systems. Strong belief systems facilitate
the evolution of shared aspirations and purpose giving organizational objectives
greater meaning.
5.3.4 Culture and success. Research in anthropology suggests three bonding
elements of culture: trust; transactions; and authority (Stephenson, 2008). While
transactions and authority are relatively easy to decode, trust is complex, intangible,
and difficult to evaluate. The challenge of any organization is to create a positive
environment that encourages people to work together to share what they know and
collaborate effectively. Nold (2012) showed that firms with higher levels of credibility,
fairness, respect (collectively trust), pride, and camaraderie significantly outperformed
comparable firms in the same industries in value creation, operational performance,
and growth rate. The Nold study reinforced results from the current study suggesting
that success increases as elements of the culture become more positive.
Cultural questions explored in the survey include; intent (shared direction),
awareness (shared understanding of past and current), agenda (getting the right things
done), aspirations (shared sense of purpose), and norms (what gets you ahead). High
scores suggest the existence of a team culture with a shared strategy, clear
understanding of current reality, a team moving in the same direction, and leadership
with shared beliefs and boundaries. High levels of awareness of internal and external
environments enable organizational leaders to sense and react quickly to subtle
changes. Shared aspirations and norms provide motivation and the necessary degrees
of freedom for entrepreneurship throughout the organization required for high agility
and adaptability.
6. Conclusion and discussion
The impact of technology, globalization, and complexity in the twenty-first century
business environment defines the dynamics of success for most organizations. In stable
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industries, traditional bureaucratic command and control organizational structures and
management philosophy can be successful but stable conditions are rare in today’s
world. Agility and speed in decision making become essential capabilities to cope
with volatility and uncertainty. Since it is impossible to know what threats or
opportunities will unfold it becomes imperative for firms to adopt designs and
philosophies to access their greatest asset –people –and the knowledge in people’s
minds and experience. Tapping into the vast tacit knowledge reservoir of relevant
participants to create new knowledge on which to base effective and timely decisions is
a key to long-term success.
Ten years of case analysis and analysis of responses by senior business leaders
resulted in the emergence of a performance triangle consisting of culture, leadership,
and systems that enable corporate agility and ultimately success. The ability of
organizations to quickly sense, evaluates, and adapt to changes in the internal or
external environment defines agility, which is an economic reality today. Like the jet
fighter pilot closing on a threat at 1.5 Mach who must make countless split second
decisions, any one of which could be fatal, successful corporate executives must assess
threats and opportunities, make decisions, and implement those decisions at high
speed. To do otherwise could be fatal to the organization.
The emergent themes of the performance triangle supported by study results
suggest that business leaders should reexamine traditional operating methodologies
and make learning a process that addresses governing variables. As Argyris (1973)
observed, “All descriptive concepts, once they are used to organize reality and guide
behavior become normative”(p. 265). Through time, a gap develops between what is
needed in form of leadership, systems, and culture for maximum performance. As
checklists become embedded within the corporate structure and belief systems,
accepted systems and behaviors reinforce the central tendency with mediocrity as the
result. It becomes essential to identify gaps between what executives think is going on
and what is actually happening.
Classic management philosophy suggests that organizations and the problems
confronted by organizations can be “fixed”through reorganizing, restructuring,
reengineering, or any of many management approaches. Too often, changes in firms
are limited to structure and leadership programs. Executives are compelled to try to
“fix”problems quickly so replacing systems becomes an achievable target that
demonstrates the executive’s efforts. Likewise, replacing leaders or engaging executive
coaches, trainers, and executive education programs to strengthen existing leadership
skills becomes an enticing strategy. Clearly any change first requires altered systems,
i.e.; new ways of managing result, performance, strategy, risks, engagement, etc. Only
after altering systems can leadership and people development initiatives be
implemented. Unfortunately, people cannot be “fixed”in a way that allows
executives to proudly display their efforts. The path of least resistance leads leaders
to focus on concrete actions to change systems and leaders but fundamental beliefs and
values of people are another matter entirely.
People must learn new ways of doing things to replace old ways many times on a
subconscious level. The old ways of thinking were adopted and became
institutionalized in the firm’s cultural as shared beliefs, values, and assumptions
because they worked (Schein, 2004). Therefore, people must experience success and
positive reinforcement using new ways before they will internalize the change. People
are affected by introducing new paradigms of thinking and acting into the culture and
creating situations with successful outcomes. Positive reinforcement is needed before
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the new systems and beliefs become absorbed into the firms culture by a critical
mass of people needed to sustain the new ways once the forces promoting the change
are removed.
Based on ten years of qualitative and quantitative study, true solutions that are
effective, timely, and long lasting result from attending to people-centric aspects of the
organization. Agility in the twenty-first century is dependent on blending culture,
leadership, and systems in a way to maximize knowledge flow throughout the
organization to develop dynamic capabilities and facilitate effective and timely decision
making. Anything less and the organization will fail to maximize success ultimately to
be overtaken by competitors who are more agile.
Future research is needed to explore more deeply the relationships between the
major themes and elements of the performance triangle model and investigate the
validity and reliability of individual constructs. Management methods and initiatives
intended to provide positive reinforcement needed to change fundamental beliefs and
values should be tried and subjected to testing. Unknown is the critical mass of people
needed to adopt new beliefs and values needed to permanently change the culture of an
organization. Additional research into the constructs of the performance triangle model
across a wider population are needed as well as investigation into the critical mass of
people needed to institutionalize cultural changes.
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About the authors
Dr Herbert Nold is a Professor of Business Administration at Polk State College in the Bachelor of
Applied Science Program where he primarily teaches strategic planning, operations
management, leadership, and ethics. Dr Nold earned a Doctor of Management in
Organizational Leadership from the University of Phoenix, School of Advanced Studies and
holds masters and bachelor degrees in Education from the Northern Illinois University. He is an
Authority on organizational culture and how the culture directly influences organizational
performance. Dr Nold’s research and writings have been published in numerous international
academic journals with “Linking Knowledge Processes with Firm Performance: Organizational
Culture”published in the Journal of Intellectual Capital chosen as an Outstanding Paper Winner
at the Emerald Literati Awards for Excellence 2013. “Using Knowledge Processes to Improve
Performance and Promote Change”was selected as the Best Paper of 2012 by the International
Journal on Knowledge, Culture and Change in Organizations. Dr Nold entered academia after a
30-year career in industry where he advanced to the executive suite in several firms as the Chief
Financial Officer or the Chief Operating Officer. He is a Member of the Emerald Literati Society,
the Academy of Management, the Production and Operations Management Society, and the
American Institute of CPAs. Dr Herbert Nold is the corresponding author and can be contacted
at: hnold@yahoo.com
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Lukas Michel is the Owner and the Managing Director of Agility Insights, AG based in Zug,
Switzerland. As well as developing his own management consultancy practice, he is a Business
Leader with a 30-year international career with global corporations in Europe, Asia, and the
Middle East. He works with executive teams around the world, focussing on organizational
agility and decision making, delivering systemic analysis, advising on the design of culture,
leadership, and systems, and providing implementation guidance for a range of local, national,
and international organizations. Lukas Michel has authored: The Performance Triangle:
Diagnostic Mentoring to Manage Organizations and People for Superior Performance in
Turbulent Times and Management Design: Managing People and Organizations in Turbulent
Times. Michel has been published in numerous business magazines and spoken at
many leadership seminars and universities. Michel holds an MS Degree in Management and
bachelor degrees in Textile Management from the North Carolina State University and education
from Switzerland.
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