Cultivating Organizational Excellence

The introductory chapter describes the circumstances in which organizations nowadays are pursuing excellence. Purpose and mission are the starting point to define the unique position of the organization within an increasingly dynamic and complex business context. Technological innovation, virtualization of important societal processes, and the increasing role of intangibles in value creation further tighten requirements on organizations. As a consequence, organizations will need to open up more strongly to maintain adequate levels of stakeholder interactions and adopt internal network structures replacing traditional hierarchies. It is indicated how the successive chapters of the book provide a comprehensive, stepwise approach towards achieving business excellence under such circumstances, but also that every organization will have to interpret and implement this in its own particular context.

Terminology is defined first to create the right distinction between excellence as an organizational capability and quality of its products and services. While the Quality Management System is focusing on product and service quality, a more fuzzy Business Management System will help to deal with all changes that are going on and gradually develop excellence. It is explained that management on several time horizons is necessary to be successful now, but also remain so in the future. Interactions with (key) stakeholders need to be on the right level to ensure that appropriate things are done now and feedback is taken on board to improve going forward. Stakeholder mapping and analysis, including identification of stakeholder groups as customers, contributors, key opinion leaders, and relevant influencers is a first step on this ongoing journey. Understanding stakeholder needs and expectations is the basis of your short and medium-term objectives. Since the ecosystem(s) in which you operate as an organization is/are also subject to continuous change, you will need to update your views on it as well. Therefore, stakeholder interactions will need continuous attention and reconsideration. Efficient, process-based structures can be implemented to ensure these interactions and coordination of changes in business processes take place on the right level. Subsequent action planning and execution can maximize value creation for the identified stakeholder groups. This defines the basis for operational excellence.

Excellent organizations know how to deal with volatile, uncertain, chaotic, and ambiguous conditions. Drivers and characteristics of business dynamics will be treated in depth. Different types of dynamics will be distinguished, and effective approaches will be indicated to translate these into operational target settings and plans. Special attention will be paid to corrective and preventive actions (CAPAs), change management, continuous improvement, and organizational transformation. Quantum mechanical models will be shown to adequately describe aspects of organizing improvement, in particular CAPA management. It is explained how the total spectrum of dynamics can be translated into an integrated management agenda that will serve as guidance for the organization to successful execution and will also enhance its change readiness.

Excellent organizations apply extensive performance management systems that anticipate change and help to manage change and transformation. Requirements for measuring performance and evaluating (progress of) change and transformation will be presented as key practices to understand the current situation, analyze possible gaps, and take the right decisions for the future. Designing a robust organizational performance management system and its development over time are essential to stay on the helm when expediting to future success. Shortcomings of traditional practices like the Balanced Scorecard are illustrated. State-of-the-art considerations on scorecards, dashboards, and the associated key performance indicators will be covered in this chapter. Special attention is paid to measuring perceptions, in particular evaluating customer feedback (e.g. using Net-Promoter Scores) and employee engagement. Attention is paid to optimizing the overall effectiveness of the measuring system and keeping the right balance between effort and relevance.

Excellent organizations apply learning processes that are feeding their development and decision taking. Understanding and improving how organizations learn and accumulate their knowledge and experiences is essential to accelerate innovation and avoid repeating the same errors. Systematic approaches to develop a comprehensive view of the organization, its ecosystem, markets, or specific stakeholder groups are discussed. Disseminating this information throughout the (networked) organization will deepen the understanding of what is going on, what is required, and what is possible, and therefore forms the basis for the development of judgment and concerted action. Further, it increases transparency on what kind of information can be provided by whom. Doing so, it accelerates progress of improvement and change, and as such it will strengthen the innovation culture of the organization. Ways in which a Business Management System can be defined and developed over time to support such learning processes will be explained.

Excellent organizations apply reward and recognition, including elements of target setting, as behavioural drivers for performance as well as transformation. Translation of organizational objectives to personal and team objectives in the organization is essential. The scales (organizational as well as temporal) at which the overall reward and recognition schemes are applied are key design parameters for overall effectiveness. Consequences of organizational transformation and contextual dynamics will be covered to demonstrate how flexibility can be embedded in the approaches followed. Target setting should anticipate the volatility of the circumstances, and its robustness helps the people in the organization to keep a steady course during the changes that are going on. At the same time, recognition needs to be given for those achievements that contributed to shorter-term organizational success as well as those over a longer period of time. A balanced award scheme can cater to this. All of these factors make reward and recognition a key instrument to drive excellence in the organization. External recognition which is an essential component of excellence, will follow. Several examples of that are given.

Excellent organizations effectively leverage their (innovation) ecosystems. The consequences of intensified interactions with stakeholders of various nature and the necessary delegation of control in such ecosystems will be discussed. The insights presented reflect the fact that many organizations are becoming part of distributed value chains nowadays, moving away from the vertically-integrated conglomerates of the past. Only by focusing on some aspects of the value chain while strengthening cooperation with other parts, sufficient value can be added while maintaining enough flexibility with respect to the technological and market changes that are going on. Examples will be given from the development of the Brainport region in The Netherlands as innovation ecosystem during the first two decades of the new millennium. These will make clear that interactions between many parties change simultaneously in such ecosystems during a co-creation process. The role of anchor companies in maintaining supra-regional connections will be highlighted. Culture and knowledge-management changes that are involved will be discussed. Finally, it is indicated how the overall effectiveness of the approaches can be evaluated, and the results of such evaluations are discussed.

Excellence can be approached stepwise and implemented systematically. Here it will be explained how excellence needs to be built on the overall value system of the organization on the one hand and on the organization culture and its flexibility on the other hand. Collective governance and sustainable progress thinking are demonstrated to be important elements of the necessary culture changes. The UN Sustainable Development Goals will be shown to provide a useful framework to filter and enrich business initiatives. The importance of Environmental, Social, and Governance (ESG) characteristics of organizations, including business ethics, for excellence will be discussed. Development of the right level of Corporate Social Responsibility (CSR) is a critical condition for sustainable value creation, and therefore for survival and success in the longer run. A high level of flexibility in the organization culture will be required to reconcile all, often conflicting, stakeholder requirements. It will be indicated how the instruments presented earlier can be put in place gradually and integrated over time to cultivate the excellence levels aspired. This chapter therefore describes how the right conditions can be created for excellence, and how this can be reinforced step by step.