Reports and Publications

• Hunn Review:
  Annexes
  • Contents
  • Annex A
  • Annex B
  • Annex C
  • Annex D
  • Annex E
  • Annex F
  • Annex G
  • Annex H
  • Annex I
  • Annex J
  • Annex K
  • Annex L
  • Annex M

Within this section

• Corporate Culture and Values
• Governance Structures and Mechanisms
• Organisational Focus
• Management Structures
• Management Processes
• Structure / Processes Alignment
• Interoperability and Relationships Management with Strategic Partners

Hunn Review: Annexes (30 September 2002)

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Annex M

Attributes and Practices of High Performing Organisations

1. I have asked for this Annex to be prepared to indicate the developments that are taking place in organisational thinking as applied to the achievement of "jointness" in the business world. It highlights features of high performing public and private sector organisations in both delivering results and in how they adapt and situate their structures, cultures, policies and processes to cope with expected future demands and challenges. These features should characterise any new organisational model for New Zealand defence.
2. The most obvious feature of organisations is their structural arrangements. However, such arrangements are only one aspect of a much more dynamic picture of capacity that underwrites high, average or low performance. A variety of features contribute to organisational capability and each works with all others to create a synergy. In fact, high performing organisations are evolving away from emphasising organisational charts and structures because as work changes more frequently, such structures (and their silo-ed job descriptions) become obstacles to using personnel resources to best effect.
3. This Annex examines a number of these key features including Corporate Culture and Values, Governance Structures and Mechanisms, Organisational Focus, Management Structures and Processes, Structural/Process Alignment, and Interoperability with Strategic Partners.

Corporate Culture and Values

4. An organisation's culture comprises the shared philosophies, beliefs, assumptions, ethics, values, standards and patterns of behaviour of its members. It encompasses shared ways of thinking about the problems of the organisation. Culture is the binding glue of all other features of an organisation. This dynamic has become particularly apparent when despite clear change management plans, new structures and processes, etc, organisations have failed to achieve the transformation they sought because they did not address culture change.
5. An organisation's culture lies at the foundation of high performance. Three features typify the culture of high performing organisations:
   • clearly stated and strongly adhered to corporate values such as high levels of commitment to the organisation, to teamwork, collaboration, contribution and commitment, innovation, continuous learning and improvement, openness and honesty, reliability, etc;
   • a common vision of the purpose of the whole organisation shared by all members, and the direction in which the organisation is heading, and a continuous commitment to sustaining both the shared nature of the vision, and the relevance of the vision to both internal members, and external clients and stakeholders; and
   • policies for recruiting, selecting, paying, training, developing and organising the organisation's workforce that sustain and reinforce corporate values.

Governance Structures and Mechanisms

6. Governance mechanisms are a key aspect of an organisation's control system. They provide the processes and vehicles through which direction is provided on actions to be taken, and through which decisions are taken. They define the roles and authorities of individuals in the decision- making process. Most organisations usually have external governance mechanisms, managed by external stakeholders that incorporate internal leaderships and decision-making processes and participants.
7. Both in the private and public sectors, organisations have become increasingly more specialised, focusing on core activities. At the same time, the greater interdependencies have evolved between organisations associated with the delivery of particular public or commercial services and results. Consequently, effectiveness and efficiency of performance increasingly depends upon broader governance models that can reduce decision gridlock between different organisations with different but complementary responsibilities for delivering a shared result.
8. Governance structures for high performing organisations are characterised by:
   • clearly-defined decision-making processes that identify the key decisions to be made, specify how decisions are made, and the decision roles (recommend, agree, input or decide) of participants;
   • decision-making processes, timings and roles of participants are aligned with and are part of the organisation's strategic management processes;
   • decision processes that manage and co-ordinate the points of intersection between different organisations that contribute larger solutions and results.
   • decision processes and structures that are based on contributing partnerships between complementary organisations;
   • high levels of factual data, understandings of cause and effect to support decision-making rather than instinct, authority or anecdotal evidence; and
   • decision-making authority aligned as closely as possible with the participants responsible and accountable for the results of decisions.

Organisational Focus

9. Some organisations focus on high performance; others do not aim as high. The focus of an organisation will influence and be reflected in its internal management structures, processes, control mechanisms, and culture. For example, low performing organisations tend to focus on organisational survival and not making mistakes, managing internal disputes, and serving internal constituencies. By contrast, high performing organisations tend to be:
   • highly mission and results-focused in terms of the needs of the organisation's external customers/clients and stakeholders;
   • focused on continually enhancing understanding of what is valued by the organisation's external customers/ clients and stakeholders and shaping the corporate culture to support a focus on all customers; and
   • recognising the needs of internal customers that must be met as a priority if the organisation is to successfully achieve its mission.

Management Structures

10. Structures reflect organisational size, diversity of results being delivered, the content, complexity, interdependence and location of the work. Throughout the 19th and 20th century, organisations became increasingly structured around divisions based on type goods or services, and the functions to be performed in delivering them. Such structures were hierarchical and vertical. Separate cultures, knowledge, and work practices defined and sustained such divisions. Rank equalled authority. High value was placed on control, certainty, loyalty to unit, discipline, and contractual styles of management.
11. Such structures worked well in the past. However, they are less and less effective in coping with today's challenges and those of the future. The conditions that underpinned the efficiency of such structures (certainty, stability and excess of customer demand) no longer exist. Workforces and customer expectations and powers have changed. Globalisation and technological developments have also changed the start-up and performance demands for new and existing organisations.
12. The Public Sector in most advanced democracies, including New Zealand, has been buffeted by the same winds of change. The 1980s Public Sector reforms were the first major recognition of these changing organisational dynamics. Unfortunately, the application of a "one-size-fits-all" formula for all organisations, in some cases, generated only partial improvements while introducing new rigidities and costs.

14. Operating in the contemporary public and private sector environment, high performing organisations have undertaken or are engaged in processes to reconfigure their organisational structures. Changes are designed to deal with the high transaction costs, gridlocks, and opportunity costs of vertical, hierarchical structures. Consequently, high performing organisations are developing management structures that are characterised by:
    • expanding partnering networks with suppliers, government agencies, and private organisations, locally, regionally, nationally and internationally;
    • a focus on building and communicating a powerful and compelling whole-of- organisation mission that gives all members of the organisation a clear and motivating reason for their commitment;
    • a de-emphasis of vertical hierarchies that separate people, tasks, processes and places, by the persistent use, re-use, and reconfiguration of cross- functional, and cross-divisional teams focused on results to be delivered;
    • re-organised groupings of subject matter specialists that support cross- functional teams, and develop and expand their specialist skills for continued contribution to the work of teams;
    • less emphasis on rigid and minutely adjustable micro-managed control of processes and staffs, tactics of information with-holding, and greater emphasis upon setting of performance standards and results expectations;
    • an emphasis on semi-permeable organisational boundaries achieved through re-aligned planning and budgeting processes;
    • compensation systems, selection and promotion criteria, career paths, performance appraisals and training and development that focus on supporting organisational network/team rather than vertical structures;
    • re-designed management and work responsibilities that are less specialised and more over-lapping;
    • use of collaborative information tools, the use of knowledge transfer agents seeded in all parts of the organisation, and emphasis upon a knowledge management capability to share people, information and best practices across vertical hierarchies; and
    • corporate values that stress collaboration over confrontation and competition, cross-functional skills and knowledge and the ability to contribute to teams, continuous learning and ability to apply learning to new work; interpersonal relationship networks that cross the whole of the organisation.

Management Processes

15. An organisation delivers results through a network of interdependent value-adding processes. Processes are developed and used throughout an organisation as the vehicle through which inputs of resources and direction are translated into results. Processes delineate what inputs, and actions need to be taken to achieve results. They also contain additional information about control mechanisms such as decision-making points and types of decisions to be made, legal requirements, and the environmental constraints and opportunities in which processes are carried out.
16. As the strategic environment has become more complex, less predictable, and more variable for most organisations, high-performing organisations have:
    • transformed their strategic planning processes into the processes by which the entirety of strategic management is facilitated;
    • expanded strategic planning from a narrow focus to be the management integrator and co-ordinator for all organisational processes and results;
    • examined the nature of results to be delivered and work to be undertaken to institute common processes where they are needed, and retain specialised and different processes where they are essential; and
    • connected all work areas into strategic planning processes, and involved staffs in continual effectiveness assessments to prevent failure and enhance results, rather than managing only by focusing on correcting poor results.

Structure/Processes Alignment

17. Processes and structures are the two engines of organisational performance. If they are not running in harmony with each other, then, not surprisingly, performance is compromised if not stopped altogether. In the past, it was possible to achieve this essential harmony by synchronising processes to structures in organisations where there was particular processes that related only to one part of an organisation, and where there are few if any interdependencies between the parts.
18. However, in responding to today's changed operating environments, organisations have had to evolve the processes through which they generate results. Processes and their associated work-flows have become increasingly integrated. Co-ordinated inputs are required from many parts of an organisation. Equally, similar processes are often carried out by different parts of the same organisation, with each carrying out actions differently to suit their particular culture, values, and internal priorities. This has led to duplication, increased cycle times for delivery of organisational-level results, limited learning opportunities, poor organisational-level information for resource allocation and priority-setting, etc.
19. As organisations have reconfigured and co-ordinated their processes to address these inefficiencies, they found that these new ways of working cut horizontally across the vertical structures. This resulted in an inability to maximise the best effect from horizontally intertwined work processes.
20. The dynamic has been well described by management educators Michael Hammer and Steven Stanton when they observed: "The power in most companies still resides in vertical units and those fiefdoms still jealously guard their turf, their people and their resources. The combination of integrated processes and fragmented organizations has created a form of cognitive dissonance in many businesses: the horizontal processes pull people in one direction; the traditional vertical management systems pull them in another. Confusion and conflict ensue, undermining performance... we have seen a number of companies make the leap to process management They have appointed some of their best managers to be process owners and they have given them real authority over work and budgets. They have shifted the focus of their measurement systems form unit goals to process goals... they have made fundamental changes to their cultures, stressing teamwork and customers over turf and hierarchy. They have emerged from all these changes as true process ente7prises -companies whose management structures are in harmony, rather than at war, with their core processes -and they have reaped enormous benefits as a result". (Harvard Business Review, Nov-Dec 1999, pp. 108-109).
21. In harmonising and synchronising management processes and structures, high performing organisations used their processes as the lead driver. In doing so, such organisations have:
    • recognised that reformed strategic management processes are not the cause of dysfunction and determined that such processes should not be simply overlaid on existing organisational units;
    • reconfigured, but not necessarily replaced vertical organisational structures that share common processes, to be able to contribute effectively to cross- functional teams and to provide subject matter specialists to teams;
    • made senior executives responsible not for vertical units, but for core strategic planning and management processes and accountable for the deliverables from each process; and
    • evolved their internal control/decision-making processes and responsibilities across the organisation to recognise the collaborative nature of decision-making.

Interoperability and Relationships Management with Strategic Partners

22. A major feature of down-sizing, and "right-sizing" changes in the 1980s and 1990s focused public and private sector organisations on their "core" activities, functions, and performance results. In-house functions and results that were diverting resources and focus from the prime advantage of a business or public sector organisations were identified. Other options for delivery of these functions and results were adopted, including out-sourcing to third party organisations whose advantage lay in specialist skills, knowledge resourcing or location.
23. While performed by third-parties with greater efficiency and at less cost, many such functions still deliver products and services that are important inputs to the core tasks for businesses and public sector organisations. This has created an important set of inter-relationships between third-party providers of goods and services, and the customers of these goods and services. These a dependency relationships -each requires the other to act in good faith, and with "situational awareness" of the delivery challenges of the other.
24. At the same as strategic relationships are becoming a normal feature of modem business and public sector management, such relationships are also increasingly likely to have international and global dimensions on the one hand, and regionalised and localised dimensions on the other. Furthermore, functionally effective relationships are increasingly required between a mixture of national governmental as well as business organisations.
25. In high performing organisations, high priority is placed upon managing relationships with strategic partners, be they local, regional, national, international, multinational business, and/or governmental. This priority is reflected in efforts to:
    • maintain a strong awareness of the partner business activity, and continuous assessment to identify ways in which own practices can be improved to assure seamless interactions with partners;
    • develop interoperable, secure and responsive communications, data exchange, resources management systems with strategic partners; and
    • develop and share similar or commonly-used processes and decision. practices that allow easy integration into the decision-making processes of strategic partners.

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