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In business we are fond of best practices. We study successful companies, distill key lessons from how they have done it and try to adopt those as best practices in our organizations. This is how best-selling books like “In Search Of Excellence” (Peters & Waterman), “Good To Great” (Collins) and “Blue Ocean Strategy” (Kim & Mauborgne) work. And it is also the mechanism at work whenever we talk about things like critical success factors and benchmarks.
This “do as Google/Apple/3M/GE/successful company XYZ” approach is intuitive. Successful companies are inspiring and they trigger some jealousy and hope—what if we could be like them… And what seems more logical than trying to learn from them and mimic their behaviors? After all, if it worked for them, why wouldn’t it work for us?
Despite the attractiveness of this way of thinking, however, it doesn’t really hold. Or, at least, there are some serious limitations because it is far from evident that what worked for them also works for us. Their best practices worked for them, at a specific point in time, in a specific context and guided by specific leaders. Our own organizations are different and we need to perform now, in our specific context with the leaders that are in place now.
Therefore, it can be more productive to strive for fit—or alignment—than to look for and adopt best practices. With a “fit” approach, instead of looking for best practices elsewhere, you focus on how to align your organization best internally and externally with the environment you operate in. The core idea of this approach is that anything can work as long as it all fits naturally together. This is also the basis of evolutionary theory, where it is nicely captured by the credo “survival of the fittest” (which, to be clear, means best fitting, not strongest or most fit).
There is increasing evidence and awareness that this fit approach beats best practice not only in nature but also in business. Interesting in this respect are two recent studies: PwC’s 2018 Global Innovation 1000 Study and McKinsey’s Organizational Health Index.
PwC’s study is a study of the world’s 1000 largest publicly listed corporate R&D spenders. As this study shows:
- 77 % of fast growth companies show high alignment between their innovation and business strategies vs. only 32 % of slow growth companies.
- 71 % of fast growth companies show high alignment between their company culture and innovation strategy vs. only 33.3 % of slow growth companies.
This shows that being internally aligned works—a result that PwC also found in a 2017 study on 17 large banks in Europe and the US.
McKinsey’s Organizational Health Index is an extensive tool that they use as part of their organizational consulting. Over the past 15 years no less than 1,700 companies and over 5 million people have participated. Based on that study, they revealed four distinct patterns of 37 management practices that turn out to be successful: the leadership factory, the continuous improvement engine, the talent and knowledge core, and the market shaper. It is not the specifics of these four strategies that I want to refer to here, but their link to performance:
- For each of the four strategies the highly aligned companies where six times more likely to be organizationally healthy than companies that were weakly aligned.
- Focusing on all 37 management practices, according to McKinsey, is a guarantee for failure. Instead, companies should choose and implement a set of practices that fits well together.
The simple conclusion that follows from these two studies is that fit beats best practice. Or, as it was formulated in a 2017 article in McKinsey Quarterly “Achieving such alignment requires focus on a small set of organizational-health practices (usually no more than five to ten) that work in concert with each other. Contrast that with what happens more commonly: leaders in various parts of the business copy different external ‘best practices’ across myriad management disciplines. This approach diffuses people’s efforts, can easily result in conflicting approaches, and hinders development of the sort of common performance culture that connects employees regardless of where they sit.”
Consulting companies’ original source of value and reason of existence was that they transferred practices learned in one organization to another organization. By building broad experience across organizations and industries they could become specialists in domains such as strategy and finance and bring best practices to a wide range of companies. It is therefore interesting to see that even the mother of all consulting companies—McKinsey—is drawing the conclusion that fit, not best practice paves the way to success.
April 2, 2019 at 03:09AM
Forbes – Entrepreneurs