Manage the Fundamentals

Maintaining a Nimble Organization. Evergreen researchers found that there is no "best" organizational structure (e.g., product, geography, business units with P&L). What really matters is whether organizational arrangements reduce bureaucracy and simplify work.

GE (GE) made bureaucracy-busting a core value and started its journey by deploying Work Outs across the company. Winners, like GE, view process and policy simplification like the never-ending process of painting a bridge.

Another method winners use to reduce bureaucracy is to flatten their organization. IBM annually audits sales management spans of control to exceed 12:1. Nucor deploys only four management levels. In Nucor's flat organization, the role of the manager is to provide advice and support so that employees can make decisions on their own. In flat organizations, managers cannot be king.

Cultivating a High-Performance Culture. Despite fabled stories of the fun workplace, winners rejected the assumption that employee happiness causes success. Rather, they believe that success is a result of setting high standards and driving accountability for results. And each year they raise performance standards.

Of all the times I've asked the intentionally provocative question, "Do performance appraisals improve performance," only three managers have answered affirmatively. All three were from Goldman Sachs (GS) . They explained that at Goldman, every associate is assessed by an annual 360° that managers use to create a multipage appraisal. Nearly all companies conduct appraisals, but few execute this fundamental practice well.

Executing With Discipline. Winners maintain a highly disciplined approach to the operational tasks that customers view as critical. Evergreen research found that it did not matter whether companies use CRM, ERP, or LEAN practices. What matters is that they relentlessly cut operational costs and drive annual productivity improvements to twice their industry average.

But first and foremost, winners believe that the downside of disappointing customers is far greater than the upside of delighting them. That's why, with few exceptions (e.g., FedEx, Tiffany's(TIF) ), winners are not the industry leader in quality, service, etc. They realize that for many products (e.g., smartphones, shoes), customers are not willing to pay a premium for six sigma quality (99.99966%) when four sigma (99.38%) is available. How much more would you pay for a six sigma shoe?