Ten Critical Performance Issues for 2010

Are we really three weeks into the new year already? Time flies when you've got too many things to do and not enough time to do them. That's why both organizations and individuals need to prioritize. Not only can setting priorities make organizations less frenzied, they can make them more effective - assuming, of course, they're focusing on the issues that really improve performance.

Last week, our CEO Kevin Oakes wrote about the five domains of high performance. This week, we're going to break things down to highlight some of the most critical subcomponents of each domain, based on i4cp's new study of the major issues of 2010.

We asked study participants to look ahead and identify the issues that would be most important to their organizations in the coming year. We also asked them to rate their organizations' effectiveness in addressing those issues. Why? Because being highly important doesn't mean something is critical. It's critical only if two things are true: it's important AND the organization is not effective enough in managing it.

Think about it this way. It's a hot day and you're stranded on a boat where there's plenty of drinkable water but no shade. Both water and shade are important, of course, but which is most critical? In that moment, it's the shade. You've already got water. What you need to figure out is a way to protect yourself from the blazing sun. That's your priority.

The same is true in management, and our study helped us pick out the most critical organizational performance issues in each of the five high-performance domains: leadership, talent, strategy, market focus and culture.

Jay Jamrog, i4cp's Senior VP of Research, has been conducting interviews on the findings of this study with our member companies. He notes that, in these conversations, there's a difference from previous years when we've run iterations of this survey. "There's a heightened sense of focus," he says. "I think the recession had a major impact. The people I'm speaking with are taking these issues much more seriously. They know that executing on their most critical issues will give them a competitive advantage that they really need to succeed, but failing on these issues could be a fatal misstep."

Develop better, more agile leadership

Let's start with leadership. It turns out that the two most important issues in this area are managing change and leadership development. But are they the most critical? As it happens, the answer is yes. Whereas about three quarters of respondents rates these two issues as important to a high or very high extent, only about a quarter said their organizations were effective in these areas to that same extent.

So, these are critically important issues for which few companies have excellent management responses. We'll save the whys and the wherefores for a future TrendWatcher. For now, however, let's just say that in 2010, companies will have their hands full trying to develop exceptional leaders who can help their firms deal with change. Such folks are in scarce supply. If you'd like to answer some questions - and get an early preview of responses, as we reward survey takers with preliminary results - that examine both of these issues, please check out our new survey on Organizational and Leadership Agility from Bill Joiner, Ed.D., coauthor of the book Leadership Agility.

Improve talent management and increase performance

Talent management is both an important AND a critical issue for 2010. This has been corroborated by two other major i4cp studies in the last three years. Relatively few organizations think they manage talent well, and we have plenty of data to show why. For one thing, most talent management systems are not very well integrated. The parts of the system often don't fit together well, like machines cobbled together from spare parts. For another thing, one of the vital components of talent management - performance management - is itself a critical issue. Fully 76% of our study's respondents said performance management is very important this year, but a meager 30% said their companies are very effective at actually doing it.

Bottom line: This year, organizations have their work cut out for them when it comes to making sure their talented folks are working up to their performance potential.

Focus on strategy execution

It isn't enough to formulate great plans. You've got to execute on them, and that requires getting everyone on the same page. Sounds easy, but most managers know it's tough to do well. Four out of five respondents said strategy execution and alignment are important, but less than a third said their firms are very effective at it. That's disturbing, and companies need to get a lot better in 2010 if they want to prosper.

Another critical concern is that less than a quarter of respondents think their firms are good at knowledge retention. If the economy truly recovers in 2010, they'd better buckle their seatbelts because lots of employees that have been constrained by a lousy job market in recent years will be keeping an eye out for new opportunities. Employers don't necessarily have to retain all of their talent, but they at least need to retain a good chunk of their expertise via cross-training, knowledge-management systems, etc. Otherwise, a lot of that intangible capital could, quite tangibly, walk out the door.

Emphasize innovation

Next, let's look at market issues. As we expected, based on our long history of research in these areas, the most important issue in this domain was customer focus. This is a perennial favorite and one of the top four most important issues for the last 20 years. What's interesting, however, is that it's not among the top two most critical issues in this domain today. That's because, although highly important, many companies actually think they're already pretty effective in this area.

Where they're not so effective, however, is in the area of creativity and innovation. Although 72% of study participants said the issue is important to a high or very high extent, just a third said their organizations were very effective in this area. We also found that innovation is the number one most critical issue among all domains for large, high-performing companies. Therefore, even some of the paragon companies in the world view innovation as their single most critical issue, and even companies that are viewed as innovative continue to focus resources in this area in order to maintain their edge.

There are two other critical issues in this domain that our index shows are in a statistical dead heat: emerging markets and sustainability. Not every company thinks emerging markets are important, but there's a clear lack of effectiveness in this up-and-coming global issue. 2010 will be a time to think hard about how to go global. Meanwhile, a surprisingly high percentage of organizations consider sustainability to be highly important, but, as with emerging markets, they don't feel they've got a good grip on the issue yet.

Get some culture in 2010

We're only going to mention one issue in the culture domain because it's so all-encompassing: that is, managing corporate culture. Just 27% of participants said their companies are effective at managing culture to a high or very high extent. But, as a recent report that i4cp partnered on with the American Management Association shows, there are, in fact, various levers organizations can pull to create higher-performance corporate cultures.

i4cp's 4-Part Recommendation:

1. Combine your efforts in the areas of leadership development and managing change if these are both critical issues in your company. That is, gauge how agile your leaders are and then take steps to improve change-management skills where warranted.
2. Assess where the barriers to innovation are in your company to make it more innovation-friendly in 2010. For more on this subject, see The Quest for Innovation: A Global Study of Innovation Management.
3. Work at integrating and aligning the various components of talent management in 2010, with a special focus on performance management. For example, employees are often cynical about performance management, and i4cp research has found that one of the nine keys to success in this area is to ensure that appraisal information has some objective components and isn't strictly limited to the judgment of supervisors.
4. Create a culture that makes it easier to implement new strategies. That is, the culture needs to be change-friendly, performance-driven and not entangled by conflicting subcultures that compete against one another and slow down strategy execution.