Defining and Describing the Performance Gap

All organizations are open systems that must monitor and react to their environments or risk becoming obsolete and dying. Organizational systems have interdependent elements that interact with each other to achieve a purpose. And all systems have natural tendencies or behaviors. For example, systems have a natural tendency toward stability or decline when renewal is absent. This system tendency is easily seen in a couple of examples. If organizations fail to keep up with technological innovations, they will be unable to compete. Competitors will use technology to deliver products or services better, faster, and cheaper. Another example is the increasingly diverse social environment, including characteristics of ethnicity, religion, age, education, and sexual orientation. Organizations must respond to the increasing diversity of its employee and customer populations. Systems must respond to changes in the environment or risk entropy and obsolescence. Change efforts provide energy to the organization in the form of improvement and renewal. Having an effective vision is the first ingredient in organizational change.

A vision is the response of the organization to its environment, which was discussed in chapter 1. To briefly recap, a vision must be compelling, shared by members in the organization, stretch the organization, and be actionable. Leadership is critical in creating a vision with these characteristics. Leadership is the second ingredient in organizational change and was discussed in chapter 2, where we saw that leadership is the ability to have others voluntarily follow you to a place that they would not have gone by themselves. This place can be into new products, services, geographical areas, or technology platforms. A leader inspires commitment to a vision and energizes individuals to action. If everyone is energized to do something but no one knows what to do, the desired change won’t happen. Or if everyone is energized and follows their own vision, the odds are also not very good that the desired change will occur. This is where a technical plan is needed. A key part of leadership is to organize people and resources toward the effective and efficient attainment of the vision. The third ingredient in transformational change is a technical plan. Once a vision is created and communicated, it is time to evaluate how different the current reality is relative to the vision.

The current reality should be defined clearly and honestly to enable management to fully understand the work required in the change effort. Jim Collins’s research for his book Good to Great found that being able to confront the brutal facts and clearly define current reality are key factors in long-term organizational success. Comparing how things are today with how things need to be in the future will either identify or confirm what needs to change. The difference between what exists and what is desired is called the performance gap. In many organizations, this gap is called a key result area (KRA), which is measured by the key performance indicator (KPI). KRAs can be very broad, such as improving company sales, or very specific, such as reducing injuries within a specific department. KRAs help focus the organizational attention on key areas for improvement. The more specific a KRA, the easier it is for the organization to understand what needs to change. It is widely accepted that KRAs should be characterized as specific, measureable, actionable, results focused, and time bounded (SMART).

For example, take the KRA “lose 10 pounds by June 1 of this year.” This is a smart KRA. It is very clear as to what the goal is, and it will be very easy to track progress. And on June 1 it will be very easy to know whether the goal was achieved.

In addition to indentifying KRAs for an organization, it is helpful to characterize the actual change effort that will be required for achieving the new level of performance. Three characteristics are helpful for this: the magnitude of change, the urgency for change, and the stakeholder impact on change.

The magnitude of the change is the first characteristic of the change effort. For example, if your vision as an individual is to lose a specific amount of weight, then you would be wise to conduct a detailed assessment of your current health before embarking on a weight-loss strategy (of which there are as many as organizational change strategies). Your detailed assessment may include the consultation of an expert, such as a doctor, depending on the specific situation. Working to lose a transformational 25 pounds requires a different level of expertise than working to lose an incremental 5 pounds, which requires different types of activities than sustaining your weight at its current level. Similarly, understanding the magnitude of the change required in the organization is important, too. Knowing whether the vision defines a transformational, incremental, or sustaining level of performance increases our understanding of the gap. Transformational change is a tsunami-type change: The change effort will radically change the organization.

After understanding the magnitude of the change, people need to know how the change fits with other priorities in the organization, or the urgency of this specific change. Urgency is the second characteristic of the change effort. Time is considered by many people today to be the most desired resource. There never seems to be enough of it. Technology has made the new reality of work a 24/7 proposition. Anyone, from anywhere, and at any time, can reach you. This new reality has a lot of advantages, but it also has a downside. It seems there is always more to do than time permits. Prioritizing work and creating space for the most important responsibilities has become an even more important skill in this age of personal electronic assistants. Assigning priority to the change helps individuals assign a priority to new initiatives by first understanding the reason for needing to change. In for-profit organizations, it may be a competitive threat. In governmental or nonprofit organizations, it may be the inability to provide needed services or aid.

Whatever the need for the change, it is important that the change, as well as how the change fits with other responsibilities, is discussed. For example, when an economic downturn coincides with an improvement in quality, a generic consumer product manufacturer is able to quickly build market share. Consumers are more cautious with their spending and were willing to forgo the more expensive brand-name product. For the brand-name organization, the need to change was clear and urgent.

The third necessity of the change effort is the analysis of critical stakeholder impact. In Productive Workplaces Revisited, Marvin Weisbord describes Kurt Lewin’s famous force-field analysis as a tool that can be used to help identify who will actively champion the change and who will do their best to prohibit the change.² Critical stakeholders are groups such as unions, doctors, a specific individual, a government agency, junior employees, or the neighborhood. At this point of the change process, the force-field analysis is done to gain an understanding of forces for and against the change. The forces for maintaining the status quo are typically larger than those for changing it and will need to be addressed in a successful change effort.