7 Practices of Successful Organizations by Jeff Pfeffer

In the 1990s, Jeff Pfeffer (Stanford Business School) suggested these 7 “practices” as common themes seen in successful organizations:

  • Employment security
  • Selective hiring of new personnel
  • Self-managed teams and decentralization of decision making as the basic principle of organizational design
  • Comparatively high compensation contingent on organizational performance
  • Extensive training
  • Reduced status distinctions and barriers, including dress, language, office arrangements, and wage differences across levels
  • Extensive sharing of financial and performance information throughout the organization

The first sentence of the conclusion in his 1998 California Business Review article read, “Firms often attempt to implement organizational innovations, such as those described here, piecemeal.”  He went on to say, “Implementing practices in isolation may not have as much effect, however, and, under some circumstances, it could actually be counterproductive.”  He’s suggesting bundled approaches are better.  Sounds complex, and like a lot of work.  Yet, it makes sense: you can hire the right people, provide them with secure employment, pay them well with bonuses tied to organizational performance, be transparent with financial and performance information, and even provide extensive training, but it won’t work unless the work environment and culture fosters self-managed teams and reduces status distinctions.

Within each of these there is a mini-bundle as well.  The implication being, if you don’t execute on the details of these practices, you won’t get the desired effect.  For example here is the bundle for selective hiring of new personnel:

  • Screen for attitude and fit, not for skills that can be readily trained
  • Be clear about the most critical skills, behaviors, attitudes – be as specific as possible
  • Use several rounds of interviews
  • When possible involve senior people
  • Continuously evaluate and improve the recruiting process

So, what is the bundle for self-managed teams and decentralization of decision making as the basic principle of organizational design?  First the structure must lend itself to teams.  In health care, this is often the case given the complex differences across populations of patients, diseases and care settings.  The challenge for larger organizations becomes maintaining that local control while ensuring sharing and implementation of best practices in order to reduce counterproductive variation.  Second, problem solving is encouraged at the local level from idea generating to ideas testing to hardwiring of the best solution(s).  Given the drive for standardization, this local team problem solving can be impeded if standardization is done just for the sake of standardizing.  Larger organizations achieve balance by driving accountability at the level of results, and less at the level of process.  Third, hierarchical control must be minimized and middle management, especially when not part of a team, reduced.  This is hard for many organizations, especially large ones.

Healthcare is at risk because of the significant control IT and finance now have over how teams function.  IT through its tight control of information systems, which are now integral to daily work, and finance by controlling costs and FTEs without local knowledge of the daily work, are forcing teams into boxes that don’t deliver the performance ultimately needed.  Giving too much control to parts of the organization that don’t have expertise in the core product or service of the organization drives short term and self-serving thinking and action.

Resources and existing elements of effective management are needed to drive change

Comments on  “Spreading at Scale: A Practical Leadership Model for Change” by Amy Compton-Phillips, M https://catalyst.nejm.org/doi/full/10.1056/CAT.19.1083

In a recent NEJM Catalyst blog Dr. Compton-Phillips described a mental model applied to addressing variation across a large network (PSJ).  The mental model was presented as being new, however, it can be found in many leadership and management publications over the last 50 years.  In fact many don’t need to go further than their own organization to find this model in action.   Vision, Trust, Data, Capacity and Alignment are not only intuitive, but proven and tested elements.  The blog does serve to remind us of these elements telling a story that eloquently illustrates them in action, yet two essential elements are implied but not spoken: resources and effective management.  Both are inferred in figure 4.

Hidden lesson #1 in this post is the requisite need for resources to drive change effectively.  Although resources aren’t directly addressed in the blog, the dependence on them is obvious in the change narrative.  The need for resources makes choosing the right thing on which to focus an important first step; resources are limited and must be used prudently.   Vision can drive prioritization, and it can also inspire people to action.  Inspiration is good fuel for change, especially when resource are limited, yet no amount of inspiration will overcome the error of not providing resources.  The process of prioritization also helps shape the “why” which is key to each of the 5 elements.  The more stakeholders involved in the prioritization the better, but the law of diminishing returns does exist here.

A lack of resources was a root cause of nearly every failed attempt at change I’ve witnessed.  There are multiple examples of why resources are important in the blog.  One example is how PSJ utilized the time of leaders and colleagues from high performing hospitals to assist low performing ones through the formation of work groups; work groups are a significant expense.  Another example is the use of cascading scorecards or dashboards; you can’t collect, use, manage, present, discuss, or analyze data without resources.  In 2007 I was the first to use a scorecard in my organization.  It took me hours to build it and maintain it.  Some of the fields were populated with estimations, or distant surrogate markers, or nothing at all.  It was all done by hand.  Although it served a purpose and did help to drive change, its effectiveness and efficiency was impacted by a lack of resources.

Hidden lesson #2 is that change management is, well, management.  Leadership is a necessary element at every step especially in the beginning.  Yet without local management of people and processes, change initiatives fail.  Existing managers, who already possess effective change management skills and tools, are essential.  One of those tools is an existing strong daily management system. The blog does mention the need for skills, tools and tactics specific to the change effort, and I agree.  Yet, these enablers need to align with the existing daily management system.   For example, if a team doesn’t take the time to frequently huddle around metrics, run by an effective leader and manger, using an already existing cadence embedded in an established management system, a change effort has a high likelihood of failing.  Furthermore, not deliberately leveraging that existing management system to drive engagement around the specific change effort would be unwise.   A daily management system enables alignment.

Alignment requires leadership and management and starts through establishing a shared vision, both of which are mentioned in the blog.   Established values and principles embedded in an existing common management system with built in quality improvement skills and tools assist alignment.  Constantly communicating the “why” and the “what’s in it for me” as mentioned in the blog builds alignment.  The disciplined cadence of a daily management system is a channel for this constant communication.

Because all change is local, and alignment is possible only when local groups stay connected to the larger whole in ways that are mutually beneficial, any change management approach needs to consider how to trust local teams with ample autonomy to solve local barriers to change.  Change is both individual and team based, and both are dependent on local elements of leadership, management, vision, trust, data, and capacity.  Empowering these local environments while driving a common vision through standard work is perhaps the most important deliverable of senior management in any change management initiative.  A strong daily management system allows this to happen with greater ease.