How Organizational Alignment Creates Growth

Organizational Alignment Creates Growth — What It Takes

Organizational alignment creates growth — the alignment of strategy, culture, and talent —  just like the three leadership cartoon characters above pulling together to keep the profitable revenue growth arrow pointing onward and upward.

The Job of Leaders to Create Growth
We believe that is the job of leaders to create organizational alignment and profitable growth.  While most businesses strive for profitable growth, aligning all the critical factors to achieve consistent and highly profitable growth is not easy.  But organizational alignment is worth it.

Based on organizational alignment research of 410 companies across eight industries, we found that  highly aligned companies:

• Grow revenue 58% faster
• Are 72% more profitable
• Satisfy customers 3.2-to-1
• Engage employees 16.8-to-1

The Cost of Organizational Misalignment
Conversely, when strategy, talent, and culture are misaligned, organizations underperform.  For example:

• PMI found misaligned organizations lose an average of $109M for every $1B spent on projects due to missed goals and budget overruns.
• McKinsey’s organizational health index found that misaligned companies generate half the return on invested capital and 18% less in EBITDA.
• IDC found companies lose at least 10% of potential revenue growth from weak sales and marketing alignment.

Organizational Alignment
So let’s look at the alignment of strategy, culture, and talent.

1. Strategy Perspective — How Organizational Alignment Creates Growth
   First let’s talk corporate strategy. McKinsey found that there is a 1.9 times increased likelihood of having above-median financial performance when the executive team is working together toward a common strategic vision.  Our own organizational alignment research found that strategic clarity accounts for 31% of the difference between high and low growth companies.

   An effective strategy retreat provides clear direction, intense focus, meaningful purpose, and compelling inspiration.  Effective strategies define where to play and outline the critical few collective actions required to win by answering seven key strategy questions:

   (1) How specifically will you grow quickly and profitably?

   (2) How are you defining success and failure over the next 12 to 36 months?

   (3) What is your organization’s core purpose and direction? Is your strategic vision inspiring enough to rally the troops?

   (4) Is your business strategy well understood by your key stakeholders?

   (5) Do your key stakeholders believe that it will set them and the company up to succeed?

   (6) Is your ideal target customer clearly defined and agreed to by all key stakeholders?

   (7) Are your offerings unmistakably differentiated from the competition?

2. Culture Perspective — How Organizational Alignment Creates Growth
   Once your business strategy is clear enough to act, you need to assess your current organizational culture and collectively and think about what kind of corporate culture you need to create to best execute your strategy.  We define culture as how things truly get done in an organization. It can be measured by understanding the way people think, behave and work.

   Organizational cultures exist by design or by default. And, regardless of their origin, some strong cultures help companies perform (e.g., Southwest Airlines) and some strong cultures hurt performance (e.g., VW, Wells Fargo, Uber).

   One thing is certain-as a leader, if you do not understand, shape, and align your culture and strategy, you will not perform at your peak. Cultural factors account for 40% of the difference between high and low performing companies.

   For example, if innovative and cutting-edge offerings will be crucial to your strategic growth plans, you need to encourage a climate where open communication, creative thinking, and collaborative teams thrive.  On the other hand, if your business strategy depends upon a tried-and-true product that already has solid name recognition at high volume, you may want a culture with low process variation that can scale.

   When it comes to workplace culture, it is not about right and wrong.  It is all about ensuring that the way work gets done is aligned with where the company is headed.

3. Talent Perspective — How Organizational Alignment Creates Growth
   Once you have aligned your culture with your business strategy, it is time to find the top talent that will get you where you want to go.  To set them up to succeed, make sure you have effective new employee onboarding, employee assessment, employee development, engagement and retention programs in place to help them thrive.

   We define talent as the workforce that leaders must build and manage to get work done — ideally in a way that creates a unique advantage that their competitors cannot replicate.

   Talent — how you attract, develop, engage, and retain your workforce — accounts for 29% of the difference between high and low performing companies.  One good indicator of success is observing that people who are a good strategic and cultural fit are most likely to be high performers within your strategy.

The Bottom Line
Strategy, culture and talent need to be aligned to optimize for growth of your people AND your business. If even one of these three organizational pillars is misaligned, your company’s health and performance is at risk.

To learn more about how organizational alignment creates growth, download Organizational Alignment Research — The Key Ingredients to High Performance