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Dr. Harry Hertz Photo and the Insights on the Road to Performance Excellence LogoDr. Harry Hertz, Director EmeritusBaldrige Performance Excellence Program
  
      June/July 2015The Baldrige Performance Excellence Program's goal is that the *Baldrige Excellence Framework* always reflects the leading edge of validated leadership and performance practice. With that purpose in mind, we are always researching the challenges and opportunities organizations are facing to gain or retain that leading edge and a competitive position in a global economy or in a highly competitive local economy. In general, we find these challenges and opportunities are equally important to for-profit and nonprofit organizations; to large and small organizations; and to government, health care, and education organizations.With these considerations in mind, I have combined what I have heard from senior executives, what I have read in blogs and publications of all types, and what I have learned from five specific studies to focus on nine topic areas that are receiving attention from CEOs and other senior executives in 2015. These areas provide both opportunities and challenges. They deserve your consideration.I will briefly describe the five studies that deal specifically with 2015 challenges and opportunities, then share the nine topic areas, and relate each area briefly to how the *2015-2016 Baldrige Excellence Framework* is addressing it.The Five StudiesThe first study, *Exploring the Inner Circle—the Final Chapter*, is apparently the last in an ongoing series that IBM has provided over many years. IBM released it in 2014. This study involved interviews with 4,183 senior executives (CXOs) globally and focused on their current beliefs on contemporary topics. The second and third studies were conducted by PricewaterhouseCoopers (PwC) as the firm's 17th and 18th annual, global surveys of CEOs. The PwC studies are entitled, respectively, *Fit for the Future—Capitalising on Global Trends*, involving 1,344 CEO interviews in 68 countries (P17), and *A Marketplace without Boundaries? Responding to Disruption*, involving 1,322 CEO interviews in 77 countries (P18).The fourth study, *20 Challenges CEOs Will Face in 2015*, was produced by Business News Daily (BND). It involved interviews with 20 experts, each stating what he or she believed to be the biggest challenge facing CEOs in 2015. The fifth study was produced by the Conference Board. Entitled *CEO Challenge 2015—Creating Opportunity Out of Adversity: Building Innovative, People-Driven Organizations* (CB), this study involved surveys of CEOs, presidents, and chairmen across the globe.The Nine AreasI have grouped the nine areas into three groups by level of importance, as indicated by the number of studies including the topic. All of the topics appear throughout material we all read, and all have come up in my discussions with senior executives. The five studies helped me define the nine areas. Only one topic emerged in all of the studies: *customer relationships*.**1. Customer Relationships:** IBM reported that 54 percent of CXOs believed they need to place greater focus on customers as individuals. In the P18 study, changes in customer behaviors are believed to be a top disruptive influence by 61 percent of CEOs. All five studies express agreement about the changing expectations of customers and the need for senior leaders to be customer-centric. CEOs studied see the growing importance of individualized customer relationships and the need to differentiate themselves from competitor offerings and relationships. They also expressed a growing appreciation for serving the "whole customer," solving customers' problems through cross-disciplinary approaches.The Baldrige Excellence Framework has *customer-focused excellence* as one of its core values. The Baldrige Criteria ask about listening to current, potential, and competitors' customers to gather actionable information. The Criteria ask numerous questions about relationship management to increase your customers' engagement with your organization. And in customer relationships, as in every other topic that follows below, the Criteria ask for the results that demonstrate your organization's performance in this area.Two topics surfaced in four of the five studies:**2. Workforce Strategies:** According to the P18 study, 73 percent of CEOs are concerned about the availability of skilled employees. In the P17 study, 64 percent of CEOs said this is a priority focus area for them over the next three years. Skills referenced went beyond technical skills to include the need for diversity and inclusiveness in the workforce. The executives' definition of *diversity* encompassed diversity of all types. In the P18 study, 85 percent of CEOs whose organizations have adopted a strategy for increasing diversity and inclusiveness said it has enhanced business performance. In the same study, CEOs also spoke about imaginers and implementers, "all-rounders" and deep specialists. The CEOs considered all of these kinds of employees necessary parts of a 21st-century workforce. CEOs also revealed an increasing need to grow their own talent internally using approaches that start with student experiences and community engagement.The Baldrige framework has a core value of *valuing people*. The Criteria ask about a workforce that represents diverse ideas, cultures, and thinking. The Criteria ask about how you will address capability and capacity needs. The Criteria address learning, development, and career progression to ensure the needed talent and skills in your future workforce.**3. Systematic Processes and Creativity:** There clearly exists a dynamic tension between an organization's need for systematic processes to increase effectiveness and efficiency and its growing need for adaptability, flexibility, and creativity to address customer desires and remain competitive. This tension was expressed in various ways by leaders in the five studies.A balanced and compatible approach is needed in every organization. The balance was expressed by some as the need to simultaneously run today's business while creating the business of tomorrow (P17) and as balancing strengths with the need for breadth and focus (P18). Some CEOs spoke of a need to be systematic in their creativity. All seemed to share a need for flexibility and agility. Part of adaptability is the ability to manage multiple, simultaneous relationships with an organization that might serve as a customer, partner, and competitor in different situations. Part of adaptability and flexibility includes organizational restructuring to align needs, structure, and talent (CB). Several of the studies concluded that a top capability for CEOs is strategic and flexible thinking and knowing when to adjust strategies.In the Baldrige framework, several of the 11 core values deal with the complexity of this topic, starting with the first core value that serves the integrating function, *systems perspective*. The others include *organizational learning and agility* and *focus on success*. Baldrige Criteria questions related to this topic appear throughout the Criteria, starting with those about senior leaders' role in the "Leadership" category, and continuing with a significant set in the "Strategy" and "Operations" categories of the Criteria.Four topics surfaced in three of the five studies:**4. Cybersecurity:** In the P18 study, 61 percent of CEOs stated a concern with cybersecurity as one of their top issues. In the United States, CEOs listed it as their number-two hot-usa-button issue (CB); for CEOs in Europe, it ranked as the number-five top concern.The Baldrige Criteria ask questions about data, information, hardware, and software security. This is a critical area that may see added attention in future revisions of the Criteria and in added guidance commentary.**5. Social Media/Digital Interaction:** 68 percent of CEOs in the IBM study stated the need for and intention of increasing social/digital interactions in their business. Closely related to digital interactions is the growing importance of mobile technology, which is also top of mind for CEOs surveyed. For organizations with direct interactions with consumers, one BND expert stated that "A business model which doesn't have a reach to a mobile device is going to dwindle away and become obsolete."Recognizing the growing use and importance of social media, the Baldrige Criteria have adopted an aggressive stance on the significance of this sea change. The Criteria include questions about senior leaders' use of social media for communication, as well as the organization's use of social media in interactions with customers, employees, and suppliers/partners.**6. Collaboration, Partnering, and Alliances:** 51 percent of CEOs in the P18 study stated that they plan to enter into strategic alliances or joint ventures in the next year. In the IBM study, 73 percent of CXOs reported the need to expand their partner base, and 47 percent reported the need for more external partnering for innovation. CEOs also spoke of the interconnected economy and overhauling partnering strategies. Alliances will result in organizations competing in and with those in other sectors, which 61 percent of CEOs in the P18 study saw this as a top disruptor that could lead to fundamental changes in an organization's "DNA." According to the P18 survey, partnering discussions for business will address better interaction with government and non-governmental organizations. The discussion about greater collaboration has focused not only externally, but internally as well. In the IBM study, CXOs spoke of the most effective C-suites being highly collaborative with a clearly shared vision, but without becoming too friendly and losing their objectivity.The Baldrige framework looks at numerous aspects of partnering and collaboration. The Baldrige core value *valuing people* speaks to the importance of internal and external partnerships. The Baldrige Criteria ask about competitiveness changes that create opportunities for collaboration and innovation. The Criteria look at innovation from technical, product, and business-model perspectives. Throughout the Criteria are questions about the involvement of suppliers, partners, and collaborators.**7. Ethics and Social Responsibility:** In the IBM study, 52 percent of CXOs believe there is a need for more organizational openness. CEOs talk about the need to pursue opportunities for growth with the interests of society in mind. And ethical accountability remains on the minds of every CEO with whom I talk.The Baldrige framework places great focus on this area. Two of the 11 core values are *societal responsibility* and *ethics and transparency*. A significant portion of the "Leadership" category of the Baldrige Criteria addresses senior leaders' role in good governance and legal and ethical behavior. The "Workforce" category addresses the organization's role in creating a workforce environment that ensures ethical business practices.The following two topics came up in only two of the five studies; however, they are so pervasive in CEO discussions that I have included them as the final two focus areas.**8. Big Data and Analytics:** CEOs and organizations' strategists are talking about the digitally led economy. They use terms such as "unprecedented digital change." Whether the focus is on better analytics or combinations of disparate sets of numerical, textual, and video information to gain greater insight, the use of data will be a growing factor in an organization's efficiency, effectiveness, and overall competitiveness.*Management by fact*has been a core value in the Baldrige framework since the first articulation of the Criteria core values. In the 2015–2016 Baldrige Criteria, an enhanced focus has been placed throughout the categories on data analytics, data integrity, and capturing and using knowledge.**9. Regulation:** 78 percent of CEOs in the P18 study expressed concern about overregulation in the future. For organizations operating in multiple jurisdictions, whether they are states or countries, the complexity of differing and even competing regulations provides a continuing challenge. This is particularly true as organizations enter adjacent sectors with a newly competing product or service, grow their markets, and establish alliances and joint ventures.While the Baldrige Criteria do not address the potential for overregulation, the questions do address the impacts of regulation and legal and ethical conduct. It is a senior leader's responsibility to ensure regulatory compliance. In the area of strategy, the Baldrige Criteria ask how the organization is preparing for potential changes in the regulatory environment.Some Concluding ThoughtsWhile I certainly could have included additional CEO challenges and opportunities in this synthesis, I believe these nine areas address the most significant, thought-provoking topics that all senior leaders have to consider today. And they represent the opinions of thousands of senior leaders!While all of these topics are addressed in the 2015–2016 Baldrige Excellence Framework (and Criteria questions), they also suggest some early considerations for areas that might be strengthened in the 2017 revisions. In the interim, I hope this selection of nine topics and use of the Baldrige framework to address them will help your organization achieve performance excellence!ResourcesBaldrige Excellence FrameworkBaldrige Excellence BuilderBlogrigeNewsIf You Want to Build Trust, Collect Trash (February/March 2015)People, Process, and Plentiful Passion (April/May 2015)Archived ColumnsYou need to have Acrobat Reader installed on your computer to view the PDF file. If you do not have Acrobat Reader installed on your computer, download the program at http://get.adobe.com/reader. People with visual disabilities can download tools and information at http://www.adobe.com/accessibility to help make Adobe PDF files accessible.
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