So what sets a CEO apart?  This is certainly a question at the heart of countless business articles, books and forums.  CEOs have a critical role to inspire and lead their organizations to success.  The Chief Executive holds key responsibility for leading the development and execution of the Company’s strategy, to create shareholder value and to achieve great results.

Faced with the reality that the vast majority of businesses never achieve their full potential, what does it take to lead an organization to this kind of success? As a Vice President with Bell Northern Research, a subsidiary of Nortel, this is the question I set out to answer near the end of my career when I accepted a challenge by the President to lead a small team to demonstrate to the Nortel Board that we were effectively spending our $2 billion annual Research & Development budget.  In the following paragraphs, I share with you the results of my years of research searching for this answer.  If, like myself, you are deeply committed to excellence and breakthrough, then it is my hope that the answers and solutions which I found and which I share with you here, may be a stepping stone to the next level in your business success.

THE JOURNEY

Having held progressive leadership roles in my 35-year career with Nortel, seeing it scale up from $300 million to $30 billion in revenue, and from sixteen thousand to one hundred thousand employees, I relished the opportunity to take on the final challenge offered to me by the President.  Over the years, I had been involved in most of the company’s core functions including design, engineering, installation, marketing, and customer service.  I had also held diverse positions out of the headquarters in Ottawa, Canada and in three international assignments as Country General Manager. I knew the company inside out and was well positioned to lead this challenge.  I was also fortunate enough to be given the resources and freedom to fully devote all my energies to this assignment.

As we advanced with the research project, I found myself fueled by my growing curiosity on the subject of business effectiveness. I read countless books, attended conferences, and joined several organizations involved in business quality and excellence. Armed with this information and backed by my experience and in-depth knowledge of the company, I, with two other senior colleagues, set out to analyze $10B worth of Research & Development major projects undertaken by the company over the previous 10 years. We methodically reviewed and analyzed successes, failures and the Return on Investment of each initiative.  After months of learning and analysis, what began to emerge was a clear pattern of what was needed for a project to succeed.  What also became clear was that none of the projects we reviewed achieved the level of success that appeared to be possible based on my newfound understanding of business excellence principles.

As part of the research I also found that the company, more broadly, lacked organization-wide approaches to achieving consistent, superior results in all areas of the company’s business.  Chief among the deficiencies I observed was the lack of consistent language throughout the company both in the definition of the work being carried out and the metrics being used to measure performance.  Whether it was Research & Development, engineering, marketing, accounting, sales, Human Resources, administration or legal, each had its own way of expressing what it did and what good performance looks like.  This lack of consistency in defining work and performance stayed with me throughout my research as a key issue that I believed, if solved, would be a major leap forward in the ability for the CEO to more effectively meet his core responsibilities and maximize value for shareholders.

As I continued to study and search for tools that could solve the various challenges I observed, two initiatives stood out for me as providing the greatest help to organizations in improving business results.  These were the Malcolm Baldrige Performance Excellence Program, and the Harvard business research by Kaplan and Norton resulting in the breakthrough “Balanced Scorecard”.

MALCOLM BALDRIGE

During the 1980’s, the United States identified a growing need to respond to Japanese competition and to improve national quality-driven productivity.  Over the course of the decade, the Reagan Administration ushered in a renewed national emphasis on defining and promoting best-in-class business management and instituted the Malcolm Baldrige Program and Award in 1987.  The Baldrige initiative served to reduce or eliminate the competitive gap and encourage organizations to invest in quality management efforts.  The Baldrige framework offers a set of comprehensive criteria for business excellence in seven categories, with each category given a score that adds together to a total of 1000 points.  When applied and measured, these categories help drive continuous improvement in delivering product and service excellence.

Today, the Malcolm Baldrige National Quality Award (MBNQA) is one of the most prestigious honors in the United States and an international benchmark for organizational excellence.  Several studies have demonstrated its effectiveness and benefits to the United States economy.  In 2011, Albert A. Link of the University of North Carolina at Greensboro and John T. Scott of Dartmouth College conducted a study that found that the benefits of the Baldrige program outweigh the overall cost by 820 to 11.  From 1994 through 2004, the Baldrige Performance Excellence Program conducted stock performance studies of Baldrige Award winners, and found that the Baldrige group consistently outperformed the S&P 5002.  In 1998, a joint study by Professors Vinod Singhal of the Georgia Institute of Technology and Kevin Hendricks of the University of Western Ontario found that compared to control groups, quality award recipients experienced 44% higher stock price return, 48% higher growth in operating income and 37% higher growth in sales3.

BALANCED SCORECARD

The Balanced Scorecard (BSC) was introduced in the early 1990’s by Harvard professors Robert S. Kaplan and David P. Norton.  In their research, Norton and Kaplan set out to discover what measures of performance were used by best in class companies.  They discovered that top performing companies use a balance of performance indicators that go beyond financial measures by also considering customer, business processes, and learning measures.  They also observed that these measures were focused on the success of the company’s implemented strategies in addition to operational measures such as revenue and cost.

The BSC advocates that these four perspectives are interdependent.  Learning influences better business processes, which leads to increased value to the customer, and finally results in improved financial performance.  Owing to its simple yet complete approach, businesses adopting the BSC approach quickly began to see stunning benefits.  A few decades later, the approach remains one of the most popular and extensively used strategic management systems in business to effectively align and continuously evaluate and adjust business activities to the vision, mission and strategies of the organization.

IMPLEMENTING BALDRIGE AT NORTEL

Convinced of the effectiveness and comprehensiveness of the Baldrige Program, I led a team of colleagues in convincing the Nortel CEO to implement an Internal Nortel Award modeled on the MBNQA.  We developed the infrastructure to establish this award by developing a training program for assessing the various divisions within our organization, certifying examiners and senior examiners, and launching a global campaign to encourage the many divisions around the world to assess themselves and submit an application that would be examined and scored by our assessment team.

After following this award process for three years as a senior examiner, I noticed two trends.  First, regardless of perceived success, every division doing an assessment for the first time scored less than 200 out of 1000 points allocated to the seven Baldrige categories.  This was a significant finding – it demonstrated the extent of the quality gap, highlighting so-to-speak how much was “being left off the table”. It was also significant insofar as it demonstrated the substantial potential that existed across the company for increased efficiency and improved results. Second, I noticed a common and repetitive thread of weaknesses in the various divisions we assessed.  To get a more detailed understanding of what I was observing, I established a team to undertake a comprehensive review of thirty-five completed assessments.  The analysis confirmed my suspicion, and the team was able to effectively validate and characterize in detail the five key weaknesses common to all organizations.  These included:

• Leadership direction not clearly articulated

• Vision, mission, strategies, processes and metrics not linked between the different levels of management

• Processes for both leadership and work not defined and linked

• Framework to ensure fact-based decision-making not established

• Approach for systematic continuous improvements not defined