• Strategy
  • McKinsey & Co.

Managing Your Organization by the Evidence

An organization is much more likely to improve its current performance and underlying health by using a combination of practices rather than any one of them alone, new McKinsey research finds.

Unfortunately, a single practice is generally inspired and implemented in isolation. Those who champion that approach ignore not only the impact of concurrent organizational practices—successful and unsuccessful alike—but also the complementarities generated by the other practices a company could implement simultaneously.

Our research has used well over one hundred thousand questionnaires to track the practices that a company can use to improve its performance—from increasing the leadership’s effectiveness and ability in charting a clear course to motivating employees and giving them the ability to innovate. By studying the impact of specific practices on specific organizational outcomes, we show that several popular remedies do not live up to their reputations.

  • The carrots and sticks of incentives appear to be the least effective of the four options commonly used to motivate and encourage employees to perform well and stay with a company.
  • Applied in isolation, KPIs and similar control mechanisms (such as performance contracts) are among the least satisfactory options for improving accountability.
  • Relying on a detailed strategy and plan is far from the most fruitful way to set a company’s direction.
  • Command-and-control leadership—the still-popular art of telling people what to do and then checking up on them to see that they did it—is among the least effective ways to direct the efforts of an organization’s people.

Ignore Any Practice at Your Peril

An exhaustive analysis of our data shows that companies cannot afford to neglect any of the 34 practices listed in the sidebar “A Wide Range of Management Practices”: achieving at least a minimum standard of proficiency across the whole range is vital for an organization’s overall performance. What’s more, lack of success in any two or three practices makes it almost impossible for a company to do well. Consequence management (to give carrots and sticks their polite name) is not, by itself, a particularly effective way to make employees accountable, but without a minimum level of proficiency in it a company has little chance of performing well overall.

Organizations don’t need superior abilities in all of these practices—far from it—but a failure to achieve competence in any one of them drags down the performance of the whole. An analysis of our database confirms the intuition of many managers: little can be gained by going beyond basic competence in several practice areas (incentives to motivate employees, for example). The good news is that management’s task is simpler because companies don’t have to be good at everything.

Some Organizational Choices Are Clearly Superior

One combination of practices increases the overall effectiveness of organizations more than others do. Indeed, it proved more effective for over half of the companies in our database, so we regard it as the “base case” (that is, the default solution) for any organization seeking to become more healthy. Yet nearly half of all companies have good reason to feel that a different approach would work better for them. They should be cautioned, nonetheless: no other combination of practices has as clear a record of success as the base case does.

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