– Thoughts on Strategy and Management

New BCG Study: Behavioral Capabilities Drive Corporate Performance

CEOs Must Prioritize Their Organizations’ Behavioral Traits—and Back Them Up with Strong Structural Capabilities, says New Report from The Boston Consulting Group

Boston, January 31, 2012 –Organizational capabilities greatly affect long-term corporate success and none more so than behavioral aspects. But behavioral attributes have high impact only when they’re backed by strong structural capabilities. Efforts to develop robust organizational capabilities are likely to pay off in performance that outstrips that of competitors.

Those are the key findings of Organization of the Future—Designed to Win: Organizational Capabilities Matter, a new Focus report by The Boston Consulting Group (BCG). The study, conducted in partnership with 12 management organizations worldwide, surveyed approximately 1,600 senior managers, seeking their input on a framework of 20 organizational capabilities—both structural and behavioral. This framework encompassed a wide range of structural capabilities—from the organization’s spans of control to project management and business analytics—and many behavioral capabilities, such as adeptness with change management and employee performance management.

All Capabilities Matter to Success, but Some Matter More Than Others

The correlations showed that all 20 types of organizational capabilities have an impact on overall performance—though clearly some have much more influence than others. “There’s a definite bias toward behavioral factors—in particular, leadership, employee engagement, and cross-functional collaboration,” said research leader Fabrice Roghé, a Duesseldorf-based partner at BCG. “But the best performance comes when those traits are backed by structural capabilities, such as a strong organization design and rigorous business processes and controls.”

Christopher Kinsella, Acting Chief Executive of Chartered Management Institute, said,

“This research confirms the importance of strong leadership, high employee engagement, and a collaborative approach to work within an organization–all of which depend on key leadership behaviors. The report highlights how the ‘softer’ behaviors and values can often make more of an impact to productivity and performance than the structural capabilities within a company. It is significant that there is such a gap between best practice and the day-to-day experiences in companies. This is where the role of management training and enhancing leadership skills is critical to ensure behavioral development, effective delivery of strategy, and the consequent success of an organization.”

The BCG publication recommends three priorities that can lead to big gains in performance. The first entails paying particular attention to leadership, employee engagement, and collaboration as key performance dimensions. The second priority is to align and improve people practices. The third is about organization design—ensuring that the company’s structure is aligned not only with its business strategy but also with its cultural goals and target behaviors, and is complemented by clarity in roles and cross-functional processes.

This BCG Focus contains many insights that can help companies gauge the impact of their organizational performance. A follow-on Focus will explore the transformation journey that most companies need to take if they want to close the gap between their current organizational capabilities and those that constitute best practice today.

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