Improving Organizational Performance

The Cube One Framework

Richard E. Kopelman

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9781138951747
• eBook ISBN: 9781317359920
• Topic: Business
• Subtopic: Business General
• Index: Business

This book presents the Cube One framework, which provides a basis for understanding, diagnosing, and improving organizational performance. It is based on the premise that successful organizations enact practices that satisfy three key constituents: the enterprise itself, customers, and employees. This book offers a uniquely empirical approach by examining enterprise-, customer-, and employee-directed practices. Validity evidence is provided by survey research, studies of financial metrics, and the analysis of cases involving well-known organizations (such as Google, Four Seasons, and Mayo Clinic). The Cube One framework is equally applicable to organizations in the for-profit, nonprofit, and government sectors. After reading this book, students and scholars, as well as organizational practitioners in the fields of organizational behavior and management, will find a practical approach to improving organizational performance.

Part I

1

The Cube One Framework

That management matters has been well documented in academic and practitioner literature. For example, Rumelt found that organization-level differences have at least six times the effect on profitability as industry has,¹ and Hansen and Wernerfelt found that management practices had twice the effect on profit than economic factors such as competition or firm size had.² More anecdotally, Professor Kim Clark offered the following observation when he was interviewed by Business Week upon his elevation to Dean of the Harvard Business School.

As an economics professor he would study companies in a given industry (such as cement) and he had an “unlikely epiphany” when he found that time and again a few companies were consistently far more profitable than their competitors, despite having similar capital structures and technology. Clark stated, “It was one of those life-changing events that nothing that I had studied in economics prepared me for.” His conclusion: it had to be better management.³

If management matters, what, specifically, do successful companies do? What are the key determinants of organizational performance, and what exactly should managers do to bring it about? Tsoukas and Chia noted, in their Organization Science article, “organizations do not simply work; they are made to work” (emphasis in original).⁴ How, specifically, do successful managers get their organizations to work? What are the key determinants of organizational performance? What should managers do to achieve success?

Cummings and colleagues have cautioned that,

organizational theories can serve as a definitive blueprint for action only if they are elegant enough to have been adequately tested, are supported by the cumulative weight of research evidence, and are powerful enough to account for much of the variance in organizational behavior. These criteria are not met by current organizational theories.⁵

The Cube One framework responds to this challenge. The framework is capable of empirical evaluation. It has been tested and supported via three types of analyses: survey research, case studies, and longitudinal research on management ratings and relative market capitalizations. It has achieved a high level of explained variance. It is applicable to organizations in all three sectors (for-profit, nonprofit, and government) and it is useful for diagnostic and intervention purposes. So, what is the Cube One framework about?

Multiple Stakeholders

Successful organizations are need-satisfying places. Successful organizations must, according to the Cube One framework, simultaneously satisfy the goals of three primary stakeholders: customers who provide revenues; employees who produce products and provide services; and providers of funding (such as shareholders and lenders in the private sector; donors, grantors, taxpayers in governmental and nonprofit sectors) who seek returns on their investments/outlays. Customer-, employee-, and enterprise-directed practices form the three dimensions of the Cube One framework.

By enacting and monitoring the three sets of practices, organizations can move within the Cube One framework, thereby improving their performance. Chapters 2 to 4 provide examples of the efficacy of each set of practices. Chapter 5 describes five survey research studies, and Chapter 6 examines the performance of companies using market capitalization data. Chapters 7 to 10 provide in-depth cases that examine practices across time and/or between companies. The last two chapters indicate how data pertinent to enacted practices can be used for diagnostic and implementation purposes. In light of diagnostic data, changes in practices can be enacted that will lead organizations to achieve higher levels of organizational performance.

The three sets of practices correspond to a multiple stakeholder perspective approach, which is, of course, not new. But to date multiple stakeholder research and writing has typically been simply theoretical.⁶ More recently, case studies of successful companies have been used as vehicles to support the multiple stakeholder perspective.⁷

For instance, Mackey and Sisoda have argued for the existence of five inner circle (major) stakeholders whose interests need to be recognized and addressed, plus six outer circle stakeholders that indirectly affect the organization through their impact on the inner circle stakeholders. The evidence supporting this framework rests primarily on an in-depth analysis of the case of Whole Foods Market. Their approach, which they call “conscious capitalism,” has been generally well received, but the evidentiary basis for this framework is weak at best.⁸ To date, there have been no systematic studies that directly measure the concepts invoked (including the degree to which various stakeholders are satisfied), and thereby explain the relative performance of companies within industries.⁹

Another influential multiple stakeholder perspective, the service–profit-chain, has been advanced by Heskett and colleagues. They suggest that employee satisfaction drives customer satisfaction which, in turn, impacts profitability. Their evidence consists of in-depth case studies which describe practices at some successful companies that are consistent with the posited model.¹⁰

Finally, it might be noted that the popular Balanced Scorecard technique represents a partial multiple stakeholder approach. One of the four strategic dimensions relates to customers, and the other three relate to enterprise-directed matters: financial results, internal processes, and learning and growth. Notwithstanding the publication of numerous books and articles, the authors have only cited case studies of successes. The analysis is also custom-made for each client organization.¹¹ When examined empirically in the academic literature, mixed results have been reported.¹²

Multiple Disciplines

Although some authors have advanced a multiple stakeholder perspective of management, most books on organizational performance have been guided by the particular field of study or discipline of the investigator(s). Abundant evidence speaks to the effectiveness of specific techniques, such as lean six sigma and supply chain management, in improving productivity and providing a superior return to providers of resources. These works are within the province of operations management.¹³ Writers and researchers in marketing and quality management have demonstrated the utility of customer-centric practices, and customer surveys, especially those asking the “ultimate question” as pertinent to heightened brand loyalty.¹⁴ Likewise, scholars in human resource management, organizational behavior, and organizational psychology have examined techniques to raise employee work motivation; to make work more engaging and workplaces “stickier” so as to reduce voluntary turnover.¹⁵

Therefore, research and writing pertinent to the goals of the three key sets of stakeholders (providers of funding, customers, and employees) relate to differing fields of inquiry and academic disciplines. However, research and writing on organizational performance has typically been conducted through the lens of a single discipline; the researcher’s academic field of study and expertise.

In contrast, the Cube One framework is multidisciplinary, examining practices pertinent to various fields of study including operations management, industrial engineering, service quality management, marketing, organizational behavior, industrial and organizational psychology, human resource management, and financial management. The first premise (or axiom) associated with the Cube One framework is that a full explanation of organization performance requires a multidisciplinary perspective.

Policies versus Practices

The second premise undergirding the Cube One framework is that what really matters are the practices actually enacted—not espoused values, vision statements, or even written policies and procedures. To be sure, corporate strategies, cultures, and climates provide a framework for the practices enacted, but it is the practices per se that are crucial.¹⁶ To reiterate the comment of Tsoukas and Chia, “Organizations do not simply work; they are made to work.” Hence, it is the practices enacted by organizations that make them work.¹⁷

To illustrate the difference between policies and actual enacted practices, consider the following two examples:

1. 1. High-level executives commonly claim that their organizations have adopted “family friendly” work-life practices. However, these policies often are unavailable, or only available with penalties. Illustrative of this is the departmental supervisor who announced, “My employees can have flextime so long as they’re here from 9 to 5.”¹⁸
2. 2. A large department store chain (a Fortune 100 company)—famous for its pay-for-performance philosophy—provided store managers with detailed performance appraisal instruments, merit pay guidelines, and pay increase grids. But, examination of actual pay-performance practices in nearly 400 stores indicated that in only one-third of the stores was there a sizable positive association between pay and...

Table of contents

• Cover
• Half-Title
• Title
• Copyright
• Contents
• Preface
• PART I
• PART II
• PART III
• PART IV
• Author Index
• Subject Index