Seven Signs of Organizational Effectiveness

What are the signs of poor organizational effectiveness? What are the symptoms of a company that has lost its way? Based on the ideas of W. Edwards Deming, “The Seven Deadly Diseases” are the things you need to look for – whether you’re managing a company – or simply investing in it.

1. Lack of constancy of purpose:

  • Purpose of business is to stay in business, grow, create jobs, and create value.
  • Does the company have a clear strategic foundation – and the discipline to stick to it? (See related tool: “The Six Rings Planning Model”.)

2. Emphasis on short-term profits:

  • “Paper entrepreneurs” only take a bigger piece of the pie, don’t make the pie bigger.
  • Does the company show steady growth in sales, revenues and profitability?

3. Emphasis on performance assessments or annual reviews:

  • Ascribes to people in a group differences that may be caused totally by the group they work in, factors beyond their control.
  • Discourages teamwork. The greatest accomplishments by mankind were created without competition.
  • Does the company hold onto talented people?

4. Mobility of top management:

  • Takes years to learn a company, what it does.
  • People need time to learn to work together.
  • Does the company value “home grown” talent?

5. Running a company on visible figures alone (“counting the money”):

  • Impossible to measure the effect on sales of a happy customer.
  • Results in short-term, shortsighted vision.
  • Does the company have multiple ways to measure success?

6. Poor customer retention/high customer turnover:

  • Customers have long-term memories (even when personnel changes)
  • The cost of acquiring a new customer is four times that of keeping an old one.
  • Does the company dedicate itself to customer relations?

7. Excessive legal costs:

  • For some companies, this is their single largest expenditure.
  • Excessive costs of warranty, fueled by lawyers that work on contingency fees.
  • U.S. is the most litigious nation in the world.
  • Does the company strive to communicate proactively with employees and customers – to keep them aware of changes in policies or procedures (the “no surprises” rule)?

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