Contagious Success: Spreading High Performance Throughout Your Organization

A major contribution. Contagious Success offers fresh data and fresh thinking on one of the most vexing challenges facing all managers.

…a completely fresh take on how to change any organization for the better…data-based action steps that can be implemented immediately.

The Vice President of sales at a Silicon Valley technology company was on his hour-long commute home one evening last week when his boss called his cellphone. “Did you make your numbers today?” the boss asked. Before the vice president could respond, his boss continued, “And by the way, you’re going to have to make more cuts.”

Richard Hagberg, an organizational psychologist, recounted the conversation after meeting with the man later that night and listening to him vent about his job. “He’s under enormous pressure to meet certain sales and profit targets on a daily basis now, and often the only way to do that is to keep cutting people and resources,” says Mr. Hagberg, founder of Hagberg Consulting Group. The vice president, who supervises about 200 people, spends all his time on “day-to-day tactical stuff and trying to get more work out of fewer people,” Mr. Hagberg says. The executive knows his company needs to streamline its product line and figure out ways to better compete against a bigger, more efficient rival. “But in the climate he’s in, there’s no time” to plan for the future, Mr. Hagberg says.

Global competition has never been fiercer, but investors still want ever-higher returns. And CEOs know their jobs and compensation packages depend on delivering. So at many companies, managers down the ranks are being given targets that can be met only by steep cost cutting.

But such an approach can easily backfire. For one thing, employee loyalty and teamwork erode quickly, along with innovation and risk taking. So, in some cases, do business ethics. Managers and employees who fear they’ll lose their jobs if they don’t deliver their assigned numbers are more inclined to fudge results.

And companies that become fixated on hitting quarterly and even daily targets often don’t produce sustainable profit growth. “It’s hard to capture employees’ hearts, and best efforts, with numbers alone,” says Mr. Hagberg. In a recent study of 31 corporations, his staff found that the highest returns were achieved at companies whose CEOs set challenging financial goals but also articulated a purpose beyond profit making, such as creating a great product, and convinced employees their work mattered.

Susan Annunzio, CEO of the Hudson Highland Center for High Performance in Chicago, found that the biggest impediment to high performance — which she defined as making money for the company and developing new products, services and markets — is short-term focus. She and her staff spent all of 2003 researching 3,000 managers and knowledge workers at such global companies as Microsoft, Intel and J.P. Morgan Chase. Just 10 percent said they worked in high-performing groups, and 38 percent said they worked in “nonperforming groups.” But almost one-third of the nonperformers said their businesses used to be high performing. “We asked what had happened, and a lot of them said `top management raised our targets, cut our budgets and staff, and we couldn’t sustain results,’” Ms. Annunzio says.

A Regional Manager at an advertising agency told Ms. Annunzio how this happened at his highly profitable unit after the agency was acquired by a bigger global concern. His new boss first cut frills like Christmas parties and office plants, but then moved on to training budgets and staff. “So the most talented staff found new jobs, took clients with them and then there were more cuts,” Ms. Annunzio says. After about a year, the regional manager figured the best thing he could do was meet his boss’s targets by eliminating his position and walking away with a severance package. “He and his team were the best thing the acquiring company had purchased, and they destroyed it,” Ms. Annunzio says.

A manager at a Dallas-based IT company who didn’t want to be named for fear of jeopardizing his job — a concern cited by many of the managers I talked to — says he has seen some operating costs rise following the layoff of some talented and experienced employees. When his company outsourced its computer-support staff to India, it laid-off an employee “who’d saved us tens of thousands of dollars when our hard-drive crashed,” the manager says. “The help desk said, `Sorry, you lost everything,’ the computer manufacturer said the same, and this guy, who was earning a smidgeon of what he saved, recovered it all. We don’t have anyone nearly as talented to turn to now,” he adds.

Other managers who meet targets fear that in the long run they’ll be punished more than rewarded. When a plant manager at a manufacturing company was told to shave operating costs, he knew he could meet the target within a month by changing some production procedures, says Ms. Annunzio, who interviewed him for her study. But he worried that his bosses would then raise the bar to a level he couldn’t meet, and he wouldn’t get a raise at the end of the year. So he parceled out the cuts over 12 months.

What to do? Ms. Annunzio says more CEOs have to “have the guts to stand up to the investment community and tell them companies can’t cut their way to sustainable profit growth.” Instead, she says, they should differentiate their products and seize opportunities in new markets — and value the employees who help them do it.

A step-by-step instruction manual for making it happen… critical.

Q. You’re the leader of a team whose members do not report directly to you. One employee’s lackluster work on your project makes the term “slacker” seem generous. How do you improve performance when you have responsibility but little authority?

A. Check your initial assumption that the employee is lazy. You may be dealing with any number of issues rather than a bad attitude, said Susan Lucia Annunzio, chief executive of the Hudson Highland Center for High Performance, based in Chicago. The employee may be going through a motivation-sapping personal crisis — or may have some legitimate concerns about the project.

“Once that negative label is applied, that defines how you interact with that person,” Ms. Annunzio said. “Whether you voice it or not, you communicate that subjective judgment. And once they respond to that defensively, you’ve moved the conversation into the emotional realm and you won’t get anything accomplished.”

Q. How do I confront the issue of poor performance?

A. Very directly, said Lonnie Pacelli, consultant and author of The Project Management Advisor: 18 Major Project Screw-Ups and How to Cut Them Off at the Pass (Prentice Hall).

Mr. Pacelli recommends that you sit down and discuss the specifics, like missed deadlines, unmet goals and late appearances. You may find that the employee has too many competing projects; if so, you need to talk with her manager about a workload adjustment. If you see that her skills do not match the assignment, you can shift her responsibilities.

Q. What if team members are just not putting in enough effort?

A. You can try several tactics to nudge them to perform before you approach their boss, said Holly Garcia, 39, director of marketing resource management at Hewlett-Packard. In that role, Ms. Garcia, who is based in Houston, helps coordinate marketing activities of several thousand people worldwide, none of whom report to her. She recommends regular meetings in which all members give updates on assignments and deadlines — a process that reveals underperformance publicly.

“Nothing motivates like the peer pressure that comes when everyone on the team gets to know who meets their goals and who doesn’t,” Ms. Garcia said.

Q. What if someone still lags behind the rest of the team?

A. The next step is to talk to the person’s boss. Mr. Pacelli recommends that in that conversation you emphasize the project, not the individual. “Which parts of the project are at risk of failing, and how is that related to this person’s contribution, or lack thereof?” he said.

Q. Won’t that employee be angry that you went to the boss?

A. Quite likely. Mr. Pacelli said you might have to request that the person be removed from the project. Several years ago, while a consultant for an aerospace company, he led a team with a member who expressed his contempt for the project by removing his socks and shoes during meetings and cutting his toenails.

Mr. Pacelli said he dismissed the toenail trimmer from the project, telling him, “I’d rather redistribute the work and go shorthanded than risk you infecting other people” with a contemptuous attitude.

Q. What do you do if removing someone from the team is not an option?

A. “Effectively sideline them by giving them tasks that aren’t crucial to the project,” Mr. Pacelli said. But be careful not to make the slacker’s workload lighter, just different. “It’s important to never let the team member slide or hold them to different standards. They should have to work as hard and as long as other team members,” he said. “Otherwise, the rest of the team will resent you.”

Q. What are positive ways to motivate better performance?

A. Rewarding good performance goes a long way toward inspiring it, Ms. Garcia said. She makes it a habit to compliment individuals’ work in the regular team conference calls. “Public praise really gets the competitive juices flowing,” she said. She often doles out thanks yous of gift certificates and small cash bonuses from a fund that Hewlett-Packard has set aside for that purpose.

Wendy Young, 38, who is based in South San Francisco as a senior director of medicinal chemistry for Celera Genomics, a pharmaceutical company, said that one way she nurtured good performance was by reminding the group how its work made a difference.

The cancer treatment drugs that her teams develop often take as long as 10 years to get to market, which can make weekly deadlines seem less important, but real-life stories from journals and case studies help maintain momentum.

“I’ll give an example of a patient who has this disease and highlight how poor the treatment options are now,” Dr. Young said. “That helps them see how what they do matters and makes a difference down the road.”

Q. Is some degree of slacking tolerable if it’s not killing the project?

A. “It may not be killing the project, but it is killing your reputation with your team,” Mr. Pacelli said. “The buck stops with the project manager,” he said. “Any project manager worth his or her salt will face this kind of problem head on. You’re paid to get people to row in the same direction and perform. If you can’t do that, you shouldn’t have the job.”

A significant business book… terrific.

A practical, prescriptive guide…based on a large-scale, quantitative study of workgroups around the world that reveals the specific steps any executive can take to create a dramatic improvement in results

Based on a study of 3,104 knowledge workers in the U.S. and 9 other countries, the author has identified the qualities of high-performing groups, i.e., those that get financial results, through being the best in developing and introducing new products, services and markets. The overall conclusion is that knowledge workers who work in environments in which 1) they are valued, 2) can do their best thinking, and 3) have the freedom to seize opportunities, constitute high-performing work groups. Such groups are adaptable, knowledgeable, and resourceful. The book goes into many factors that explain the success of these groups, offering many case examples drawn from the extensive research. The insights of this book are readily accessible. The book is written in a to-the-point, very readable style. But most importantly, it offers some mind-broadening findings that, for some, may appear to be a challenge to conventional thinking. Speaking as an organizational consultant (www.futureorganization.com), as well as a reviewer, this book shines forth as offering some solid, although not altogether surprising, conclusions. Bottom line: highly recommended-well worth the reading.

…points a direction that offers proven results and specific action steps that actually work.

…shows the power and practicality of pairing highly successful people with those on the next rung.

When managers are told they must hit profit targets, their first reaction is to cut costs, slashing resources and laying off workers.

Pruning the fat benefits companies. But cost-cutting alone is shortsighted and can hamper long-term growth.

Susan Lucia Annunzio, CEO of Hudson Highland Center for High Performance and author of “Contagious Success,” says people are working harder, with fewer resources, but it’s not producing the best results.

Annunzio and her staff spent all of 2003 researching 3,000 managers and knowledge workers at global companies such as Microsoft, Intel and JPMorgan, among others. When surveyed, just 10 percent said they worked in high-performing groups, and 38 percent said they worked in nonperforming groups.

Almost one-third of the nonperformers said their businesses used to be high performing. When Annunzio asked what happened, they said: Top managers raised their targets and cut their budgets and staff, making it impossible to sustain good results.

Talent Dilution

In some cases, top-performing teams were disbanded and spread across groups that weren’t performing well. While this strategy might look like it could help lower-performing groups, it actually dilutes the effects of the group dynamic that might have been key to its success. Annunzio says it might have been better to simply leave the high-performing group intact and use it as a role model for others to follow.

To be sure, no one thinks top managers are out to get their workers fired or drive their companies into the ground. “They’re trying to do their best job,” Annunzio said.

Part of the problem is the investment community’s unrealistic and unrelenting expectation that CEOs will instantly show profit growth as soon as they take the reins.

“Their window of opportunity to show their worth is so small and they’re so invested to show growth,” Annunzio said.

So their knee-jerk reaction often is to cut costs across the board. What should CEOs do instead? Annunzio says leaders should tell it like it is.

“They have to have the courage to tell (investors) they’re going to need time to figure out how to be profitable in a new economy,” she said.

CEOs whose sole focus is to hit quarterly targets to please Wall Street often don’t produce sustainable profit growth, says Annunzio, an adjunct professor of management at the University of Chicago Graduate School of Business. Instead they risk alienating top workers who flee to better workplaces, taking clients with them.

Create A Winning Environment

Annunzio says that while setting tough financial goals is important, it’s equally important to create an environment where employees have the best chance to achieve them. Managers who can articulate goals — such as creating great products or finding new ways to better serve clients — often come up with better results in the long run. In essence, showing workers that what they do matters and affects the company’s success is key.

“The way you treat people and the work environment you create drives success,” Annunzio said.

Annunzio, who has taught at General Electric’s Crotonville Corporate Training Center, says her study also uncovered clues for alternatives to constant cost-cutting for profit growth.

“Micromanaging and mandating tasks instead of having dialogue, cutting training and leaving workers with insufficient resources produces low-performing groups,” she said. “High-performing groups that were innovative often were large — one of them had 110 people — which broke the myth that you need small groups to perform well. You need people to come up with ideas.”

Above all, Annunzio says, workers who feel valued perform best. “Smart people who are treated like they are smart and told what to do — not how to do it — performed best.”

Spreading high performance throughout your company seems like a logical goal for any business leader. Truth is, few managers know exactly how to do it.

Experts say the focus is often on trimming costs — at the expense of working conditions. That makes for less productive workers.

Susan Lucio Annunzio, author of “Contagious Success” and CEO of Hudson Highland Center For High Performance, said research shows that successful companies “understand the link between internal environment and sustainable growth.”

Annunzio wrote that senior leaders at many top-notch firms her group studied “are baby boomers who have realized, after years in negative environments, that there is a better way to run the company — and make more money at the same time.”

The Distinguishing Feature

The book quotes Tom Mendoza, president of Network Appliance: “I’m amazed that people don’t understand that your corporate culture is what differentiates you long term.”

Mendoza says the company shows respect for its employees by setting them up for success from the start: “We believe that you have to apply the principle of fairness — did we explain (the task) correctly, did we give them opportunity, did we help them? If they can’t measure up, we’ve got to put someone else in that job and we’ve got to run faster.”

Network Appliance goes the extra mile to make sure employees are on the right track. Executives routinely invite groups of about 20 employees to a brown-bag lunch to discuss projects and any concerns they might have.

If it sounds like Network Appliance is a touchy-feely kind of workplace, you’re wrong, Mendoza says. “I’m not a hug-a-tree guy,” he told Annunzio. He does get the results he wants from employees without being unpleasant.

Indeed, experts say managers who learn to keep the lines of communication open and are honest with employees are more likely to create an environment where workers want to perform to the best of their abilities. This approach demands a certain amount of flexibility.

Even the most loyal go-getter no longer thinks a paycheck is enough, Peggy and Peter Post wrote in “The Etiquette Advantage in Business.” A career is often viewed as a vital element but not the ultimate goal of “an existence that incorporates family, leisure-time activities and personal pursuits,” the Posts wrote.

Savvy managers are aware of this reality and work hard to strike a balance. “If employees pull their weight and give their all during work hours, their needs are met in return, whether they involve taking maternity or paternity leave or telecommuting from home,” the Posts wrote.

Research shows that creating a work environment where people are valued and have the freedom to come up with new ideas is key to a company’s long-term success, Annunzio says. “These companies get financial results the right way,” she said. “They are not afraid to defy conventional wisdom, and they are likely to sustain profitable growth.”

Susan Lucia Annunzio offers important counsel on leading a high-performance business environment.

I thoroughly enjoyed reading Contagious Success as it provided a unique and different perspective on the evolving role of global knowledge workers. The author, Susan Lucia Annunzio, Chairman and CEO of the Hudson Highland Center for High Performance, has through her global in-depth research and analysis provided a useful managerial roadmap of how knowledge workers around the world contribute to accelerating high performance for their corporations. It is a must read for senior managers working in the international arena who want another important perspective into understanding global competitiveness and multinational mergers and acquisitions. Traditionally, multinational corporations and international development agencies have paid little focus on the importance of valuing people.

Annunzio has skillfully demonstrated the key factors of success: (i) valuing people, (ii) optimizing critical thinking, and (iii) seizing opportunities. Annunzio’s comprehensive analysis has provided for the necessary analytical underpinnings to the conventional skeptics and soothsayers. What was most telling of her analysis is that only 10 percent of the global knowledge workers could provide evidence that their working group was profitable and was adding value to the corporation as a whole. A shocking disconnect for a segment of the workforce that are generally the highest paid and best educated workers in the world.
It would be very interesting to see Annunzio and her team continue to expand and refine the scope of their research in this field to include: (i) the work force that are not necessarily knowledge workers, (ii) the differences in behavior of the knowledge workers between public and privately owned companies; and (iii) the differences in behavior among knowledge workers based on the nationality and cultural leadership of the senior management.

When you lose your keys, you’ve often left them in the last place you’d think to look. Companies in search of a competitive edge do the same thing. They look outside for answers when the secret ingredients for success might already be right under their noses. Every company has a few ace workgroups — identify those top-flight teams and “clone the genes” by positioning them as examples for other employees to follow. Simple, right? That’s the thesis of management wonk Susan Lucia Annunzio’s latest book, where, fortunately, she’s done all the legwork. To determine what makes some teams good at what they do — be it HR at Microsoft UK or product development at Whirlpool Corp. — Annunzio put 3,000 knowledge workers under the microscope in search of a universal formula for high performance. The result is a book about the dos and don’ts of managing, intended for rising execs with teams of their own. Although it’s illustrated with dozens of examples of “high-performing” workgroups in action, don’t look for many actual leadership secrets; Contagious Success is more of a field guide for how to cultivate and leverage your firm’s secrets once you find them.

Backstory

A lifelong consultant and educator, Annunzio takes a break from her day jobs teaching management at the University of Chicago Graduate School of Business and heading the Hudson Highland Center for High Performance (where she is both chairman and CEO) to offer up her third book on managing and leadership.

What we liked


For all its research and numbers, Contagious Success is really a book about people; satisfy your employees — foster a comfortable working environment and provide good role models — and your efforts will be realized in your quarterly earnings reports. Call it trickle-down customer service.

What we didn’t


The book seems to promote micromanagement as the key to success. The case studies often feel more like common sense or necessity than brilliant strategy. Annunzio’s central success-as-virus argument has one primary flaw: Companies can only be as good as their best existing workgroup.

What to say to sound like you’ve read it


The best managers aren’t alchemists, they’re copycats. Smart leaders should skip the strategizing and hold up their best teams and workgroups as templates for the rest of the staff.

A blueprint for improved performance–how to infect underperforming workgroups with the success of high-performing workgroups…could spark a performance revolution.