Why Focusing on Performance is Destructive

Questions Leaders Struggle With

Over the last several years, I have asked a series of questions of leaders: 

• What is performance? 
• What is organisational health? 
• Where do you think most leaders and organisations focus – performance or health? 

Almost without exception, leaders can answer the first question about performance, but usually in very narrow terms. They might mention profit or products or services. The answers to question two – what is organisational health – varies widely. Generally, people respond with terms like ‘it’s about the culture’, or ‘it relates to how strong your leadership capability is’ while others take the term ‘health’ more literally and believe it’s about the wellbeing of their employees.

To answer the questions from an evidence-based approach, I draw on the work of Scott Keller and Bill Schaninger (Beyond Performance 2.0, 2019) who present some useful definitions and distinctions about the terms, not to mention a depth of research that holds up across industries and sectors.

Performance is what an enterprise does to deliver improved results for its stakeholders in financial and operational terms. It’s evaluated through measures such as net operating profit, and total returns to shareholders. 

Health is how effectively an organisation works together in pursuit of a common goal. It is evaluated in levels of accountability, motivation, innovation, coordination, external orientation, and so on. A more memorable way to think about health-related actions is that they are those that improve how an organisation internally aligns itself, executes with excellence, and renews itself to sustainably achieve performance aspirations in its ever-changing external environment.

The Question that Bites

Once these definitions are more clearly understood, I then ask the third question, “Which one (performance or health) do organisations focus on?” The answer is obvious – performance. It is rare for someone to say that organisations have a bias towards organisational health. Organisations should focus on performance to get performance, right? Wrong.

The last follow-up question is “Which one out of performance and health should leaders focus on? Most answer ‘health’ – and then there is usually an awkward silence – as some in the room realise that they have spent a lifetime perpetuating the myth that to get performance you should focus on performance. This is a classic ‘knowing-do’ gap. We know what to do, but fail to take action.  

The Magic of ‘And’

The actual answer is BOTH. In a world where ‘either-or’ thinking dominates, focusing predominantly on one or the other is going to be counter-productive. It’s what has been called the magic of the ‘and’. Leaders need to focus on performance AND health concurrently. 

However, the view that to get performance we need to focus on performance prevails. Not only does it prevail, but for many leaders it dominates their approach. A case in point was a conversation I once had with a CFO of a large Australian company, who said, and I quote, “We can’t focus on fixing the culture yet because we have invested in a major technology platform that now needs to be implemented.” 

There are many flaws in this thinking. Firstly, you can roll out the gold standard in technology, but if people aren’t aligned behind the organisation’s vision and purpose, then you’re likely going to be flushing a sizeable portion of it down the toilet. I once mentioned that we still seem to tolerate a high failure rate in organisational change (i.e. the change initiative fails to deliver on its promise) to a group of senior bankers. The head of technology acknowledged that they had possibly wasted around $1billion in the last year because of poor implementation. When I queried what he meant by ‘poor implementation’, he replied, “we forgot about the people.” Related to this point, a high profile change initiative is the perfect time to start to shift to a more constructive culture in how it is rolled out. Leaders need to use the initiative as a vehicle to demonstrate the ‘new way’, or aspirational culture in everything they do. Again, it’s an ‘and’. 

Performance and Health Matter Equally

The central premise of our work (and supported by an avalanche of research) is that leaders should put equal emphasis on the health elements of making change happen as they do the performance elements. 

As Keller and Schaninger point out, “Workplaces that are characterized by any or all of competing agendas and conflict (no alignment on direction), politics and bureaucracy (low quality of execution), and where work is “just a job” (low sense of renewal), aren’t just unhealthy for sustainably delivering bottom-line results—they are unhealthy for the human soul.”

Leadership must be the bridge between performance and health.

Organisations that are healthy, however, are places people actually want to be, creating the environment and conditions for people to do – and be – their best. They mobilise and align around important organisational challenges and goals, they create a sense of belonging by fostering high-performance teams, and they foster creativity and innovation through a sense of psychological safety, encouraging ‘smart failures’ and promoting a sense of renewal. 

The Leadership Challenge

In the fast-paced, always-on, rapidly changing world we live in, the need for action and results is a powerful and seductive force. But if leaders focus on this to the exclusion of – or even to a greater extent than – developing organisational health, then it will ultimately come back to harm them and their organisation or team. There are numerous examples where a focus on performance alone has hurt the bottom (and top) line. Think about the leaders you have worked with where they have focused on performance to the exclusion of health. What were the results? In the short-term, probably pretty good. But anything beyond that there was a likely dip in performance and in fact a complete undermining of it. There may have also been substantial damage to the culture, its people, and the goodwill and trust required to run an enterprise.

The leadership challenge is to develop more sophisticated lenses to be able to see – really see – organisations as both systems and as a personal construct. Changing mindsets and behaviours are critical, but if you don’t understand the formal and informal structures and relationships that play out in the organisation, including the way that people take up their roles, then you will be doomed to achieving average results at best. And ‘average’ results in a world where change leadership is generally done poorly, means below what organisations, their people, and those they serve deserve. 

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