Management often makes the mistake of measuring the performance of individuals based on the belief that strong personal performance leads to strong corporate performance. This is true only when management understands all the dynamics in the organization that lead to successful business outcomes, and when the business environment is stable. However, even the most casual observer immediately recognizes that usually neither of these assumptions is true.
Companies that want to build high performance cultures must focus on organizational performance, not personal performance. By setting clear organizational metrics, the individual performance metrics will fall into place quite easily.
This is illustrated best by case studies, not an abstract line of reasoning.
BioPlus Specialty Pharmacy
Let’s look at BioPlus Specialty Pharmacy. Its medicines are expensive; they treat rare, complex diseases. Although the company enjoyed stellar growth, it was not fast enough for the president. He knew the company could grow even faster, but he didn’t know how to do it.
Rather than trying to figure out a solution himself, the president pulled together a team of trusted advisors who wrestled with the issue for a few months. They eventually realized that the roadblock to faster growth was quite simple: the company needed to be able to process new orders in a couple hours rather than a few days. This one change – which measured the quality of its service, rather than its products – proved pivotal in leading to an even greater growth rate.
The challenge in finding a solution was in deciding what to do and how to do it. This solution was easy to measure at the corporate level. It also led to spinoff metrics for staff along the way – and those staff always understood how their efforts contributed to the organizational objective.
Through implementing this solution, the company grew over 400% in three years.
Abbott Laboratories and Amgen
Abbott Laboratories is another excellent example of how accountable leadership fostered a high-performance culture. Abbott hired a financial officer, Bernard Semler, who specifically used accounting mechanisms to drive cultural change. He called his approach Responsibility
Accounting. This approach tied every expenditure back to a specific manager. Each manager was held tightly responsible for his or her return on investment. Each manager agreed to be held responsible for a clear set of objectives during the coming year as well as the budgets to achieve those objectives. These managers were encouraged to be entrepreneurial in how they used their budgets. But deviations from the agreed-upon objectives were not tolerated. This created a culture that required strict adherence to financial responsibility, while at the same time it encouraged highly divergent thinking and truly creative work.
When George Rathman left Abbott to found Amgen, he applied Responsibility Accounting to his new company with the same rigor to create the same culture. What happened next is staggering: within 20 years he built Amgen into a $3.2 billion company with a staff of 6,400. Its stock grew by a factor of 150 times from its IPO price and its stock appreciation was 13 times better than an investment in the general stock market. Rathman clearly built a high-performance culture by implementing strict adherence to accountability.
Hewlett Packard is recognized as one of the pioneers in what eventually became the Silicon Valley phenomenon. Long before the notion of culture was popularized in the management literature, HP was organized in a highly decentralized structure. The company gave each division manager full responsibility for running their operation as a small business – including full P&L responsibility. This may have been one of the first times a high technology company applied the notion of full accountability to senior managers.
But was HP a high-performance organization? To answer that, let’s look at its track record: After incorporating the company in 1947, its sales jumped from $679,000 that year to $5.5 million in 1951, only four years later. Eight years later, in 1959, the company established an overseas presence with a marketing organization based in Geneva and a manufacturing facility in Germany. By 1970 its sales reached $365 million. 15 years later – 1985 – its sales were at $6.5 billion with 85,000 employees. The company had developed a very high-performance culture – and its founders credit their corporate success to a large extent to holding their leaders accountable for their results, not their activities.
The Take Away: Accountability is Non-Negotiable
At the risk of overstating the obvious, accountability at every level is essential to building a high-performance organization. It is not optional. At the same time, our case studies highlight that accountability for results is not incompatible with management freedom or restrictions on creativity. Top performing companies usually urge their managers to be highly creative and take risks – but to do so within a framework that holds them fully responsible for the outcomes the managers committed to originally.
performers like to be measured – if the measurements make sense to them and
relate to outcomes that truly impact the well-being of the company. But if the
metrics are activity oriented rather than results oriented, they are quite
likely to “game the system” to “hit their numbers” without regard to the things
that are truly important to customers, investors, employees, and other stake
 Good to Great: Why Some Companies Make the Leap and Others Don’t, Jim Collins, 2001
 The HP Way, David Packard, January 3, 2006