In an interview with The KPI Institute (TKI) Publishing Team, Ihab Ibrahim Mohamed Alsakkti, a Strategy and Performance Manager at Alkifah Contracting Company, shares his insights and expertise in organizational performance management for the next issue of Performance Magazine – Print Edition.
On the one hand, investing in sustainability is no longer a nice-to-have strategy. But it is absolutely a need-to-have strategy to ensure compliance with governmental and regulatory requirements.
Here is an excerpt of the interview, where Ihab highlights the effect of sustainability in strategy planning and performance management.
A hundred billion tons of materials enter the global economy every year. Only 8.6% of the total amount of the materials are cycled back into the economy. This is the result of the linear economic model. In a case study written by Thibaut Wautelet, he refers to the linear economic model as a production and consumption model based on the “take-make-waste” scheme. He explained that raw materials are collected, then transformed into goods that are used and finally discarded in landfills or incinerated as waste. This approach turned out to be broken, enabling overconsumption to the detriment of planetary health.
Governments and businesses are looking to adopt the circular economy model and start repairing the damage created by unsustainable production and consumption. According to a published research in “Cleaner Environmental Systems Journal”, authors define circular economy as a catalyst for sustainable business. Moreover, the circular model promotes “…the use of resources within closed-loop systems, reducing pollution or avoiding resource leakage while sustaining economic growth.”
The pressure to adopt sustainability compels companies to implement the “reduce, reuse, and recycle” practices from the design stage to post-sales activities. Based on the same research, “Circular economy as a driver to sustainable businesses”, the influence of the circular economy can be seen in many business areas:
Cost management – The circular model leads to the transformation of products at the end-of-life cycles into resources for new products. Integrating material recycling into new components production can close the loop, reducing waste and the usage of more expensive raw materials.
Supply chain – The circular management of the supply chain is based on the coordination across the different members in closing, slowing, or narrowing energy and material flows. Additionally, the packaging system is an important aspect of the distribution process circularity.
Process management – The business processes are rebuilt to make them more circular, facilitating the reusing and recycling out of the desire to extend product life and reduce environmental impact.
Service management – The Product-Service system is considered an enabler of the circular economy by offering services instead of products aiming at pro-environmental outcomes.
Research and development – The achievement of circular goals relies heavily on design, which determines the circular potential. The life-cycle-based research and development allows the selection of the type and quantity of materials and determining how they are combined – a process that affects the product life and the possibility of repairing and recycling it.
Figure 1. Product Lifecycle in Circular Economy Model | News European Parliament
Companies Leading the Change
Companies embrace the concept of circularity in response to the growing interest of customers in green practices and concerns about the global waste problem. Philips is one of the companies that are successfully paving the way toward the circular economy in their industry.
Philipswas one of the largest electronics companies in the world. But it has changed its focus on health technology, looking to improve people’s health and well-being. Its products include large-scale and small medical equipment and home care products. The company developed new business models to adapt to the circular principles organized on seven strategic pillars:
Close the loop with current products through take-back, refurbishment, and recycling
Further circular practices across Philips sites, including zero waste to landfill policy
The circular design of products and business models
Technical competence building
Driving change with external coalitions and supply chain
Embedding in the Philips Business System
In 2016, the company set goals to generate 15% of revenues from circular products and services and send zero waste to landfills in internal operations. At the end of 2020, Philips achieved their circular goals. Therefore, they set three greater targets for 2025: to generate 25% of revenue from circular solutions, send no waste to landfills, and close the loop by offering a trade-in on all professional medical equipment.
The Benefits of Adopting the Circular Model
The Circular Model and its principles are still new to the business ecosystem, and the market penetration of circular business models remains limited. But the potential to scale up the model is considerable in many industries.
Besides the environmental impact that the circular model creates through the reduction of greenhouse gas emissions or the use of fewer nonrenewable resources, or achieving zero waste, shifting toward circularity can help companies secure a competitive advantage and create long-term value.
The circular model enables new revenue streams by accessing new markets or cutting off costs from waste generation. It reduces the dependency on raw material suppliers and increases the resilience in the face of supply chain disruption.
Additionally, by implementing a circular model, businesses can attract new clients and improve the retention of old ones, as sustainable practices are becoming an influencing factor in customers’ buying decisions. Also, customer loyalty is favored due to servitization, product-as-a-service offerings or take-back programs.
Based on the survey conducted by Deloitte, more consumers this year are pursuing a better sustainable lifestyle. Results show that 40% of the consumers choose brands that promote sustainable values and practices, which increased by six points compared to 2021. The number of consumers who stopped purchasing from a specific brand due to their ethical or sustainable issues and concerns towards the company has also increased by six points in 2022, which is 34%.
Going in circles is the way forward. It is time for companies to rethink how they do business, considering the industrialization’s impact on the environment, relevant international initiatives, such as the UN Sustainable Development Goals and the EU Circular Economy Action Plan, and the increasing importance of sustainability to everyday customers. The change may be difficult for organizations used to operating in the linear economy but not impossible as seen in the above examples. In order to thrive in the market, companies must establish circular business models and adapt their strategies to the circular economy.
Competency-based education (CBE), according to the non-profit organization EDUCAUSE, enables students to advance their development based on their learning capacity, skills acquisition, or competency improvement at their own pace. This learning journey could happen in almost all types of environments.
CBE creates opportunities for learners and employees to nurture integrated performance-oriented capacities that can help them handle different challenges. This strategy is designed to accommodate various learning styles and can result in more efficient learner outcomes.
CBE would not work well without high-quality trainer’s training. Trainer’s preparation is a critical component of successful CBE deployment. Trainers must learn how to assess learners and tailor learning experiences to their needs. They must have a thorough understanding of the CBE process, techniques for tailoring learning experiences, mastery-based assessment, and the critical role of technology in learning customization.
Developing competencies standards is a crucial part of CBE. It helps sustain skills at the enterprise level by defining an ideal competent performance to measure a worker’s actual performance. The competency criteria can be tailored to a specific country’s setting and confirmed through a local method. TheILO (2021) recommends considering the following factors when creating a local validation strategy:
The industry’s size and geographic dispersion (so representative businesses can participate)
The industry’s diversity (i.e., the technology utilized and the products produced)
The worker’s profile (to guarantee that all competencies are included)
Validation costs and validation time
They must be aware of the differences between CBE and traditional education (TE) while developing competency maps, assessment goals, learning speed, grading, and promotion. They must also understand the importance of assessment in adapting training.
CBE in Healthcare
Healthcare institutions and organizations are being confronted with a number of challenges, including developing clinical approaches and a scarcity of resources. On the other hand, healthcare providers are expected to use care skills effectively and put theoretical knowledge into practice (Eijkenaar et al., 2013; Goudreau et al., 2015). However, a growing amount of research from several countries demonstrates that the clinical performance of healthcare systems is not up to par (Eijkenaar et al., 2013).
Below is a case study demonstrating how CBE works, its effectiveness, and its application to professional practice. It includes a population of physicians, nurses, medical students (residents or interns), and nursing students. CBE courses were offered to improve the clinical performance of medical and nursing students, physicians, and nurses. Traditional education was provided to the control group, and the clinical performance of the study population was the outcome.
Thestudy “The effect of competency-based education on clinical performance of health-care providers: A systematic review and meta-analysis” aimed to evaluate the influence of competency-based education on the clinical performance of healthcare providers. The study takes into consideration the need to develop an intervention to improve the clinical performance of healthcare providers.
The criteria for inclusion were clinical or quasi-experimental trials; physician/nurse or medical/nurse participants; an age range of 18–65 years; adoption of the CBE approach; measurement of clinical performance of the participants using concrete tools of performance assessment; presentation of the results quantitative scoring; and the use of traditional teaching methods for the control group. The exclusion criteria are the use of a combination of CBE and other educational modalities, the lack of a control group, and the measuring of the participants’ theoretical knowledge or non-clinical abilities.
The study used six international electronic databases: PubMed, Ovid, Cochrane Library, Web of Science, ProQuest, Scopus, and Google Scholar. The national electronic databases IranMedex and SID were also used to conduct a systematic review and meta-analysis. In addition, the study comprised other studies that were related to the research goals. The Cochrane Collaboration’s Risk of Bias Tool was applied to assess the studies’ quality.
According to the random-effects model, CBE could improve the clinical performance of health care professionals in the intervention group compared to the control group (SMD = 2.717, 95 percent CI: 3.722 to 1.712).
Competency-based education can help health care practitioners improve their clinical performance. Meanwhile, high turnover rates, decreased job satisfaction, increased presenteeism, poor patient safety, and increased medical errors are consequences of a lack of clinical skills and competencies
Catalyzing teamwork and supporting people to work towards the company’s vision is very important. Having a common belief among people inside the company is what needs to be established first. The beliefs of people refer to their values.
Values serve as the guiding principles of the organization. They need to be set not only by managements’ input but also by employees who will need to comply. IBM CEO Sam Palmisano has done this when he was leading a change from a mainframe maker to a robust provider of integrated hardware, networking, and software solutions back in 2002.
Samproposed three (3) value statements: commitment to the customer, excellence through innovation, and integrity that earns trust, which then changed as per input from the workforce and after being shared with employees to comment on. However, this is not the end of the story. Collaborative effort to set the values is one side of the coin. Believing in them and steering the company forward through these values is the second side that compliments the first side. The new agreed-upon values are dedication to every client’s success, an innovation that matters for our company and for the world, and trust and personal responsibility in all relationships (Paul Hemp and Thomas A. Stewart 2004).
Teamwork is always a key to change. Creating the right team that evolves and gets bigger along the process of change is important. Putting together the ideal team creates the needed collaboration and energy to change. It can start with a few numbers of people and eventuallygets bigger. While there are tools that can create harmony between team members, ensuring they all follow the same direction to the desired change is crucial to success.
Creating harmony among teams and team members involved in the change is important to minimize resistance. Resistors are everywhere and can be created at any time. They exist due to the fear of change, not understanding the big picture, and how they will fit in. This is where leaders of companies and leaders of change teams need to create the urgency to continue. Even if achievement was gained, it still needs to be reflected in other areas of the organization.Change needs to be absorbed by the culture to maintain and sustain its outcome.Sustainability can’t be achieved in short periods. It requires continuous efforts to build harmony among organizations on any achievement andto introduce sustainable practices gradually into the surrounding environment. (John P. Kotter 1995).
Attitude and behaviors of employees are important to keep at high levels during any change. To steer this positively, employees need to be the ones who acknowledge the small changes related to a big change in place. They need to share their perceptions of how things are being led and how this is resulting in new consequences that can relate to a big change.
Employees are the ones who are executing the change. To acknowledge this and empower it, leaders need to listen to employees and use their perceptions and insights as valuable input to make any modifications to the plan for change (Ron Carucci 2019). Getting the buy-in from employees means that they need to be part of setting the actions forward and developing the change plan. Asking “how can we do this?” and “how they can contribute to this?” or “how they can support us in this?” is crucial to bring people into one group feeling empowered, cared for, and letting employees be convinced that their leaders truly believe in them. No change can happen without such an important asset which is the employees (Harvard Management Update 2008).
Creating a common purpose for employees and driving them forward with hope is essential for value-based management. Motivating them to realize the need to change leads to more agility and the achievement of objectives (Paul Hemp and Thomas A. Stewart 2004). Motivating employees to be part of a change is not easy, especially if there were previous attempts for change that have either stopped or failed. Failed attempts at change can cause employees not to trust any new change or choose not to be part of it. Employees can even not put forward all their potential during a change if they are not motivated. Therefore, it’s important to build employees’ resilience to change and maintain it along the way. Keep them part of the developments and achievements and share successes with them (Ron Carucci 2019).
Conclusion
Change is part of any business now. Leading it efficiently and effectively is needed to sustain the business. Proper leadership enables organizations to tackle the external factors affecting business anywhere in the world while building on internal capabilities, assets, and employees. Leading change requires leaders to work hand in hand with their employees. Working as a team is a game-changer to handle the different details and aspects of the change and transformation in their businesses. This can be done by strengthening the teamwork between employees, team members of the change team, and departments to eliminate silos. Working as a team also develops a collaborative environment between everyone.
Leading change is always aligned with value creation. We always look at the value of what is being delivered to customers. We also need to understand that value goes through different stages to be created. This chain of stages needs to be supported by having a clear guiding principle shared among all employees and having leaders talk the walk and walk the talk to be the role models for their teams.
Communication is another aspect that is very important for leading change. It needs to be well managed and executed to ensure it is done properly. Effective communication in leading change gets the needed buy-in from everyone while also keeping them all in the loop of achievements, success, and progress. This will support building the needed motivation among employees who are executing the change. While employees know they will not be put aside but referred to and considered by their leaders, organizations should empower their members to share perceptions and ideas continuously to ensure the success of the change journey.
They say excellence and changes are also a journey that does not end by achieving the result of a new change. But they will require continuous efforts to embed this change in the business’ working environment and daily operations to ensure sustainability and reflection on customers and financial numbers.
To widen your knowledge about defining your organization’s strategy in times of change, establishing appropriate customer trust, and creating the right balance between team members, visit The KPI Institute’s website and sign up for Certified Strategy and Business Planning Professional Live Online Course.
Often than not, several executives take strategy as a routine task or a series of frameworks instead of a mode of visualizing and solving problems. Furthermore, taking on the newest strategy trends or following a successful entrepreneur’s guidelines is not an ideal way to win. Companies need to take their strategies through a series of tests to determine their validity.
There are three tests that identify the success of strategies. These assessments help executive teams to answer some of their burning question, such as:
a) Does your company strategy respond to uncertainty and trends?
b) Does your strategy exploit legitimate sources of advantage?
c) Is your strategy aligned and cascaded throughout your organization?
Three Winning Strategy Tests
There are three types of tests companies can apply to determine whether their strategies are viable or not. The first one is the Fit Test. This type of test measures the level of fitness of a company’s strategy along with its business condition. When conducting the Fit Test, there are three fit dimensions that need to be assessed: internal fit, external fit, and dynamic fit.
Internal fit and external fitare the keys to securing a company’s survival (Tyge Payne et al., 2015). Internal fit is described as a multi-dimensional matching of strategy with structure. It is undertaken to ensure that the strategy matches the company’s resources as well as competitive capabilities. Winning strategies display an internal fit and must be compatible with the ability of a company to implement the strategy in a competent mode.
External fit refers to the congruence between an entity’s strategy and composition and its task environment. Testing external fit will exhibit how a strategy matches significantly with the external conditions, such as industry dynamics, competition, and market opportunities. Therefore, a strategy will only work well if it has an excellent external fit against the external environment.
The last type of fit test is dynamic fit. It is a fundamental measurement that assesses if strategies are changing over time. Dynamic fit is used to synchronize and align the current state of the business with market conditions.
According to Jonathan Trevor and Barry Varcoe, retaining a good strategic alignment relies on the ability of a company’s structure, procedures, and culture to evolve with strategy changes. The signs of misalignments are always evident to employees and customers who fail to receive the type of service they expect.
The second type of test is called the Competitive Advantage Test. This type of test measures the lasting competitive advantages of businesses in the market space. The Competitive Advantage Test also enlightens managers on strategies that often fail to keep up a constant competitive advantage with rivals. Failed approaches to maintain a competitive advantage over competitors usually lead to inferior performance in the long run.
As winning strategies enable competitive advantage to be durable and larger, the research of competitive advantages in the tech industry by (Huang et al., 2015) sheds light on the outcome differences between Temporary Competitive Advantage (TCA) and Sustainable Competitive Advantage (SCA).
The paper suggests that companies can achieve higher outcomes through SCA by amassing assets, resources, and capabilities. However, TCA created through strengthening market positions can assist firms with capital to accumulate resources that will develop a sustainable competitive advantage.
The Performance Test is the third form of measurement to differentiate a winning or losing strategy. A performance test is vital for organizations as companies usually mark their success based on performance. There are two types of indicators that a company looks at to understand the standard of this strategy test:
a) Competitive strength and market positioning and
b) Profitability and financial strength.
One of the performance measurements tools that businesses can use to effectively manage organizational performance is the balanced scorecard. It provides a holistic strategy implementation framework comprising five elements: desired state of evolution, strategy map, performance scorecard, performance dashboard, and portfolio of initiatives.
To sum it up, a company’s strategy needs to excel in all tests to succeed. Failing in even one of the tests could spell problems for business ventures and lead to negative performance. A company can introduce new practices only if they match or erase both internal and external conditions. On the other side, existing strategies should always be evaluated thoroughly to affirm that they are fit and contribute to good performances and competitive advantage. Incorporate fast changes to current strategies if companies fail at least one of the three tests.
Take a look at The KPI Institute’s website and find out more about the Certified Balanced Scorecard Management System Professional course. Discover new approaches on how to create a performance management system based on the balanced scorecard technique and how to implement it at all levels of the organization.
In an interview with The KPI Institute (TKI) Publishing Team, Ihab Ibrahim Mohamed Alsakkti, a Strategy and Performance Manager at Alkifah Contracting Company, shares his insights and expertise in organizational performance management for the next issue of Performance Magazine – Print Edition.
