Measuring the Success of an Organisation

 Organisations only exist to achieve something that individuals can't achieve alone. This involves coordinated, cooperative effort. In 1938, Chester Barnard, author of The Functions of the Executive, wrote "the only measure of a cooperative system is its capacity to survive". Despite its vintage, that seems like a valuable insight at the moment with the demise of so many household names over the last decade and many more to come during the current economic turmoil.

But how to measure an organisation's capacity to survive?

Is it the age of the organisation? But that only measures historical capability to survive, not necessarily the current and future capacity.

Is it a measure of vitality - like a doctor measuring vital signs: heart rate, blood pressure, blood composition, immune system, etc.? Measuring liquidity, cashflow, and any number of financial ratios are useful metrics. But, continuing the medical analogy, measuring vital signs helps you know if you're outside normal limits for health, but don't actually measure vitality much beyond that. If your blood pressure is too high or haematocrit too low, your doctor might diagnose atherosclerosis or haemolytic anaemia and prescribe the appropriate treatment. But if they're within the normal range, it tells you nothing about your "capacity to survive". Given the current situation, tracking vital signs will be critical for many companies. But vital signs don't measure vitality beyond being within normal limits for life - they don't really measure vitality in the sense of thriving.

What else is required?

Is it a measure of adaptability or flexibility? In a changing world, what could be more vital, more indicative of a capacity to survive than adaptability? Systems, processes, routines and rituals, while essential for effective performance, can becomes inertia wheels. When customers no longer want or need a product, want to consume it in a different way or they find an alternative, surviving means changing products, changing how products are made or changing how they are delivered. Sometimes being adaptable will mean little more than being able to deal with the natural cycles of business. Other times it will mean reacting to crises, like a pandemic, economic crash or political upheaval. And sometimes, a market will go into decline or disappear altogether. Evidence of a capacity to survive is, therefore, having effective mechanisms in place to (I) identify, ahead of time, critical changes coming; (ii) adapt internal systems and processes accordingly; and (iii) continue to perform well while transitioning.

Does that assure success? No. The healthiest, most vital human being can be run over by a bus or incapacitated by a disease. And so too, the most vital, healthy business. But the more healthy and vital it is, the more likely it will be to survive and thrive. This is the basis of evolution - survival of the organis(ation)m most able to adapt to its environment and pass on its genes to the next generation.

On that note, we should append Chester Barnard's statement: the only measure of the efficiency of a cooperative system is its capacity to survive long enough to achieve its goal or purpose.

Being clear about an organisation's goal or purpose allows an important decision to be made: dissolve the organisation because its purpose has been fulfilled; define a new purpose and adapt; or adapt and continue working towards an as yet unfulfilled purpose. If we accept, as initially proposed, that longevity is a factor in the capacity of an organisation to survive, then having a purpose or goal that transcends the foreseeable future is essential. There are organisations in existence today that are more than 1000 years old. While the Shore Porter's Society has some way to go to reach that mark (it is only 523 years old) it has adapted from being a cooperative of shore porters moving goods from the Aberdeen docks to town, into being a nationwide and international removals firm. The firm's purpose? It's hard to say, but has something to do with the strength of commitment and loyalty that every member of the firm has to each other and their customers. The capacity to survive comes from the purpose their commitment gives to the company. What's the purpose of your organisation that will see it survive and thrive for a thousand years?


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