The Five Habits of Highly Reliable Organizations

When Ray Kroc discovered the McDonalds brothers in southern California, he fell in love with the tasty burger they prepared. He also saw that if their processes could be developed and replicated, he could create a burger dynasty. The McDonalds that Ray Kroc developed was a study in process vs. outcome. The brothers were focused on the end product, while Ray focused on the process. The brothers believed a true McDonalds burger could only be obtained at their store in California. To Ray, it was important that a customer could buy a Big Mac in Illinois, Florida, or California, that customer would receive an identical order with the same expected results.

Highly Reliable Organizations (HROs) and effective leaders learn to focus on processes rather than outcomes. Outcomes are by-products of the process. If we do not like the outcome we must change the process. Let’s examine the 5 characteristics of HROs.

 

1. They are PREOCCUPIED WITH FAILURE. HROs play the “what if” games, thinking through multiple scenarios of what could go wrong and how they would respond. This is what the aviation business does and why it is the safest means of public transportation. Business realists understand that negative forces are constantly working against them – markets change, customer needs/wants change, supply-chains change. The only constant in life is change. Successful companies are those companies that can adapt to change and stay in the game. A quick look back over the last decade reveals how one player – Amazon – has been a major disrupter in the retail world. Anchor stores from malls – JC Penney, Sears, Macys, et al, have suffered major and in some cases permanent damage. Wal-Mart, Target and Kroger along with nearly every retail and grocery chain, have had to reinvent themselves in some form in order to stay relevant, and those who don’t cease to exist, or become so insignificant as to be practically out of the game.

Success can blind a business and prevent it from thinking of failure. Just look at GE, one of this country’s biggest success stories. It may still survive and come back, but it has gone from the glory to the gory in less than a decade. In oversimplified terms, GE fell into a preoccupation with its own success rather than holding a healthy preoccupation with the forces of potential failure.

 

2. They show a RELUCTANCE TO SIMPLIFY. Successful companies often do not know exactly what makes them successful. In fact, no one knows PRECISELY why any business is a success; so, the wise company resists the temptation to streamline and simplify their processes. Success is not always simple, and it lies in the processes that are producing the success. If your business is seeing success, be very reluctant to make any changes in your processes. I liken business success to some of the weird superstitions that many athletes have who are on a winning streak. They will not change their socks or a sweatband or they will hold to a certain talisman they happened to be carrying one day when they began winning. And while the streak lasts, they will not change any habit or diet or routine. Perhaps they put too much stock in their superstition, but their thinking is this: Something I am doing is helping me, so I will not change anything I am doing while the success continues. There is some very sound logic behind that, and it is a humble admission that they do not entirely know why they are seeing unusual success. HROs have a similar mindset.

 

3. They are SENSITIVE TO FRONT-LINE OPERATIONS. Wherever the customer interfaces with your company, where the public meets you, how the customer receives the merchandise from you or pays for it, or how the goods are packaged, or how the customer is treated with a return or complaint along with how the goods are produced, displayed – these are all front-line operations. GE became preoccupied with moving to new offices, other companies get preoccupied on bonuses and profits and perks – but those are all distractions from where your business meets the customer and your product meets its purpose. Success does not depend on the corporate office location or the campus environment. A grumpy clerk in accounting won’t kill success, but a grumpy customer service rep can. Poor production quality can.

 

4. They have a COMMITMENT TO RESILIENCE. Adapting to market trends, technology and customer trends is vital. The ability to adapt to sudden changes in a business environment is the mark of a highly successful CEO. To discern those changes early and adapt swiftly shows remarkable gifts and talents. Great companies sense trends and get in front and appear to be leading the trends. Those that wait too long eat the dust of the stampede.

 

5. They show DEFERENCE TO EXPERTISE. Knowledge is POTENTIAL. You can borrow and buy brains, and HROs do just that. One of the dangers of executive strategy committees is the pitfall of “groupthinkā€. As smart administrators spin their opinions, they cannot only become enamored by their opinions, but the group can become victim of wanting to fall in line with the predominant thinking. Just because a person is a smart, competent administrator does not confer on him/her omniscience. The truly smart administrators find the experts in various disciplines and harness those brains to help find the solutions they seek. The search in HROs is not for inner wisdom they already have, but for the knowledge and wisdom they know they do NOT have. This requires humility, a quality often missing in failing businesses.