This week, we offer excerpts from Beyond Performance 2.0, a new book on leading large-scale change by McKinsey senior partners Scott Keller and Bill Schaninger, and an interview with Alibaba’s CEO on how his leadership style balances analytics and instincts. Plus, McKinsey is helping United Way of Greater Atlanta improve a well-being index for at-risk children. |
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If you’re looking to make big changes at your company, there’s no polite way to say it: you’re a lot more likely to fail than to succeed. Whatever the undertaking—digitization, reskilling staff, transforming operational processes, or integrating recently acquired companies—pitfalls abound. The need to shift mind-sets, both individual and institutional, is your biggest obstacle. |
Drawing from decades of experience and a network of global colleagues, McKinsey senior partners Scott Keller and Bill Schaninger’s updated and revised book, Beyond Performance 2.0, is a practical, step-by-step guide to corporate transformation. From setting measurable goals to laying out a plan for continuous improvement, their tried-and-true methods are proven to dramatically increase the odds of change-program success. |
In the course of their research, Keller and Schaninger discovered that the business execs who analyzed and assessed employee mind-sets increased their odds of success by a magnitude of four. It sounds simple, but change cannot happen without employees at all levels being able to envision, understand, and accept that change. That’s why it’s crucial for leaders to identify any limiting beliefs, reframe them, addressing underlying concerns as necessary, and reinforce new employee behaviors. |
Another important principle is for leaders to focus equally on a company’s performance (measured through metrics like net profit and total shareholder returns) and its overall health (concerning “softer” concepts such as employee engagement, having meaningful values, and alignment on shared goals). |
Time and again, our research confirms a strong and steady link between both. For instance, we’ve found that businesses that worked to improve their organizational health achieved an 18 percent increase in earnings, outperforming the S&P 500 average by 11 percentage points. Although maintaining an equal focus on performance and health isn’t easy, what’s clear is that leaders who do so help their companies achieve significant and sustainable growth. |
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OFF THE CHARTS |
Like Mom said, timing is everything |
Private equity (PE) funds should consider how to instill the same level of discipline and rigor to exits that they apply to purchasing assets, given how critical exits are to securing overall value. Timing increases the need to promote operational value in the business before exiting in order to minimize the impact of the economic cycle. We interviewed more than 30 decision makers across a range of established PE funds to better understand their exit strategies. |
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INTERVIEW |
At Alibaba, balancing analytics and instinct |
Daniel Zhang, Alibaba’s group chairman and CEO, talked to us recently about the e-commerce company’s approach to innovation, and how he spots hidden opportunities. Zhang, known on Alibaba’s Hangzhou campus by a nickname that translates as “the free and unfettered one,” has shunned the spotlight, but his instinct for innovation proved instrumental in Alibaba’s rise. “When people say ‘AI,’ we laugh and say that it’s ‘Alibaba intelligence,’” he says, “because data and technology power everything we do.” |
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MORE ON MCKINSEY.COM |
Are your investments stuck in neutral? | Executives need to notice and fund the most promising investment opportunities at any time, no matter where in the organization they originate. Here are some best practices to help them do that. |
Shifting sands for shale producers | The US unconventionals sector has yet to deliver cash flow or returns to investors across the full cycle. To achieve profitability, shale producers will need to shift their strategic focus from growth to value creation. |
Going with the (trade) flow | We look at how Asian economies are building more domestic supply chains as trade in Asia becomes more intraregional. |
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WHAT WE’RE DOING |
Help for Atlanta’s most vulnerable |
United Way of Greater Atlanta has worked to create communities where people of all backgrounds—especially children—can thrive. Like any city, Atlanta has communities that are affected by poverty and other social challenges. The right answer in one neighborhood might prove ineffective elsewhere. |
The organization created the Child Well-Being Index, a data set that tracks the welfare of the city’s 1.3 million children. The index takes into account how children, their families, and their communities are faring. It includes figures like the percentage of low-weight births, families with financial instability, and adults without health insurance. |
It’s a powerful tool, but United Way leaders wanted to find a better way to use all the information the index provides. They reached out to Steve Reis, a senior partner in McKinsey’s Atlanta office, for help. Specifically, United Way wanted to find new ways to derive insights from the data, measure return on investment, and identify better interventions. Steve mobilized a team of nine local business analysts to work pro bono on the project. |
To help United Way gain better insights, the team created a platform that produces a composite score showing where in the city children are most vulnerable to issues like poor health, school absenteeism, poverty, and homelessness. It has already produced real results. |
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UPS, for example, worked with United Way to use the index when it was searching for a location for its new Atlanta smart hub, an advanced 1.2 million-square-foot package-processing facility. The company strategically chose an area with a low index score—one with high unemployment and little access to high-wage jobs—in order to provide employment opportunities. The UPS center even went so far as to align work shifts with the city’s public-transportation schedule, so residents could easily catch the bus or train home. |
Pulling data from the index, the McKinsey team has also built an interactive heat map that shows the Child Well-Being scores of each zip code. This feature lets users see which areas are most at risk (rendered in red and orange on the map) and then double-click to find out what specific measures related to children, families, and communities look like there. |
“This is a really powerful tool for both donors and partner organizations,” says Austin Smith, a McKinsey business analyst and member of the United Way team. “Right away, they can determine where to direct their efforts and spending.” |
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BACKTALK |
Have feedback or other ideas? We’d love to hear from you. |
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