The Organizational Hierarchy of Needs: A Recipe for Thriving
It is not enough for organizations to have a strategy; they must also be able to seamlessly execute upon that strategy.
Effective strategy execution requires strong market differentiation, engaged associates, and accurate and timely performance measures with nimble course corrections.
Similar to Maslow’s Hierarchy of Needs, SOAR’s Organizational Hierarchy of Needs enables organizations to thoroughly assess both their current performance and future potential via the domains discussed in this post. (See Figure 1 of SOAR’s Organizational Hierarchy of Needs.)
Figure 1: SOAR’s Organizational Hierarchy of Needs:
Let’s take a look at each of the layers within the Hierarchy of Needs:
1. Strategy Deployment
“However beautiful the strategy, you should occasionally look at the results” -Sir Winston Churchill.
Large organizations often invest thousands or even millions of dollars developing a solid strategy, but if they are unable to implement that strategy, the business will not reap the expected benefits.
In fact, a study by Walters et al. showed that strategic planning alone is not significantly associated with strong organizational performance measures.¹
Strategy Deployment (also known as hoshin kanri) is based on the science of Lean and emphasizes action in conjunction with strategy formulation. Hoshin kanri translates to “a method for compass management,” which is figuratively represented by a ship in a storm moving purposefully in the right direction.
When Strategy Deployment is executed effectively, it not only aligns the talented people and complex processes with the organizational purpose, but it also helps identify essential initiatives, aligns resources, and tracks and communicates results across multiple layers and divisions.
Each of the remaining layers within the Hierarchy of Needs connects directly back to Strategy Deployment through a cascading scorecard with business goals, objectives, initiatives, action items, and performance measures linking frontline resources to senior leadership.
Figure 2 demonstrates the vertical and horizontal integration for large organizations that is inherent in the Strategy Deployment approach. This critical integration is what connects strategy to results.
Figure 2: Vertical and Horizontal Integration within Strategy Deployment:
2. Financial Performance
“No margin, no mission.”
This common adage made popular by Sister Irene Kraus, former CEO of Daughters of Charity National Health System, refers to the fact that every business must ensure it is financially viable and maximizing shareholder value to be able to serve the purpose it set out to achieve.
This is true for both for-profit and non-profit organizations.
Financial viability encompasses multiple facets that lead to profitability, such as demand, efficiency, and efficacy.
It requires an adequate understanding of the market, which is also outlined in the layer below it, Customer Value.
This refers to providing the service or product to customers via on-time, complete, and correct terms (known as OTCC in Lean manufacturing jargon). Efficiency not only saves time, energy, and money for the customer, but it also directly impacts employees.
Focuses on quality and accuracy, ensuring high customer satisfaction. By successfully and consistently managing customer demand and internal capability via efficiency and effectiveness, businesses can create sustainable profitability and financial viability.
3. Customer Value
Businesses often assume they understand what their customers want and/or need.
However, experience shows that these assumptions are often incorrect when not backed by data.
The third layer of the Organizational Hierarchy of Needs focuses on the Voice of Customer (VOC), which refers to the expectations and desires of the customer base. Without a thorough understanding of both the customers’ needs and the business’ capabilities, there can be significant misalignment resulting in an inadequate customer base.
Lean Six Sigma uses a tool known as the Kano Analysis (see Figure 3) to break down the customer’s needs and desires into four basic categories:
Basic Expectations or Basic Satisfiers are required to meet the basic needs of the business (e.g., a coffee shop offering coffee). When the basic expectations of customers are not met, the longevity of a company is put at risk.
Performance Needs differentiate the business and enable it to outperform its competitors through better or faster service.
Delighters are unexpected and instantly gratify the customers upon receipt.
Indifferences neither make customers happy or sad, so they should not be an investment for a company. Examples of this may be using blue vs. black uniforms if there is a cost differentiation.
Figure 3: Kano Analysis
Basic Expectations or Satisfiers
The first area to address as a business is of course Basic Satisfiers; if you are not meeting the basic needs of the customers, they will not come to you for your product or service. Customers do not always think to ask for these things (e.g., patients don’t ask a physician if he/she is board-certified in healthcare or if a restaurant will provide silverware or napkins with the meal), but once they find the characteristic is missing, they are dissatisfied.
Performance Needs become differentiating factors that set a business apart from others (e.g., providing faster service while still meeting quality expectations). These become competitive differentiators within a saturated market.
Delighters can also be competitive differentiators but are often offered in limited amounts. Delighters must be balanced between customer excitement and organizational profitability. It is important to note that Delighters can shift over time to become performance needs or basic expectations as the market catches up (e.g., free Wi-Fi was once considered a delighter in businesses, today it is a basic expectation).
Finally, Indifferences are often overlooked by businesses, but can be quite costly. For example, customers may not care about the color of team uniforms at McDonald’s or the color of plastic bags at Walmart, so the businesses should not spend extra money on these things.
Without a clear picture of the market needs and offerings, businesses can flounder.
However, with a clear picture of the market needs and offerings, businesses can tap into demand, exceed customer expectations, and inspire customer loyalty.
Figure 2: Vertical and Horizontal Integration within Strategy Deployment:
4. Organizational Effectiveness
The fourth layer of the Organizational Hierarchy of Needs focuses on maximizing operational capability by developing productive partnerships, maximizing operational efficiency, and creating high demand services and/or products.
There is a direct relationship with each of these and the third layer of the Hierarchy, Customer Value. Meeting customer demand cannot occur without productive partnerships via channel partnerships (which provide access to target markets), sourcing partnerships (which competitively deliver raw materials), or collaborative partnerships (which offer additive value through joint services vs. individual offerings).
Additionally, operational efficiency enables businesses to exceed customer expectations by delivering what the customer wants, when he/she wants it, and how he/she wants it. This is accomplished by eliminating unnecessary waste in the organization’s processes, engaging and empowering employees to act as owners, creating visibility among improvement efforts, and connecting actions to strategy. This not only supports positive financial performance, but it also instills a culture of trust, problem solving, action, and brand loyalty.
5. Colleague Engagement
The final layer of the Organizational Hierarchy of Needs holds every other layer together, because without a strong workforce, it is not possible to operate effectively, create customer value, be profitable, or execute strategy.
Colleague engagement is a result of recruiting quality associates and enabling ownership behavior, which naturally elevates performance. Steve Jobs famously stated,
“It doesn’t make sense to hire smart people and tell them what to do; we hire smart people, so they can tell us what to do.”
This is complemented by the three characteristics of an ideal team player according to Patrick Lencioni:²
This is true for both front-line staff and leaders. With humble, hungry, and smart individuals, enabling ownership behavior becomes easy. This encourages a safe, responsive, supportive, and positive work environment.
Each of the five layers of the Hierarchy relate directly to the Baldrige framework, which is outlined in a later blog post: Baldrige Program. Similarly, SOAR’s Strategy Execution System envelops the Organizational Hierarchy of Needs, developing and nurturing a culture of sustainability.
Walters, B.A.; Clarke III, I.; Henley, E.S.; & Shandiz, M. (2014). Strategic Decision-Making Among Top Executives in Acute-Care Hospitals. Health Marketing Quarterly, 19(1), 43-59.
Lencioni, P. M. (2016). The Ideal Team Player: How to Recognize and Cultivate the Three Essential Virtues: Wiley India Pvt. Ltd.