Is it time for a reality check?

(Editor's Note: This is an excerpt from business performance improvement expert Larry Valant's book, Stop Breaking These Rules! 100 Hard-Hitting Truths for Business Integrity and Performance.)

The Early Recognition of Reality (ERR) prevents costly errors.

The words "Early Recognition of Reality" should be embroidered in a tapestry and hung on our office wall, reminding us to look for those signals that tells us a change in direction or new course of action is required!

If you are willing to look openly and honestly at your environment, be it personal or work, you cannot help but see reality. This, simply put, is the concept of ERR, the early recognition of reality. Choosing to recognize reality is a conscious process, a process the best leaders and managers employ so that they can adjust to the reality of their environment.

When we fail to employ the concept of early recognition of reality, we err. How do we err?

• By denial: "I am sure the numbers will look better next month, if we just work harder, faster!"
• By rationalization: "I know he has a poor attitude that affects the team, but it is impossible to find someone who can fix widgets like he can. We can't afford to let him go".
• Through emotional attachments: "He's been with the company since we started, I can't possibly let him go."

It is not difficult to see the cost that will result from our failure to act on such realities.

Frequent reality checks would tell us what we've been doing isn't working, and the sooner we stop going down the wrong path, the sooner we will head down the right path.

Rarely do you find companies without walls between the functions.

Another great irony in organizational behavior is the continued use of the words team, teamwork, and there is no I in team, et cetera. In point of fact, rarely do teams and teamwork exist in organizations. Instead, walls exist around functions. The reasons there are walls are not important. What is important is understanding what is required to reduce the walls around and between functions.

Removing walls around and between functions requires effective leadership and management. Good leadership must then provide a commonality of objectives so that each function is doing its part to work toward the same objectives as all the other functions. Additionally, these objectives must be constantly measured to assure they are being met and when they aren't met, corrections must be made.

Another critical part of creating this commonality of effort and goals (dare I say teamwork?) is compensating all the function heads and key participants based on overall performance and competent goals. Compensation based on performance assures that the functions will have a strong motivation to work together toward the same ends.

Companies that can remove walls around and between functions and are able to get the functions to work together toward common goals are the same ones that make plan and have high levels of performance.

Set the organization's capacity at 80 percent.

Many CEOs and top managers either formally or informally set their organization's workload at 100 percent-plus. While the reason for their zeal is usually based on an inherent lack of trust in the work ethic of their employees, the why of it doesn't matter.

What does matter is that when expectations are set unreasonably high, the results will most likely be unattainable. And the unintended consequence of this approach is to guarantee shortfalls to the budget and plan at the bottom line while expense budgets are almost always met – an interesting irony.

Managers who trust their people realistically set capacity at 80 percent, providing the organization slack so that when unexpected crises or opportunities occur (and they always will) the organization can capitalize on the opportunity or challenge without missing a beat.

Companies that set realistic expectations consistently make plan year after year and are highly profitable. Why? Because when expectations are met, all budgets are achieved, including sales and profit budgets. Interestingly, capital budgets and capital budget projects that follow the 80 percent capacity planning rule will also make plan.

Setting the organization capacity at 80 percent places trust in the organization's ability to deliver, and avoids setting management up for failure. Quote me on this: Unrealistic expectations result in unattainable goals.