Differences HPO and other studies

Differences between HPO and Good to Great, Six Sigma, Balanced Scorecard, GPTW and EFQM model

On this page we describe the differences between the HPO studie and Good to Great, Six Sigma, Balanced Scorecard, Great Place to Work (GPTW) and EFQM model. The information below was put together by Dr André de Waal. It provides a brief discussion of the distinguishing capability of the HPO study as this is implemented by the HPO Center.

Difference with Other HPO Studies e.g. Good to Great

The difference in approach such as carried out by people like Peters and Waterman and Jim Collins (Good to Great) is big. These researchers, and many others, made a selection, based on financial analyses, of organizations that perform well or excellently in a certain sector and then compared them to competitors that did not perform as well. It is from these comparisons that they then determined the distinguishing characteristics. The weak point of this approach is the first selection: if this is not made carefully (enough), the validity of all other study results can be impugned. And there is always an element of coincidence: Was the correct information available and was the selection made based on the right criteria? Accenture is currently conducting a large-scale and many-yeared study in this manner, whereby the focus is on good performers among organizations quoted on the stock exchange. A disadvantage with many of the studies (as that of Accenture) is that it is hardly possible to control what exactly is being studies and how this is processed (statistically or not). As far as it is known, none of the studies were validated by other researchers or scientific institutions. Moreover, many studies concentrate on the Western – read “American” – profit market and the Eastern countries and developing countries are usually not considered, which makes universal generalization a problematic issue.

In the research approach applied by the HPO Center, not one selection of organizations was made in advance. The selection regards potential HPO characteristics that stem from a very broad meta-analysis, whereby studies from as many scientific disciplines as possible were involved and the professional literature was also thoroughly studied. Such comprehensive literature research was not conducted in any other study. This guarantees that in principle all sorts of elements – structure, human, emotional, strategic, material, resources, HRM, etc. – were included. No selection of respondents was made for the questionnaire either; they were randomly involved by showing up at a workshop that the Center held all over the world. Due to this the study conducted by the Center has resulted in the broadest basis of all HPO studies conducted until this point in time. The Center also expressly looked at what does and does not work, something that remains neglected in many other studies. The Center also does research in all branches, not only in the for-profit sector, and in all countries, including in Asia and the developing countries. Openness is always observed: It is clearly documented how the study was conducted and how the data were analyzed and processes and regular presentations are given about this at scientific conferences. This is the scientific way, because research needs to be validated, something that was done for the Center by Cranfield University (Dr. Veronica Martinez).

In conclusion, the Center continues to do research in order to identify better behaviors that high performance organizations and their people exhibit. This combats the so-called halo effect because the (subjective) opinions of respondents are no longer being inquired about but rather behaviors that can be objectively observed in practice.

Biggest Differences with the HPO Study:

• Not always scientifically based
• Often the study objects are selected in advance
• Frequently limited to the Western world
• Often limited literature research as the basis
• Little (scientific) validation
• Frequent vagueness about how the study was carried out

Difference with the EFQM Model

The EFQM model is a widely used management model and is intended for organizations to conduct a self-evaluation. Often these self-evaluations are performed by auditors in order to get the most independent picture possible of the organization. By using the INK model the maturity of the organization is determined and points for improvement are identified. The model helps organizations focus on areas where improvements are possible. The Instituut Nederlandse Kwaliteit (INK) (Dutch Institute for Quality) has the objective of stimulating Dutch organizations to work on quality assurance (total quality). To this end, the institute developed the so-called INK management model, which is based on the European Foundation of Quality Model (EFQM).

The EFQM management model has nine focal areas. Four results areas, each of which has its own group of interests: end results, appreciation by customers, appreciation by employees and appreciation by society (people and organizations in the direct surroundings, governments and social partners). Five organizational areas: leadership, policy and strategy, personnel management, middle management and management of processes. In a diagnosis one can determine of each focal area how the organization is doing in the focal area and where improvements are possible. Managing an organization according to the guidelines of the INK management method has the following characteristics:

• Management of the organization is a derivative of the mission and the strategic objectives of the organization
• Attention is paid to both the results as well as the internal organization
• There is continuous focus on what is truly important for the organization
• Attention is paid to both the short term as well as the long term
• The planning and control cycle is a continuous process: the EFQM model  requires regular evaluation and reassessment
• Introducing and using the EFQM model  is a learning process that takes years, during which the organization becomes continually better

The EFQM model is not scientifically based and, as far as is known, no research has been done regarding the extent to which it improves the results of an organization The EFQM model in particular stresses healthy business management but not so much high performance. The EFQM model has long had a static character and few adjustments and improvements were made to the model, but recently the INK institute began to move up and an initial attempt was made to expressly involve the “soft” elements of business management in the model. However, this is still in its first phase of development and has certainly not yet been made concrete.

Biggest Differences with the HPO Study:

• Not scientifically based
• Model is primarily intended for improving operational management
• Model is primarily limited to improving structural aspects of an organization
• The EFQM model does not form an HPO framework

Difference with Six Sigma

Six Sigma is a quality management approach for improving the operational performance of an organization by identifying and improving shortcomings in the processes of an organization. Six Sigma builds upon existing improvement methods, whereby statistical process control (SPC) is partially considered as the underlying approach. Literally, Six Sigma is defined as a measure of error. At a value of 60 (sigma), the number of defects is not more than 3.4 per million possibilities. At 40, for example, the number of defects is 6,200 per million possibilities, thus much higher. In this sense the value of 60 is the symbol for striving for (near) perfection. The underlying philosophy is that processes can only be controlled and improved if there is insight into these processes. This requires descriptions and measurements. Six Sigma is based on statistical thinking. In addition, a fixed methodology is used to resolve problems, namely the DMAIC methodology. DMAIC is an acronym for Define-Measure-Analyze-Improve-Control. DMAIC can be generically applied to every business process.

Biggest Differences with the HPO Study:

• Not scientifically based
• Model is primarily intended for improving operational management
• Model is primarily limited to improving structural aspects of an organization
• Six Sigma does not form an HPO framework

Difference with the Balanced Scorecard

The Balanced Scorecard is a type of development method for a performance management system that uses critical success factors and performance indicators in a special reporting layout. The Balanced Scorecard was developed in order to help management chart the performance of an organization. The Balanced Scorecard was created in at the beginning of the 1990s from a study conducted by Kaplan and Norton in cooperation with a number of prominent companies, including Apple, General Electric and DuPont. The reason for the study was the need of these companies to better respond to rapid changes that occurred in the markets in which they were active. The traditional performance measurement, based on (almost exclusively) financial information, provided sufficient support for this. Especially the possibility of tracking the degree to which the strategic objectives were achieved was missing. The Balanced Scorecard was introduced in three articles in the Harvard Business Review (Kaplan and Norton; 1992, 1993 en 1996).

With the Balanced Scorecard, an organization reviews its performance from four different points of view which together give management the possibility of tracking the performance in a balanced manner: innovation of products and services and personnel (including employee learning and growth), effectiveness of processes, customer experiences (including customer satisfaction) and financial results.

The emphasis of the Balanced Scorecard is on the balance between financial and non-financial information, between external and internal information and between short-term and long-term information. Through this managers get a balanced overview of performance indicators that allow them to find out the cause and outcome of actions that have been undertaken and results that have been achieved. The developed critical success factors and performance indicators are classified into one of four perspectives. The innovative perspective measures how often an organization introduces new products, services and processes. The internal perspective measures the effectiveness of the processes that an organization applies in order to create value. The customer perspective measures how customers evaluate their interactions with the organization: Does the organization have added value for them? The financial perspective measures the bottom line, such as intended revenue growth, desired margins and return and other financial goals.
Biggest Differences with the HPO Study:

• Not scientifically based
• Model was initially only intended as an improved reporting tool and was later developed as a strategic development method
• Model is primarily limited to improving structural aspects of an organization
• The BSC does not form an HPO framework

Difference with the Great Places to Work (GPTW)

The services offered by the Great Place to Work® (GPTW) Institute, founded in 1991, are based on the over twenty years of research initiated by Robert Levering and Milton Moskowitz, and first presented in their book The 100 Best Companies to Work for in America 1984 Edition (Addison-Wesley 1984). A great place to work is defined as ‘a place where employees trust the people they work for, have pride in what they do, and enjoy the people they work with’. A great workplace is measured by the quality of the three, interconnected relationships that exist there: the relationship between employees and management, the relationship between employees and their jobs/company, and the relationship between employees and other employees. The research results now form the basis of work lists with which companies are ranked yearly on Best Workplaces and Best Companies to Work For rankings.

The research results are based on interviews with hundreds of employees from 125 American companies. No information can be found on the selection criteria of the companies nor the people interviewed, the interview questionnaire, or the way in which the interviews were analysed and how the results were derived. The premise of the research is that enhancing the workplace brings better results. As the website of the Great Place to Work® (GPTW) Institute states: “In a great workplace, how people are treated is important. Creating a great working environment is considered a valid objective of the company. This contrasts with the conventional business assumption that the only legitimate objective of a company is to increase profits. In a great workplace, both goals are seen as compatible. Indeed, good employers that create the best possible workplace may enhance a firm’s ability to perform well financially.” However, both the books and website of the Great Place to Work® Institute only gives anecdotical evidence of improved performance.

There is however other research which uses the GTPW lists to identify whether improved performance is achieved: S. Fulmer, B. Gerhart and K.S. Scott (2003), Are the 100 best better? An empirical investigation of the relationship between being a “great place to work” and firm performance, Personnel Psychology, 56: 965-993. In this research, the ‘100 Best Companies to Work for in America’ list of Fortune (1988) was the source of the best companies in this research. For the list, 238 companies were invited to submit information by distributing a 55-item survey (called the Great Place to Work Trust Index) to 225 randomly chosen employees. This survey measures a broad range of attitudes, including credibility, respect, fairness, pride and camaraderie. Each company was also asked to fill the People Practices Inventory, a 29-page company-level questionnaire. Companies for which no financial information and stock returns data was available were eliminated. Eventually, 50 companies were left over for which the relation between their scores on work practices and financial return (return on assets + stock returns) over 5 years (1995 – 2000) was looked at. The results were: (1) companies included on the 100 Best list exhibit better performance (ROA and market-to-book value of equity) relative to other companies because of their emphasis on establishing strong employee relations; and (2) companies included on the 100 Best list exhibit better performance (stock returns) relative to other companies when considering cumulative (longer-term) returns, but not consistently for annual returns.

Biggest Differences with the HPO Study:

• Not scientifically based
• The Great Place to Work (GPTW) index focuses on the employee side of the organization, and is therefore not an all-encompassing framework for excellence
• The Great Place to Work (GPTW) index is used to publicly rank companies and to hand out awards for the best companies