Organizational fitness refers to how well an organization's systems, structure, people, and culture support its business strategy. Highly fit organizations are better able to continuously adapt to changes in their environment. While few organizations are perfectly fit, those that are more fit enjoy competitive advantages like barriers to entry and greater ability to innovate. Achieving and maintaining organizational fitness is difficult and requires ongoing assessment and realignment of key elements. Studies show organizations that excel in areas like strategy, execution, culture, and structure consistently outperform peers financially. Assessing and improving fitness is a multi-step process involving data collection, analysis, intervention, and evaluation.

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Competitive Advantage Through Organizational Fitness
Like humans, organizations have varying degrees of fitness. In the case of organizations, fitness refers to how well the systems, structure,
people and work culture support each other and the realizationofthefirm’sbusinessstrategy.Thehigherthelevelofbalanceand
consistency among these components; the higher is the overall level of fitness. Few firms are totally fit –not unlike humans. However,
thosethataremore“fit”arebetterabletocontinuously adapt to significant and unanticipated events in their business environment. In
short, they possess more heartiness and have a greater ability to continuously adapt.
Competitive Advantage Through Organization Fitness
Michael Porter of Harvard argued in his pioneering book, Competitive Advantage, that firms producing the highest shareholder returns
over time enjoyed competitive advantages over the competition for one or more of the following reasons:
 Very few new competitors exist;
 No substitutes for the product or service exist;
 Buyers and suppliers have little bargaining power;
 Very little rivalry exists between existing competitors.
FormanyyearsPorter’sanalysiswasconsideredconventionalwisdom onhowtotargettherightmarketsforlong term competitive
success. Increasingly however, the evidence suggests that while these sources continue to be important, they are not as dominant in
determining success as once thought. The reasons include:
Product and process technology patents are not as valuable as in years past. Companies are able to imitate products much more
easily, primarily because of the power in computer-aided design (CAD), computer-aided manufacture (CAM), and other forms of
information technology.
Protected and regulated markets are vanishing. Over the past two decades the financial, trucking, airline and utility industries have
all witnessed varying degrees of de-regulation. Increasingly governmental bodies are not receptive to sanctioning monopolies or
oligopolies.
Information technology and the internet now allow such a rapid diffusion of ideas and information that most markets can now
realize a high degree of efficiency in very short order. Product life cycles are significantly shorter, and buyers are able to obtain
information for purchasing decisions much more quickly. The ready availability of information erodes traditional forms of competitive
advantage.
Economies of scale are less important because markets are becoming more fragmented. Customizing products and services are more
common. Speed and agility –being the first to introduce a new product –are argued by many to be as important.
Abetterexplanationforthesustainedsuccessofmanyofthecountry’shighestperformingfirmsliesinthemannerinwhichthey
organize themselves –that is, how well they lead their people, and how well their systems, structure, people and work culture fit
their business strategy.
The Difficulty in Realizing Organization Fitness
Duringthelate1980’sGeneralMillswasconverting its manufacturing plants into high performance work systems (self-directed work
teams). Unlike other firms engaged in this type of organizational transformation, General Mills Operations Division was receptive to site
visits by other firms and people, due to its belief that work culture, leadership, and execution of human resource strategy were difficult to
copy. Plus, General Mills believed that it was implementing something that was not highly secret; much of the implementation techniques

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and so forth were readily accessible through various consulting firms, think tanks and publications. Don Ryks, the General Manager of the
OperationsDivision,oftenstatedthatthe“devilwasinthedetails.”Hestronglybelievedthatfewfirmswouldbeableto get that right.
Similarly, achieving organization fitness is difficult, and for many of the same reasons:
The re-architecture of firms for greater fitness is stymied by personal biases, agendas or political dynamics. Redesigning
for the good of the enterprise is not necessarily a shared or fully embraced objective. Unfortunately, it is not uncommon to see
companies organize themselves in a sub-optimal fashion for reasons that are not business-related.
The re-architecture process is theoretically flawed. Typically, experts or management will focus on re-architecturing to
solve a particular problem, but will overlook taking a systematic approach to ensuring that all of the elements of fitness are
reviewed. For example, a problem in getting products designedandmanufacturedmorequicklymayfocuson“shufflingchairs”
in the R&D and manufacturing departments without any analysis on how other elements of fitness impact organization speed –
such as information systems or employee compensation practices.
Organization fitness requires continuous review and redesign of systems, structure, people and work culture. Daily
business pressures often prevent management teams having the best intentions from following through on what they intuitively know is
necessaryandappropriateforsustainingsuccess.Further,somefirmsareblindedbytheirpastsuccess.This‘successsyndrome”leads
sometopteamstoconcludethatthe“old”formulathathasproducedthecurrentlevelofperformanceandsuccessinthefirmshould not
be tinkered with. In the most egregious cases of success syndrome, the team holds an arrogant view that they are virtually invincible.
Witness the recent case of Enron.
Organization fitness requires a talent-laden organization. Speedy, accurate execution of the activities needed to achieve fitness
is very challenging. Commitment to realizing fitness is not enough; the firm must have a top management team and supporters
throughout the company who can perform their duties swiftly and competently. A commitment must be made to recruiting and retaining
the very best talent available.
The Evidence: Organization Fitness Produces Superior Business Results
Numerous research studies have concluded that organization fitness can positively impact the bottom line. Some of the most convincing
evidence was recently obtained through a Brigham Young University study called the Evergreen Project. The results of the study were
recently published in a book authored by professors from Dartmouth and Harvard, entitled,“What Really Works: The 4 + 2 Formula for
Sustained Business Success.”Thestudyconcludedthatjusteightpractices,fourprimaryandfoursecondary,haveadirectlinkageto
long-term business success. Winning companies achieved excellence in all four of the primary practices, plus at least two of the
secondary practices. Firms that scored high in all four primary areas and any two of the four secondary ones had at least a 90% chance
of consistently delivering high shareholder value. Between 1986and1996,these“4+2”firmssawtheirsalesriseanaverageof415%,
assets increase 358%, and operating income lift 326%. Total returns to their investors rose 945%:
The four primary management practices identified were:
► Strategy
► Execution
► Culture
► Structure
The four secondary sources of competitive advantage included:
► Talent
► Leadership
► Innovation
► Mergers and partnerships

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The Framework for Achieving Organization Fitness
The first step in becoming more fit,whetherasahumanoranorganization,restsintakingabaselineassessmentofone’s
current level of health. Assessment provides the firm with data to focus its attention on those areas requiring the most amounts
of resources and time. Equally important, the initial assessment becomes a baseline measurement that allows the firm to gauge
its progress over time. Ongoing assessments enable the management team to determine whether their systems, structure,
people and culture are continuing to be in alignment with business strategy.
Cenek Company advocates the use of a six-phase process for assessing fitness and implementing improvements:
Phase 1: Contracting/Planning
This involves determining the scope of the assessment, the time frame, schedule of activities and implementation plans.
Phase 2: Data Collection
Cenek Company uses a multi-method approach for assessing organization fitness. True, accurate assessments require customized
approachesthatare“madetoorder,”notsomething that’sbeentaken“offtherack.”
Dependingontheclient’sconcern,organizationissue,orpreference,anyorallofthefollowingmethodsareused:
 Interviews and direct observation of operations
 OrganizationScan - a qualitative survey process
 Strategic Alignment Survey –a quantitatively-based survey that assesses the degree of fit between systems, structure,
people and culture –andthefirm’sbusinessstrategy.
 LeadershipScan - a multi-rater survey of leadership practices; and Individual assessment
Phase 3: Data Analysis
Information obtained through the various assessment methods are summarized with initial conclusions presented. Next steps are
determined as well.
Phase 4: Data Feedback
The summary of the data analysis is presented, along with preliminary interpretations.Thefirm,throughCenekCompany’sguidance,
reaches a more definitive conclusion about the assessment of organization fitness. Plans are developed for responding to the issues.
Phase 5: Intervention
The actions that have been developed to respond to the issues uncovered in the assessment are implemented. These actions could
include leadership development initiatives, organization design changes, the installation of new systems and processes, etc.
Phase 6: Evaluation
At appropriate milestones follow-up should occur to monitor whether desired changes have occurred. The follow-up may be targeted
specifically to the interventions included in phase 5 and/or another rendition of the assessment process to measure ongoing progress and
fitness.
Summary
Highperformingorganizationsare“fit.”Thegreaterthelevelof“fitness,”themorealignedareitssystems,people,cultureand
structure with business strategy. These firms have the ability to continuously change those key organizational dimensions to
perpetuate high degrees of fitness and to respond to key challenges in their business environment.