When it comes to simple remedies, few are more seductive than those claiming to help companies create a healthy organization. One-dimensional messages about how to achieve sustainable organizational excellence remain in circulation even though most CEOs and other senior executives instinctively know that any large company's people, processes, teams, and control systems require artful handling. The head of one North American auto manufacturer, for example, asserted in a recent edition of the Financial Times that a new culture allowing employees to speak out "boldly" would drive the company's future success. In the same edition, a major investor in a fast-food business insisted that direct equity compensation for senior managers was the missing key to organizational efficiency.

Without hard data, bold claims are hard to resist. But new McKinsey analysis of more than 230 businesses around the world provides evidence for a much more subtle picture. This research, aggregating results from the past four years, shows that strong organizational performance is really fueled not by isolated interventions but by a combination of three or four carefully selected complementary ones—what we call management "practices." Executives can use a wide range of them to improve the organizational performance of a company—in other words, its ability to unite around common goals, to execute efficiently, and to renew itself over the longer term by, for example, refreshing product lines, replacing people, and upgrading capabilities.

Most executives rely on their experience and personal knowledge of, at most, two or three companies to shape their mantras and determine which organizational levers to pull. Our analysis provides a much wider base of knowledge for decision making. Three main conclusions stand out from our data. The first is that executives should eschew simplistic organizational solutions: when applied in isolation by the companies in our database, popular techniques such as management incentives and key performance indicators (KPIs) were strikingly ineffective. Second, high-performing companies must have a basic proficiency in all of the available practices; a conspicuous weakness in any of them drags down the overall result.

The third finding—and our main contention—is that managers should concentrate most of their energy on a small number of practices that, introduced together, typically produces the best results, according to our 115,000-plus respondents (see sidebar "The Data Behind the Findings"). Doing more doesn't add much value and involves disproportionate, not to mention wasted, effort.

Which combinations of practices are most effective at creating high levels of near-term organizational performance and longer-term organizational health—meaning the ability to generate sustained performance year after year? Careful selection is crucial because the complementarity among practices (the additional impact they have when applied together) is what creates organizational excellence.

A Look at Prevailing Wisdom
Advice from business commentators, elder statesmen, consultants, and other experts on organizational performance often falls into either of two traps. Some of these authorities fail to give the full picture because they assume that companies already have a number of complementary building blocks in place and therefore systematically overestimate the impact of a single practice. Others have a preference—as external observers, consultants, and new appointees typically do—for one big, visible intervention they regard as more effective than a combination of less dramatic initiatives.

Unfortunately, a single practice is generally inspired and implemented in isolation. Those who champion that approach ignore not only the impact of concurrent organizational practices—successful and unsuccessful alike—but also the complementarities generated by the other practices a company could implement simultaneously.

Our research has used well over one hundred thousand questionnaires to track the practices that a company can use to improve its performance—from increasing the leadership's effectiveness and ability in charting a clear course to motivating employees and giving them the ability to innovate. By studying the impact of specific practices on specific organizational outcomes, we show that several popular remedies do not live up to their reputations.

• The carrots and sticks of incentives appear to be the least effective of the four options commonly used to motivate and encourage employees to perform well and stay with a company.
• Applied in isolation, KPIs and similar control mechanisms (such as performance contracts) are among the least satisfactory options for improving accountability.
• Relying on a detailed strategy and plan is far from the most fruitful way to set a company's direction.
• Command-and-control leadership—the still-popular art of telling people what to do and then checking up on them to see that they did it—is among the least effective ways to direct the efforts of an organization's people.

Ignore Any Practice at Your Peril
An exhaustive analysis of our data shows that companies cannot afford to neglect any of the 34 practices listed in the sidebar "A Wide Range of Management Practices": achieving at least a minimum standard of proficiency across the whole range is vital for an organization's overall performance. What's more, lack of success in any two or three practices makes it almost impossible for a company to do well. Consequence management (to give carrots and sticks their polite name) is not, by itself, a particularly effective way to make employees accountable, but without a minimum level of proficiency in it a company has little chance of performing well overall.

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