In our book, Mastering the Cube, we discuss eight common organization design stumbling blocks. One of these is a common organization design decision making practice that we like to refer to as the “Secret Society” when a few leaders sequester themselves in a room in order to make organization design decisions. One of the reasons we consider the “Secret Society” approach to be a stumbling block is that decisions made in isolation without thinking through the secondary and tertiary ramifications can have serious and sometimes devastating consequences for an organization.
Let me share the stories of two companies who found this out the hard way. Both these companies were well intentioned. Both were large, well-structured organizations with established PTO policies and leaders who cared enough about their employees to want to do something really nice for them. However, in both cases the decisions backfired.
Case Study #1
The leaders of the first organization decided to implement an unlimited vacation policy, or free time off (FTO) — where vacation time and days off are not tracked, but each employee is allowed to take time off as needed, much as C-suite executives do — across all levels and statuses of the company.
FTO has worked well for some organizations, who report that it helps them cut costs and attract top talent in addition to boosting employee morale. In this organization, however, a few top leaders got together, decided they liked the idea of FTO, and implemented it virtually overnight with little to no analysis to see if the decision would help the company meet desired company outcomes (i.e. how this policy affects the other sides of the cube). Their written policy was quite sketchy, and the organization’s management teams received very little training on how to manage it once it was in place.
In a company employing hundreds of people, it didn’t take long for significant conflict to arise. Within months of implementation, accusations of FTO abuse and disproportionate utilization created discord within the teams. What the leaders hadn’t considered was that people keep tabs on each other. With no clear guidelines or guidance as to how to use the policy, they began to complain to their managers that co-workers were behaving unfairly, causing a significant drop in morale throughout the company. A policy that was hastily implemented to improve morale across the company actually had the opposite effect.
Case Study #2
The second organization also wanted to restructure PTO for the betterment of their employees. Rather than unlimited vacation, this company decided to go to a 5-4-9 schedule, giving employees every other Friday off.
This company, too, implemented their decision very quickly without conducting an initial assessment—and chaos ensued. Had the leaders of this company sought feedback from their managers and employees, they would have realized that many daycares in the area didn’t readily offer an extra hour of child care, so those employees would need to stay on a regular 5-8 schedule. They would have also learned that a few employees were already on a 4-10 schedule. It would have realized that employees with extensive business travel assignments would not be able to participate in the 5-4-9 option and their morale would suffer. And because a 5-4-9 option inherently requires the workforce to be split into Schedule A and Schedule B to ensure adequate Friday staffing, managers and HR were left having to juggle four different work schedules.
Another unintended consequence was that prior to the 5-4-9 option, many salaried, exempt professionals regularly elected to work 9+ hour days to accomplish their assignments. When the 5-4-9 option was implemented, these employees jumped on board for the shorter workweek and their productivity and achievement of deadlines suddenly declined.
Three months after implementing the new policy, this manufacturing company experienced an approximate 12% drop in productivity, tremendous loss of revenue, and significant complaints from employees. To make matters worse, the new schedule proved popular enough with many employees that once it had been offered the leaders didn’t want to risk company reputation by rescinding it. This company is likely to continue to experience the negative consequences of this particular design decision for a very long time.
Tips for Avoiding the “Secret Society” Stumbling Block in Organization Design Decision Making
In both cases, organization design decisions were made at the top level with very little analysis or thought about the secondary or tertiary effects of the decision, and how it would affect outcome for the organization. Both groups of leaders were well-intended, and both concepts were good on paper. But without engaging others in the organization design decision-making process and analyzing the potential implications of the decisions, these leaders ended up putting the morale and productivity of their organizations at risk.
How might these leaders have altered their approach to mitigate risk and improve the outcome of their decisions?
First, they could have done their due diligence. Focus groups by Human Resources, productivity assessment, and financial analyses, all would have probably put the brakes on misaligned solutions, and/or generated new ideas more suitable for the organization. Drilling down to the details helps to really flush out possible implications – for instance, should this new policy be extended to salaried, non-exempt employees? Hourly employees? Part-time employees? What are the opportunity costs and trade-offs? Are all employees committed to and capable of utilizing this new policy responsibly? How can we help our leaders better manage this transition?
In addition, asking themselves these three questions would have helped them make more aligned decisions:
- What are we really trying to accomplish? Rather than zeroing in on and pushing through a solution that may or may not be suitable for the organization, a focus on results opens up alternate possibilities from which to choose the most appropriate for the organization. Was there a real or perceived problem that would be solved by the solution?
- How will we measure what we are trying to accomplish? While it’s not always possible to track the exact result of any decision, metrics such as employee turnover, sick days, and productivity do provide valuable feedback on the impact of a decision. Decide in advance which metrics make the most sense for tracking results.
- How will we know if it is successful? Desired results should reflect your initial goals.
You can avoid making costly decisions for your organization by getting clarity in advance as to the intended benefit of an organization design decision, how that benefit would be measured, and indications of success, in combination with due diligence.
