A difficult balance for any organization to achieve is the balance between effectiveness and efficiency.
Effectiveness is delivering the organization’s strategy in a way that customers consistently choose to do business with you. Efficiency is delivering that strategy with as few resources as possible. Indeed, one of the great organizational challenges facing human resource executives is how to support their business leaders in designing organizations that deliver both a differentiated strategy and a low-cost operating model.
The starting point for effective — and interestingly, efficient — business design is understanding the organization’s work. How each work activity is performed or how a series of work activities are configured creates differentiation that ultimately causes customers to choose one organization over another.
Much has been written about Southwest Airlines and its ability to compete against larger, mainstream carriers. All airlines provide a service by moving passengers from point A to point B. However, as 30-plus years of profitable financial results attest, Southwest has found a unique formula for providing this basic service in a way that has caused customers to choose them over other options.
The leaders of Southwest understand that the configuration of certain strategically relevant work activities make the difference in the way they deliver their value proposition to customers. They operate a low-price, low-cost strategy that hinges on high aircraft utilization. By getting one additional flight per day on average from their most expensive asset (airplanes), they are able to beat their competitors.
To drive high-aircraft utilization, Southwest has carefully designed an interconnected set of activities including highly productive ground crews, limited passenger service, exclusive use of Boeing 737 aircraft, flexible union rules and open passenger seating.
While competitors have tried to copy Southwest by offering some or all of these features and characteristics, they have almost universally missed the mark because they have not copied the entire configuration of activities.
How did the leaders of Southwest begin the process of designing their world-class operating model? They understood a key principle of organization design: “All work is not equal from a strategic perspective.”
Some activities are more closely related to driving an organization’s strategy than are other activities. Therein lies the secret to designing an organization — any organization — for both effectiveness and efficiency.
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