The Most Neglected Aspect of Organization Design
Reed Deshler | October 9, 2018
When we are involved in major transformations, one of the first discussions leaders are eager to get into is the structure discussion . . . the new organization chart. Leaders also give enthusiastic consideration to the major business processes of the organization. In fact, leaders easily see the wisdom of aligning all the “sides of the cube,” as we say in our book, Mastering the Cube: Overcoming Stumbling Blocks and Building and Organization that Works. In the book, we compare organizations to a Rubik’s Cube and point out that concentrating transformational change on only one side of the cube—like structure or process—can scramble all the other sides without achieving “real” change. Alignment leaders readily agree that organizations are multi-faceted, and that the composition of each side of an organization must be considered to bring the whole “cube” into alignment.
There are six sides of the cube, at least as we’ve defined it, and because a leader’s time is always limited, it is inevitable that one of the sides tends to get short shrift.
The Neglected Side of the Organizational Cube
Which would you say it is? Experience suggests that the most neglected side of the cube is Information and Metrics (the other sides are work processes, structure and governance, people and rewards, continuous improvement, and leadership and culture).
Why is this side vulnerable to inattention during an organization alignment effort? Let’s consider an example…
We see a transformation trend in our clients, and that trend is to revamp their business models to be more solution- or experience-oriented. Enterprises with success in product innovation or distribution reach, for example, are finding themselves in a competitive environment where customers clamber for more comprehensive solutions instead of stand-alone products, and richer retail experiences rather than simply adequate store selection.
The problem is, when firms move toward these new business models that require much greater organization sophistication, the metrics they rely on do not always come along. At one firm long known for outstanding product innovation, the prevalent measures reinforced product sales numbers. But as leaders took up the challenge of building an organization that could offer broader solutions, they were sluggish in building and emphasizing new measures. The firm needed new measures to reward people for developing and selling solutions that were profitable overall rather than as measured by each individual product margin.
In another case, a big-box retailer was slow getting away from measures that focused on margins. Instead, they needed to encourage store associates to linger with customers to help them assemble a collection of products that would meet their more complex needs. A margin measure did little inside the store to encourage the desired behavior.
What Can Be Done?
Here are three ideas that we can keep in mind to better leverage the information and metrics side of the cube:
- Think long term. Many metrics are short term in nature, such as quarterly financial targets. When we think longer term, short-term aberrations can be smoothed out to help us see if we are driving the right strategic behaviors. Instead of sales per retail associate or margin, for example, perhaps better measures might be the size of the customer basket or customer loyalty or percent of relevant purchases. These types of measures are harder measures to craft, but their longer horizon helps reveal the true value being created.
- Strive for balance. The array of measures you choose should not rely on one category of metrics such as the financial performance, but instead should expand to other areas that deal with operational performance, employee engagement, and customer satisfaction.
- Drive for specific critical behaviors. Metrics should be tied to specific, strategic behaviors, which will lead to the right business outcomes. So for example, in a big-box retail store, if we want sales associates spending generous amounts of time with potential customers, we need to create a measure that drives or otherwise connects to that behavior.
Do you think the information and metrics facet is the most neglected side of the organizational cube? Share your comments below.