How two very similar organisations, with similar problems ended up with different results during and after their organisational design efforts.
By: Ken Brophy
Research shows that 70% of all organisational change efforts fail – well somewhere between 65%-80% to be exact. For the 30% of initiatives that succeed, three commons themes arise:
- Leaders who believe in the change, who lead from the front and are not afraid to stick to the initial direction, tweaking the path to get there if required
- High quality communications that continue to reinforce the change efforts, utilising a myriad of different media
- Some form of model and process that the organisation can use to inform the design so that the prescribed solutions aren’t the result of preconceived ideas, playing favourites, slashing costs or making hasty, uninformed, if not fatal decisions
This article will compare two recent redesign efforts, within two different companies to paint a picture of how to drive successful organisational design and change. Both of these businesses had been the player in their respective industries, both had always achieved very nice profits for their owners and traditionally both had always been able to exert their size and dominance in the market to such an extent that competitors were few and far between.
But the tide had turned. Recently both were coming under increased pressure from competitors and were facing a ‘ground swell’ of negative public perception because of the view that they had been indifferent to customer’s demands, for too long. They were also not designed to compete in this new environment given a lack of focus on the customer and organisational structures that had become ‘fat’ over years of soft competition and high revenues.
Both businesses partnered with AlignOrg Solutions to guide their organisation redesign and change efforts. AlignOrg Solutions provided both a framework (a model and approach) for each organisation to use as well as differing levels of consulting support throughout the design process. Even though each organisation followed a similar model, we found it interesting to note the differences in how it was applied, the level of advice that was sought and the results that were achieved.
The remainder of this article will use these two design efforts to highlight what to be mindful of the next time you are confronted with a manager who is asking you to help them design a structure to deliver 10% cost savings, increase profits by 15% or create a platform to launch future products. There is no intent to disparage one organisation over another – both did things well, both had things they could work on. This article looks to highlight some key observations and cautions for your future design efforts. Of the above three themes of successful design efforts I will single out number one in its own right, whereas you will find evidence of two and three spread through out the article.
It all starts with the leaders!
For any good organisational design effort to succeed leaders need to understand what it is that they want from the design and to stand up for it, to empower and spend the time with the design teams so they in turn understand the target and believe the organisation is serious about reaching it. Leadership involvement also provides the basis for your communications – consistent messages that come from the top signalling that what is happening is serious and necessary.
Organisation A had a leader who was new to the business, had taken the time to understand what was going well and what was not going well and then used the information he had gathered to shape a strategy that would jump-shift the company among the shareholder, customer and employee eyes. He came out very early in the process to articulate what had to change in the organisation for it to succeed and that this meant cost reductions, including headcount. He articulated what was happening in the industry and the impact it was having on the business. Indeed, the amount of change required meant every job in the organisation would have to change, even his. He was instrumental in working with the executive team in handpicking the core design team and ensured that in the formative period of the design effort he and his team participated and were on hand for input, advice and feedback regarding the progress the design team was making. He also clearly laid out what the design team was permitted to do and what they weren’t for example, there were things that in an ideal world would be great to have or do but for whatever reason such as cost or time they were not going to be options for consideration. These conversations were open and honest and the design teams knew where they stood. A great platform for successful organisational design!
Organisation B had a leader who knew they had to change but had to be convinced that in order for the change effort to be successful they needed to bring together a design team made up of people from across the business. A change of this magnitude was not something the executive team could do alone. Despite the urgent marketplace pressures, the leader struggled to personalize the goal so that everyone understood the context, the potential impact to the business and to people’s jobs. Once the design team was formed, it received input from individual executive team members but rarely from the leader who remained largely inaccessible. At times there was not clear alignment of opinion coming from the executive team – this lead to issues in managing towards a shared goal and drove confusion for the trade-off decisions the design team had to make. In addition, the design team’s efforts were welcomed but feedback was often provided in such a way that it was difficult for the team to see how or why the executive team had made its decisions. From a design and change management perspective, this organisation did not have a solid platform from which to work – not the best way to start your efforts in changing an organisation.
Sprinting the marathon.
An organisation’s executive team will often spend months, even years working on future strategy. They will then take a robust period of time to redesign the organisation at the most senior level(s). However, the layers below this are often expected to understand a new strategy, the new organisation designed above them and then effectively design the lower layers of the business. Because the strategy and high level design choices took so long to make and formalize the patience of senior leaders will often run thin and the time allocated to finish the critical design work is time constrained – leading to the term ‘leaders sprinting the marathon’.
Back to our companies – both spent a good amount of time establishing their respective strategies which for any organisational design effort is critical. If you are not clear about your target, how you intend to differentiate yourself in the market place and subsequently what you are going to say ‘no’ to then your organisational design will fail. Since organisation design is fundamentally about trade-off decisions, clarity of trade-offs decisions are at the heart of the design process.
Sufficient time was then committed for the executive team structures to be designed, agreed and team members assigned to the roles. This is where the paths diverged.
Organisation A prescribed early to a detailed project plan, each respective design team was given the time to familiarize themselves with an organisation design model (in this case the model came from AlignOrg Solutions) and then each wave was given the same period of time in which to finish the design at their level in the organisation. This time period was broken down into clearly defined periods for macro design and micro design. Organisation design can be considered an art and sometimes robust project planning based on strict time allocations inhibits good design. Here project planning was used as a guide to ensure everyone was very clear about the trade-offs they faced if macro design was to run over (i.e. some late nights lay ahead). This approach not only ensured that each team had sufficient time to carry out their design, it also meant the senior leaders expectations were managed. They understood when they would be required to provide input on respective areas of the design, as well as ensuring HR had the time required to get ready for each stage of design rollout/change management. This organisation knew the clock was ticking in relation to the requirement to change the business but the shared belief at the leadership table was that the additional months required would be a prudent investment in the long term viability of their strategy.
Organisation B gave ever decreasing time to the respective layers of the design efforts. What started as a very robust design process quickly became land grabs, designs that were based around people and prospective cost savings that were based on assumptions and not clearly defined activity analysis. Understanding design at the activity level enables the organisation to design robust solutions that drive exceptional design, i.e. if we are going to be at par with our competitors in a certain activity do we really need to have 25% more staff. You need to do the activity analysis to understand how activities impact competitive success and employee productivity. From this analysis, you work back and find the efficiencies and then design around these. It all takes time and if this time is not provided, the inefficiencies will remain and you will still need all the extra people to ensure the work is done. In some cases, as we saw with this design effort, extra people were actually introduced even though parts of the design effort were about operational excellence and cost reduction.
A good model or framework to guide the above mentioned design work is essential as it creates a common language for those involved, it provides a sequence for making design decisions and it enables you to set clear expectations, with your leaders and employees alike, regarding the time required to complete the necessary design work. It also impersonalises the design process enough that those involved do not become side tracked by the potential ‘human’ impacts of their work. The remainder of this article talks to points that a large number of failed organisational redesign efforts missed, primarily because they didn’t use a model and sound process. More specifically they did not ensure that the detail required within their design was addressed in a robust way.
Restructuring Does Not Create New Capabilities
Effective organisational design helps businesses to both create and align activities. This alignment sets organisations up to achieve their longer term strategies by providing the platform for processes, technologies, competencies and capabilities to be changed. Doing only a restructure will not enable you to do this if you are just moving around people.
As previously stated, the CEO of Organisation A talked about all roles changing with the reason being that if this company did not very quickly evolve to meet the market challenges it was going to struggle to survive. By starting with a clear understanding of what the stakeholders of the business required of them, how they were going to create value for their customers and the differentiating activities that would make this happen the design team could work on fundamentally redesigning the activities required in the organisation. This then drove a requirement to look at the processes, systems and people required to do things differently because they knew they needed a different type of thinking in the organisation. The other key point of difference was that this organisation was not afraid to look outside of the current incumbents to fill the roles, even going to market for new recruits in a candidate short market knowing the time delays that often occur.
While Organisation B knew it faced the same issues around having to change, it struggled to articulate to its key stakeholders (including employees) what the change in capability had to look like. Furthermore, there were also significant concerns around the potential of having to make even a small number of changes at the senior management level. In the end, the design did try to change some of the capabilities but not enough time was dedicated to revising processes, identifying new types of required capability and being brave enough to make some decisive changes among senior leadership. Part of the issue lay in the fact that because leadership didn’t break up the established power basis, pivotal stakeholders were able to influence those involved in the design and those making the final decisions. This was something that should not have occurred if the leaders in the organisation stood, in a more aligned fashion, for the desired end state, ensuring the design teams had sufficient ‘air cover’ and time to complete all of there required work.
Know Your Trade-offs.
There are always lots of things happening in organisations and the ability for any design effort to succeed is about making sure that the efforts of each initiative are aligned, that the design enables future success and that in some instances saying no can be the best result. Part of this relies on understanding the ever present trade-offs with the different components of your design. Frequently, senior managers don’t want to see the downsides of their design despite the facts they have been presented.
Every organisation is perfectly designed to get the results that it gets and yet no organisation is perfectly designed. A critical element in deciding on any design is clarity of the trade offs between the benefits and risks associated with the ‘organising rationale’ you have chosen. There are a lot of organisations who end up going through sustained periods of change, post their design work, because they only focus on the benefits and do not spend the time working on how to mitigate the risks. As part of our design model we ask all of our design teams to capture the trade-offs they make throughout their design efforts so that when asked the question ‘why do you want to do it this way’ they can talk about their pros and cons/ benefits and risks. More importantly they can talk about the ways in which they see these cons or risks being effectively mitigated.
In this instance both organisations did some fantastic work in developing the trade-offs, presenting different options but always ensuring that they had done the work up-front in deciding how best to mitigate the risks. The issue is that you need to do this throughout your design efforts with your ability to complete this work being dictated by how long you have, how deep you are prepared to allow your design teams to go and whether senior leaders are prepared to listen. This last point is particularly relevant because when faced with change some leaders will go back to a structure they are most comfortable with as opposed to the one that will benefit the company the most. If you know the trade-offs and can articulate the strength of different options then you can go a long way in stopping this from occurring.
AlignOrg Solutions is often asked into organisations to help them escape the seemingly endless cycle of restructurings (about every 18-months). More often than not, this cycle is caused by organisations not being clear about what the organisation design they are choosing gives them versus what the risks are and how best to manage them.
You Need to Re-Link Your Organisation
One of the ways to overcome the risks associated with the design you have ended up with is to establish effective linking mechanisms – essentially those things that allow you to integrate work across the business. Almost any organisation can copy the structure of another organisation but it is the strength of your linking mechanisms that provides the means to process information across organisational boundaries and effectively align resources. In addition, linkage mechanisms enable capabilities and processes to work most efficiently.
If you do not re-create the linkages that you want to see in your new design then the old ways of working will remain. Unfortunately this is also one of the biggest issues we see because it just isn’t done – yet it is one of the simplest and most effective ways to overcome the risks associated with the design you have chosen. So if you do have leaders who want to sprint the marathon, not providing their design teams with the required time to think about the ways they will overcome the risks associated with their design then do not expect much organisational change in the long term.
Both of our organisations had great successes in this area by establishing separate design teams to drive this work. A lot of very robust thinking went into devising key linking mechanisms that would overcome the risks faced. The outputs were very well thought through and the benefits to the company, if this effort was realised, were immense. The issue these teams faced was very similar – how do we then reintegrate this work back into the design. Both tackled it in a similar and in a very simple fashion – they made it part of the job descriptions, they ensured it was in the performance plans and they made sure that the senior leaders understood the importance of the need for linkages to the extent that the ongoing efficiencies gained were discussed on a monthly basis.
Both organisations approached their design initiatives from a similar starting position but drove them in a very different manner with the short term results being markedly different. Organisation A is starting to see great traction in the marketplace, while Organisation B is still struggling to deliver to customer requirements, make themselves easier to do business with and to drive the type of results their shareholders are demanding.
In the end, one of the organisations now has a robust platform from which to launch its future strategy. Granted, they have taken a hit in bottom line results this year so as to make this happen but the leaders of the organisation had communicated this to the market and employees at an early stage. They have taken the time to ensure that all the key stakeholders are brought on the journey and that they have been assembling the right capabilities required to deliver them the positive market results they desire. Like most businesses, Organisation A didn’t have anymore time to give than did Organisation B to transforming their business but they created it – they gave the design teams the remit, the leadership, the access to the right people and the time to ensure that the design was going to be a robust one. The tale of the tape for future results of both these organisations will be interesting, however one, in my opinion, has given themselves a far better platform from which to launch their future strategy. How will you position your organisation to succeed the next time it embarks on a significant organisation redesign?