For decades, the question that has been observed to be top of mind for many executives is “How should we be organized to be able to achieve our strategic objectives?”
Perhaps that explains why leaders select reorganization or restructuring as the single most frequently practiced method of change management. To test this out, simply ask yourself how often your company has modified the organization chart in the top two to three levels during the past three years? If you answered less than three times, you are probably in the minority.
Also, ask yourself whether your strategic direction and/or customer requirements were the drivers of those reorganization efforts. Unfortunately, far too many attempts at restructuring are little more than a game of shuffling the deck chairs, with a couple of new players added in for good measure. In the absence of a clear linkage to strategy, business process, and enabling technology, such reorganizations are often more disruptive than synergistic.
Some restructuring efforts attempt to make the leap from strategic direction to organization design without considering the key customer touching business processes. These efforts fly in the face of the basic premise that an organization creates value for customers primarily through a complex set of activities that cross traditional organizational boundaries.
Other restructuring efforts neglect to consider the existing culture and degree of current role clarity. These efforts may lead to organizational resistance [at the worst] or significant disruption to the people and the quality of work [at the least]. Often this results in the restructuring effort not achieving the desired objective, leading to yet another restructuring initiative in short order.
Alignment requires a special mental model. It is based on the following set of fundamental beliefs:
- Organizations should be designed, led and managed such that it is easy for the customer to do business with the company and concurrently create an environment that facilitates the efforts of employees in serving customers.
- Organizations are complex business systems within which a change in any one component is likely to have an impact on other components. Accordingly, an understanding of the critical linkages is essential.
- Creating focus begins with strategy – and strategy begins with the customer. This calls for a clear statement of strategic direction – not buzzwords, jargon, or platitudes, and by definition involves a series of tough choices.
- Creating shared values necessary to fuel achieving strategic objectives requires an understanding of the organizational culture, and what elements need to be considered to gradually shape the culture in alignment with strategic objectives.
By beginning with the customer and strategic direction, issues such as; should we organize by market, by product, by function, by geography or by process or some combination of the preceding, takes on new and more substantive meaning as leaders are prompted to ask the key questions around the impact of a given design on cycle time and number of hand-offs.
The pace of change in the current business environment would generally bias organization design choices in favor of a market, product or process design, especially where new product development cycle times are critical. Some of the key questions to be asked and answered include:
- What are the key value added activities that customers are willing to pay for?
- How can we organize to minimize departmental hand-offs in delivering value to our customers?
- Which designs [functional, market, geographic, product, or process] are most suitable given our strategic direction and key strengths?
- How can we best align reward systems across departments to reinforce our performance focus?
- Which combination of process, organization design and enabling IT systems creates greatest value for both customers and the organization?
In this context, the decision criterion around the role of teams in organization design also becomes far more meaningful. Historically, organizations have struggled with questions relating to when a team approach should be taken, who should be on the team, should it be a standing team or an ad hoc team, etc. Once the organization design decision is taken within the context of alignment, the decisions around team structures become clearer. For example, those companies who select a product-based structure may have teams of cross-product people to share learning on selected key processes. The same principle would hold true for companies with a market-based structure [cross-market teams] or geographic structures [cross-geography teams].
While the alignment of organization design to strategy is accomplished through clarity on creating value for customers, the necessary discipline to maintain alignment is provided by the organization’s performance measurement system.
