Time to shift those lines & boxes - but not so fast!
As we slowly emerge from Covid-19, many organisations are realising that their business models or operations of the past are not necessarily fit for the future. Many have had to pivot, or rethink their value chain, how they engage with clients, how teams and departments work with each other, the role of digitialisation and the impact of shifting government policy.
Many of these changes are here to stay and, more than likely, further change is on the way as we move towards hybrid ways of working.
What is becoming evident is that organisations of all sizes are focusing on how they are designed and structured. Leaders that I speak with feel that they can now stop with the crisis management and firefighting and start to look more intentionally towards the future. A large part of this is looking more deeply at organisation design.
isn't organisation desing simply drawing lines and boxes? Well No...
But what is organisation design and what is the best approach to take? Surely it is a simple as sketching out some lines and boxes on the back of an envelope and handing this to HR to implement!
Regardless of which website you open or book you refer to; organisation design is first and foremost a process. Dr Roger Allen from the Center for Organisational Design defines Organizational design as a step-by-step process that identifies inefficient aspects of workflow, procedures, structures and systems, realigns them to fit current business realities/goals and then develops plans to implement the new changes. The process focuses on improving the technical, operational and people sides of the business.
Secondly, as referenced in the above definition, organisation design takes a holistic or systems wide view of the organisation or department that is being reviewed. Jay Galbraith’s Star Model is one such model. It consists of five areas that should be connected and aligned to successfully shape the decisions and behaviours of your organization: Strategy, Structure, Processes, Rewards, and People. I will write more about the importance of having a systems perspective in OD work in a future blog. For now, the team at Strategyzer have a great blog on the Star Model.
What are the organisation design process steps?
Various consultants use different processes; however all follow these basic steps and generally in this order.
Understand the Problem and Opportunity
You need to begin by being clear on why you want to embark on a process of organisation re-design and be able to articulate these clearly. Is it a shift in strategy due to changing external conditions? For example, Shell and the need for a global energy transition or Netflix when technology shifted their business from physical tape subscription to online on demand. Being clear on strategic direction helps inform the criteria that design options need to respond to.
I had a client who after we had started the design work re-opened exploration around strategy and market positioning. This was important work and needed to be addressed. If we had continued the design work we probably would have designed for the wrong desired future.
It is also important to engage with those doing the work today. Be curious about what is going well and should be retained in a future design as well as what gets in the way of achieving success. This is important so that you do not unintentionally designed these inefficiencies or pain points into any new organisation. This work requires time; go deep and go wide. If you can, engage externally and with key stakeholders. Tools such as a SWOT are simple and powerful for this.
Again, when assessing the organisation of today, consider processes, systems, skills, capabilities, behaviours, leadership style etc. It is important to use various sources of data to validate any hypotheses and bring objectivity to the process.
Based on the above it is now time to establish the design criteria. The few key measures against which you will assess the design options. Examples might be:
- We will have no more than 5 layers from the CEO down.
- We will design with customer at the centre so that there are minimal or no handoffs
- We want interfaces and decision making process where the business is accountable for strategic results supported by functions
- Any design is to have no impact of departments A or B.
- The design will lower our operational costs by X% over Y years.
High Level Solution
Once the design team and sponsors are clear on the problem and opportunity, it is time to start designing for the future. Again, it is important here to follow a process. Remember, departments or teams are made up of various positions. These positions fulfil different roles in turn designed to complete specific activities or tasks.
Thus, we need to begin with a review of activities required for the future ensuring that core work is designed into the set-up of the organisation, and that it is organised in a way that maximises effectiveness/efficiency. Understanding what work will need to get done helps to inform subsequent design steps around the operating model and importantly, how to effectively develop the roles and structures to deliver the work.
There are again a number of ways to do this. For example, create a catalogue of the activities done today and ask what might you stop, need to do differently or start doing. Which activities are mission critical, make a strategic difference or are nice to have? You can follow the organisation’s value chain or functional WBS structures to catalogue the activities. A team that I am currently working with is starting with external stakeholders and defining the activities required to meet those stakeholder needs or influence the decisions they take.
Now we have defined the activities to be completed in the future organisation, we can cluster these to create operating model options. The operating model is a visual, abstract representation of the core components of an organisation and the relationships and flows of information/ work between these and how they. There are only so many ways that you can design the basic organisation operating model. For example, functional, geographic, product, line of business or the ubiquitous matrix design.
Once tested with stakeholders, you can use the design criteria to select a preferred option.
Develop a Detailed Preferred Solution
Now is the time to design the detailed structure and roles that will bring the new organisation to life. Identify which roles will be responsible for high-level sets of activities and how these roles connect with each other. It is important to focus on developing a thorough and joined up detailed design which is vital if strategy has a chance of being made a reality!
As the design emerges, start to stress test or scenario test the new organisation. Bring together those that know the required work and follow the new processes. This is crucial for designs which have multiple or complex points of integration. A question I always ask is “who gets to decide and when?” Make sure you are also testing any options against the earlier defined designed criteria.
It is also important to consider the skills and competences required in the new design, how technology is to be leveraged and where will positions be located etc. What are the desired ways of working, the behaviours and mindsets needed in order for the new organisational setup to work?
And now it is time to implement the new organisation! The implementation plan and accompanying change management plan will depend on the scale and complexity of the change as well as legal requirements. The more people you have involved in the overall process who will also be impacted by the shift, the easier the implementation may be.
As you are now moving from design to implementation, you may find that there is a need to change project team governance and roles. This is also a great point to pause, reflect and capture lessons learned which can applied to the implementation or future projects.
If you have got this far, well done. You might also be interested in the following articles s from authors I respect and have found useful in my work.
Aaron De Smet, Chris Gagnon, and Elizabeth Mygatt (Mckinsey): Organizing for the Future.
KatesKesler Organisation: https://kateskesler.com/
I want to acknowledge the work of the Shell Organisation Development team. It was whilst working at Shell I learned “my craft”. Also the team at Novartis from whom I continue to learn.