What is true organisational design?

Effective transformation of a business requires a whole lot more than simply moving boxes.
Ken Brophy looks at two similar organisations altering their structures that ended up with very different results.

In a world of ever-increasing disruption, numerous organisations want to transform but often under-deliver because of large capability gaps. Strategy should be focused on the future but, all too often, operating models are aligned to what delivered value in the past.

Consequently, many businesses dive into a rapid process of altering their structure but fall into the trap of just trying to change their organisation chart.

That alone is insufficient to drive transformation to exploit marketplace opportunities and remain viable in a rapidly changing environment. 

Countless organisations simply move a few roles and activities around and then get frustrated when they don’t get the business results they were hoping for.

Even if a perfect organisation chart did exist (with optimal layers of management, proper placement of talent and clear decision rights), structure is just one aspect of organisation design. 

Organisations are complex – changes in one area can cascade and set off changes throughout the entire system. Furthermore, external factors such as market forces, competitor behaviour and regulatory requirements demand continual change and adaptation.

Focusing only on structure ignores the deep connections between components like culture, processes, metrics and rewards. It also ignores the reality of how work is actually done, who makes decisions, and how resources are allocated. 

Often, with so many things on the ‘to do’ list, leaders sprint the marathon and focus on ‘Speed to Announcement’ – getting the restructure communicated to the business quickly and then moving off to focus on other things. 

However, the focus needs to be on ‘Speed to Alignment’. Yes, it can take longer but will ensure true transformation and ongoing value creation for the organisation. It also enables organisations to create a business that can evolve quickly and stay ahead of the market.

It is clear effective transformation requires a whole lot more than simply moving boxes. So, let’s look at two similar organisations that ended up with very different results. 

Both businesses had been the dominant player in their industry and had always achieved a return for their owners. But the tide had turned, with increased pressure from competitors and a disruptive marketplace. 

 

It all starts with the leaders

For good organisational design to succeed, leaders need to understand what it is they want to achieve and to stand up for it. 

Organisation A had a leader new to the business who took the time to understand what was going well and what was not. They shaped a strategy to jump-shift the company in the eyes of shareholders, customers and employees.

Early on, he articulated what was happening in the industry and acknowledged every job in the organisation would have to change, even his. They worked with the executive team to handpick the core design team and ensured they all participated and were on hand for input, advice and feedback. He clearly laid out what the design team was permitted to do and was clear about the time pressures they faced.

Organisation B had a leader who had to be convinced they needed to bring together a design team from across the business for the change effort to succeed. A change of this magnitude was not something the executive team could do alone. 

Despite the urgent marketplace pressures, he struggled to personalise the goal so everyone understood the context, the potential impact to the business and to people’s jobs. Once the design team was formed, there was no clear alignment from the executive team which led to issues in managing towards a shared goal and confusion about the trade-off decisions the design team had to make. 

The CEO of Organisation A talked about all roles changing because the company needed to evolve quickly to meet the market challenges or it was going to struggle to survive. By starting with this clear understanding, the design team could work on fundamentally redesigning the activities, with processes, systems and people all needing a different type of thinking. 

Organisation B faced the same issues but struggled to articulate to its key stakeholders, including employees, what the change in capability would look like. 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. 

 

Know your trade-offs

Both organisations did some fantastic work in developing the trade-offs – the potential benefits versus risks and how the latter be mitigated. They presented different options but always ensured they had done the work upfront in deciding how best to minimise risk. This needs to be done throughout the design stage. 

One way 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.

It is the strength of these mechanisms that provide the means to efficiently process information and effectively align resources. 

If you do not recreate the linkages you want to see in your new design then the old ways of working will remain. Unfortunately this is one of the biggest issues we see yet it is one of the simplest and most effective ways to overcome the risks associated with the design you have chosen. 

Both organisation A and B had great successes in this area with a lot of robust thinking completed to devise key linking mechanisms. The outputs were very well thought through and the benefits to the companies were immense. 

 

Sprinting the marathon

An executive team will often spend months working on future strategy, followed by a redesign of the organisation at the most senior levels. However, the layers below this are frequently expected to understand the new strategy and organisation straight away and then effectively design the lower layers of the business. 

Both company A and B spent time establishing their new strategies with sufficient time (days not weeks) allowed for the executive team structures to be designed, agreed and team members assigned to the roles. But then their paths diverged.

Organisation A gave its team enough time to finish the design at both macro and micro levels (weeks not months) and everyone was very clear about the trade-offs they faced if macro design ran over. This approach ensured the design team had sufficient time to carry out their work and meant the senior leaders’ expectations were managed. 

Organisation B gave ever-decreasing time to the respective layers of the design efforts. What started as a very robust process quickly became land grabs – designs based around people, and prospective cost savings based on assumptions and unclear analysis. 

While they started their designs from a similar position, the two companies drove them differently leading to markedly different results. Organisation A found immediate traction in the marketplace, while Organisation B struggled to deliver to customer requirements and make itself easier to do business with. As a result, it had to go through waves of further design, change and disruption.

Organisation A didn’t have any more time available than Organisation B to transform the business but they created it. They gave the design teams the remit, the leadership, the access to the right people and used their time well to ensure the design was robust. 

Consequently, Organisation A now has a strong platform from which to launch its future strategy because it focused on the right work to ensure effective ‘Speed to Alignment’. And that in the end is what truly effective organisational design is based on.

________

Ken Brophy is a management consultant and organisational design/change expert. He is a director of K3 Consulting – an Auckland-based professional services firm.
www.k3.co.nz

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