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  1. 1. Success and failure in organisation design Sri ram. R RA1952001020098
  2. 2. Success in organization design Focus first on the longer-term strategic aspirations  Leaders often spend too much time on the current deficiencies of an organization. It’s easy, of course, to get fixated on what’s wrong today and to be swayed by the vocal (and seemingly urgent) complaints of frustrated teams and their leaders. However, redesigns that merely address the immediate pain points often end up creating a new set of problems. Companies should therefore be clear, at the outset, about what the redesign is intended to achieve and ensure that this aspiration is inextricably linked to strategy. One retail company we know, strongly committed to creating a simple customer experience, stated that its chosen redesign option should provide “market segment–focused managerial roles with clear accountability” for driving growth. The specificity of that strategic test proved much more helpful than simply declaring a wish to “become customer- centric.”
  3. 3. Take time to survey the scene  Sixty percent of the executives in our survey told us they didn’t spend sufficient time assessing the state of the organization ahead of the redesign. Managers can too easily assume that the current state of affairs is clear and that they know how all employees fit into the organizational chart. The truth is that the data managers use are often inaccurate or out of date. A high-profile international bank, for example, publicly announced it was aiming to eliminate thousands of staff positions through an extensive organizational redesign. However, after starting the process, it discovered to its embarrassment that its earlier information was inaccurate. Tens of thousands of positions, already referenced in the press release, had been inaccurately catalogued, and in many cases employees had already left. This new organizational reality radically changed the scope and numbers targeted in the redesign effort.  Knowing the numbers is just part of the story. Leaders must also take time to understand where the lines and boxes are currently drawn, as well as the precise nature of talent and other processes. That helps unearth the root causes of current pain points, thereby mitigating the risk of having to revisit them through a second redesign a couple of years down the road. By comparing this baseline, or starting point, with the company’s strategic aspirations, executives will quickly develop a nuanced understanding of the current organization’s weaknesses and of the strengths they should build on.
  4. 4. Be structured about selecting the right blueprint  Many companies base their preference for a new structure on untested hypotheses or intuitions. Intuitive decision making can be fine in some situations but involves little pattern recognition, and there is too much at stake to rely on intuition in organizational redesign. Almost four out of five survey respondents who owned up to basing decisions on “gut feel” acknowledged that their chosen blueprint was unsuccessful. In our experience, companies make better choices when they carefully weigh the redesign criteria, challenge biases, and minimize the influence of political agendas.  Interestingly, Fortune magazine found that its Most Admired Companies had little in common when it came to aspects of their organizational design, beyond a flexible operating model. This finding is consistent with our experience that off-the-shelf solutions aren’t likely to work. The unique mix of strategy, people, and other assets within a company generally requires an individual answer to things like role definition, decision-making governance, and incentives, albeit one based on a primary dimension of function, geography, or customer segment. The key is to get the right set of leaders reviewing options with an open mind in the light of redesign criteria established by the strategic aspiration.  Take a large public pension system we know. Its leaders convinced themselves that a new organization must be set up along product lines. Challenged to reconsider their approach, they ultimately arrived at a functional model—built around health, pensions, and investment—that has served the system well over the past five years and underpinned significant cost savings and the launch of innovative new products.
  5. 5. Failure in organization design No clear and compelling case for change  When people don’t understand why change is necessary, anxiety, cynicism and resistance inevitably build. Most major transformations are justified from a financial returns standpoint, but the rationale for large-scale change must be clear and compelling for all of the key stakeholders. If you don’t help critical groups of people understand why change is necessary and how it will affect them, you will never get to the rest of the story. Even with a solid intellectual rationale for change, people inevitably want to understand the implications for and impact on them.  Lack of senior team alignment  The leadership requirements of leading a transformation are quite different from those of leading a business or function in steady-state or even a smaller, more focused change effort. By definition, transformations are comprehensive makeovers of the way work is done. Leading such efforts involves making progress on an array of projects or workstreams that need to be managed in a traditional sense, but that also need to be pulled together in ways that require close collaboration and difficult tradeoffs. Only the senior leadership team can do this work.  Abdication of leadership’s responsibility to drive the process  While necessary, senior team alignment is not sufficient. The team needs to remain fully engaged throughout the transformation process, even as they continue to run the business. Given the significant competitive and operational pressures that senior teams face, it’s all-too-easy for leaders to abdicate their responsibility for actively directing, leading and monitoring the transformation. This often is reinforced by the organization’s reward system, which incentivizes a shorter-term, more operational focus.
  6. 6. Insufficient focus on co-creation in design  Given the times, organizational transformation consulting unsurprisingly is a thriving business. However, given the high failure rates, it’s clear few actually are delivering the value they promise. This is particularly true for consultants who use what we call the “doctor-patient model”; they diagnose the situation and prescribe solutions without engaging the patient in deciding what is best for them, without giving them choice. “Co-creation culturing” means building maximum alignment through the process by providing accurate and relevant data as the basis for critical discussions, always pushing for assessment of multiple options (whether different strategic directions or different organization designs) and reaching agreement by openly, collectively assessing the different options against a clear set of criteria for success. Communicating without really engaging  It’s not enough for leadership to put substantial time and attention into articulating and communicating the business case for transformation. They have to do it in ways that truly enlist employees in the transformation process. Too often, however, they fail to get them really onboard, even when there is a burning platform providing a clear and compelling rationale for change. This is because one-way communication, even with the best of supporting materials, is not enough to win employees over to being willing change agents. To enlist employees, leadership has to be willing to let things get somewhat messy, through intensive, authentic engagement and the involvement of employees in making the transformation work. Inadequate focus on culture change  Culture change is always an essential element of transformation. Culture is “how we do things around here” – the norms and ways of operating that underpin getting work done. If that doesn’t change in necessary ways, then all the work to change strategy, structure and systems is likely to come to naught. Culture is, however, hard to work on directly. It can only be changed by altering peoples’ behaviors. The first step is to clearly define what behaviors are necessary for driving the transformation. The next is to figure out what levers are available to alter them.
  7. 7. The END

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