Critical success factors in designing a successful organisation
For troubled businesses, change is likely to result in a reduction of the workforce
‘Buy-in' alone is not the key to successful implementation of organisational change. It must be complemented by an organisation's willingness, appetite and capability to change
The concept of organization design is simple in theory but highly complex in practice. Like any strategic decision, it involves making multiple trade-offs before choosing what is best suited to a business context.
Many business houses spend months of management time trying to design the perfect organizational structure. However, they often forget to answer one simple question, which is on every employee’s mind: WIIFM or “What’s in it for me?”
A change in organization design can be triggered by several business factors, including privatization, globalization, growth (organic or inorganic), consolidation or turnaround. From our past client experiences, a common trend that emerges in all the above business determinants is that the “people” factor is pivotal to the success of any change initiative. More so when the initiative, such as a change in organization structure, has a direct impact on a person’s role.
So what should an organization do to create “buy-in” and ensure people concur with the new organization? Our experience has shown that there are five key factors critical to the success of any organization change.
1. Design with bias: This is possibly the biggest mistake any business manager or change agent can make and also the single biggest reason why external consultants are hired as advisors. Organizations often anchor the structure design process around a senior individual’s capability and preferences. For instance, clients have often told us “Mr. X has been with us for 10 years. Any change in his role will cause a lot of disruption”. As a result, companies end up with “personality based” structures as opposed to a structure which is aligned to business strategy and there is rarely enough business logic to defend such decisions. This poses a risk to the organization, because when “Mr. X” leaves, finding a replacement is tough. High performers also feel stifled in such an environment.
2. Must be driven from the top: Any organization design initiative must be among the top points on a Chief Executive’s agenda. The CEO should invest his/her time in all critical aspects of the design and deployment process. Some of these aspects include assessing the strategic fit of the chosen structure, staffing leadership roles, communicating the structure and its rationale at various forums and providing the resources needed to succeed in implementation. Any large design initiative must be communicated as a critical business exercise and not just another “HR project”. HR can only facilitate the process. In a recent client engagement, the CEO himself presented his Key Result Areas to the top 20 leaders in the company. He was spearheading an initiative to drive role clarity (after structural changes had taken place).
3. Communicate relentlessly and transparently: Any change in organization structure often evokes mixed feelings and grapevine talks across various levels of the organization. This is because any major change in organization structure is likely to result in enhanced responsibilities for some roles and reduced responsibilities for others. For troubled businesses, change is likely to result in a reduction of the workforce. Therefore, a clearly defined communication plan must be developed at the organization design stage itself. This plan should list out:
a. What to communicate? How much do we want to share?
b. With which audience (Corporate functions, units, senior versus junior levels of management)?
c. In what medium (Email / Presentation / Speech / Webinar / Audio call etc.)?
d. At what frequency?
e. Who is responsible (CEO / Unit Manager / Functional Manager / HR etc.)?
Some years ago, while we were helping a large Chemical company in Thailand reorganize its business structure; we observed that our client’s corporate culture was largely consensus driven and that their senior management members were not comfortable confronting each other in public. Keeping this in mind, we developed a tailor made communication strategy and validated the new organization structure in one-on-one discussions with the senior management members (CEO and direct reports) and sought their inputs on the same. After obtaining their individual consensus, it became easier for us to get their agreement in a collective forum.
4. Create and communicate a Value Proposition for employees: Employee growth and development is an important factor to be considered at the organization design stage. For instance, even though a structural change may create new Strategic Business Units (SBUs) in the organization, it may often lead to enhanced general management opportunities for employees and allows functional managers to step into ‘business management / leadership’ roles. It is important to communicate this to the larger workforce. One of our clients recently transitioned into a new organization structure, which created five new leadership roles reporting to the CEO. The CEO had 2 choices -
a. Unilaterally place five individuals in the five new positions and announce the appointments
b. Invite candidates from within the organization to apply for the vacant leadership positions; after which they would undergo a professional and formal assessment process
The CEO wisely chose the latter. Although it was a more time consuming choice, yet it was perceived across the business as a transparent and democratic process, which encouraged internal talent to step into bigger roles.
5. Manage the Matrix well: A Matrix organization structure, i.e. a structure where employees may have more than one boss, is often an inevitable part of an organization’s growth journey. Unfortunately, poor implementation leads to great confusion for employees who have to take directions from multiple bosses. Many companies have had disastrous results while trying to implement a matrix structure for the first time, often because of inadequate communication. However, some organizations have successfully managed to conquer the challenges of a Matrix organization by:
a. Clearly defining the boundaries of decision making between the two bosses, i.e. solid and dotted line.
b. Clearly putting in place ‘tie breakers’ to resolve conflicts between two bosses.
c. Communicating the impact of the matrix organization on the individual’s Performance Management Processes, i.e. which boss will have how much say
d. Rewarding team behavior as opposed to individual achievements.
Our experience tells us that ‘buy-in’ alone is not the key to successful implementation of organizational change. It must be complemented by an organization’s willingness, appetite and capability to change. It is a combination of these factors which will eventually translate into successful implementation.