​Organisational Design: Keeping Your Eye on the Ball

When designing your organisation, your eyes must be kept firmly on the strategy, the whole strategy, and nothing but the strategy, or you could end up with a ‘disorganisation’ full of ‘busy fools’, argue Melvin Jay and Simon Collinson

Highly effective organisations follow a design. All activities, projects and processes are purposefully designed to deliver their strategy, and thus to create value for stakeholders. Each function, department and individual understands the company’s strategy and how their daily work contributes to its delivery. People are diligent and focused; everything they do adds value to the business. This is because all decisions about the way teams are assembled and activities assigned have been made with the company’s stated goals in mind.

Unfortunately, these companies are in the minority.

In overly complex organisation designs, the opposite is true. Despite having equally intelligent and hard-working people, a high percentage of their activities will create no value and play no significant part in helping the company achieve its strategic purpose. We call these companies ‘disorganisations’. They are often populated by large numbers of ‘busy fools’: people running fast but in the wrong direction! There is plenty of activity, but very little of it creates value.

Lean Six Sigma studies of office workers suggest that in many organisations 97% of activity is wasted because so much of what people do will create no measurable value for the company. Just imagine: staying at home in bed would have almost the same impact on the success of your company as turning up.

For the purpose of this discussion, let’s assume that you have a good strategy in place. Companies have become very effective in the creation of strategy, yet we often find the strategy in significant dissonance with their organisation design. This raises the obvious question: why this frequent misalignment between strategy and organisation design?

See the ‘Warning signs’ box below for the symptoms to be aware of:   #pb#
WHAT’S GOING WRONG?
Here are some common reasons for misalignment of organisation design and strategy:

1. YOUR STRATEGY IS NOT UNDERSTOOD
One of the most common reasons is also the easiest to correct: communication. In many companies, the majority of people don’t fully understand the strategy. In our workshops, we often ask the more senior participants to write or draw their company’s strategy. At first, we were surprised by how few could clearly articulate it. But it no longer amazes us since this problem has proven to be so common.

Similarly, we have seen management teams unable to agree on the best metrics for success, simply because they don’t fully grasp their strategy. Companies happily spend millions of dollars creating a great strategy but fail to communicate it in a simple and inspiring manner. If people don’t entirely comprehend your strategy, then it will be no surprise to see your senior managers designing organisations that fail to deliver it.

2. THE ORGANISATION WAS NOT DESIGNED WITH THE STRATEGY IN MIND
The second most common reason is that the work of individual functions or departments has not been purposefully planned to deliver the strategy. This is particularly common in the support functions, which are less close to customer needs. But even in front-line functions like sales we find that a high percentage of work has little or no impact on achievement of the strategy.

People are busy collecting information, following processes or pursuing projects, but these activities have not been carefully designed with the strategy in mind, so their efforts are not creating value.

In fast-growing companies, people and departments are often added in haste to keep up with the growth, without carefully aligning with the company strategy. When the cycle slows or reverses, the company then finds it has a lot of people or whole departments not adding value.

3. ORGANISATIONAL DRIFT
The misalignment of organisation design to strategy can also happen because people lose sight of your strategy over time. The organisation starts off carefully designed to deliver your strategy, but over time things drift.

NEW WAYS OF WORKING
In organisations everything evolves. Unfortunately, things rarely become simpler. New projects and activities get created and processes reworked, but because the strategy is not at the forefront of your mind during these changes, the organisation design gradually shifts away from its strategic purpose, rather than towards it.

This drift can also happen because people are still doing what they have always done, even though the strategy has changed and the organisation has been reconfigured accordingly.

Humans can be very resistant to and scared of change. Old habits and ways of working are hard to kill. So we often find that the organisation was, on paper, carefully redesigned to align with a new strategy, but people have simply drifted back to their original activities and ways of working. Of course, it is easier to carry on doing what we know well, and companies rarely invest enough time and money in embedding new processes or new ways of working.


Organisational Alignment Tool: Click on image to enlarge

GAUGING ALIGNMENT
There are ways you can test whether your organisation design is in harmony with your chosen strategy. We call it the ‘organisational impact tool’. It offers you a simple yet methodical way to assess if all the elements of your organisation design are fully aligned with your intended strategy. You can do this at a company level, but it works equally well when looking at the organisation of specific divisions, functions, departments or teams. When looking at the organisational alignment tool, ask yourself the following questions:

STRUCTURE
Looking at our organisation’s structure chart, does the way we divide up activities and responsibilities into different functions and departments give us the best possible chance of delivering our stated strategy? Do the reporting lines make sense? Does our current structure hinder strategy delivery in any way?

COLLABORATION MODEL
Do different teams and functions collaborate effectively to ensure we make good decisions that help deliver our strategy? Which connections work well and support our strategy? Which ones hinder us from delivering our strategy?

SKILLS & CAPABILITIES
What are the skills, know-how and capabilities that our people need to deliver our strategy? Do we already have these skills? Is our organisation designed to ensure we develop these skills?

WAYS OF WORKING
What are the key values and behaviours we need? Does our culture support our strategy or hinder it? Is our organisation designed to ensure that the right values, behaviours and ways of working are encouraged?

MEASUREMENT & REWARD
Does the way we measure and reward teams and individual performance help us deliver our strategy well? If not, how can it be improved?

INFORMATION & RESOURCES
Do we provide people with the information and resources they need to deliver our strategy and check that we are on track? If not, how can we improve in this regard?

TWO CLEAR OPTIONS
As you assess your organisation design against each of these six questions, ask yourself: is this particular aspect of my design helping me deliver my strategy, the whole strategy and nothing but the strategy? Limit yourself strictly to two options:
 
You can take this assessment even further with what we call the ‘stop/start/continue’ tool. Apply it as a final checkpoint to help you decide which existing elements should be stopped, which continued, and which new ones you need to kick off to improve things. This is a good way to summarise your learnings. At the end of this exercise you should be able to see clearly which elements of your organisation are well aligned with your strategy and which elements are not.

#pb#
MAKING IMPROVEMENTS
To improve the alignment between strategy and organisational design, follow these steps:

STEP 1: MAKE SURE YOUR STRATEGY IS WELL UNDERSTOOD

Regularly test understanding of your strategy among your people by asking them to tell you what the company strategy is in their own words. If this test reveals that the awareness is poor, invest more time, energy and creativity in communicating your strategy.

There are three unbreakable rules when it comes to communicating your strategy well: 
 
STEP 2: ENSURE ALL ACTIVITIES AND PROJECTS CONTRIBUTE TO THE STRATEGY

Review the role that each function or department plays in delivering your strategy, and agree how that particular team creates value. Also ask each function or department to create an ‘organisational purpose statement’ that clearly explains the overall role they play in helping the company deliver its strategy. Review and sign off these statements at CEO or board level.

Using finance as an example, the organisational purpose statement could be the following: “We provide only the essential financial information needed to track progress versus our strategy and to identify how we can improve our overall financial performance”.

Now ask each departmental head to review their current organisation design and all key activities against this purpose statement and prove that each element of their organisation is designed to deliver the strategy. They should review each activity (eg a project, process, task, report produced, etc.) and ask themselves these questions:

• How does this activity help our department meet its purpose and deliver our strategy?
• Do we really need to do this activity at all? What if we stopped it all together?
• Is there a smarter, simple way to do this activity?

Next, ask them to make sure every job description has a dedicated (yet concise!) section that describes how that person’s specific role contributes to the company strategy.

For the head of legal, for example, this could be the following: “I ensure we stay on the right side of the law and regulations, while actively supporting our ability to achieve our strategic goals”.

STEP 3: FIX THE ISSUE OF ORGANISATIONAL DRIFT

As part of your annual planning process, each department should review all the activities and projects they will take on in the coming year – this is to make sure that all planned work will add value and contribute directly to the company strategy. This way the organisation design can only drift or carry on with outmoded structures for a year before being reset again.

The ‘keep/improve/kill’ framework is particularly handy for this. Review everything your team is doing, ask how this activity helps deliver the strategy, then decide to carry on or stop doing it. 

The other useful questions to ask are:

• Are we doing the right things? (Then stop all projects/processes/activities that don’t help deliver your strategy.)
• Are we doing things in the right way? (Then find simpler ways to deliver the remaining activities/projects.)

Encourage people to challenge the value in process changes, new tasks or information requests. They should feel empowered to question the worth of anything that doesn’t appear to help with strategy delivery.

STEP 4: KEEP THE LONE WOLVES IN CHECK
Give leaders who are out of line with the overall strategy the opportunity to contribute to the development of the next strategic plan, making sure their ideas and views are carefully considered – they might have a point.

Once the strategy is signed off, give them six months to get their house in order. If their department is not 100% aligned with the company strategy by then, you may need to look for a new management team to lead that part of the organisation.

In the long run, you will drive more success from a fully aligned management team than a federation of lone wolves!

IN SUMMARY
In order to keep your company simple, your organisation design needs to be totally focused on delivering your strategy, the whole strategy and nothing else. You should ruthlessly rip out any elements of your organisation design and any activities that don’t have a proven role in delivering your strategy.

If you succeed in this, your business will be simpler, your results will improve, and your people will enjoy their work, since every day they come to work they do so to achieve great things.


Professor Simon Collinson is the dean of Birmingham Business School. He is a world-recognised expert in complexity management, has consulted for a wide range of globally renowned companies, and has been widely published in prestigious academic journals.




Melvin Jay is the founder of Simplicity and the author of From Complexity to Simplicity. He has over 25 years of commercial and consulting experience with some of the world’s biggest companies. Visit simplicity-consulting.com.