This series on organization design targets readers unfamiliar with the subject, illustrating how intentional design enhances performance.
The first post (Why Organization Design Matters: Part 1), posed two questions to tee up specific, tangible reasons why design matters.
- What’s the payoff for an organization that commits to deliberately and thoughtfully redesigning itself?
- What practical, impactful difference does it make?
Part 1 of the series looked at the critical contribution of organization design to operationalizing strategy. Why Organization Design Matters: Part 2 examined the essential importance of aligning the organization to its marketplace.
In this post, we’ll look at how organization design can help organizations to address and eliminate obstacles to success they have been continually unable to overcome.
A Persistent Obstacle
I have worked with a number of clients whose organization’s current “design” and accompanying arrangements were unable to effectively address a stubborn, persistent problem. For example, a high technology manufacturing organization I consulted with had a product quality problem they couldn’t overcome. They had tried numerous, incremental quality fixes and various forms of brute force and had not made appreciable progress. The cause, as they ultimately diagnosed, was rooted in the assembly line work system and all of the associated assumptions and hierarchical control arrangements they had designed into it. When the organization and work system were successfully redesigned with self-managed production and support teams at the core, product quality increased by 1000% and other key performance indicators plus overall process control showed similar remarkable improvement.
In another example, the one we’ll examine here, a different technology company was chronically slow to market with its new product releases and it was costing them the advantages of being first to market.
Digital Network Solutions (not its real name and subsequently acquired) was a technology company that designed and manufactured diagnostic and monitoring tools for data network convergence solutions (multimedia, telephone, and data on a single network). Speed to market to keep pace with the competition was vital, but as we all know, being first to market has considerable advantages. It establishes market leadership, builds brand recognition and reputation, captures market share and revenue before competitors can play catch up, and places the leader in the enviable position of setting price.
Digital Network Solutions (DNS) had competitive products, but it was regularly being beaten to market by competitors on new product releases. That meant that, while DNS was doing well, it wasn’t experiencing the “first-to-market” benefits. DNS’s product development process was embedded in a functional structure and simply took too long. After yet another second-to-market finish, the president resolved to address the problem head on.
DNS went back to basics. The leadership team recast their vision, developed a new mission statement, and refined their strategy. The discovery work done for strategy purposes paved the way for organization design. A set of design requirements (also referred to as design criteria) thoroughly informed by their vision, mission and strategy work was a logical outcome.
Design requirements are data-based statements that are used as principal reference points for organization design. Here are a few examples of the DNS statements that were an outgrowth of the vision, mission, and strategy work:
The organization must be designed to:
- Expedite the timely delivery of products
- Maximize responsiveness to market demands
- Foster innovation and creativity
- Promote interdependence in product development
On the heels of the strategy work, the leadership team engaged in a structured design process that unfolded over three full days.
Their work began with an organization modeling exercise. Organization modeling (to be addressed more completely in a future post) is an activity in which participants develop operating models of the organization using different organizing principles (the pure forms being function, customer, product, geography, and process) with a laser focus on responding as completely as possible to the design requirements. The objective is to draw pictures of how a particular model would work and organization charts are forbidden. Participants use bubble diagrams to indicate various groupings of work, adjacencies to indicate relationships, arrows to indicate information and workflow, interdependencies, and the like. The idea is to animate the organization by telling a graphical story – this is how we see this model working.
The organization models were critically reviewed and scored against design requirements. Models that scored poorly on requirements were eliminated but valuable design features were incorporated into surviving models. After several iterations, considerable deliberation, and combining valuable elements of various models, they decided unanimously on a front-back product architecture for the organization with a marketing front end. In cascading fashion, operational level detail was added to the model once the strategic level of the design was decided. Detailed design was addressed as each of the product groups was launched.
Here is the client’s original depiction of the strategic organization model they designed.
The product segments were derived directly from the new strategy. Functional resources based on expertise and experience were distributed to the product groupings. However, some cross-cutting functions, such as Project Management, Engineering Services, Design Verification, etc., were retained as lateral processes for integration and coordination. Shared Services underpinned and supported the whole organization.
The Added Value of Organization Design
At the beginning of this post as in the first post of this series, I posed two questions:
- What’s the payoff for an organization that commits to deliberately and thoughtfully redesigning itself?
- What practical, impactful difference does it make?
Consider the following:
In the two years following organization redesign, Digital Network Solutions beat its competition to market in two of the product segments and experienced “first-to-market” benefits. In addition, the new design was promoting the kind of innovation, creativity, and interdependence the leadership team had hoped for. Designing to marshal and focus the organization’s resources in a new way to address seemingly insurmountable obstacles can indeed make a difference.
- What obstacle has your organization been unable to overcome?
- What incremental, operational fixes (or perhaps brute force) have been tried and failed to achieve the desired outcome?
- How can you imagine marshalling your organization’s resources differently to address your stubborn, persistent challenge?
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