Archive for November, 2009
Between 2000 and 2003, I was working for Aker Solutions, a global engineering company with around 20,000 employees. One of my responsibilities was to serve as project manager for the annual employee survey. The survey was taken very seriously by top management and we developed a follow-up process to ensure that something would be done with the results.
After I had analysed the results from the first survey, I presented the key findings to the HR director. Although some organizational strengths had been identified in my analysis, the feedback from people was generally quite critical and indicated a big potential for improvement in business processes, HR policies, organization, and in leadership more generally.
I asked the HR director how we should communicate the findings. He suggested posting the findings on the internet. I didn’t quite believe what I heard so I asked him to clarify: “I assume you mean the intranet – we are not going to publish our internal data on the internet, for all to see?” No, I had not misunderstood – he did mean the internet (the company’s web site). Despite my doubts, I wrote a summary of the key results, which were published on the web shortly thereafter.
In retrospect I think Aker’s HR director was on to something. During the last few years, one dramatic change is the increased level of transparency. As a leader, you cannot hide bad results or ineffective internal practices anymore. If you don’t actively disclose the challenges that your organization faces, people inside and even outside the organization will soon know about them anyway – via discussion forums or blogs (or sites such as glassdoor.com, which posts anonymous company reviews written by employees.)
There are several possible implications of this change. With so many unofficial channels of information, employees and other stakeholders may to a lesser extent put faith in “official” information. If so, it suggests that Corporate Communications departments may need to change their focus from the production of glossy brochures and annual reports to considering how you actually create and sustain a reputation.
But there are also implications for organization design. In the past, leaders could sometimes get away with ignoring or delaying the resolution of difficult organizational problems, or, if they did choose to do something about them, invite only a handful of executives to participate in a “secret” re-design process. In the age of the transparent organization, such an approach will hardly build the trust that one is dependent upon as a leader.
To be transparent, we should continuously evaluate how effective our organization is. We may not want to post all our internal data on the internet but we need to be open and honest with our key stakeholders about the challenges we face. I also think we should more frequently invite the real experts on the organization – the employees – to participate in the re-design process. With a proper way of involving people there will be much less of a need for venting frustrations on external discussion forums.
Many of the changes introduced in large organizations only seem to add to the internal complexity. One example is process improvement efforts, which sometimes lead to the creation of a new organisational dimension consisting of “process owners”. The unforeseen consequence is to create a kind of matrix where responsibility is divided between line managers and process owners. But it doesn’t stop there: I was told of one large organization that – in addition to the two dimensions of functions and processes – introduced a third dimension of “process coordinators”, who were supposed to facilitate co-ordination between functional managers and process owners. This company ended up with a three dimensional matrix!
Based on 12 years of experience working with large organisations in Scandinavia, I have concluded that handling the increasing level of internal complexity is a key challenge for most managers.
This is the main motivation for writing the book I am working on. The main purpose is to show how to re-design organisational structures and minimize unnecessary complexity. The basic line of reasoning is presented in the PowerPoint presentation included here. I would welcome comments and reactions from readers of this blog.
The familiar organization chart is still the most frequently used organisation design tool; indeed, many people seem to equate “organization design” with “re-arrangement of the boxes” and this is unfortunately what many organisation design processes consist in – re-naming titles and re-arranging reporting lines.
There’s nothing wrong with organization charts as such – they are useful depictions of the formal structure of any organisation. In today’s complex, network oriented organizations, however, they provide few clues about how work is actually carried out.
If you are to make effective organisation design decisions, you need to figure out what goes on in the white spaces of the organisation chart, to paraphrase the title of a well-known book written by Rummler & Brache in 1990.
This is what I tried to do in a presentation I gave at the Organisation Design forum in 2006. At the time my plan was also to write and publish an article about this topic together with co-author Ron Sanchez, a visiting professor at the Copenhagen Business School. Due to other commitments we were unable to complete it then, but we have now blown the dust of the drafts that we worked on, and are in the process of writing a new paper that elaborates on the concepts mentioned in the presentation.
Please note that we are not saying (as some seem to be thinking) that “structure is out”. We firmly believe that organizational structure is as important as ever, but that 1) the structure needs to be chosen based on an understanding of the business processes and working relationships, and 2) the formal reporting relationships (which the organisation chart depict) are only one of several dimensions that you need to design (and manage, once a unit is established).
You can view the 2006 conference presentation here:
A fundamental question in organisation design is the following: Should you attempt to design the structure to fit the people that are available, or you should you start by defining the structure, and then select or recruit people to fill the roles specified by the structure?
Several management gurus have argued that structure is less important than before, or even irrelevant, in modern organizations. Michael Hammer – known for the “re-engineering” movement in the 1990’s – now holds courses for managers teaching them how to lead “structureless” organizations. Jim Collins, the author of the best seller Good to Great, proclaims that one should decide “who before what”:
“Get the right people on the bus (…) before you worry about where your’re going to drive the bus”
These viewpoints differ sharply from the viewpoints of the late management theorist Elliott Jaques, who, between 1950 and his death in 2003, wrote a number of books on how to design optimal hierarchical structures. See for example this book. His name is not as well known as the most influential management gurus today, yet one reckons that around 400 companies worldwide have used his framework in defining their management structure (these include Unilever, a global firm with around 200 000 employees).
He was adamant about what the appropriate sequence was: That one should begin with strategy, proceed to define the organizational units, processes and roles required to realize the strategic goals, identify the competencies required, and, as the last step, select the individuals best suited to perform the roles.
Jaques claimed that by considering structure first, you not only create a more effective organization, but also build an organization where people are treated more fairly and have better development opportunities. By defining the structure first you ensure that there is a need for each role, that you hire the right individuals, that managers have clear accountabilities and are capable of leading people, and that performance and potential can be assessed in a transparent and predictable manner.
I am asking myself: Doesn’t the metaphor that Jim Collins chose illustrate the problem: Would you board a bus unless you knew where it was heading? It’s not without reason that the destination of most buses is marked in big letters on the front window!
Russell Ackoff, professor emeritus at the University of Pennsylvania, passed away last Thursday, October 29th. His writings have been a source of inspiration for me since I first read his book Reinventing the Corporation. I always felt that there were few others of his calibre:
Both academically rigorous yet practically relevant. He challenged conventional thinking but did not restrict himself to developing theoretical models – he explained how radically new concepts could be implemented by practitioners. He was very concerned about the process used to effect change and insisted on the involvement of a wide set of stakeholders in the change process.
He introduced a number of important organisation design concepts, which I build on in the book that I am currently writing on organisation design. For example, he developed the idea of a circular organisation, based on the application of democratic principles in managing organisations (Many would say this is a completely unrealistic concept, but wait, the future may prove Ackoff right.)
I particularly like his way of explaining what design is all about. He rejected the notion that design should be about “solving problems”, which he interpreted as incremental optimization of the currently existing system. Instead he proposed that design should be about “dissolving problems”, that is, not only eliminating the current problem, but also re-designing the system in such a way that one eliminates the root causes and thus removes the chance that the problem may recur in the future.
Here are links to three videos containing a keynote address he gave in 2004 (the three videos run a total of 30 minutes):
- http://www.youtube.com/watch?v=ZLU3aoQ7t7c (part 1)
- http://www.youtube.com/watch?v=VsF32GAHVfI (part 2)
- http://www.youtube.com/watch?v=_Z3hJIGHdfk (part 3)
Here’s a link to an interview with him:
http://www.acasa.upenn.edu/p19.pdf
