During Fall 2013, I conducted interviews with 23 senior executives in 16 international firms, together with colleagues from Deloitte Consulting.
The purpose of the interviews was to understand how the firms had organized their international operations.
We summarized the main results in a brief report, which we shared with the participants and presented in a seminar we held recently.
But let me tell you about something that wasn’t in the report – namely, my own, personal observations from the interviews.
I thought this might be relevant because people often make assumptions about how executives think about organization design.
I have found that some of the assumptions are wrong – or at the very least, they don’t seem to apply to this group of people.
But before I go on, let me first say that it was a great privilege to have these conversations. The participants seemed genuinely interested and willingly shared their views and experiences, and described both opportunities and challenges.
Here are three observations I made:
Organization design is considered a key strategic issue.
Some people claim that “formal structure doesn’t matter anymore” and that leaders are preoccupied with other things.
But from what I could tell, executives spend quite a bit of time considering organization design issues.
As an example, with the EVP in a bank, we discussed alternative ways of allocating responsibility between branches abroad and the headquarters. He remarked:
I discuss these kinds of issues with people internally in the bank, and even with people in other banks, at least once every month.
All of the participants were able to explain the relationship between their strategy and their organization very well.
Some also described adjustments to their overall organizational model that had been made recently.
In a couple of cases they described what a possible next step could in the development of the organizational model.
The CFO in one firm stated:
Leaders in every firm should, from time to time, ask themselves whether they are organized in the right manner, particularly when the external conditions are changing.
By the way, the fact that leaders are interested in structure does NOT imply that they think narrowly about organizational issues. On the contrary, they think broadly.
As one example, all of them (even the CFOs!) touched on important cultural factors that had to be taken into account when considering how to organize the firm internationally.
Senior executives are not “trigger happy”.
Some employees and consultants claim that executives enjoy re-organizing firms, just for the sake of it, or to show that they are action-oriented.
I can’t speak for all executives in the world, but there was little proof of such an attitude among the 23 people I met.
If anything, they rather seemed too reluctant than too eager to introduce organizational changes.
Here’s a quote from one participant, a CEO:
The board kept asking me when I would make the decision about a new organizational structure, but I held it off. When we finally did make the decision, earlier this year, we were surprised by how quickly it was accepted and implemented. But after all, we had been discussing an alternative model for five years, so everybody knew that we were considering making this change.
This is not to say that there aren’t cases of bad decisions and poor implementation processes.
I was told of a couple of reorganizations that had created a lot of frustration and achieved very little.
It’s not difficult to do this thing wrong, to put it that way.
But in general, my overall impression is that most senior executives are quite careful and fairly averse to risk.
So most of the time, they wait until there is a real need – and until they have a good plan –before they execute.
Nonetheless, most senior executives are quite intuitive decision makers.
From the conversations we had, I got the sense that executives develop new organizational models in a fairly intuitive manner.
New designs gradually take shape in their minds as they consider strategies, feedback from customers, and internal challenges.
As I mentioned, some of the firms had recently re-designed the organization. From what I could tell, there had been a real dialogue between stakeholders leading up to the decision in these cases.
At the same time, my impression was that there had been a somewhat limited exploration of options: Typically, only one solution alternative had been discussed, as far as I could ascertain.
Nor do I recall any participants mentioning the use of facts-based analysis of markets, work processes, or other relevant factors as an input to the decision process.
So if my interpretation is correct, this may be an improvement point.
During the last few years, many firms have become more systematic in terms of change management, and some even have a standard process for managing the transition to a new structure, once the decision has been made.
The next step may be to consider how we can improve the actual design and decision process.
I am not talking about removing the prerogative of the leader to make the final decision. But these are complex issues. A systematic and data driven approach will help leaders become more effective – by increasing the odds of making the right decision.