Four years go, I was assisting a firm in developing a new organizational model, working together with a colleague.

We first identified key design criteria, based on interviews with more than 40 managers.

The most important criterion was to design an organization that would help the firm achieve growth for one of the key products. It was also important to find a model with the right “balance” between different business areas.

At the same time, there was a need to simplify the structure, and reduce the number of management layers.

We then started developing a couple of alternative models.

It was pretty hard work, trying to identify a model that would meet the different criteria, while avoiding an increase in costs. But one evening, in a meeting with the VP of Human Resources, we thought we had found at least one possible solution.

We went through the criteria and could check off one after another. We concluded the meeting on an optimistic note.

But as we were about leave, the VP remarked:

Wait a minute…this alternative makes a great deal of sense. But let’s see…how many of the senior executives will move up, and how many will move downwards, if we go for this option?”

That question re-framed the discussion. Suddenly we were not talking about what you could call the “rational” criteria, but about the impact on individuals and whether the proposed model would get the support of a large enough coalition to be accepted (and once accepted, whether it would be implemented with some level of enthusiasm).

So we looked at the model, and considered the potential impact for each of those who currently held leadership position (and who would be candidates for key positions in the new model).

A simple count suggested that the balance would be negative: A lot fewer would move up than down in the management hierarchy.

So we went back to the drawing board. And in the end, we did produce three alternative models that were more attractive, both from the “rational”, and from the political side. One of the proposed models was then selected by the CEO. The subsequent implementation of the model went quicker than we had anticipated.

* * *

One word of caution here: I am not suggesting that you should “start with the people” in the sense that you should tailor the design to the personal interests of the current members of the management team.

The main design criteria should be derived from the strategy of the firm (see my book for a detailed description of a methodology you can use for this purpose).

The political test is an additional step that you carry out, once you have a potential solution that fulfills the main requirements, and satisfies the key design criteria.

But it’s a step that you shouldn’t skip– if you want your proposed model to be implemented.

A week ago, I was in a meeting with the CEO of a middle sized firm. He explained how they were organized, and drew a diagram of the main units. He explained that they had introduced this organizational model only a few months ago.

I asked him whether he believed this model was the “final one” – or whether it was a necessary, transitional step to another model.

He paused for a few seconds, rose from his chair, walked to the other side of the room to close the door, which had been left half open when we entered.

Then he sat down again and drew another diagram, completely different from the first one. And he went on to explain why the firm would have to adopt this alternative model.

Think about this for a moment: The rest of the organization is busy trying to understand and implement the most recent re-design, and the CEO is already thinking about the next one!

Visionary leaders are often one step ahead of the rest of us. As Jack Welch once pointed out, such leaders “can see around the corner”. They anticipate and prepare for what happens next.

There’s a story about John Sculley, the former head of Apple Computers, that is illustrative.

Sculley was trained as an architect. While he was with Apple, he designed a holiday home. While the building was still under construction, he invited one of his staff members to visit.

He went for a tour of the building, and when he came to the sitting room, he asked: “What do you think about the view to the rose garden?” The staff member looked out of the window, but could only see rubble.

The world needs visionary leaders (without them, Apple wouldn’t have existed). Yet there’s a big challenge here.

The challenge is that others may not see the rose garden, at least not yet. Or they may see it, but prefer quite a different kind of garden. So often what starts as visionary inspiration leads to a long drawn process of convincing others to buy into a proposed design.

A well-known expert on decision processes, professor Paul Nutt, estimates that the chances of making the right decision decreases by 50% if you start a process by communicating a preferred solution. The reason is that it creates resistance (if people don’t understand the rationale behind the solution) and discourages a search for even better alternatives.

If you are a leader, what can you do?

There is no easy answer. I certainly wouldn’t suggest that you should stop thinking about the future. And there will probably always be some degree of tension between what we as leaders view as necessary, and what followers believe is possible or desirable.

It seems clear, though, that we should be careful about starting a change process by communicating a preferred solution. Before we do that, we should try to identify whether there is a felt need for change: Did the discussions at the last management forum meeting suggest that people are aware of the shortcomings of the current model? What about the feedback from employees and customers, or from the board?

If there is not already a felt need for change, we need to focus hard on creating a shared understanding of the need for change among key stakeholders and engage the entire system in a “strategic conversation” (to use the term coined by Arie de Geus).

In the initial phase, it may help to distance ourselves somewhat from a potential solution, and focus more on articulating the goal or the design criteria: “We agreed at the last meeting that we are not able today to utilize our resources effectively across the sites. So we know that improved resource utilization is a key criterion for our future organization”.

One thing that we should do as leaders is to design the decision process. Refraining from proposing a preferred solution does not mean that you should delegate the decision process itself.

By sketching out a decision process with different phases, you can alternative between steps where you work more individually, and steps where you involve a lot of people to gather data and generate new ideas.

Another possibility is to propose two potential solutions, and ask people to debate the merits of both (ideally, with reference to the goals or design criteria that have been formulated. )

If you are visionary enough to imagine one rose garden, you might also be able to imagine two.

Related posts:

Can we have an open decision process to select a new organizational model?

How to involve 800 people simultaneously in an organization re-design process

—
Photo credit: Mays Business School via photopin cc

In the videos posted in the last five blog posts, I have described five important ideas in the field.

What I tried to do was to select innovative ideas (or concepts/tools) that I thought relatively few people were aware of, and that few organizations have implemented so far.

At the same time – ideas that I believed would have a big positive impact, if adopted and implemented more widely.

Here, let me briefly summarize what each idea is about and why I think it is needed.

1. In the first video I spoke about idealized design. Unlike the typical visioning process, it does not require you to predict what the future will be like. Rather, it asks you to assume that the environment will be exactly the same as today, and to image what would be the ideal organization given the current challenges facing the organization.

The purpose is to raise the aspiration level and spur creativity, while at the same time developing realistic solutions that one can start implementing today.

2. In the second video I described some key features of the axiomatic design approach, which was the main inspiration for my book (particular chapters 2, 4, and 8). The key observation is that new organizational designs often contain contradictions which prevents them from being fully effective.

At times, these contradictions are only discovered after a new organizational model is implemented. For example, one discovers that although a new model enables the organization to reach one goal, such as cost effectiveness, it compromises the ability to reach another goal, such as improving the customer experience.

The key idea is that we need to be more precise in defining requirements and to test how different requirements relate to each other, before implementing a new design (In the coming months I intend to develop this idea further and develop tools that I will test on my client projects.)

3. In the third video, I discussed the classic issue of how to align the formal organization with the work processes. I presented the FRAPS diagram, drawn from my book. The diagram is intended to summarize a key insight in the academic research on organization design: To maximize effectiveness and minimize coordination cost, you need to integrate (between roles/units/processes) when there’s a high level of interdependency, and separate when there is a low level of interdependency. It’s a simple principle, but frequently overlooked.

4. In the fourth video, I turned to vertical structure and talked about how to define managerial accountability. In particular, I discussed Elliott Jaques’ concept of three tier management, which distinguishes between the responsibilities of the direct line manager and the manager’s manager. This is not a new idea, but few companies have implemented it consistently. Every large organization that intends to get better at developing talent and facilitating internal mobility should consider it.

5. Finally, in the fifth video I discussed a somewhat controversial issue, namely, why we need hierarchy and whether democratic governance is a viable alternative. There have been many idealistic attempts at removing management hierarchies, but as I explained in the video, few have been successful.

I argued that the basic challenge isn’t to create more participation or engagement per se, but to recognize the basic design contradiction: To be successful, a democratic organization would also need to be effective. That’s why we have organizations – to get things done. I describe the best option I have encountered so far – the circular organization.

This video marathon has come to an end, but I consider these five ideas to be foundational, so I am going to return to these topics frequently on this blog, but maybe discuss them from different angles. One thing I want to do is to show in a bit more detail how to apply these ideas in an actual redesign process.

By the way, I received several comments about the videos (some posted on the blog, some via email) – I appreciate that, I learn a lot from your feedback and try to respond to every message I receive, so keep’em coming.

Before we can design a more effective organization, we have to understand the current one.

We have to understand how it works, and identify the causes of problems. In other words, we have to come up with a “diagnosis” of the organization.

It’s a critical part of any re-design effort. Yet it is frequently underestimated.

I have been thinking it’s a challenge that affects several areas in life.

Let’s focus on health care and medical treatment for a moment.

Most people who need to undergo a medical procedure of some sort will worry about the chances of it going wrong. In most countries, doctors are required by law to inform patients about the risks of various treatments. Similarly, many patients will ask their doctors about side effects of drugs that they are taking (or hopefully, be told without asking).

Yet, one thing is the risk associated with the medical procedure it itself, or the drug, but is it actually the one that is needed given the medical problem the patient is suffering from? Could it be the right procedure, for the wrong medical condition?

It could. It turns out that the probability of misdiagnosis (including missed diagnosis of a disease) is far higher in most studies than the chance of surgical or medication errors. In the studies I have seen, there might be a 1 in 100 (or less) chance of adverse effects of a standard surgical operation. The probability of misdiagnosis is more like 1 in 10 – that is, 10 times higher.

Now think about that for a moment. In medicine, one has a wide range of standard measures and well established, objective indicators (blood pressure, heart rate, infection indicators, etc.). One also has a set of well established interventions for the most commonly known medical problems.

What do you think the chances are of forming the right diagnosis during an organizational change process?

Unlike in medicine, there are generally no standard indicators that everybody can agree on. There is no study that says that once customer satisfaction tips below 62,5%, you have a problem, and need to inject a satisfaction-raising organizational serum.

So we are probably much worse than doctors and the probability is then below 90 percent. Maybe 50%? In any case, I think it is likely that a lot of energy is spent fixing the wrong problem. Or, put differently, that we could save an enormous amount of time and money if we improved our ability to carry out organizational diagnoses in a better way.

What could we do, specifically?

The key thing is to focus time and attention on it. We need to have a process in place to find out what the problem really is.

The fact that we don’t have standardized indicators like in medicine doesn’t mean that we don’t have data. In fact, there’s lots of data. The first thing we should do is use the data we already have – for example, in customer and employee surveys.

Then we should supplement that with data that can tell us more about the current organizational design, and how well it is aligned with our strategic goals and our business processes.

Collecting and intepreting organizational data requires a particular “investigative” attitude. Just like medical doctors, there’s a risk of just confirming our initial guess regarding the cause of a problem. We need to be aware that we may make errors. We need to remind ourselves that the first solution we come up with probably is wrong.

There are those who say, come on, we don’t have the time for this, we need to make a decision and start implementing now. I have addressed this challenge in previous blog posts.

Unlike in medicine, there is not an “organizational doctor” that makes the diagnosis. It’s a social process. You gradually create a consensus about the problem and about possible solutions. By spending time in this phase, by being systematic, and by involving people you not only increase the chances of a correct diagnosis but also lay the foundation for acceptance – and for rapid implementation of the chosen solution.

P.S. By the way, if you consider using external consultants in an organization re-design process, I would suggest that you try to evaluate their ability in this area before hiring them. I have observed that even experienced consultants do not necessarily display very sophisticated “diagnostic” skills. I think you will get a sense of this by asking how they typically proceed in a project, the kinds of questions they ask during interviews with managers, and so on. And above all, steer away from the ones who believe there is only one possible cure, regardless of affliction.

Photo credit: jfcherry via photopin cc