With thanks to Toby Tester and following from my blog last week (click here to read it if you’ve unwittingly stumbled upon this random collection of thoughts), here is the exam question for the week:
What does an ideal organisational structure look like to cope with the challenges of today’s working environment?
Let me first try and define what I envisage as an ‘ideal’ structure with a series of questions:
People: Can we design something leverages talent, innovation, new knowledge, and nurtures employees so that they are motivated to give of their ‘discretionary’ (not contracted, out of office, problem solving typically) time?
Efficiency: Can we develop a structure which has minimal ‘friction’ both in terms of decision making / strategy implementation and the generation of new ideas?
Control: Can we create a control structure which places emphasis on the spirit and commonality of purpose rather than just conformity to a set of processes which potentially constrain and are not particularly effective?
Way of working: Can we enable scalable agility and flexibility across a business structure?
Leadership: Can we create a cadre of leadership that actively supports and engages with the above criteria? How do we manage performance to encourage the right behaviour?
As an aside, I suspect that the restrictions of public listing almost inevitably discriminate against what I’ve set out above. Shareholding in what I’ve set out above is likely to be amongst the employees. Enabling easy transferability / avoiding accumulation through length of service / rewarding outstanding performance with equity are three key challenges which I would set those with the right skills and experience!
What do these criteria lead to? Let me start to set out some likely consequences.
Flat rather than deep: The challenge of communication, agility / flexibility and friction leads to a flat structure with as few layers as possible. The structure is less about control and more about communication. As a principle, I would suggest that organisations need to challenge their structures in terms of hierarchy on a regular basis and constrain the tendency to extend as part of their annual efficiency initiatives.
In the recently publicised GE Aerospace example (click here for a link on the subject), the ratio of employees to leaders is 200:1.
Fewer but stronger: Single function leadership roles lead to silos. Integrating leadership roles so that they are ‘outcome’ based leads to broader responsibility and ownership. To give some examples, combining:
- Strategy / Corporate Planning function with responsibility for Programmes and Projects (which is where strategic initiatives are delivered).
- CEO role with the HR role to bring alignment between direction, corporate culture, recruitment and talent management.
- Looking at corporate ‘risk’ on a holistic basis, encompassing CSR, legal, reputational and perhaps combining this with the financial function to provide a forward looking requirement with performance measurement capability creates an integrated perspective.
- Combining Communications / Customer Experience / Innovation / Research and Development, creating ‘front to back’ clarity in the context of product development and delivery.
CEO / Heads of HR roles are not necessarily new but still quite rare. Churchill Insurance (prior to the purchase by RBS) was run by Martin Long who famously filled both roles exceptionally well.
Partnering or employing? Working with service providers (legal, financial, company secretarial, regulatory) to deliver these capabilities as an ‘as required’ basis. Saves on cost, maintains market leading knowledge.
The norm amongst many start ups who cannot afford the cost base but even in larger established companies, the secondment of specialists into key roles is becoming reasonably established practice. Some Chief Risk Officers in global banks are good examples of this practice.
What’s critical and what’s not? Clarity of purpose and critical internal skills leads to a ruthless approach to outsourcing and a maximum use of technology to minimise human operational infrastructure. The test should be supervision and management by exception as the minimal requirement for any internal employee.
Following the wave of outsourcing in the late 90s, there has been a reaction with some functions coming back in-house. However, what’s not changed is that certain commoditised functions such as payroll, tech support, procurement are firmly in the hands of outsourced providers. The partnering with external providers is starting to become significantly more sophisticated to avoid the previous errors where shadow organisations started to build due to poor service levels and a lack of innovation amongst the outsource providers.
Forming and reforming: Recognising that project based work is likely to feature heavily in the new environment, removing barriers of access to new initiatives. These are driven by employee opt-in processes, both in terms of strategic intent and implementation. Part of every employees annual expectation is to have worked on at least one project outside of ‘business as usual’.
The best examples of this trend are firms like WL Gore, Google and Valeant (a pharma business entirely based on an acquisition strategy). Leveraging the positive aspects of project type behaviour, such as personal accountability, autonomy and decision making at the most appropriate levels, breadth of perspective are key drivers for this trend.
Rotation, Promotion: For all leaders, experience across all disciplines is a mandatory qualification prior to promotion.
Designing an organisation from the bottom up? Perhaps…