Organisations are always seeking new catalysts for efficiency and effectiveness – and never more so than when a new CEO is appointed. In response to increased digital disruption, we are seeing more and more incumbent leaders also turning to the tried-and-tested approach of the company-wide re-organisation. Normally expressed as lines and boxes on a metaphorically dusty powerpoint file, the org chart is often zealously guarded, and in many organisations, an inaccurate secret.
In 2010, Bain & Company shared the results of research into re-organisations launched by new CEO’s, which showed that one third undertaken by companies produced no uptick in performance, and in some cases, value was actually destroyed. However, as the trend for transparency, agility and flexibility grows, we are seeing more organisations trying more radical systems such as holacracy, dual organisation and other self-management structures. But what have we learnt about making them stick?
We spend a lot of time helping orgs sense and respond to market conditions, and transforming the inside of their organisations to cope with disruption & get ahead of the curve. Inspired by many discussions and projects, here are three key considerations:
- Don’t divorce org structures from decision-making: for companies undertaking an organisational transformation that spans not only structure but also culture, leadership, ways of working and technology, the need to show quick results can mean focusing on only one, easy-to-understand aspect at a time. Re-structures, although big in scale, are well understood by organisations. And this is where the gremlins begin. You cannot change the org structure without changing the way decisions are made, a core leadership way of working. The reason that hierarchy made the Army so efficient, was not that everyone had a place and knew where it was, but rather than decisions could be made quickly and efficiently at the right place said hierarchy, and the results of that decision could be quickly cascaded to where they needed to be executed on. In new, self-managing org structures, the decision-making approach needs an even more radical overhaul, and a significant investment of time and learning for leaders and employees alike.
- Since there is single perfect org structure, there is no single perfect decision-making model: When we think about the types of structures in which work gets done in an organisation, we see communities of practice, networks, agile teams and, yes, the line org. In each of these areas, we can enable faster decisions in different ways depending on who is taking the decision and who needs to act on the outcome. Enabling employees to select the right kind of decision-making approach, by encouraging sharing of practices across the organisation or using a knowledge base such as Shift*Base are great starting points. But employees need protected spaces in which to try and fail as they find the right balance.
- Design Transition Strategies: A key strategy to success in org structure changes linked to decision-making is a clear transition plan, with the stages of the transition clearly described. Much as successful enterprises have a clear, shared vision, so do changes in structure and decision-making. The more clearly this is linked to the business strategy, customer needs and the drive towards a future firm, the more engaging it becomes for employees. When seeking to reduce bureaucracy in an organisation, and simplify/flatten the organisation structure, the new decision-making model becomes even more crucial. Without the regularised procedures and formal division of responsibility that bureaucracy brings, self-management needs discipline, culture and ways of working otherwise chaos ensues.
Here are some links to help you explore the area in more detail:
- Alexander Rupert discusses the increasing move towards decentralisation in organisations, with entrepreneurs, in particular, focusing on value creation opportunities
- James Governor looks at the three types of people you find in any change process in large organisations
- Excellent overview from HBR on the Decision-Driven Organisation
- An excellent overview of GE’s approach to self-management, Teaming
- An interesting workshop exercise from the University of Kent on the critical role of organisational structure in effective decision-making