How to find the sweet spot – where the design of an organisation connects with its employees and unleashes business performance.
To tell a story of how structure can affect behaviour and ultimately performance of a business, I would like to share my experiences of a previous life as a longstanding employee of Dixons Stores Group. Over a period of ten years, I was on the receiving-end of a series of restructures, each of which was distinctive, having a profound effect on how the employees responded and performed. Comparing this experience to the Organisation Effectiveness Portal helps us understand how interconnected the various dimensions are.
Acquisition of Currys and the generation of destructive energy
In 1984 Dixons acquired Currys. The businesses were initially kept quite distinct and separate, with the objective of allowing competition in their overlapping product areas to continue to retain their edge in the marketplace. However, instead of a constructive, healthy competitive environment, this generated a destructive energy. The two retail chains battled vehemently against each other, with both discounting heavily to win over each others’ market share in TV and video. One could only marvel at the amount of energy taken up in effectively reducing each other’s margins. What had not been appreciated was how their history of intense rivalry was amplified once they were both inside the same organisation, where they were now competing head to head.
Integration and the sapping of energy
Of course, such a destructive episode could not be allowed to continue and so in 1988 we entered an era of integration, whereby the commercial departments merged. This restructure created a new functional business model where the marketing, buying, operations and property directorates each had responsibilities for both chains, with the aim of creating synergies between the businesses. This worked very well, especially for the buying department where the buyers in the overlapping product areas of television, video, hifi, electronics and computers could extract better terms from their common suppliers. Likewise, for retail operations, the new regional management oversaw both chains in the same towns, generating an ever-more efficient process of store management, with best practice being spread between the two chains.
However, it wasn’t long before the negative consequences of this approach started to surface.The very strategy of business integration that eliminated those initial destructive tendencies now began to sap people’s energy. Now, as the business focused on systems integration, there grew a more “corporate” feeling with a weaker connection to each brand. The unintended consequence was an unconscious blending between the two brands, reducing the distinctiveness between them in terms of store look, product range and shop-floor culture. The identity of being either a Currys or Dixons employee, with the passion to go that extra mile and make themselves distinctive, withered away. Market share drifted south, prompting (an ultimately failed) takeover bid from an unwelcomed rival.
Balance, identity and the leap of positive energy
The journey that took us from destructive competition to dulled integration had to move on, and so came the next stage of evolution. By keeping some functions centralised, whilst creating separate sales and marketing retail brand businesses, we gained a healthy balance between the two former business models. Once again each brand had its own managing director, but whose remit was limited to marketing and retail sales operations. Within days of the move, the excitement amongst staff and managers was palpable. The potential energy that had been suppressed for the last few years was unleashed. The MDs with their distinctive styles generated a different feel in each brand. The volume of initiatives planned between marketing and retail operations exploded, and although it was a nightmare for the corporate support functions, it turned out to be a very profitable period for both brands. Within weeks, Dixons and Currys had rediscovered themselves, and with a strong supporting back-office backbone from which to grow, the market shares of both businesses started to climb.
Of course, things move on, and in the past decade they’ve seen seismic shifts in the marketplace, so the business has subsequently had to make yet further fundamental changes to its business model. But reflecting back on this particular era, what can we learn from this experience and why the third phase ultimately succeeded?
Applying he OE Cam portal for organisation effectiveness to this story demonstrates the following inter-dependencies :
- The history of rivalry of the two brands would require careful handling of the acquisition to ensure that the energy was harnessed and unleashed on the competition rather than each other;
- The strategy of the company was to strike the right
balance between maximising the benefit of having two distinctive but overlapping brands, whilst also optimising on buying and service synergies;
- This led to the creation of the separate P&L sales & marketing businesses, supported by Group Buying and Group Service functions;
- This required business processes to be re-written to create the right constructive tension between the brands and buying;
- It also created the right level of decision autonomy of the new MDs and their product teams, by working to a set of commercial rules for those areas where product categories overlapped;
- The brand teams were then rewarded according to their brand success as well as overall Group profitability;
- The brands were led by two leaders who had distinctive styles, each galvanising their commercial teams to win;
- The culmination of all of this was teams of people who identified with their brand, engaged in their strategic objectives and were energised to win.
Understanding how the configuration of a business can affect the identity and drive of individuals and teams, and how that can impact business performance, is crucial. Such a powerful energy source can destroy, wither, or re-energise your business.”
The secret then is to discover where the value of the business (that is created) coincides with human passion and motivation. As in the case of the Currys and Dixons saga, what can be seen as rational, economically driven decisions, can flounder if your thinking does not take into account your people and what they identify with and are passionate about.
This is where OE Cam can help. We work with top teams on two levels. On the rational level, we provide a methodology that enables you to translate your strategy into an organisation that differentiates you from your competitors and delivers value. On the emotional level, we work with teams to reveal what makes the organisation tick, what people identify with and what energises them.
The trick is to find where the rational and emotional come together and create that sweetspot between history, power and reward that can generate such a powerful, creative energy.