Perhaps most crucially, if you embark on any organisational change without fully understanding what makes your company special – both for employees and customers – you could lose the very magic that makes your organisation what it is. A great example of this playing out right now is the discussion around John Lewis considering changes to its staff-ownership model. Is this part of the JLP spirit that will be lost? Or is it an anachronism that needs to be removed for the long-term success of the business?
…if you embark on any organisational change without fully understanding what makes your company special – both for employees and customers – you could lose the very magic that makes your organisation what it is
So where to start?
A considered approach to organisational transformation & retaining the sparkle
Before rushing into any decisions about the way forward, it’s critical to be able to answer questions such as: What are the organisation design principles that will guide your decision-making? What are the areas critical to delivering your strategy that you need to protect or build? What part of your organisation should drive the business forwards? And how do the different parts of your organisation interface with each other?
In our experience, there are three main steps for answering these questions and helping you to take a more considered approach to organisational transformation:
1. Define the dominant logic of the business
Firstly, you need to define your design principles. These will act as a check and balance to your decision making. For instance, if digital is key to your strategy, how is this reflected in the transformation? If the customer is central, how will your new design support this? Perhaps your people really value flexibility and empowerment – how will this feed into how you allocate decision authorities? Clarifying these principles will make it easier to keep on track.
Another component is understanding your competitive advantage. Look internally and externally to verify this. Confidence in articulating the areas that set you apart from other organisations will help you to protect them later on in the process.
Ultimately, much of an organisation’s effectiveness is determined by where you want the power to lie. What element of your business – such as customer, geography, product or channel – has primacy in driving the business and how it operates today? And how, if at all, does that primacy need to shift? Understanding your organisation’s core value chain and mapping your teams against it is important for building this understanding and highlighting where change is needed. See diagram 1 below.
Finally, the eventual structure will need to be inherently ‘ambi-dextrous’. What do we mean by this? Being able to balance the short-term with the long-term is a critical skill for any leader or organisation. This capability should be reflected in the organisational design. By facilitating a simultaneous focus on business as usual and long-term change, you will enable delivery on the bottom-line, as well as account for unforeseen change and transformation. Sustainability is a good example here; any organisation looking for long-term growth needs to ensure that the accountability for building a sustainable business has sufficient weight and is balanced with the imperative to deliver profit in the short-term.
Spending enough time on this first step helps create a shared understanding among senior leaders of the logic used to shape the organisation. This will be a critical tool in engaging people in the transformation.
Confidence in articulating the areas that set you apart from other organisations will help you to protect them later on in the process
2. Clarify accountabilities, boundaries and interfaces
Nothing in life ever stays the same. As a result of small changes over time, elements of the organisation may have ended up in the wrong place, and boundaries around different processes and accountabilities may have shifted or blurred.
So step two is all about ensuring effective cross-functional working. By defining clear interfaces between critical functions and clarifying who is accountable for what, there is huge potential for more effective working between functions, and some potential for cost savings. People will spend less time duplicating work or being delayed by confusion over who does what, who has the power to decide, or who needs to be consulted – and more time on value-add work.
3. Find the efficiencies
Now that you have a clear future operating model that reflects your organisation design principles, and teams that understand how to interface with each other, you can look to see where you can drive efficiencies.
It is only when you have determined steps one and two that you can make sensible decisions about resource efficiencies that do not jeopardise the long-term future of the business. It will also force the business to think hard before making any cuts, as it will better understand the trade-off it is making between delivering in the short term versus the long term.
For step 3, there are a number of options that firms are familiar with. One option is about reducing management layers and/or increasing spans of control to speed up decision making. Another area is about optimising resources through delivering activities at scale across the business rather than duplicating the same activity within each function. In looking for these economies of scale you will need to be clear about the trade-off between keeping localised, responsive focus, versus building cost-effective scale, that reduces duplication and builds cross-functional learning. (See box-out on Making Trade-offs)
Making Trade-offs
Scale vs Focus – one challenge that often comes up is how an organisation can obtain economies of scale. This requires a trade-off evaluation between scale (centralisation) and focus (decentralisation).
On the one hand, working at scale means common ways of working, less duplication, more efficiency and more cross-unit learning. On the other hand, centralisation can make things slower and less responsive to the customer.
The counter view is decentralisation (more focus). This means you are closer to the customer and more responsive to their needs; providing teams with a stronger sense of accountability. However too much focus can generate duplication and even rivalry within the organisation.
Future Now vs Cost Savings – the second challenge is about how quickly you can implement your future operating model, as some elements may require building-in capability or capacity, which challenges your second objective of reducing costs. So, you need to determine what trade-offs you are willing to make between saving costs and moving towards your future model.
It will also force the business to think hard before making any cuts, as it will better understand the trade-off it is making between delivering in the short term versus the long term
Protect the core to flourish
A focus on ‘keeping the magic’ and being crystal clear about what core elements in the business you need to protect or build before driving down costs, paves the way for a more considered, effective organisation transformation.
Make time to define the logic and clarify accountabilities first and you will find the right efficiencies that enable your organisation to flourish.
GARY ASHTON, PARTNER
Gary leads OE Cam’s Organisation Development practice and consults across both public and private sectors. He has undertaken a variety of governance and performance improvement projects including Board evaluation and development, major organisation change to structures and processes, post-merger integration, and improving joint venture organisation capability.
LUCY COX
Lucy is a Business Psychologist in OE Cam’s Talent Management practice with expertise in management and leadership development. With experience spanning organisation design, employee engagement, team effectiveness and learning & development, she enjoys using psychological insight to create mindset shifts and drive behaviour change both at an individual and organisational level.
