Organization Design Rick Walters
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This document summarizes an organization design presentation given to the Dallas Human Resource Management Association. It discusses organization design frameworks, engagement of human potential, and examples of organization design interventions. The document provides an example of an organization that addressed shifts in products/services through workshops identifying common goals, challenges, and initiatives to improve processes, structure, and develop employee capability over multiple years. Key success factors included clear strategy, leadership engagement, and a structured design process.
Organization Design Rick Walters
- 1. Organization Design: Strategy Driven and a Whole System Perspective and a Whole System Perspective Presented for the Dallas Human Resource Management Association OD Professional Emphasis Group By Rick Walters Rick Walters © 2010 September 16, 2010 1
- 2. Topics • Introduction • Organization Design Framework • Examples • Success Factors • Overview of Five Design Areas • References Rick Walters © 2010 2
- 3. Organization Design . . . • Alignment . . . is guided by business strategy which changes to some is g ided b b siness strateg hich changes to some degree from year to year. Org design must be reviewed. • H li ti Holistic . . . is more than the structure. Don’t stop at the organization chart. • Engaging . . . releases or inhibits human potential. . . . releases or inhibits human potential. Your choice. Your choice. • Responsibility . . . is a responsibility of leaders at all levels. i ibilit f l d t ll l l Effective Eff ti design and change won’t happen by itself. Rick Walters © 2010 3
- 4. Engaging . . . Release human potential • The seed wants to grow, move the rock. – “Don't Push Growth; Remove the Factors Limiting Growth ” Don t Push Growth; Remove the Factors Limiting Growth. Peter Senge, 5th Discipline • Beliefs about people – People are naturally active; they set goals and enjoy striving – People who understand and care about what they are doing can devise and improve their own methods of doing work Two of the beliefs listed by Douglas McGregor, The Human Side of Enterprise • P i i l of Whole S t Principle f Wh l System A hit t Architecture – Design work systems to customer’s needs and for business results. One of twelve principles by One of twelve principles by Larry Miller, Whole System Architecture Rick Walters © 2010 4
- 5. Organization Effectiveness Frameworks • People Systems – Performance Management – Training & Development – Recognition and Reward – Individual and Team Dynamics • Process Focused Process Focused – Business Process Improvement – Six Sigma – Reengineering • Whole Systems Whole Systems – Comprehensive Organization Design Models Rick Walters © 2010 5
- 6. Organization Design Concepts Progression and Some Representative Resource Books Some Representative Resource Books Process Improvement Strategic Planning Tavistock Socio- Self- Dynamic Institute Technical Directed Org. Research Systems Teams Design Rethinking and Reengineering Effective Holistic View Teams of Performance Rick Walters © 2010 6
- 7. Organization Design Framework: Star Model Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels 2002. Jay Galbraith, Diane Downey, Amy Kates Rick Walters © 2010 7
- 8. Organization Design Enablers Structure People • Function • Assessment and selection • Geography G h • Performance feedback • Product • Learning and development • Customer • Culture, norms, habits • Role definition • Written, unwritten rules • Interfaces Strategy Strateg • Boundaries • Vision • Governance • Mission • Priorities • Strategy Rewards Processes • Values • Networks • Metrics • Goals • Values and Behaviors • Processes • Teams • Compensation • Integrative roles • Rewards and recognition • Matrix structures • Lateral capability 8
- 9. Focus Question • Is the organization designed to achieve the desired outcomes (defined by market/customer) and results (d fi d b k / ) d l of the business strategy? – What gaps in results exist now or will exist if no changes to design or capability are made? – What capabilities and changes are needed to capture opportunities or move in a new direction? Rick Walters © 2010 9
- 10. Organizational Development Approaches • Targeted, narrow focus • Complex interventions • Comprehensive, detailed, interventions – Governance by key g , g large scale, design and – One or small team of sponsors or implementation programs sponsors leadership team – Governance by hierarchy – One or a few – Several organization of steering teams organization design design components – Dedicated design teams components involved involved – Comprehensive transition planning and implementation Targeted Process Individual / Manager Improvements or Work Group Mergers and M d Performance Issues Acquisitions Problem Solving / ERP System Decision Making Implementations New Business or Unit Startup Rick Walters © 2010 10
- 11. OD/HR/Consultant Role in Organization Effectiveness • Responsibility . . . is a responsibility of leaders at all levels. • When Quality Circles, Total Quality Management, Business Process Reengineering or other business improvement frameworks were emerging, many organizations had dedicated groups of experts to lead organizations in application of these complex approaches. • To a large degree, these dedicated functions no longer exist. However, from T l d th d di t d f ti l it H f the momentum of the initial programs and with additions to management curricula, managers are taking ownership of organization design (whether they know it or not). Although not necessarily in a methodical or comprehensive fashion. p • The role of the consultant can be to maintain an eye on the principles and methods available for organization design and to bring just the right amount of relevant process to leaders and leadership teams when needed. Rick Walters © 2010 11
- 12. Examples from division and department level transformations. ORGANIZATION DESIGN INTERVENTION EXAMPLES Rick Walters © 2010 12
- 13. Case for Action & Accomplishments 2000 Accomplishments Diminished credibility Credibility up – seat at the table Decreased customer satisfaction High customer satisfaction Cost overruns Cost goals being met – predictable outcomes Ability to deliver strategic and tactical “Fire-fighting” solutions Not taking full advantage of investments in Increasing entitlement and leveraging of IT IT solutions investments Poor project execution Projects meeting expectations Positive impact on morale – higher than p g Negative impact on morale benchmark on industry surveys Poor global coordination Global coordination & cooperation Minimal business integration g Increasing integration across business units g g Rick Walters © 2010 13
- 14. Example – Drivers: Shift in Products and Services Structure People Corporate Priorities Improve Customer Strategy Relationships • There is and will be a change in the make up of projects to Increase Market Share include more, larger system integration projects. i t ti j t Improve Organization Processes • Common platforms will need to Performance support diverse business unit needs. (e.g. commodity and Rewards differentiated, low and high volume) Rick Walters © 2010 14
- 15. Structure • Initially a Major Program box and manager was added to the org chart with the implication that: h h i h h i li i h – The other functions continue with the ongoing work. – The Program Manager manages the large program. Enterprise Applications V.P. Order to Purchase to Application Major Plan to Start B2B Cash Booking Support Program Rick Walters © 2010 15
- 16. Adding the role to the org chart addresses one component (partially). p (p y) Structure People • Add Major Programs function and leader. Strategy • There is and will be a change in the make up of projects to include more, larger system integration projects. i t ti j t Processes • Common platforms will need to support diverse business unit needs. (e.g. commodity and Rewards differentiated, low and high volume) Rick Walters © 2010 16
- 17. Challenge • The leadership team recognized there were many g y implications for how the organization would operate going forward. For example, all managers will have challenges with priority and h ll ith i it d resource limitations with the addition of the new large program. The program was to be 3 4 years in was to be 3‐4 years in duration. • A workshop was held with the leadership team with the following objectives: – What are the common goals across the functions in the group, including the new large program? – How do we work, communicate and support one another to implement our , pp p combined priorities (continuing with existing functions and successful execution of the new large program)? Rick Walters © 2010 17
- 18. Areas to address identified in the workshop, mapped to the organization design framework. mapped to the organization design framework Structure People • Internal Customer interfaces and • SME’s on business processes relationship management • Cross-training Cross training for fle ibilit flexibility • Restructure customer teams • Need appropriate knowledge per • Internal and external suppliers system interfaces and relationships management Strategy • Business Internal Customer priorities, short and long-term. Processes • Scope management (assistance from internal customers) • People resources allocation Reinforcement • Requirements gathering and • Alignment within the organization, priority setting with customers across functional groups and • Contracting and on-boarding of individuals supplemental labor (short lead time, expertise requirements) • Simplified work design to make it easier to bring in contractors Rick Walters © 2010 18
- 19. Four initiatives defined with leadership team members assigned to each. members assigned to each • Communication Across Functions – Action: Project Coordination Team. • Communicate with Customers C i i hC – Action: Stakeholder communications and planning. – Action: Restructure business unit stakeholder teams. • Resource Management esou ce a age e t – Action: Develop plan / approach. • Internal / External Supplier Management / Relationships – Action: Continue with existing efforts and mechanisms. • In addition a process was developed and implemented to manage the life cycle of the initiatives so that organization capability was improved year over year. Initiative Life-cycle Definition and Identification of Planning to Final Report, Consensus on Org Change Institutionalize Celebration and Scope Implications the Changes Next Steps January December Rick Walters © 2010 19
- 20. Structure & Lateral Functions • Viewing the additional structure and lateral mechanisms overlaid with the functional organization h i l id i h h f i l i i chart. Restructure business stakeholder decision making teams. Enterprise Resource Management & Proactive relationship Applications management. V.P. External Supplier Relationships Order to Purchase to Application Major Plan to Start B2B Cash Booking Support Program Cross-functional Projects Team: Review projects, staffing, forecasts and interdependencies. Rick Walters © 2010 20
- 21. Other Implications • A shift in the organization characteristics from highly technical emphasis to a business analyst role and skill h i l h i b i l l d kill set. • Reconfiguring the organization to a functional model: Reconfiguring the organization to a functional model: PMO structure, Level 2 Support Function and Technical Applications support. • Developing and using tools for resource allocation and l d l f ll d management. • Development of career maps for business analysts and Development of career maps for business analysts and project managers. Rick Walters © 2010 21
- 22. Success Factors for Sustainable Change • Clear understanding of business drivers and strategy. • Engagement of leadership team in process to identify – Common goals / vision – Challenges and gaps Challenges and gaps – Implications for organization culture / mindset – Initiatives to develop organization capability • Structured process to implement organization design changes: Awareness Adoption, Institutionalization – Typically, the organization design changes that are needed to execute strategy are new and often do not fit in to the current execute strategy are new and often do not fit in to the current charter of any existing functional area. – To create new capability, the leadership team must define a charter for the initiatives, take the lead and make time to develop and implement them in parallel with existing develop and implement them in parallel with existing operations. Rick Walters © 2010 22
- 24. Organization Design Enablers Structure People • Function • Assessment and selection • Geography G h • Performance feedback • Product • Learning and development • Customer • Culture, norms, habits • Role definition • Written, unwritten rules • Interfaces Strategy Strateg • Boundaries • Vision • Governance • Mission • Priorities • Strategy Rewards Processes • Values • Networks • Metrics • Goals • Values and Behaviors • Processes • Teams • Compensation • Integrative roles • Rewards and recognition • Matrix structures • Lateral capability Created from concepts in : Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (New York: AMACOM, 2002). 24
- 25. Strategy • Strategy guides decisions in the face of infinite possibilities for organization design choices. possibilities for organization design choices • Clarity on drivers for change, vision and direction is key for creating a foundation for consensus building k f ti f d ti f b ildi across leadership teams and key stakeholders. • Key steps: – “Identifying Success Indicators: What business results must the design achieve? – Understanding the Value Proposition: What are the organizational implications of our strategic focus? – Determining the Design Criteria: What are the organizational capabilities that the design must help our organization biliti th t th d i th l i ti build?“* *Source: Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (New York: AMACOM, 2002). Rick Walters © 2010 25
- 26. Structure Two of five steps from Designing Dynamic Organizations. • “Step 1. Selecting a • “Step 2. Defining the new structure that is most likely h i lik l organizational roles in the i i l l i h to support development of structure and clarifying the required organizational points of interface among capabilities* capabilities*” them.* them *” – A new organization structure – A cross‐functional resource was implemented: From management team was Product to Function focus. established. – Roles were defined for Enterprise relationship managers for key Applications business functions. V.P. Resource planning User Technical Major PMO and management team. Support Support Programs * Source: Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (New York: AMACOM, 2002). Rick Walters © 2010 26
- 27. Processes Key Concepts • Organization Structure provides a starting point for organization design. There is not a perfect or ‘right’ structure that accommodates all needs. • Lateral organization components can fill the gaps or Lateral organization components can fill the gaps or ‘white spaces’ in the organization structure. • Designing Dynamic Organizations emphasizes and provides more information about lateral capability. There are many other references for basic process design, improvement or reengineering. Rick Walters © 2010 27
- 28. Five Types of Lateral Capability • Matrix Structures: Dual reporting relationships in order to manage the conflicting needs of functional, customer, product or geographic forces. Elective • Integrative Roles: Managerial, coordinator or Integrative Roles: Managerial coordinator or boundary‐spanning positions charged with Managem orchestrating work across units. • Teams: Cross‐business structures that bring Complexity ment Time and Energy people together to work independently and share collective responsibility for outcomes. Can • Lateral Processes: Move decisions and information through the organization in a information through the organization in a y d Occur O formalized flow. Naturally • Networks: The interpersonal relationships and communities of practice that underlie all other types of lateral capability and serve to coordinate work informally. Rick Walters © 2010 28
- 29. Examples of Lateral Capabilities Augmenting Organization Structure Design Organization Structure Design Cross-functional Cross-functional Cross-functional Networks Processes Teams • Project • Cross-business • IT Leadership Team Management M t Funding Model F di M d l • Regional P t R i l Partners • Business Analyst • Business Readiness • Global Initiatives • Architects • Standards Board • Cross-functional • Diversity es y • Job Rotations oa o s Projects ojec s • Others… • Others… • Others… Rick Walters © 2010 29
- 30. Example of Integrative Role for the CTO to facilitate communications and sharing across technical roles in the organization. Prior to 2000 2001 2006 2007 + Customer Enterprise Centralized Facing g View Function Focus Perspective IT Architecture Centralized decision Separate customer Separate customer making and governance focused technical focused functions with for architecture. functions. CTO in integrative role. Rick Walters © 2010 30
- 31. Excerpt from Chapter Five: Defining and Rewarding Success Defining and Rewarding Success* Reward systems define expected behaviors and influence the p p likelihood that people will demonstrate those behaviors. They y ensure that everyone is pulling in the same direction. An aligned reward system reduces internal competition and the frustration and diffusion of energy that comes when people are given p gg competing goals. • Reward systems have four components: 1. Metrics: The systems that identify measures and targets for enterprise, business unit, team, and individual performance business unit team and individual performance 2. Desired Values and Behaviors: The actions that are most likely both to produce desired business results and to reflect the organizational values 3. Compensation: The monetary means intended to recognize a person s Compensation: The monetary means intended to recognize a person’s past contribution as well as motivate continued or improved performance 4. Reward and Recognition: The nonmonetary components that complement compensation systems to let people know that they are valued l d * Source: Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (New York: AMACOM, 2002). 31
- 32. Leadership Team Process – Defining a Recognition Program to Drive Desired Behaviors and Values B h i dV l • Definition ‐ Defining the program helps Alignment build consensus among the leadership • Consider how the department level y team members and clarify what values recognition program fits with other recognition program fits with other and behaviors are needed to meet programs. business and organizational culture goals • To get the most from each, in what ways do the recognition programs align • Process – The winner selection to reinforce behaviors. f b h process has value in asking the – Consistency of message (what is questions on a recurring basis, serving valued, desired) as a reminder of what is important, – Emphasis – what is needed to succeed driving discussion about what it looks d i i di i b t h t it l k in the current business environment or in the current business environment or achieve this year’s priorities like in action and providing feedback – Different levels or perspectives – and reinforcement. ensure programs are aligned but not redundant • Results – T ibl Tangible and intangible d i t ibl End f Y E d of Year Reflection R fl i results should be positively impacted • Are we getting maximum benefits from by the change in behaviors driven by the program? the program. This includes business – Effectively communicating expected g goals as well as the quality of the q y values and behaviors values and behaviors working environment and – Demonstrating and observing people relationships. exhibiting, behaving – Reinforcing other programs Rick Walters © 2010 32
- 33. People Practices* • Staffing the New Organization presents principles and tools to guide the process of placing people into new roles and positions. guide the process of placing people into new roles and positions • Assessing for Learning Aptitude presents a way to select for learning‐agile candidates. l i il did t • Performance Feedback reviews the ways in which multidirectional feed‐back can support building lateral capability. • From Training to Learning provides a checklist of the best practices that many organizations are utilizing to create a learning organization. Source: Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (New York: AMACOM, 2002). 33
- 34. Next Steps / Topics Rick Walters © 2010 34
- 35. What level of capability would you like to achieve? Capability Levels Mentor Teach T h Practicing act c g Learning Lead L d Reading Do Speak Rick Walters © 2010 35
- 36. Rick Walters © 2010 36
- 37. References • The Social Engagement of Social Science: A Tavistock Anthology : The Socio‐Ecological Perspective. Eric L. Trist, Fred E. Emery, Hugh Murray, Beulah Trist (1997) • Designing Effective Organizations: The Sociotechnical Systems Perspective William A. Pasmore (Apr 1988) • Whole System Architecture: Beyond Reengineering : Designing the High Performance Organization Lawrence M. Miller (1994) Lawrence M. Miller (1994) • Designing Dynamic Organizations: A Hands‐On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (2002). • Applied Strategic Planning, An Introduction Timothy N. Nolan, eonard . Goodstein, and Pfeiffer ( 008) Timothy N. Nolan, Leonard D. Goodstein, and Pfeiffer (2008) • Business Process Improvement: The Breakthrough Strategy for Total Quality, Productivity, and Competitiveness H. J. Harrington (1991) • Reengineering the Corporation: A Manifesto for Business Revolution g g p Michael Hammer, James Champy. (1993) • Work Teams That Work: Skills for Managing Across the Organization Anthony R. Montebello (1994) • Analyzing Performance Problems: Or, You Really Oughta Wanna‐‐How to Figure out Why People Aren't Doing What They Should Be, and What to do About It Robert Frank Mager (1997) Rick Walters © 2010 37
- 39. Organization Design Framework Created from concepts in : Designing Dynamic Organizations: A Hands-On Guide for Leaders at All Levels. Jay Galbraith, Diane Downey, Amy Kates. (New York: AMACOM, 2002). 39