We’re moving into the second half of 2015. Are you thinking about an organizational redesign?
If you are, you may want to read “Getting Organizational Redesign Right” a recent article from Steven Aronowitz, Aaron De Smet and Deirdre McGinty, the organizational design experts from McKinsey & Company.
Perhaps when we say “organizational redesign” you think of well intentioned but misguided efforts driven by senior management and the HR organization to improve operating performance, or – more cynically – as moving boxes and reporting lines around on pieces of paper.
The article is interesting because they open by confirming the high failure rates on organizational redesign efforts that most people suspect from the anecdotal evidence.
They note that many companies these days appear to be “in a nearly permanent state of organizational flux” with over 85% of senior executives having experienced a resdesign in the past few years (over 75% of them within the past two years alone). The kicker is that less than 25% of these organizational redesigns work.
They also confirm, in describing their own “golden rules” of organizational redesign, that there is no magic bullet or formula for success. Instead of better motivated and engaged employees, and enhanced business performance, in most cases organizational redesign is associated with unnecessary cost, wasted time and a net negative impact on employee morale and engagement.
Some organizational design initiatives are necessary – they may be linked to a new expansion of operations, a new product line introduction, or a business acquisition. In these cases it is great to be able to use tools like Organimi to help streamline, simplify and more effectively communicate the needed organizational design changes.
But what about the less obvious cases? The authors share a broader perspective on organizational design – as the strategy framework for the organization spanning “the processes that people follow, the management of individual performance, the recruitment of talent, and the development of employees’ skills.” They note that a “shake things up” tendency often prevails when senior managers get “a sense that ideas agreed upon at or near the top of the organization aren’t being translated quickly into actions or that executives spend too much time in meetings. These signs suggest that employees might be unclear about their day-to-day work priorities or that decisions are not being implemented.”
Whatever the root cause or motivation behind a redesign effort, their definition of success is the same:
A successful organizational redesign should better focus the resources of a company on its strategic priorities and other growth areas, reduce costs, and improve decision making and accountability.
McKinsey’s “golden rules” of organization resign are derived from hundreds of engagements across different industries, regions, and company sizes. They also reflect learnings derived from redesigns driven by restructurings, business acquisitions or mergers, or efforts to simply reduce costs and streamline operations and accountabilities.
The rules are listed and summarized below. You can get more detail and case study / success story references and information from their article above.
1. Focus first on the longer-term strategic aspirations
Shift the focus from the near term – preeoccupation with organizational deficiencies – to the long term, making sure organizational redesign efforts are linked in the minds of all to strategic business objectives.
2. Take time to survey the scene
Have a baseline. As simple as it sounds a majority of executives apparently have a poor understanding of the “on the ground” reality of operations in their current state when they go about reworking things. If your data is out of date your conclusions and decisions taken on that data will be wrong. Using Organimi to get the current organizational design laid out – as it really exists – is a great way to create a solid baseline for your redesign efforts.
3. Be structured about selecting the right blueprint
There are no right answers on organizational design. Avoid making decisions based on untested hypotheses or intuitions. To make better decisions, organizations should “carefully weigh the redesign criteria, challenge biases, and minimize the influence of political agendas”.
4. Go beyond lines and boxes
Get beyond the paper based org chart with its lines and boxes, into structure, people and process – where people meet, how they interact and how this shapes decision-making and execution. As the McKinsey article notes, the strongest correlations with success came from organizational resigns that targeted “at least two structural, two process, and two people-related redesign elements”.
5. Be rigorous about drafting in talent
One of our favorite golden rules is the notion that organization resign efforts should focus first on roles, then on people, avoiding the temptation organizations often succumb to of selecting candidates for positions and then building organizational redesign efforts around them. Let’s here it for the “talent draft”.
Organimi easly permits a roles based view of your organization, and makes it not only possible but incredibly easy to experiment with various individual iterations.
Organimi makes it much easier to ensure a successful outcome for your redesign efforts – and a fairer one for your teams. “A talent draft that gives all units access to the same people enables companies to fill each level of the new organizational structure in an orderly and transparent way, so that the most capable talent ends up in the most pivotal roles. This approach promotes both the perception and the reality of fairness.”
6. Identify the necessary mind-set shifts—and change those mind-sets
Organizational resign needs to take into account the “beliefs, emotions, hopes, and fears” of the people whose work lives your redesign efforts are reorganizing, including the irrational elements of all of our behaviors. Emphasis on communication, transparency and the positive elements of organizational redesign efforts in building new employee skills and capabilities are important to successfully changing entrenched views of how the organization works today and should work moving forward.
7. Establish metrics that measure short- and long-term success
In a world where “what gets measured gets done”, having metrics to evaluate how an organizational resign effort is working makes simple common sense – a step that is nonetheless often overlooked. Simple, clear and new key performance indicators (KPIs) focusing on how a changed organization is contributing to performance over the short and long term are the best ones to use.
8. Make sure business leaders communicate
An interactive cascade (one that allows two-way communication) gives people an opportunity to ask questions and forces top leaders to explain the rationale for change and to spell out the impact of the new design in their own words, highlighting the things that really matter.
9. Manage the transitional risks through “pulse checking”
Given the high failure rates of organizational resign efforts, risk mitigation plans are a simple and important extra step to take to address a wide range of potential issues whether relating to business continuity, employee defections, employee engagement, or implementation failure itself.