Not too many years ago, poorly managed and marginally competitive businesses could succeed. Not anymore. Aggressive competition, demanding customers, new technologies, global markets and now a severe downturn in the economy are putting unprecedented pressure on companies to rethink the way they do business.
Many organizations are floundering, even going out of business. Others are changing the way they operate and getting tremendous results. The leaders in companies that are achieving success are regaining their balance by resetting their strategies, refocusing on their most important customers, and improving performance by redesigning how they go about doing business.
Consider the following examples of companies that we’ve helped redesign:
- Rockwell International Corp. Space Shuttle modification site in Palmdale, CA, on a $60 M modification of the Atlantis Orbiter. The site modification team finished ahead of schedule and under budget and achieved outstanding customer quality ratings, working almost no overtime, with 20% of previous manpower levels, and one half the previous management hierarchy. They improved customer relations, implemented self directed work teams and had employees training employees in team skills with the full and enthusiastic support of the UAW Union.
- Corning, Inc. Mold Machine Shop in Charleroi, Through redesign, the facility moved from a failing cost center to a viable profit center, realizing 100% improvements in quality and delivery, reducing costs from 15% above the competition to 15% below the competition. The plant retrained an alienated workforce into multi-skilled work teams and reduced head count by 15% with full support and involvement of employees and the local union.
- Enseco Inc., Rocky Mountain Analytical Labs, Arvada, CO. By implementing several self-managing mini-labs they improved productivity by 50% in the 18 months, increased profit margins by 20-25%, reduced turn-around time from 28-14 days and reduced internal handoffs between departments by many times. Quality is at an all-time high.
- Coach Leatherware, Northeast Manufacturing, Carlstadt, NJ This manufacturing facility went through a cultural change process that included strategic visioning, redesign and training that improved leather utilization by 48%, reduced overhead spending by 10%, and increased plant efficiency from 88% to 100%.
What is organizational design?
As companies grow and the challenges in the external environment become more complex, businesses processes, structures and systems that once worked become barriers to efficiency, customer service, employee morale and financial profitability. Organizations that don’t periodically renew themselves suffer from such symptoms as:
- Poor performance and results
- Inefficient workflow with breakdowns and non value-added steps
- Redundancies in effort (“we don’t have time to do things right, but do have time to do them over”)
- Fragmented work with little regard for good of the whole (Production ships bad parts to meet their quotas)
- Lack of focus on the customer
- Silo mentality and turf battles
- Lack of ownership when things go wrong (“It’s not my job”)
- Lack of information or authority to solve problems when and where they occur
- Cover up and blame rather than identifying and solving problems
- Delays in decision-making
- It takes a long time to get something done
- Systems are ill-defined or reinforce wrong behaviors
- Mistrust between workers and management
Organizational redesign is a step-by-step methodology that eliminates or minimizes these conditions and improves the overall health and responsiveness of a business by better integrating people with core business processes, technology and systems. We take you through a process to identify dysfunctional aspects of work flow, procedures, structures and systems, realign them to fit current business realities/goals and then develop plans to implement the new changes. The process focuses on improving both the technical and people side of the business.
A well-designed organization ensures that the infrastructure of the organization matches its purpose and goals, meets the challenges posed by business realities and significantly increases the likelihood that the collective efforts of people will be successful. The process leads to a more efficient organization design and significantly improved results:
- Excellent customer service
- Increased profitability
- Reduced operating costs
- Improved efficiency and cycle time
- A culture of committed and engaged employees
- A clear strategy for managing and growing your business
Below is an overview of our approach to organizational redesign which targets and improves several dimensions of business performance.
The Transformation Model
We utilize the transformation model as a framework to help leaders understand their organizations and also guide a successful redesign effort. The model reduces the vast complexity of an organization to seven key elements that must be understood and aligned for a business to be successful. Alignment implies a holistic or systems point of view that finds the best “fit” between all organizational elements.
These seven elements form the “big picture” or context of an organization and ultimately determine its success. When we talk about organization design we are talking about the relationship and balance between each of these variables. The purpose of the design process is to create and successfully implement a streamlined and effective organizational design perfectly aligned with your organization’s philosophy and desired results. Many organizations, in spite of capable and well-intentioned people, fail to realize their potential because the structure, processes, and systems of the organization are barriers to efficiency and common sense decision-making.
Environment. Organizations, like all living systems, can survive only to the extent that they maintain harmony with their external environment. This includes being sensitive to the evolving needs and perceptions of customers, understanding changes occurring in technologies, knowing what the competition is doing and knowing the legal, social and political climates. Most organizations eventually die because they fail to keep up with changes in their environments.
Strategy. There are two parts to strategy. Business strategy identifies the reason for being of the business as well as the core competencies, objectives and factors critical to its success. A well developed business strategy tells the organization where it is going and guides it like a ships rudder in a stormy sea. An Organization strategy (core ideology) is the “being” or character of the organization. It has to do with who we are and not just what we do and includes the mission, vision of the future, values and guiding principles. A clear organizational strategy helps transform a company or office from a normal work place to one that inspires people and brings out their best.
Core Process. Flow of work through the organization. It is the sequence of events or steps necessary to get a product out the door or deliver a service. It usually cuts across department or organizational boundaries. It is, or should be, the focal point around which all other business unit activity is organized. Understanding, streamlining and properly supporting the core business processes is the central job of any organization.
Structure. How people are organized around the core business processes. It moves beyond box charts to understanding the boundaries, roles, responsibilities and reporting relationships among people. It is a sort of template that determines not only relationships but coordination of tasks and allocation of resources. The proper question about structure is not whether it is the right one, but whether it fits with the rest of the organization (core process, strategy) and helps rather than hinders performance.
Systems. Interrelated tasks or activities that help organize and coordinate work. Examples include recruiting and selection, training and development, how people are promoted, communication/ information sharing, decision making, how people are rewarded, planning/goal-setting, personnel policies and procedures, performance feedback, etc. They are usually “owned” by management or special support functions and cut across the entire organization.
Culture. How the organization really operates—leadership style, worker attitudes and habits and management practices that make up the distinctive “personality” of the organization. It is like the air that permeates everything and is both cause and effect of organization behavior. Culture mirrors the true philosophy and values that the organization actually practices. It is a measure of how well an organization has translated its philosophy (organizational strategy) into practice.
Results. The organization’s current performance which the success or health of an organization and are therefore the starting point for understanding how well the organization is functioning. Results indicate where the organization is strong and what it needs to keep doing, as well as where it is weak and what it needs to change. All other elements are the cause of results. Not being clear about current or future results is like being lost at sea; even knowing where you want to go, you don’t know how to get there.
The Redesign Process
Through redesigning dozens of companies, we’ve documented a methodology that can be applied to most any organization, including large and complex organizations, subunits of a large company or a small office or business in virtually any industry. Although the steps may need to be modified or streamlined depending on the nature and size of the organization, the same principles and general sequence apply.
Step 1: Gain senior leadership commitment. Before embarking on a redesign effort it is necessary that the sponsor(s) of the project and senior leadership understand and be committed to the process. Senior leaders come together to discuss current business results, organizational health, environmental demands and the need to embark on such a process (a “case for change”) as well as the steps in the process. It is imperative that this group understand and be willing to commit time and resources to the change effort. (Click here to test your readiness to change.)
Step 2: Charter the process. Once everyone is on board, we create a charter to guide the process. This consists of a clear definition of the purpose, scope, desired outcomes, allocation of resources, time deadlines, participation, communications strategy, and other parameters that will guide the project. Chartering also involves identify roles and responsibilities of key people who will play a role in the process.
Step 3: Commission steering and/or design team. The senior-most leadership team leads the redesign process. However, depending on the scope and size of the project, they may commission a steering team to make key decisions and assume responsibility for its implementation. Sometimes the senior/steering team will commission a design team to do much of the spade work of the project.
Step 4: Create a communications plan. The purpose of this step is to keep employees informed about the change process underway that may seriously change the way the business operates and will significantly involve them over time. This plan includes both the what, how and when of your ongoing communications, as well as who will assume this responsibility. Of course, communication is not a single event but a continuous process that occurs at many junctures. The plan may include all-location communication sessions, department staff meetings, informal stand-up meetings, brown-bag lunch discussions, memos, in-depth orientation meetings, etc. Keeping your employees informed of the process taking place brings the beginning of commitment.
Step 5: Assess the current organization. You don’t want to begin making changes until you have a good understanding of the current organization. Using the Transformation Model, we facilitate a comprehensive assessment of your organization to understand how it functions, its strengths and weaknesses, and alignment to your core ideology and business strategy. The assessment process is astounding in the clarity it brings an organization’s leaders and members, not only regarding how the organization currently works but how the various parts are interrelated, its overall state of health and, most importantly, what needs to be done to make improvements.
Step 6: Develop design recommendations. The senior team (and/or others who have been invited to participate in the process), look to the future and develop a complete set of design recommendations for the “ideal future.” At a high level, this process includes such decisions as: defining your basic organizing principle. (Will you organize primarily around functions, processes, customer-types, technologies, etc.?); streamlining core business processes—those that result in revenue and/or deliverables to customers; documenting and standardizing procedures; organizing people around core processes; defining tasks, functions, skills, accountabilities and performance metrics for each department/team; identifying headcount necessary to do core work; determining facility, layout and equipment needs of various teams and departments throughout the organization; identifying support resources (finance, sales, HR, etc.), mission, staffing, etc. and where should these should be located; defining the management structure that provides strategic, coordinating and operational support; improving coordinating and development systems (hiring, training, compensation, information-sharing, goal-setting, etc.).
Step 7: Make transition plans. At some point the design process morphs into transition planning. The central question governing this step of the process is: What is everything that needs to happen to prepare the organization to successfully implement the design recommendations? The steering/ design team will identify major milestones and then specific actions to make the design a reality. This will include identifying task and project teams who will be charged with responsibility for the implementation of certain aspects of the new design.
Step 8: Implement the new design. Now the task is to make the design live. People are organized into natural work groups which receive training in the new design, team skills and start-up team building. New work roles are learned and new relationships within and without the unit are established. Equipment and facilities are rearranged. Reward systems, performance systems, information sharing, decision-making and management systems are changed and adjusted. Some of this can be accomplished quickly. Some may require more detail and be implemented over a longer period of time.
Step 9: Align your employees. This often overlooked step is perhaps the most important to your long-term success. It is based on the assumption that your people (leaders and workers) are your most important asset and, ultimately, responsible for the success of your new design. Aligning your employees begins with overcoming resistance and gaining the goodwill of your people by following good change management strategies, including open communication, throughout the process. It may also include training supervisors in new roles and responsibilities as well as equipping them with the skills they need to lead in a high performance environment. And, this step often includes providing employees with education, team building and development activities in which they learn to take full responsibility for making decisions, solving problems and continuously improving the quality of their work. Technically, you may have the most elegant organizational design ever invented, but if your people are not fully committed and if they lack the resources and authority to do their jobs then you won’t realize your full potential.
Step 10: Evaluate and renew. A healthy organization continually monitors and adjusts its performance to achieve desired results. Throughout the entire implementation process goals are set and achieved or adjusted based on experience and new business realities. The entire process is dynamic and flexible and it is not uncommon to see course adjustments throughout the process.
This redesign process can be used by any organizations including manufacturing, service, government, health care or professional staffs. The steps may need to be modified or streamlined depending on the nature and size of the organization, yet the same principles and general sequence of steps apply. Likewise, the process can be used to redesign a large and complex organization, subunits of a large organization, or a small office or business.
This approach to redesign results in dramatic improvements in quality, customer service, decreased cycle times, lower turnover and absenteeism, productivity gains from 25 to at least 50%, etc. In the past, businesses grew even when managed poorly. However, today’s economy, rapidly changing technologies, international competition and sophisticated customers have made that impossible in today’s world. Companies that gain and retain competitive advantage must rethink the way they’ve organized and reinvent themselves to take advantage of new opportunities and overcome business challenges.
Our purpose, at the Center for Organizational Design, is to guide you through this process and help you learn the competencies to renew yourself again and again as business needs require in the future.
Call (303-730-0018) or email us for a free, no-obligation consultation about the needs of your business and whether you can benefit by going through a process of redesign.