Guide to Organisation Design : Creating high-performing and adaptable enterprises

GUIDETOORGANISATIONDESIGN

Creatinghigh-performingandadaptableenterprises

NaomiStanford

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Acknowledgements

MY THANKS TO the many people who have contributed directly andindirectly to this book. They include employees of many of theorganisationsIhaveworkedwith,colleagueswhohavereviewedchapters,friendswhohave trackedmyprogressand the familymemberswhohavelivedwiththeprocess.I am especially grateful to Hannah Barugh, Rosa Barugh, Roger

Woolford,RosieStanfordandMichaelStanford.I would also like to acknowledge the good work of the Medical

FoundationfortheCareofVictimsofTorture(www.torturecare.org.uk),towhomtheroyaltiesfromthisbookaregoing.

Preface

ICAMETOwritethisbooktoanswerthemanyrepeatedquestionsthatpeoplehave about the constant “reorganisations” and “restructurings” that theywillingly or unwillingly participate in during the course of theirworkinglife.Icurrentlyworkwithboththeinitiatorsofthesereorganisationsandthe

peoplewhoseworking livesarechangedasa resultof them.Bothpartieshavesimilarconcerns:

•HowdoIknowthatthereorganisationisreallynecessary?•Isthereanyevidencesuggestingthatitisgoodtochangethingsperse,ordoesitalwaysdependonthespecificchange?

•Howdoyouknowiforganisationredesignhasworked?• Is there any hard evidence about the absolute pros and cons of

differentstructures?•Isthereastep-by-stepguideIcouldfollow?

In my previous work, as an employee of several large multinationalcompanies,overtimeItoohadtoreapplyformyjob,waslaidoff,hadfivenewmanagers in the course of six-months,was relocated, had to lay offstaff myself, and so on – all as a result of various reorganisations. ButduringtheseexperiencesIalsoworkedwiththechangesandhelpedpeopleapproachrestructuringnotwithdreadbutwithacertainsenseofexcitementandenergy.From these experiences I learned to think of organisations both in the

more traditional way as whole systems that are inevitably shifting andresponding as their context changes, and in the newer way as complexadaptiveorganismsevolvinginordertosurvive.WiththeseperspectivesIdiscoveredthatthereisalotmoretoreorganisationthantinkeringwiththechartthatrepresentsthestructure.To answer the types of questions listed above (that I too had asked), I

lookedatallthecomponentsthatcontributetoorganisationalperformance

and found that organisational performance is more likely to improve ifleadersandmanagerstakeawiderperspectivethansimplyfocusingonthestructure:thereislessrework,peoplearehappierwiththeoutcomesanditmakesiteasiertoalignalltheorganisationalelements.I also recognised that organisational alignment is always temporary,

becausethingschange.Thedesignhastobeadaptable;itmustevolveanditmust take intoaccount the interestsandviewsofall thosewithastake inthebusiness.Lou Gerstner (former CEO at IBM) spoke well when congratulating his

staff:

Inmyeyesyoustandtall.Youdidallthis–themilestonespassed,thevictories justahead,and those fardown the road.Thankyou.Takeabow.You’veearnedit.And,ofcourse,Ican’tresist:let’sallgetrightbacktoworkbecausewe’vejustbegun!

As it is with milestones passed so it is with organisation design. Onedesigngiveswaytothenext.Thisbookguidesyoualongthepath–notthestraightandnarrowpathofrestructuring,buttheinterestingandmuchmoreproductive path of organisation design. It is written for leaders andmanagerslookingforpracticaladviceontacklingthebusinessperformanceissuesthatfacethem.Eachchapterhasinformationaboutthetopicinhand,illustrative examples fromorganisations, a case study, and somepracticalandimmediatelyusabletools.Notethatalltheexamplesgiveninthisbookreport the situation as it was at that moment in time, and they are onlypartial:theyserveasillustrationsofpoints,notasenduringtruthsaboutanyspecific organisation. The case studies are all disguised and somewhatfictionalisedexamplesoforganisations Ihaveworkedwith.The tools areall ones I find helpful and use regularly. I hope as you look through andreadthebookyouwillfindhints,tipsandapproachesthatyoucanapplytogoodresultinyourorganisation.NaomiStanfordApril2007

1Introducingorganisationdesign

Design is a plan for arranging elements in such away as best toaccomplishaparticularpurpose.

CharlesEames,1969

STORIESABOUTCOMPANY start-ups run like this: “Wehadagreat idea.Wegot the funding. We hired people. We did well for a bit. Somethinghappened.We fell apart.”Unfortunately, 50% of start-ups do not survivebeyondthefirstthreeyears.Businessfailureisnotlimitedtostart-ups.IndustryWatch,publishedby

BDOStoyHayward,anaccountingfirm,predictedthat“17,043businesseswillfail[intheUK]in2006,afurther4percentincreasefrom2005”andwasnotfarwronginitsestimates.1Itcitedarangeoffactorsthataffectthesuccessofbusinesses(seeFigure1.1).

Almostallbusinesses–establishedorstart-up–fail.Thisfailure isnot

necessarily total but is evident in some aspects: the businesses do notcontrol costs, they let their customers defect, or they bring the wrongproducts or services to market. These failures result in low businessperformanceandall-roundstakeholderdissatisfaction.Risk of failure in these and other aspects can be minimised or even

completely avoided by consciously designing a new organisation orredesigninganexistingoneinsuchawaythatitperformswellandadaptsreadilytochangingcircumstances.Thismeansassessingalltheelementsof

anorganisationanditsoperatingenvironmentandactingtobringthemintoalignment.Organisationdesign,inthisbookdefinedastheoutcomeofshapingand

aligningallthecomponentsofanenterprisetowardstheachievementofanagreedmission, isa straightforwardbusinessprocess that“is socritical itshould be on the agenda of everymeeting in every single department”.2Curiously,however,executivesrarelytalkaboutitandevenmorerarelyactto consciously design or redesign their business for success. What theyoftendoinsteadisreorganiseorrestructure– itwillbecomeclear later inthischapterthatafocussimplyonorganisationstructure(theorganisationchart) seldomhas thedesiredeffect.PeterSenge, inTheFifthDiscipline,pointsoutwhyintentionalorganisationdesignworkisuncommon:3

Part of the reason why design is a neglected dimension ofleadership:littlecreditgoestothedesigner.Thefunctionsofdesignare rarely visible; they take place behind the scenes. Theconsequencesthatappeartodayaretheresultofworkdonelonginthe past, andwork todaywill show its benefits far in the future.Thosewhoaspiretoleadoutofadesiretocontrol,orgainfame,orsimply tobe“at thecenterof theaction”will find little toattracttheminthequietdesignworkofleadership.

Leadersinterestedinthedesignoftheirorganisationhaveanedge.Theybelievethatanorganisationbehavesinthewayitisdesignedtobehave.Ifitisnotdesignedcorrectly–ananalogyisapoorlydesignedracingcar–itwillnotbesuccessful.Believing that organisation design matters, these leaders act on five

principles:

1Design isdrivenby thebusiness strategyand theoperatingcontext(notbyanewITsystem,anewleaderwantingtomakeanimpact,orsomeothernon-businessreason).

2Designmeansholisticthinkingabouttheorganisation–itssystems,structures, people, performance measures, processes and culture,andthewaythewholeoperatesintheenvironment.

3Designforthefutureisabetterbetthandesigningfornow.

4Designisnottobeundertakenlightly–itisresourceintensiveevenwhenitisgoingwell.

5Design is a fundamental process not a repair job. (Racing cars aredesignedandbuilt.Theyarethenkeptingoodrepair.)

Thischapterdiscusseswhatorganisationdesignisandwhatitisnotandthen looks at these five principles. Note that throughout “organisation”means a discrete unit of operation or whole enterprise. Following theprinciplesofhierarchytheory(seeGlossary),departmentsanddivisionscanbe designed independently as long as interfaces and boundaries with thewiderorganisationformpartofthedesign.HerbertSimon’sparableofthetwo watchmakers (see below) explains how complex systems, such as awhole organisation,will evolvemuchmore rapidly from simple systems,suchasdepartments,iftherearestableandintermediateformsthanifthereare not. In organisation designs, getting the units aligned and organisedcoherentlyworkstothebenefitofthewholeorganisation.

Theparableofthetwowatchmakers

There once were two watchmakers, named Hora and Tempus, whomanufacturedvery finewatches.Bothof themwerehighly regarded, andthe phones in their workshops rang frequently. New customers wereconstantly calling them.However,Hora prosperedwhile Tempus becamepoorerandpoorerandfinallylosthisshop.Whatwasthereason?Thewatchesthemenmadeconsistedofabout1,000partseach.Tempus

hadsoconstructedhisthatifhehadonepartiallyassembledandhadtoputitdown–toanswerthephone,say–itimmediatelyfelltopiecesandhadtobe reassembled from the elements. The better the customers liked hiswatchesthemoretheyphonedhimandthemoredifficultitbecameforhimtofindenoughuninterruptedtimetofinishawatch.ThewatchesHorahandledwerenolesscomplexthanthoseofTempus,

but he had designed them so that he could put together subassemblies ofabouttenelementseach.Tenofthesesubassembliescouldbeputtogetherintoa largersubassembly,andasystemof tenof the latterconstitutedthewholewatch.Hence,whenHorahadtoputdownapartlyassembledwatch

inordertoanswerthephone,helostonlyasmallpartofhiswork,andheassembledhiswatchesinonlyafractionofthetimeittookTempus.

Source:Simon,H.A.,TheSciencesoftheArtificial,3rdedn,MITPress,1996

Organisationdesign:whatitisandwhatitisnot

Asstatedearlier,organisationdesignistheoutcomeofshapingandaligningall thecomponentsofanenterprise towards theachievementofanagreedmission. This definition implies that there are designed-in qualities thatkeeptheorganisationadaptabletotheoperatingcontext(seeFigure1.2).

Areorganisationorrestructuringthatfocuses–sometimessolely–onthestructural aspects is not organisation design and is rarely successful.Askanyonewhohasbeeninvolvedinthistypeofreorganisationandtherewillbestoriesofconfusion,exasperationandstress,andofplummetingmorale,motivation and productivity. Most people who have worked inorganisationshavehadthisexperience.Sowhyisitthatinitiativesaimedatrevitalisation, renewal and performance improvement so often miss themark?Thesimpleansweristhatfocusonthestructureisbothnotenoughandnottherightstart-point.The following example illustrates the point that reorganising from a

structuralstart-pointismisguided.Anewvice-presidenthasbeenrecruitedto lead a division. The division structure looks like that shown in Figure1.3.

The new vice-president decides (without consulting anyone) that the

division would be more effective if the organisation chart looked likeFigure1.4.

Sofar, this looks likeasimplechange(orperhapsnotachangeatall).

Butthenewpositioningofemployee1raisesquestions;forexample:Whywasthischangeinitiated?

•Isemployee1nowinadifferentrole?•Isemployee1nowsuperiortoemployees2and3,orhasemployee1

beendemotedtotheroleofthevice-president’sassistant?•Doemployee1’sresponsibilitieschangeinthenewrole?Ifso,how–

byaddingtothemand/ordroppingsome?•Ifresponsibilitiesaretobedropped,who,ifanyone,istotakethem

on?•Howwillthisstructuralchangeaffectinformationflow?•Howwill thisstructuralchangeaffect relationshipsamongthe three

employees?•What effect will the change have on the business’s systems if the

workflowchanges?•Howwillcustomersbeaffected?•Whateffectwillthischangehaveonotherdepartments?

What seems a simple structuring tweak is actually complex, and thecomplexity is increased when more hierarchical levels are involved.Extending the example, Figure 1.5 shows that the new structuring couldchange the dynamics of the division substantially (depending on the

answers to the various questions) and not only because the relationshipsbetweentheplayersarechanged.

This example shows why taking a structurally focused approach to

organisationaldesignisrisky.Althoughitlooksstraightforward,itislikelyto have numerous impacts and consequences and bring with it potentialderailers. Using the racing-car analogy again, it would be foolhardy todetermineanew tyreconfigurationwithout thinking through theoutcomeandresultsofdoingso.Simplychangingtheboxesonanorganisationchartistantamounttothoughtlesslyreconfiguringtyres.Organisation design is more than what is called reorganisation and

different from a purely structural response to trying to solve a businessproblem.Organisation design startswith the business vision/mission (seeFigure 1.2) and then involves consideration of all the elements of theorganisation in its environment. Too little consistent, collaborative andstrategicthoughtatthestartoforganisationdesignworkalmostguaranteesfailure.Althoughsuchworkmay(ormaynot)resultinstructurechange,itinvolvesmuchmorethanthestructure.Torecap,organisationdesignisthewholesequenceofworkthatresults

in an alignment of vision/mission, values/operating principles, strategies,objectives, tactics, systems, structure, people, processes, culture and

performance measures in order to deliver the required results in theoperating context. Just as in car racing, winning the Grand Prix isdeterminedbymuchmorethansimplythestructureofthecar.

Designingisdrivenbythebusinessstrategyandtheoperatingcontext

Look again at Figure 1.2. The design process starts with leadershipagreement on what the organisational vision/mission, values/operatingprinciples, strategies, objectives and tactics are. This implies strategicthinking and strategic planning, which are different activities that shouldnotbeconfused.EtonLawrencesummarisesHenryMintzberg’sdistinctionbetweenthetwo:4

Mintzberg argues that strategic planning is the systematicprogrammingofpre-identifiedstrategiesfromwhichanactionplanis developed. Strategic thinking, on the other hand, is asynthesizing process utilizing intuition and creativity whoseoutcomeisan integratedperspectiveof theenterprise.Brieflyputstrategic thinking is the “what”, and strategic planning is the“how”, and you can’t know how you’re going to do somethinguntilyouknowwhatitisthatyouwanttodo.

NotethattheoperatingcontextsurroundsthegraphicinFigure1.2.Itisconstantlychangingand isacriticalvariable inorganisationdesignwork.Knowing theoperatingcontexthelpsdetermine theneed forandscopeoforganisationdesign.Havingdeterminedthebusinessstrategy,thenextstepinorganisationdesignistoassesstheoperatingcontext.Asimpletoolsuchas theSTEEPLEmnemonic illustrated inTable1.1willhelp (thecellshavebeencompletedforahypotheticalorganisation).

Table1.1Designtheorganisationwiththeoperatingcontextinmind

TheexampleoperatingcontextshowninTable1.1impliesthreethings:

• Context factors do not come in neat single packets. Whether abusinessisneworestablished,itisusuallynecessarytorespondtoseveralsimultaneously.

•Thecontextisnotstatic.Asitchangeselementsbecomemoreorlessimportant.

•Businessesmustbedesignedtobeadaptabletoandaccommodatingofconstantcontextchanges.

Designingmeansholisticthinkingabouttheorganisation

Look once more at Figure 1.2. When the organisational vision/mission,

values/operating principles, strategies, objectives and tactics have beendeterminedandtheoperatingcontextassessed,considerthesixelementsofthe organisation labelled within the circle (systems, structure, people,performance measures, processes, culture). Organisation design workinvolves aligning these with each other, with the elements above them(vision/mission, and so on), and with the changing operating context.Imaginetheorganisation(asrepresentedbyFigure1.2)isagyroscopethatneeds tobekeptbothstableandmoving.Organisationdesignworkkeepsthe organisational alignment and also organisational flexibility andadaptabilitytothecontext.Delivery of desired business results comes from aligning all the

organisationalelementstowardstheachievementofthevision/mission.Thedesignisimportantbecausepoordesignsresultinpooroutcomes.Whetherthebusiness isneworestablished,gooddesigndecisions that involve thewhole enterprise and its operating context will help give a competitiveedge,minimiseriskandraiseperformancelevels.This holistic approach to organisation design is evident in the case of

GoreAssociates, a privately owned company consistently rated as a highperformer:5

AtGore,we take our reputation for product leadership seriously,continually delivering new products and better solutions to theworld. Gore’s products are designed to be the highest quality intheirclassandrevolutionaryintheireffect.Our founder, Bill Gore, created a flat lattice organisation. Since1958,Gorehasavoided traditionalhierarchy,opting instead forateam-basedenvironmentthatfosterspersonalinitiative,encouragesinnovation,andpromotesperson-to-personcommunicationamongall of our associates. This kind of unique corporate structure hasproventobeasignificantcontributor toassociatesatisfactionandretention, and continues to be a factor in our inclusion in themagazine’s [Fortune] annual list of top companies. There are nochainsofcommandorpre-determinedchannelsofcommunication.Instead, we communicate directly with each other and areaccountabletofellowmembersofourmulti-disciplinedteams.

Notethattoachieveitsbusinessstrategyandmaintainhighperformance,Gorehasconsideredeachoftheelements.ThesearesummarisedfromtheextractaboveinTable1.2.

Table1.2AlignmentofGore’sorganisationelements

OneofthestrategiesthatGorehasdeterminedisthatnodivisionsinthe

company should comprisemore than 150 people. By staying at this sizeGoreisabletoretaintheinnovation,peerpressureandinterconnectednessthat enable it to consistently deliver outstanding results. However, thismeansthatthecompanyisconstantlydividingandre-dividingtomaintainitsedge.(Note toothatatGore therearenostandardjobdescriptionsandthereisacollaborativeprocessfordeterminingpay,bothenablinginternaljobmobility.)Fromthis informationit isclear thatGore’sorganisationalelementsare

aligned.Thestrategyisclear,andthelatticestructure,team-basedworking,lack of hierarchy, easy communication flows, reward systems andinterpersonal accountability all promote consistent high performance thatdeliversthestrategy.Beware, however, of believing that there is a blueprint for design.

Another company could not use the Gore design and achieve the sameresults.Inthesamewaythattherearemanydesignsofvehicles(designedfor specific customer segments and purposes), so the design of anycompanymust reflect its particular styles and cultures of operation.Eachenterprise has to determine its own design, and also its own timing and

conditionsfordesignwork(butitmustrelatethesetothebusinessstrategyandtheoperatingcontext).Having said that organisation design is both enterprise and context

specific, there are nevertheless some generally applicable ways ofapproachingdesignwork,startingwithfiverulesofthumb.

Fiverulesofthumbfordesigning

1Designwhenthereisacompellingreason.Withoutacompellingreasonto design it will be difficult to get people behind and engaged in anyinitiative. Business jargon talks about “the burning platform” needed todrivemajorchange.Partofadecisiontodesignrestsonmakingastrong,strategic, widely accepted business case for it – based on the operatingcontext.Ifthereisnobusinesscasefordesignorredesign,itisnotgoingtowork.

2 Develop options before deciding on design. Scenarios or simulationscan help to develop options. Mapping the workflow and identifying theimpactthatthecontextandcircumstanceshaveonitgivecluesonwhetherdesignisnecessaryorwhethersomeotherinterventions(seeGlossary)willbeeffective.Storytellingisanotherpowerfultechniquetodevelopthinkingonwhetheranewdesignisreallynecessary:askpeopletotellstoriesaboutthework itself, about thenatureof theworkandhow todo it better, andwhethertodoitatall.LarryPrusak,executivedirectorofIBM’sInstituteofKnowledgeManagement and author ofWorkingKnowledge and InGoodCompany,explainsthevalueofstorytelling:6

Whatdoyouthinkpeoplearegoingtodowhenafirm’sindistress?They’re going to talk to each other. They’re going to try to tellstories. They’re going to try to dig the firm out of whateverproblemsit’sgotteninto.They’lltrytocomeupatleastwithlocalsolutions. To help their offices as best they can. To help theirbranches. To help their division. The veryworst thing you couldtell people is: don’t talk to your fellow workers when you havegraveproblemslikethat.Andwhatwe’re really talking about here is a differentmodel of

how an organisation works. We’re talking about a very non-mechanisticnon-rationalistmodel,amodelthatisorganicandself-adjusting, where people talk to each other, and things are not ascrisp,notasclear,notasrational,notasscientificastheyappearinthe mechanistic models. They’re very little of those things.Organisationsstillhavealotofpeopleinthem.Andthat’swhatthepeopledo:theytalktoeachotheraboutwork,mostlyintheformofstories.Therearemanyotherstudiesofstories,butthat’swhattheydo,amongotherthings.

Using a range of methods helps decide at a tactical level whetherorganisation design work makes sense or whether the issues can beaddressedbyotherapproaches(forexample,technicalskillstraining).

3 Choose the right time to design. Design work is undertaken in adynamicenvironmentinwhichtheorganisation,likeagyroscope,needstobe kept both stable andmoving. Choosing the right time to intentionallydesign is amatter of judgment.However, for organisational change tobesuccessfulitisnecessaryto:

• establish a sense of urgency (the “burning platform” mentionedpreviously);

•formwhatJohnKotter7callsapowerful“guidingcoalition”–thatisa group of people with enough power and influence to lead theorganisationthroughthedesign;

• create a picture of the redesigned organisation in vivid terms thatpeoplewillrecogniseandwanttobepartof(orcandecidenottobepartof–inthiscaseplantohelpthemexitgracefully).

4Look forclues that thingsareoutofalignment.Assuming that thereare frequent and regularmeasures of business results, look for clues thatthings are out of alignment. For example,Gore already knows thatwhenunitsizegets tomorethan150,people issuesarise, innovationis lostandassociates stop seeing the whole picture. Organisations’ blog sites are agoodsourceofcluesaboutorganisationalmisalignment,asarethetypesofrumoursorgossipthatcirculateaspeopletalktoeachother.

Lackofcurrentalignmentisagoodsignalfordesignwork.However,ifthingsarealigned, there isusuallyno reason to initiatedesignwork (it isresourceintensiveevenwhengoingwell).

5Stayalert to thefuture. Identifying that thingsarecurrentlyaligned isno cause for complacency. The context is constantly shifting and thisrequires an alert, continuous and well-executed environmental scanning.Organisationsmustbeawarethattheymayhavetododesignworkatanypoint,sotheyshouldtakestepstobuildaculturewherechange,innovationandforwardthinkingarewelcomed.Gore’scurrentsituationillustratesthispoint:8

A $1.6 billion company can’t run on hope. Gore’s next bigchallengeistokeepupitsdouble-digitgrowthrateevenasitgetsbigger.AsGoregrowsfromnearly7,000employeesto14,000andthen21,000, itmustcontinue to inventways toprotect itspeoplefrom the harsh outside elements, even as it lets their big andcreativeideasbreathe–andprosper.Thatmeansventuringintothehazardsofthegreaterworld,whereGoremightfinditdifficult tosafeguard its unusual [innovative] culture. It means teaming upwithgiantslikeGM,thequintessentialhierarchicalorganisation.Itmeansexpandingoverseastotapnewmarketsandnewsourcesoftalent.

Gore has been a successful business since 1958. Even so,would it besafe to bet that the company is consciously considering how it should bedesignedforcontinuingandfuturesuccess?

Designingforthefutureisabetterbetthandesigningfornow

NeitherGorenoranyothercompanycanaccuratelypredictwhatthefuturewill bring, but trend analysis, scenario planning, environmental scanningand a range of other techniques give clues on the context and thecompetitive environment.Organisations such as Shell that take the futureseriouslyare less likely tobeblindsidedbyevents thanorganisations thatarerootedinthepresent.Shellhashadconsiderablesuccessover thepast30yearsworkingwith

scenario planning. (See J. Van der Veer (ed.), Shell Global Scenarios to2025, or look at the Shell website, www.shell.com, or www.well.com, ascenario planning website.) This has enabled the organisation to meetsetbacks effectively with swift action and to perform well in difficultcircumstances.Conversely, the authorities inNewOrleans did not heed the article by

Joel K. Bourne published in National Geographic in October 2004,describingingreatdetailthedevastatingeffectsthatahurricanewouldhaveon the city. So when Hurricane Katrina hit in August 2005 theconsequenceswereexactlyasthejournalisthadpredicted.Whatmany leaders fail to do is consider future possibilities. They are

preoccupiedbycurrentandday-to-day issues.Frequently, theyarecaughtoff-guard even by predictable events and are equally unprepared forunpredictable events, having no plans in place to deal with eithereventuality. (Theywould dowell to heed the second habit StevenCoveydiscussesinhisbookSevenHabitsofHighlyEffectivePeople:“beginwiththeendinmind”.9)Systematicorganisationdesignwork involvescreatingaclearvisionof

thelookandfeelofthecompanyinthefuture(the“to-bestate”),assessingwhere it is now (the “as-is state”) and thendetermininghow to close thegap between the two. The gap-closing activity is the organisation designandimplementation.Designersknowthat“theend”isamovingtarget,andthey also know that the nature of the business issue any new design isseekingtoaddressdetermineswhatistakenastheend–itmaybeanythingfromsixmonthstotenyearsaway.

Designingisnottobeundertakenlightly–itisresourceintensiveevenwhengoingwell

Because organisation design involves all the elements of an organisation(here organisation can mean the whole organisation, a division of anorganisation,orabusinessunit–designworkdoesnothavetoinvolvetheentireenterprise),itisresourceintensive.Keepingtheday-to-dayoperationgoing while simultaneously trying, for example, to design for a newcomputer system, or merging divisions, or moving from a process to amarketstructureisnoteasy.

Be aware that organisation design, involving alignment of allorganisationalelements,maynotbetherightsolution.Thisiswhydoingacareful assessmentof thepresenting issues, aswell as the as-is and to-bestates,isvaluableandpaysoffinthelongrun.Itmaybethatothertypesofinterventionswillsolvetheissues.TaketheexampleofProctor&Gamble(P&G):10

Outrageouslyhightargetsforrevenues,earnings,andmarketshare;a bold vision based on a striking new business model orgroundbreaking technology; major strategic moves, such asacquisitionsorpartnerships,thatchangethegameinanindustry;anew CEO, freshly arrived from the outside and committed toshakingthingsup.Suchshockstothecorporatesystemarewidelyassumed to be necessary for transforming a company’sperformance.Yet Alan G. Lafley’s first five years as CEO of P&G show thatnoneofthesethingsisstrictlynecessaryforachievingthissortofchange.Alargeglobalcompanythathasstumbledandlostsomeofits confidencecanbe led tonew levelsofperformance throughamoresubtleformofleadershipexercisedbyalong-terminsider.

AlanLafley,whobecameCEOafter25yearsasaP&Goperatingmanager,turnedthecompanyroundbydoinganumberofthingstoalignanexistingdesign:11

“I took P&G company goals down to 4 to 6 percent top-linegrowth,whichstillrequiredustoinnovatetothetuneofonetotwopointsofnewsalesgrowthayear,”aswellassomemarketsharegrowthand,onaverage,apointofgrowthfromacquisitions.“Andthen I committed to stretching but achievable double-digitearnings-per-share growth.” The share price went down again“becausethefirstthingIdidwastosetlower,morerealisticgoals”.Lafleyreinedinthecompany’saspirationsinasecond,moresubtleway:hedefinedwhathecalls“thecore”–coremarkets,categories,brands, technologies,andcapabilities–andfocusedhisnear-termeffortsentirelyonthat.

While management literature has emphasised the necessity ofdefining the core, Lafley underscores the importance of actuallycommunicatingthedefinitionclearly.Indeed,hesaysthattheneedtocommunicateataSesameStreet levelofsimplicitywasoneofhismostimportantdiscoveriesasCEO.Lafley realised that P&G, though struggling,was in better shapethan press reports suggested. In particular, he recognised that thecompany’s culture, far frombeing a hindrance,was an asset thatcould be leveraged in a transformation. So he reversed hispredecessor’s sharp critique of the culture and affirmed itscompetitive value in discussions with managers and employeesacrossthecompany.Lafley clearly has strong faith in the transformative power oflearning–afaithevidentnotonlyinhisaspirationsfortheGillettedeal but also in the coaching role he regularly assumes withmanagers. It is clear, as well, in his initiatives to expand P&G’sformal management and leadership training: for example, hefounded the company’s college for generalmanagers and teachesleadership.

Lafley’s approach was one of substantial change accomplished not bydiscardingwhatwas inplacebutbymaking itworkmoreeffectively.Hisstrategysuccessfullyproducedthedesiredresults.Unfortunately,therearenotruesignsofaneedto“startover”thedesign

ratherthandoingsmaller-scalealignmentwork.Equally,itisnotpossibletodeterminewhetheranewdesignwillhavetheintendedoutcome.TaketheP&Gexampleagain:12

WhenJager[Lafley’spredecessor]leftthecompany,newsaccountscited his global reorganisation as a major contributor to hisdeparture. Lafley, however, not only supported the reorganisationbut had also served on the team that designed it. Rather thanabandon Jager’s new organisational structure, Lafley used it tosupport his own theme of returning to a stronger consumerorientation.Thenewmarket-developmentoperationswerechargedwith winning the first moment of truth, the new global business

unitswithwinningthesecond.Thenewstructure,saysLafley,then“had a simple reason for being”, and another apparent liabilitybecameanassetforthetransformation.

Byfocusingonreorganisation(thatis,structurechanges),Jagerappearsto have omitted the crucial work of aligning all the other elements. BydoingthisLafleybroughtsuccesstotheorganisation.Decisions onwhether or not to designmust be taken judiciously after

doing a careful assessment of the circumstances and a risk assessment ofthe consequences.Bear inmind that theway thework is implemented isalso a critical factor in its success or failure. In the P&G example, Jagerapparently left the company partly because of the failure of hisreorganisationwork.Lafleypickeditup,tookaslightlydifferenttackandmadeasuccessofit.Iforganisationdesignisgiventhego-ahead,twothingscanhelpkeepit

ontrackwithoutescalatingdisruption:stronggovernance;andtightprojectorprogrammemanagement.Bothoftheseinvolvefindingpeoplewiththeright skills, abilities and experience to manage and run the organisationdesignwork and do so in away that plays to the organisation’s existingstrength.

Designingisafundamentalprocessnotarepairjob

Racing cars are designed and built; they are then kept in good repair.Whether the design relates to a department, division, new enterprise orexistingenterprise,itisimportanttorememberthatorganisationdesignisawell-plannedstrategicchangethatfundamentallyaltersthewaybusinessisdone.TaketheexampleofIKEA:13

[IKEA] sought to redesign a specific product development anddistribution system. The managers already knew that to restoretheir market advantage they had to flatten the hierarchy andbroadenlinesofcommunication.Thepipeline lookedsimpleenoughonpaper. In fact, itdescribedan interactive web of complex interdependencies. All 10,000productsweredesignedbyIKEAemployeesinSweden.Materials,

from raw goods to finished products, were bought from roughly1,500suppliersin55countriesandwarehousedascloseaspossibleto the stores. The 179 stores in 23 countries enjoyed more than365m customer visits a year, and soon there would be 20 storesmore.The company a few years earlier had been reorganised into 11business areas by product type, for example, upholstered seating,shelving,office,kitchen,andsoon.Thegoal thenwas toshortenthepathfromsuppliertocustomerbyeliminatingregionaloffices.ItsunintendedconsequencewasaproliferationofcentralisedstaffinSweden,seekingtoco-ordinatethefar-flungoperations.

The organisation designworkwas undertaken usingwhat is called theFutureSearchmodel(seeGlossary).Ayearlatertheoutcomewasreportedasfollows:14

Ipreviouslyhadfivemanagers reporting tome.NowIhave two:oneforsupply,quality,andpurchasing,andoneforproductrangeandcommercialquestionslikeadvertising,rollouts,andmarketing.Nowtheinterfacesareclearertoallofus.I realised that I needed another kind of leadership to help myorganisation get all the way there. When it comes to productdevelopmentatthesuppliers,wehavecomefar.Ourlatestexampleisafour-productprogrammecalled“Solsta”thatwasdevelopedata supplier in Romania, for theGermanmarket. The stakeholdersdeveloped a new distribution set-up to minimise the cost fromsupplier to customer aswell asmake it possible for theGermanstorestoorderdifferentcombinationsofthefourproducts.Thefirstdeliverywaslastweek.Thedevelopmenttimewaslessthanhalfofwhat it was a year ago. (Catarina Bengtsson, business areamanager,seatinggroup)

Inthisexample,theorganisationdesignworkrelatednottoadepartmentbuttoaproductdevelopmentanddistributionsystem.Theoutcomewasafundamentalchangeinthewaythisbusinesswasdone.Fromtheextractitis evident that the design affected all the elements of the organisation –

systems, structure,people,performancemeasures,processesandculture–andtomakethedesignworkthesehadtobealigned.Notethat“thecompanyafewyearsearlierhadbeenreorganisedinto11

business areas by product type” and the unintended consequence was “aproliferationofcentralisedstaff inSweden”.This illustrates thepoint thatwithout alignment of all the elements of the organisation the intendedoutcomesaredifficulttorealise.The requirement to maintain a business designed for its context is a

constant. This means knowing when and how to make design changes.Whatworksinonetimeandenvironmentdoesnotworkinanother.If thebusinessresultsandtheenvironmentaresignalling that thecurrentdesignfundamentallydoesnotwork,itistimetochangeit.Theracingcarthatwasdesignedinthe1990sisnotgoingtowinracesagainstcarsdesignedwiththetechnologiesavailableinthe2000s.

Summary

Organisation design is a series of activities aimed at aligning all theelementsofanenterpriseresultinginhighperformanceandachievementofthe business strategy. Because organisations behave the way they aredesigned tobehave,consciouschoicesanddecisionsmustbemadeonanindividual enterprise basis on the right design for that organisation. Fiveprinciplesgoverneffectiveorganisationdesign:

1 Designing is driven by the business strategy and the operatingcontext(notbyanew ITsystem,anewleaderwantingtomakeanimpact,orsomeothernon-businessreason).

2Designingmeansholisticthinkingabouttheorganisation.3Designingforthefutureisabetterbetthandesigningfornow.4Designing is not to be undertaken lightly – it is resource intensive

evenwhenitisgoingwell.5Designingisafundamentalprocessnotarepairjob.(Racingcarsare

designedandbuilt.Theyarethenkeptingoodrepair.)

Fiverulesofthumbguidetheapproachtoorganisationdesign:

1Designwhenthereisacompellingreason.2Developoptionsbeforedecidingondesign.3Choosetherighttimetodesign.4Lookforcluesthatthingsareoutofalignment.5Stayalerttothefuture.

Stronggovernanceandeffectiveprojectmanagementminimisetherisksoforganisationdesignwork.

2Models,approachesanddesigns

Allmodelsarewrongbutsomeareuseful.G.E.P.Box1

Models

Approaching the organisation as a system is a good start-point fororganisationdesign.Figure1.2showsonesystemsmodel,butseveralotherorganisation design models are available for use. These are all based ineither systems theory or complexity theory, but because there are severalmodels to choose from considerations ofwhich ismost appropriate for aparticularsituationcomeintoplay.Knowingwhatamodelisandthereasonsforusingonehelpdetermine

whichtouse.Amodelcanbedefinedas:

•animageorframeworkthatpresentsatemplateforguidance;or• a representation of a set of components of a process, system, or

subject area, generally developed for understanding, analysis,improvement, and/or replacement of the process (USGovernmentAccountabilityOffice);or

• a representation of information, activities, relationships, andconstraints(TreasuryEnterpriseArchitectureFramework).2

Thevalueofusingamodelliesinitsabilityto:

•helpstructureapproachestoproblems,improvements,orevents;•provideaframeworkforcommunicationofchangesandtransitions;•givethedesignprocessacommonlanguageandvocabulary;•illuminateandhelpresolvedesignissues;

•illustrateinteractions,interdependenciesandalignments;•helpwritea“newstory”3oftheorganisation.

WithoutamodelitishardforaCEOorotherseniorexecutivestodescribeorthinkabouttheirorganisationinaholisticway.Theirtendencyistothinkabout only the structures (that is, the organisation chart), and with thisnarrow focus they cannot see thenecessary alignmentof all the elementsthatcompriseafullyfunctioningorganisation.Itisremarkablethatmodelsoforganisationdesignarenotusuallypartof

anexecutive’stoolkit.Peoplearefamiliarwiththeuseofmodelstoclarifyintention in all sorts of situations. For example, think of an architecturalmodel of an apartment block. Prospective buyers know that themodel isonlyanapproximationoftheunbuiltscheme,butevensoitallowsthemtoimaginethemselveslivingintheapartment.Theyareabletousethemodelto project a whole lifestyle. Similarly, online clothing retailers such asLands’ End have developed the capability for buyers to “try on” clothesusingavirtualmodelofthemselves.The modelling process allows a more complete (though not fully

complete) assessment of the fit of the product to the requirements.Organisation design models do not result in a product like a physicalbuilding or a garment that meets customer requirements. But they doprovide a good conceptual basis for developing an effective organisationdesign.Systems models for organisation design in common use are those

originatedbyconsultingfirmssuchasMcKinsey,orindividualssuchasJayGalbraith, Marvin Weisbord, David Nadler, Warner Burke and GeorgeLitwin (the Burke-Litwin model). The different models present variousperspectives of the organisational system, in the same way that anastronomer standing on each of the planets would present a differentperspective of the universe. No one perspective is “right” – the one thatmakes sense depends on circumstances, culture and context, amongotherthings. So organisation designers at an airline might use the Galbraithmodel, andorganisationdesigners at a large bankmay favour theBurke-Litwinmodel.Thechoiceofmodelalsodependsonhowcomplexuserswantittobe–

how fancy, how usable, how costly in terms of implementation, how

adaptabletochangingcircumstances,andsoon.Table 2.1 lists five systems models from the simplest to the most

complex, noting some strengths and limitations of each. Comparing themodelshelps the selectionprocess,which isdiscussedmore fully later inthischapter.ThefivemodelsinTable2.1havebeentriedandtestedoveratleasttwo

decades.However,eachwasdevelopedinaneraofrelativestabilitywhenorganisations tended tohaveasingleoverarchingbusinessdesign that forthemostpartfloweddownthroughthevariousdivisionsandbusinessunits.Today’sworldisdifferent:anorganisationmightcompriseaportfolioof

companies that operate differently one from another, might besimultaneously competing and collaboratingwith each other, and have topredict and respond in a chameleon-like way to a changing businessenvironment. Because of the pace and extent of change, this relativelyrecent and crucial emphasis on having to be able to anticipate what thefutureoperatingenvironmentwillbelikepresentsasubstantialchallengetosenior managers and organisational designers. Additionally, the modelsshown in Table 2.1 were developed with more of an inward-lookingperspective (theorganisationasaclosedsystem) thananoutward-lookingone(theorganisationasanopensystem).

Table2.1Systemsmodelsoforganisationdesignincommonuse

Thus it is amoot point just how long themodels discussedwill be in

circulation (and, of course, models are not set in stone – they can beadaptedforbestfit).Newmodelsarebeginningtoemergeasorganisationsrespond to changes in society, technology, economics, environment,politics,legislationandeverythingelsethatbombardsthem.Thesemodelsareemergingfromarenassuchascomplexity theory,quantumtheory(seeGlossary) and non-western cultural traditions and patterns. Table 2.2presentssomeofthosewhichhavepotentialforuseinorganisationdesignwork.The likelihood that traditional systems models (Table 2.1) are

inappropriate for designing today’s organisations is implied by ThomasFriedmaninhisbookTheWorldisFlat.HedescribesthewayWPP–“thesecond largest advertising-marketing-communications consortium in theworld” (comprising 130 companies) – changed its design to adapt to thecurrentenvironment:4

WPPadapteditselftogetthemostoutofitself.Itchangeditsofficearchitecture andpractices, just like those companies that adjustedtheir steam-run factories to the electricmotor.ButWPPnot onlygotridofallitswalls,itgotridofallitsfloors.Itlookedatallitsemployees from all its companies as a vast pool of individualspecialistswhocouldbeassembledhorizontallyintocollaborativeteams,dependingontheuniquedemandsofanygivenproject.Andthatteamwouldthenbecomeadefactonewcompanywithitsownname.

With this type of differently structured and temporary organisation,designers will find themselves using organisation design models in adifferentwaythaninthepast.Theywillhavetoensurethatthemodeltheyselect results in a design that is adaptive enough to keep pacewithwhatFriedmancalls the“tenflatteners”(seeGlossary)–andtheirsuccessors–whicharehavingsuchaprofoundeffectonthewayworkisdone.Onewayofdevelopinganadaptivedesignistolooklessatmodelsand

more at design principles or questions that are applicable to specificbusinessstrategies.Thisarguesforakindof“patternbook”oforganisation

designmodelsforanenterpriseratherthanonemodelbeingusedacrosstheenterprise.Raising its head, then, is the question: why even consider any of the

traditional systems models? To which the answer is: because a largemajority of organisations still have traditional architectures. The systemsmodels described still fit most organisations and, used creatively oradapted,canhelpthemmovetowardsarchitecturesthatwillaccommodatethe growing emphasis on decentralisation, cellular networks, internalmarkets,globalisationandemployeeempowerment.

Table2.2Newmodelswithpotentialforuseinorganisationdesignwork

Approaches

Choosingtherightmodelfororganisationdesignisonepartoftheprocess.Thesecondpartistochoosetherightapproach–themethodforinitiatingthe design work but also the way the design will be developed andimplemented. The approach must match either the current organisationalway of doing things or set the tone for doing things in future. So, forexample,ifthingsarecurrentlydonebyleadershipmandateinacommandandcontrolenvironment theremaybe lackofcapabilityandbehaviour toundertakedesignworkusingaparticipativeandcollaborativeapproach.Thatsaid,organisationsthataredesignedwiththecloseinvolvementof

stakeholdersaremorelikelytobeeffectivethanthosethataredesignedinaclosedroombyafewpeople.Themoreeveryoneinanorganisationfeelsinsomecontrolofwhat’sgoingon,andhasinputintothings,themorelikelyitisthattheendresultwillbeonethattheyaremotivatedtoworkin:thatisthey will be committed rather than simply compliant. Advocates ofemployeeempowermentarewellawareofthevaluetotheorganisationofgivingpeopleatall levels in theorganisationavoiceandchoices in theirwork,astheZapposexampledemonstrates.

TheZapposculturebook

Zappos runsa three-week trainingcourse forcall-centre repswhichstartswith telling employees to forget everything they’ve learned.That’s partlybecause Zappos, a six-year-old online shoe retailer with $184m in 2004grosssales,isn’tlikemanyothercompanies.Thetrainingcourse’srequiredreading? A 156-page handbook on Zappos culture, written entirely byemployeesthemselves.Init,theyquoteJimiHendrix,praisethecompany-paid lunches, and tell stories about how they’ve felt empowered to helpcustomers. Chairman and founder Nick Swinmurn, who calls Zappos “aservice company that happens to sell shoes”, (it offers free expeditedshippingandfreereturns)believesempowermentmeansmorethangivingemployees free rein to solve customers’ problems. It’s the power to helpmake the company better. “You need as many eyes, ears, and handsworking toward the same goal for themselves, not for someone else,” hesays.AnentryintheZapposculturebookbyJamesG.,acustomerloyaltyassociate since2003, shows that employeesget it. “I’mhelpingwrite the

book,”hewrites.“Weallare.”

Source: “Employee Innovator Runner-up”, Fast Company, Issue99,October2005

This book strongly advocates stakeholder involvement – specificallyemployee involvement and empowerment – in organisation design, but ifeach of the traditional five design and implementation phases of assess,design,implement,embedandreview(seeChapter4)embraceswidespreadstakeholder participation using traditional approaches like surveys, focusgroups, one-to-one interviews, problem surfacing, and soon, it canmaketheprocessfeellaboriousatbestandnever-endingatworst.Tomanagetheriskoffeelinglaborious,organisationdesignersareusing

a range of “engagement” approaches that are fun and energising. Tomanagetheriskoffeelingnever-ending,large-scale“jumpstart”eventsthathave representatives of all stakeholders in one place at one time areincreasinglybeingused.Table2.3presents someexamples ineachof thetwocategories.

Table2.3Examplesoftheengagementandjumpstartapproaches

FutureSearchwasusedintheIKEAexampleinChapter1toredesignthe

company’s process and structure for product design, manufacture anddistribution. Fifty-two stakeholders gathered to examine the currentprocess,developanewdesign,createastrategicplanandformtaskteamstoimplementit.Ittook18hourstodevelopadesignandsignoffonit.Notethat this was not a sign-off meeting for something presented by topmanagement–thedesignwasdevelopedwithanimplementableplaninashortspaceoftimebypeoplewhohadnotmetbefore.

Designs

When the function and purpose of the end-product is known the designprocess is started. In architecture, Louis Sullivan’s phrase “form followsfunction”iscommonlyusedanditisasusefulandnecessaryapreceptfororganisation design as it is for architectural or product design. (Sullivan,1856–1924,isconsideredthefatherofmodernarchitecture.)The selection of a model and an approach (or approaches) must be a

consciousprocessbecauseitformstheframeworkfortheemergingdesign.Inotherwords,themodelandapproachstarttoexpressthepredeterminedfunctionofthedesign.Takeaproductanalogy.Designerswantedapocketknifethatfunctionedwellforaspecifictargetgroup(youngwomen).Withthis in mind they adopted the model of the Swiss Army knife. Theyfollowed this with a design approach that would appeal specifically toyoung women by virtue of its function. Thus with the function clear, amodel inmind and some specific approaches, the designerswere able todeveloptheknife.

MissArmyKit

•Awaytomakeyourdailyadventureseasier.•Everythingawomancouldpossiblyneedinacompactlittlekit.• Lightweight Miss Army Knife comes with 15 must-have female

emergencyitems.

• Includes a flashlight, needle and thread, nail file, scissor, pill box,mirror,safetypin,tweezer.

•Secretcompartmenttoputanemergencybottleofperfume.•Veryeasy-to-carryinyourpurseoronakeychain.

Source:www.amazon.com

An architecture analogy further illustrates the use of models andapproaches.If thedesignchallengeishousingforoldersinglepeople(thefunction),themodelcouldbeanapartmentblock.Theapproachistodesignsomething that,withincertainparameters,will appeal to that targetgroup(and ideally unit purchasers will have been involved in the early designwork). These parameters might include accessibility, utilities availability,market conditions, compliance requirements and cost to buildmatched tocost of purchase. The result is a form of housing for senior citizens thatmeetsthebrief.Inthesetwoexamples,theprincipleisthatformfollowsfunction.Sothe

Miss Army Knife has many of the constituents of the traditional SwissArmyknife: shape, size,price andelements that fold into themainbody.Theapartmentblockhasalltheconstituentsofmanyotherbuildings:metal,bricks or concrete, glass, ducting, cables, and so on. But in both casessomethingdictatesthatthefinalproductisspecificallyaMissArmyKnifeandnotsomeother typeofknife,oranapartmentblock forover60sandnotforupwardlymobileyoungpeople.This“something”isthefunctionorpurpose of the product in relation to its form. For themost part form iscircumscribedbythingslikecost,quality,timetodeliver,andsoon.Similarly, with organisation design the principle is that form-follows-

functionmodels and approaches followwhen theboundaries – the thingsthatcircumscribetheform–areknown.Soasinaproduct:

•organisationdesignisanintentionalconstruct;•anorganisationcanbepurposefullydesigned;•anorganisationwillachievesuccessfulresultsifathoughtfulprocess

isusedtodevelopitsdesign.

Managers at Fujitsu described their picture of a well-designedorganisationasfollows:

It has well-defined processes. There are clear links between thefunctions. We can see close fit between strategy, delivery, andoutput. People in the organisation understand their roles and canplay their part without stress. Work flows smoothly through theorganisationandtheoutcomemeetscustomerexpectations.

In thecaseoforganisationdesign, the functionorpurpose isexpressedby the business mission, vision and strategy. The boundaries of theorganisation design are delineated by the values, operating principles andgoals, among other things. In Figure 1.2 the key purpose and boundaryelementsareshownatthetop.NownotethatfourofthefiveorganisationmodelsdescribedinTable2.1

specify strategy or purpose as one of their elements. To emphasise thepoint, designing an effectiveorganisation startswith agreeing its function(equatedherewithpurpose,missionorvision).Thisisfollowedbygettingclarityontheboundariesofthedesign.Oncetheaspectsthatcomprisethefunctionandboundariesofthedesignemerge,theformofitfollows.Thisform-follows-function approach is implicitly endorsed byMichael GooldandAndrewCampbellwho,inprescribingninetestsoforganisationdesign,state:5

The first and most fundamental test of a design, therefore, iswhether it fitsyourcompany’smarket strategy.Youshouldbeginbydefiningyourtargetmarketsegments.Thedefinitionswillvarydependingonwhichpartofyourorganizationisbeingevaluated.IfGE,forexample,weredesigningitsoverallcorporateorganization,it would use broad definitions such as “aircraft engines” or“broadcasting”. But if it were looking only at the design of itsfinancial services unit, it would use much narrower definitions,probably combining particular service lines with particulargeographicmarkets: “aircraft leasing in Europe”, for instance, or

“receivables financing in Mexico”. There should be no disputeabout the relevant market segments; if there is, you need to dosome fresh strategy thinking before you proceedwith the designeffort.

Sometimesadilemmafororganisationdesigners lies in thequestion: isthe model chosen before the function is known, or is the functiondeterminedandthenthedesignmodelchosen?Thismayseemaredundantquestionbecausethereisanassumptionthatanorganisation’sleadersknowwhat its function or purpose is. However, this is often not the case. Anexecutive team can have as many different ideas about what theorganisationexists todoorproduceasthereareteammembers.Oftenthefirst step in thedesignprocess is toget a commonagreement (preferablydeliverableinasinglesentence)ontheorganisation’sfunction.Membersofthe leadership team are then required to demonstrate through theirbehaviours and actions that they are committed to this purpose, willcommunicate it clearly andwillwork tomake it “live”.Googleand IntelIndia Development Centre, for example, both have clear, one-sentencestatementsofwhattheyareinbusinesstodo:

•Google’smissionistoorganisetheworld’sinformationandmakeituniversallyaccessibleanduseful.

• Intel IndiaDevelopment Centre’smission is to grow and sustain adesign/development capability in India that delivers high-quality,cost-effectivesolutionsforallmajorInteldivisions.

Any discussion on whether to determine function first or whether tochoose the model first is immaterial. Most models force the cleardeclaration of the organisation’s function. The choice of model andapproach to develop the design is more a question of fit. Repeating thepointmade earlier, there is no single choiceofmodel for anorganisationdesign in the samewayas there isno single choiceof car for a family–makingthechoiceusuallyinvolvestrade-offsandcompromises.Buttohelpchoose the model for the specific organisation, ask diagnostic questionssuchasthefollowing:

•Does themodel package the organisational elements in away that

stakeholderswillrecognise(arethereenough,aretheyonesthatareimportantintheorganisation)?

•Howwillstakeholdersreacttothepresentedmodel(isitjargon-free,simpletounderstandandcommunicate)?

•Willthemodelfindfavouracrosstheorganisationorwillitcompetewithotherorganisationdesignmodels?

• Does the model harbour implicit assumptions that might help orhinderdesignwork?Forexample,doesitincludeorexcludefactorssuchas localculture (bothnationalandorganisational)andhumanfactors(suchaspersonalities),ordoesitsuggestwaysthatelementsmayrelatetoeachother?

• How adaptable is the model for the specific context andcircumstances in which it will be used? Does it enable any newperspectivesorinnovativethinking?Isitscalabletosmallwork-unitdesignandwholeorganisationdesign?

•Doesthemodelworkwithothermodelsinuseintheorganisation(forexample,changemanagementorprojectmanagementmodels)?

•Are the costs to adopt themodel acceptable (for example, training,communicationandobtainingbuy-in)?

• Does the model allow for new and unconventional organisationdesignthatwillhelpdrivethebusinessstrategy?

• Does the model have a sponsor or champion who will helpcommunicateitappropriately?

• Does the model allow for transformational design as well astransactional design? (Transformationalmeans a design developedinresponsetoenvironmentalforceseitherinternalorexternaltotheorganisation–forexample,creationorclosureofabusinessunitora merger – that affects the mission, strategy and culture.Transactional means changes related to the business or work-unitstructures, systems, processes, and so on that might be needed tocarryoutthemissionandstrategybutdonotchangethem.)

Choiceofapproachtakesplaceas themodel ischosen.Approachesarenot either/or – they can be used in combination. So, for instance,storytellingcanbeusedincombinationwithappreciativeinquiry,orFuture

Search can be usedwith positive psychology. An example isNASA’S ASKwebsite,whichwassetupforstorytelling.

StorytellingatNASA

One of the few things of value to survive the knowledge managementmovementofthelate1990sisanonlinesiteformanagersat,interestinglyenough, NASA. The site, with the awkward name of Academy SharingKnowledge, or ASK, gives NASAmanagers the opportunity to tell eachotherstoriesaboutsuccesses,failuresandlessonslearned.Itisapublicationeveryfederalmanagershouldread.ASKusesayoungtechnology,theWeb,todisseminatethelessons,butit

usesanancient technique, storytelling, tohelpmanagersbecomebetterattheirjobs.It’sarefreshingchangefromconsultant-speakbooksfilledwithjargon and catchphrases. It’s far easier to peruse than GovernmentAccountabilityOfficeandinspectorgeneralreviews,whichforcemanagersto read between the lines for leadership lessons. In ASK, managers tellstoriesintheirownwords.Take a recent submission on risk management by Marty Davis, a

GoddardSpaceFlightCentermanager.Heaskedhisemployeestocomeupwithalistofrisksfacingtheirweathersatelliteprogram.Hetoldthemnottousesilly,unlikelyriskssuchassomeonedroppingthesatellite.Shortlyafter,someonedroppedthesatellite.“A 3,000-pound spacecraft dropping 3 feet onto a concrete floor gets

damaged,”Daviswrote. “Howdamagedwas a bitmore complicated, butestimatesranupto$200m.”The contractor on the program should have had 11 peoplemoving the

satellite,buthadonlysix.Thequalityassuranceofficialswhoshouldhavecarefullyobservedtheproceduredidn’tdoso.Aninspectionofthecarttomovethesatellitedidn’thappen,andwhensomeonenoticedsomethingonthecartlookeddifferentthanusual,noonestoppedtoexamineit.Itturnedoutboltsweremissing.Aftertheteamputthesatelliteonthecart,itfell.Next came an investigation. Some of the contractor employees were

fired.Davisdiscovered thatsimilaraccidentshadhappenedin thepaston

otherprojects.Whatwere the lessons learned?“Noneof theseare simplecaseswhereateammissedonestepandsotheaccidenthappened,”Daviswrote.“It’salwaysacombinationofskippedstepsormiscommunicationsordangerousassumptions.”“We need to properly identify the risk. … The real risk wasn’t

necessarily‘droppingthespacecraft,’eventhoughitwastheendresult.Therisk in our case would more accurately be called ‘complacency,’” Daviswrote.Hesaidmovingaheavy,expensivespacecraftisalwaysrisky,eventhoughitisroutine,andshouldalwaysbetreatedasrisky.“Safetyrequiresstrictadherencetoprocedures.Period!”hesaid.AkeystrengthofASKis thegoal to find lessons,not toassessblame.

Managers feel free to talk about what happens without worrying thatsomeone will take the fall for what they write. Davis, for example, wastroubledbywhichemployeeslosttheirjobs.“ThewayIsawit,thepeoplewhogotfiredweren’tnecessarilythepeoplewhoshouldhavebeenblamed,because theyweren’t the rootcauseof theaccident,”he says.The sourcewasthecontractor’scomplacencyaboutmovingthesatellite.Storytelling is a way to bring out those kinds of lessons. Government

often is ruled by the cover-your-butt method of management, in whichpeople point fingers and eventually someone (usually amid-or low-levelsupervisor or employee) takes the blame. Instead,ASK teachesmanagersthatmistakeshappen,lessonscanbelearnedandpeoplecanimprove.

Source:Friel,B.,“For theASKing”,GovernmentExecutive, June1st2005

Itiseasyenoughtoseethatstorytellingcouldhelpinorganisationdesignwork atNASA, and indeedMichaelGriffin,who became head ofNASA inApril2005,institutedasweepingnewdesignfortheagency.

NASA’snewdesign

InJuly2005,Griffinresurrected the1970sexecutivepositionofassociate

administrator and promoted chief engineer Rex Geveden to fill it. WithGeveden serving as chief operating officer, the administrator is free totackle policy and strategy issues. Griffin also established an independentProgramAnalysisandEvaluationOfficeto“scrub”plansandbudgets,andshiftedreportingauthorityforthedirectorsofNASA’s10fieldinstallationsfromthemissiondirectorates toGeveden.He’swarnedofachangein thestructureof the IndependentTechnicalAuthority,whichNASAformed inresponse to recommendations from the Columbia Accident InvestigationBoard.In the 2005 operating plan update NASA submitted to the Senate

Appropriations Committee in July, Griffin detailed several otherorganisationalchanges.Whenhewasasked,“WhichofthesechangeswillhavethegreatestimpactonNASA’sabilitytoachieveitsshowcasemissionofexploration?”,Griffinreplied,“Idon’tthinkanysinglechangewillhavethegreatestimpact.TheColumbiaAccidentInvestigationBoardreportwasnot flattering about NASA organisation and institutions and programs.NASAneededafreshlook.Theorganisationhasn’tadaptedtothechangesyet,butitwill.”

Source:BethDickey,“TheNewRegime”,GovernmentExecutive,October19th2005

As with choosing a model, choosing an approach or approaches alsoinvolvesposingaseriesofdiagnosticquestionssuchasthefollowing:

•Howwillstakeholdersreacttotheapproach(isitpragmatic,nottoofluffy)?

• Is it an approach that will work with other approaches in theorganisation?

•Does the approach harbour implicit assumptions thatmight help orhinderdesignwork?Forexampledoesitincludeorexcludefactorssuchas localculture (bothnationalandorganisational)andhumanfactors(suchaspersonalities),ordoesitsuggestwaysthatelementsmayrelatetoeachother?

• How adaptable is the approach for the specific context and

circumstances in which it will be used? Does it enable any newperspectivesorinnovativethinking?Isitscalabletosmallwork-unitdesignandwholeorganisationdesign?

•Arethecoststoadopttheapproachacceptable(forexample,training,communicationandobtainingbuy-in)?

• Does the approach facilitate new and unconventional organisationdesignthatwillhelpdrivethebusinessstrategy?

• Does the approach have a sponsor or champion who will helpcommunicateitappropriately?

• Does the approach allow for transformational design as well astransactionaldesign?

•Doweneedorwantajumpstartapproach?

Again there isnosinglechoiceofapproach.Thegeneralprinciple is toensure that there is no conflict between the prevailing style of theorganisationandtheproposedapproach.

CASESTUDY:choosingamodelandanapproachforadesign

This case study illustrates how one organisation initiated a design andimplementation project around a specific business issue. The choice ofmodelandtheapproachchosenwerepartoftheearlythinkingabouthowthe design project should be set up. These choices formed the basis forresolvingtheissueinaparticipativeandspeedyway.

Theorganisation

A multinational pharmaceutical company with 91,000 employees in 140countries.It isaworldleaderinofferingmedicinestoprotecthealth,curedisease and improve well-being. The organisation’s stated goal is todiscover, develop and successfully market innovative products to treatpatients, ease suffering and enhance the quality of life. It has leadership

positions inbothpatentedandgenericpharmaceuticals. It isstrengtheningitsmedicine-basedportfolio,whichisfocusedonstrategicgrowthplatformsin innovation-driven pharmaceuticals, high-quality and low-cost genericsand leading self-medicationover-the-counter brands. In 2005, thegroup’sbusinesses achieved net sales of $32.2 billion and net income of $6.1billion.Approximately$4.8billionwasinvestedinR&D.

Theissue

Pricing of drugs is currently donewithin each geographic location. Thustherearemanypricingteamseachrespondingtolocalconditionsandeachwith their own methods and criteria for pricing. There is a headquartersviewthatthismodelleadstooverlapandduplicationofwork,inconsistentpricingforcustomersandlackoftransparencyonanticipatedsalesvolume.

Therequirement

Anorganisationdesignmodelandapproachfordesigninganddevelopingapricingorganisationandstrategythatwillresultincostsavings,efficiencygains, appropriate standardisation of pricing policies and processes(allowingforlocalconditionsifnecessary),andlocalreinforcementofthedesiredbusinessimageoftheglobalcompany.

Discussion

Agroupofmanagersmet to look at newwaysof thinking about pricing.They agreed that the design envisaged was transactional rather thantransformational–thatis,theoverallbusinessvision,missionandstrategywould be unaffected.However, they felt it likely that thinking differentlyaboutpricing,howtopriceandpricingteamswouldresultinasignificantnewdesignofmanycomponentsoftheorganisation.Beforelookingcloselyatthemodelsthemanagersagreedthat:

•thefunctionofpricingwastodeterminethebestpricetocovercostsandearnoverallprofitforthewholeenterprise;

• pricing was determined by a relatively complex input, throughput,outputprocess,shapedbytheenvironment;

• theyhad tohaveacommon,agreedandadhered topricingstrategythat dovetailedwith the overall business strategy at the enterpriselevelbutallowedfordifferentiationatthelocallevel;

•thenew“pricingorganisation”shouldeliminateoverlap,duplicationandcustomerconfusion.

This agreement ruledout a coupleof themodels immediately.The7-Smodel does not specifically mention external environment and operatingcontext and neither does Galbraith’s Star Model, though both could beadapted.Themanagers lookedmore closely at the remaining threemodels.The

Burke-Litwin model with its many boxes, arrows and feedback loopslooked too complex to be grasped easily and quickly by busy line staffoperating in a range of geographies. TheWeisbord 6-boxmodel did notparceltheorganisationalelementsinawaythatseemedrighttothegroup;for example, theywere not clear what “helpfulmechanisms”might looklikeacrossthecurrentpricingprocess.ThisleftNadler’sCongruenceModelasapossibility.Thistoohadsome

constraints:

• It appeared to be amodel formaintaining stability and consistencyratherthanencouragingadaptabilitytotheenvironment.

•Itappearedtomilitateagainstconsiderationofthedifferentoperatingenvironments. In designing the characteristics of the pricingfunction, the managers were determined that this should includewhat Nadler calls the “twin principles of integration anddifferentiation”– integrationmeaningthateachgeographyfocusedon the same business and pricing strategies; and differentiationmeaningtheabilityforeachgeographytoimplementthestrategiesinawaythatmadesenselocally.

• The managers were not convinced that it would result in a swift,innovativedesignandimplementation.Theywerelookingforaverydifferent pricing function that would be operational within weeksratherthanmonths,sotheywerenotinterestedingoingthroughthe

type of long-winded organisation design process they hadexperiencedinthepast.Theywerelookingforspeedinthedesignprocessandinnovationintheresultingdesign.

However, they then realised that the Congruence Model had beenupdated to resolve theseproblems.Thebasic principles remain the same,but in the newer version6 (see Table 2.2) the model is applied at eachbusinessunitlevelbutwithinasingleenterprisevision.The managers felt that in their case they could start to envisage an

organisationdesign thatbuilt alignment, congruenceand linkages (that is,integration) across all the geographic locations in the areas of formalorganisation and work activities, and built differentiation for eachgeographiclocationintheareasofpeopleandculture.Theoutcomewouldbepeopleusingthesamesystemsandprocessestocarryoutthesameworkactivities but their ways of working could be different. The managersunderstoodthatthepeopleandcultureaspectsofeachgeographiclocationwould have tomeshwith the formal aspects and thework activities, buttheybelievedthiswasachievable.Recognisingthattheywereatanearlystageintheprocess,themanagers

decided not to jump into an immediate solution to the business issue.Instead theyworked through thediagnosticquestions tosee if their initialselectionof theUpdatedCongruenceModelmadesenseintheirsituation.Byand large they felt that itwouldwork, although theyneeded to checkthat itwas in linewithothermodels,and theywanted toseesomeof thecostsassociatedwith introducing it. (Themanagershadbeenbitten in thepast by external consultants using a range of models, each with its ownvocabulary and style. The result was confusion, lack of consistency andmoneywastedasimplementationscollidedoncompetingpaths.)Themanagersthenstartedtoconsidertherangeofapproachestheycould

use to develop and implement the design. As they went through thediagnosticquestions,thediscussiongotmoreheated.Manygroupmembersfelt that theprevailingstyleof theorganisationwasoneofcommandandcontrol, which was in direct conflict with the stated intention of beingcollaborative and “valuing the ideas of our people”.With this disconnectbetweenwhatwassaidandwhatwasdone,participants felt that trying tojumpstart the process through something like Future Search would be

difficult to sell to some stakeholders because it could appear too soft instyle and to others because they would not believe that anything theycontributedwouldactuallybeused.A challenger to this argument suggested that successfully using Future

Search or other participative approaches could start to move the culturetowards being a genuinely more involving one. In his view, this wouldimprove organisation effectiveness because his experience was thatparticipativebusinessculturesweremorehighlyperformingthancommandandcontrolones.Themanagerslistenedtohimbecausetheyknewthatalthoughhewasa

relativenewcomertothebusinesshehadcomefromanorganisationwherecollaborationwas sought, valued and delivered excellent business results.Hesuggested that theyexamine theirassumptionsabout involvingpeoplebylookingforexamplesintheorganisationwherepeoplehadsucceededincollaborative ventures against the odds. (He decided not to label this as“positivedeviance”butknewthatthisiswhatitwas.)However, he also made the point that if they were to choose a

collaborativedesignprocess,theywouldprobablyhavetochangetheirownindividual and collective management styles in order to “walk the talk”credibly.Bravely,hesaidthathethoughtthiswouldbeabitofastretchforsomeof themandapotential risk to theproject,buthe felt that ifpeoplecouldsee their leadersvisiblysucceeding inbecomingmorecollaborativethis would be a great demonstration of ability to change and a goodmitigationofthatparticularrisk.The discussion continued with people talking about the management

challengesofbeingsimultaneouslyglobalandlocal,particularlyintermsoforganisation design thinking. Some people started to suggest solutions tothewholepricingissuebutwerepulledbackbysomeonestatingthattheyhadalreadyagreednottojumptoasolutionandtoinvolveothersintheirthinking.Themeetingendedwithanagreementto:

• find out the costs of running a Future Search jumpstart, includingpreparationtime;

• draw up a list of internal and external stakeholders to invite to themeeting,assumingtheydecidedtogoahead;

•alertthecommunicationsgroupabouttheforthcomingpieceofwork;

• individually do some work on assessing their comfort levels withparticipativeandcollaborativeapproaches;

•makeadecisionontheboundariesoftheprojectattheirnextmeeting–theydidnotwanttobiteoffmorethantheycouldchew,andtheydidwanttoagreeclearparameterstotheproject.

Reflectionsonthecasestudy

The selection of the model and discussion of the organisation designapproachisnottimewasted.Itisnotasterileacademicexerciserootedinivory tower theory but something that provides a number of real-worldbenefitstothestart-upofasuccessfuldesign:

• It is a firm framework for everyone working through the designprocess, acting as a guide and a reference point right the waythrough.

•Communicatedeffectively,itshowsstakeholdersthatthereisabasefrom which a plan and a process will be developed. Too oftenrestructuringorreorganisationisfeltbythoseonthereceivingendtobearbitrary,haphazardandnotthoughtthrough.

•Thediscussionstartstorevealtoseniormanagerstheirperspectives,attitudesandresponsestothedesignissues.Theylearnwheretheyneed to develop their capability to work as a team to solve theproblem.

•Usingamodelenablesanumberofpossiblesolutionstobegeneratedfrom the same platform. This makes comparing their relativeadvantagesanddisadvantageseasierthansimplypresentingarangeofpossibilities.

•Discussion of differentmodels or the aspects of a particularmodelencourages questions and debate about the intended design. Forexample,inthepricingcaseabove,whetherthecriticalpricingtaskswere likely candidates for streamlining and consistency, andwhether theway thingswere formallyorganisedwouldneed tobethesameorsimilaracrossthelocations.

• Using a model generates reflection on possible consequences of

varioustypesofdesigndecisions.Forexample,whatwouldbetheconsequences if theywent fororganisationalconsistency toenablemobilityacrosslocationsintermsofroles,positioninthehierarchy,andsoon?Would therebeanyunintendedconsequencesofgoingforsuchconsistency?

Similarly, making conscious choices about the approach to the designhelpsmovetheorganisationinacertaindirection.Inthepricingcase,oneof the design outcomes had to be to minimise customer confusion. Thismeantthatpeoplehadtorecognisecustomerconfusion,careenoughtodosomethingaboutit,andhavethecapabilityandthemeanstodosomethingabout it. The managers realised that people knew when customers wereconfusedbut theprevailingattitudeandbehaviourswereof the“sowhat,it’s a management problem, we can’t do anything about that” variety.Customer satisfaction surveys consistently pointed out these unhelpfulattitudes.Thusitwasdecidedtouseadesignapproachwhichgavepeopleasayin

theoutcomes,developedattitudesandbehaviours that improvedcustomerservice,anddemonstratedanewcommitmenttomakingthingstransparenttoallstakeholders.

Toolsforthiscase

Thisdebatecouldhavegonewrongwhenitstartedtogetheated.However,because of bad experiences in the past, the managers decided to get afacilitator to run their meetings and also to work on developing theirindividualskillsinlisteningandquestioning.Whatalsohelpedthemweretwotools:theLearner/JudgerMindsetModel;andelectroniccollaboration.

TheLearner/JudgerMindsetModel

This model was developed by Marilee G. Adams. Her engaging book,Change Your Questions, Change Your Life: 7 Powerful Tools for Life &Work,7 teaches readers how to ask questions from a learning (curious)mindset rather thana judgingmindset (seeTable2.4).Beingan inquiringleadermeansaskingquestionslike:What’sthebestthingtodo?Whatarethe choices? What’s possible? What’s the big picture? It also means

listeningcarefully andnotmakingassumptions, leaping to conclusionsorclosing down possibilities. Questions posed are constructive and open-mindedratherthanloadedwithcriticismorblame.Thisinquiringapproachleadstoinnovationandcreativityinthinking.

Table2.4Askquestionsfromalearnermindset

Electroniccollaboration

Web-basedcollaboration tools suchasGroupSystems (GroupSystems is aregistered product of GroupSystems.com) come in a number of forms.Theseproductsarevaluableinanumberofways:

• They can be deployed across multiple locations simultaneously,cutting down on travel costs, time taken to get to different sites,scheduling,andsoon.

• They allow participants to “speak” in the electronic meetingenvironment. Participants answer questions or debate points bysimultaneously typing in thoughts, ideas and responses. Each sees

the input of others, stimulating more avenues of thought. Thisfeature seems to produce more and higher-quality ideas thantraditionalmeetings.

• The rapid collection of input enables substantive discussions witheveryoneseeingthesamedata.

• Everyone contributes anonymously and so participants are free toofferallkindsofideaswithoutfearofembarrassmentorretribution.

• Each participant has an equal vote on an equal level. Each idea isevaluated on its own merits, rather than on the power, status, orpersuasivenessofthecontributor.

•Toolsarefullyintegrated,whichmeansthatagroupcanbrainstormideas,movetheirideasintotopicsorcategories,establishprioritiesfortheideas,lookatalternatives,produceanoutlineofresultsandpublishareportcoveringallstagesoftheirwork.

•Reportsproducedcanbeintegratedintoothersoftwarepackagesforeasyeditingandpublication.

•Acompleteandaccuraterecordofallideas,evaluationsanddecisionsis produced. This meeting “memory” is extremely valuable,especially if theparticipantschange.Anynewparticipantcanreadthedecisionrecordandrapidlycomeuptospeed.

Summary

Organisationdesignworksonsimilarprinciplestoproductorarchitecturaldesign in that “form follows function”. Traditional systems models oforganisationdesignaregivingwaytomodelsderivingfromfieldssuchascomplexity theory and quantum theory. Nevertheless, traditional modelscanbeadaptedtotakeorganisationsintonewforms.Organisationdesignswork best when a full range of stakeholders are engaged in the designthinking and process. Several approaches involving stakeholders arepresented,allofwhichcanbeusedwiththevariousmodels.Noonemodelor approach is recommended over another as the choice depends on thesituation and the questions or issues that the organisation is aiming toaddressinthedesign.However,tohelpmaketherightchoiceofmodelandapproach,somepertinentquestionsarelisted.Ashortcasestudyillustratesthepointsmadeandtwotools toapplyin thisstageof thedesignprocess

arebrieflydescribed.

3Organisationalstructures

Structuresarefineaslongastheyarecontrolledbythepeoplewhoactuallyworkwithinthestructures,butthey’rediceyeventhere.

GeorgeWoodcock,Canadianpoetandliterarycritic

HOWGREATA role structuraldecisionsplay inorganisationdesignprojectsdependsontheoutcomessought.Structuraldecisionsusuallyloomlargerinleaders’mindsthanotherdecisionsrelatedtoorganisationdesign.Butitisamistake(oftenacostlyone)tofocusadesignonchangesinthestructure.Structure is simply one of the elements to consider because, as previouschaptershavepointedout,organisationsshouldbeviewedascomplexandadaptiveorganismsratherthanmechanisticandlinearsystems.However,alldesignwork requiresat leastanassessmentof thecurrent

structureand its ability to supportdeliveryof future results in away thataligns with the other elements of the organisation. In making theassessment,itisusefultodeterminewhetherthecurrentstructure:

•directssufficientmanagementattentiontothesourcesofcompetitiveadvantageineachmarket;

•helpsthecorporatecentreaddvaluetotheorganisation;•reflectsthestrengths,motivationsandweaknessesofthepeople;•protectsunitsthatneeddistinctcultures;•providesco-ordination for theunit-to-unit links thatare likely tobe

problematic;•hastoomanymanagementlevelsandunits;•supportseffectivecontrols;•facilitatesthedevelopmentofnewstrategies;•providestheflexibilityrequiredtoadapttochange;•reflectscomplexityofmarketsandindustryrelationshipswhilebeing

sufficientlystraightforwardforstakeholderstoworkwith.

Organisationstructuresseeninmatureorganisations(onesthathavebeenaround for two decades or so) have their roots mainly in classicalorganisation theory characterised by principles of scientific management.Based on these principles, organisations were structured to reflecteconomiesofscaleandstandardisationofwork.Financialcapitalwasseenas a scarce resource and corporate headquarters exercised operationalcontrol over divisions, business units and departments. Many largeorganisationsstrugglingtodayhavehadahardtimeupdatingandrenewingthe legacy structure that has become entrenched. An example is GeneralMotors. Jim Jubak, senior markets editor ofMSN Money and formerlymarketseditorofWorth,comments:1

Once upon a time,US industrial companieswere designed to doeverything themselves. Ford Motor marked a high point of thiskindofcorporatestructure: thecarmakermade itsownsteel, forexample,inthegreatRiverRougeplant.GeneralMotorsbuildsitsown cars from its own designs and then finances the cars.Independently owned – but company-affiliated – dealers sell thecars.Untilrecently,carmakersbuilt theirownparts, too.GeneralMotors and Ford Motor didn’t begin spinning off part makersDelphiandVisteonrespectively,until1999.Andonceupon a time this structureworkedwell.Byowning allpartsof theprocess, thesecompanieswereable tomakesure thatalltherawmaterialsandpartsneededtomassproducecarswereintherightplaceattherighttimeandoftherightquality.Butnobodywoulddreamofbuildingacompany thisway if theywerestartingacarmaker today.LookathowCheryAutomobile,an eight-year-oldChinese carmaker, proposes to enter theNorthAmericanmarketwith sixmodels in2007. IthashiredVisionaryVehicles(oftheUnitedStates)forsalesandmarketing;PininfarinaandBertone(ofItaly,thedesignersofPeugeotsportscars,FerrarisandLamborghinis)forbodydesign;andLotusEngineering(oftheUnitedKingdom),MitsubishiAutomotiveEngineering (of Japan)andAVL(ofAustria)forenginesanddrivetrains.Mostotherparts

willbefarmedouttoChinesesuppliers.That gives the company a chance to focus on just two things –logistics and final assembly – and to put together a team of theworld’sbestandworld’scheapestovernight.

There are several reasons why traditional structures, largely stemmingfromthelate1800sandexplainedinFrederickW.Taylor’s1911bookThePrinciplesofScientificManagement,arenolongervalid.Theyarebasedinaworldviewthatnolongerholds,typifiedbyaviewthat:

•management control andco-ordinationare essential formaintainingproductivityandperformance;

•thereisa“best”structureforanyorganisation;•specialisationanddivisionoflabourincreasethequalityandquantity

ofproduction;• changing the structure is the best way of dealing with perceived

problems.

This so-called mechanistic perspective gave rise to the functionalorganisationstructurecharacterisedbyaclearhierarchyintheworkforce,astatus-drivenview linked toadvancement (theperkofacorneroffice, forexample)andanemphasisonverticaltaskswithafocusoncontent.Subsequentorganisational theorists suggested thatTaylor’sviewon the

right structure formaximumproductivitywas too simple. They “proved”thatitisnumbersofcomplex,interactingvariablesthatmakethedifferenceinmotivatingpeopleand increasingproductivity.Themostwidelyknownof these theorists isEltonMayo,who between 1924 and 1932 conductedexperimentsinWesternElectric’sHawthorneplant.Hisfindings,popularlyknown as theHawthorneEffect, propelled awave of new thinking aboutorganisationalforms.2

Further thinking about organisations emerged, based on the view thatorganisationsaresystems.Achangeinonepartofthesystemwillproducedifferent effects in the system as a whole, and because the operatingenvironment changes frequently if not continuously, interactionswithin asystemare inherentlycomplex.Thisperspectiveresulted instructures that

emphasisedhorizontaltasks,collaborationacrossunits,afocusonprocessand a commitment model of worker productivity. Typical structures,discussed in subsequent sections of this chapter, reflecting early systemsthinkingaredivisional (product,process,geographic/market,orcustomer)andmatrix.Later systems thinking and now complexity theories related to

organisationshaveresulted instructures thataimtoenableself-organisingandinteractingnetworksofagents,with leadership tiednot toahierarchybut to where it makes sense to have a leader. Structures reflecting opensystems and complexity theories, also discussed later in this chapter,includeproject,networkandcluster.So the development of organisational theory gives rise to different

organisationalmodels(seeChapter2),whichinturngivesrisetodifferentorganisationalstructures.Table3.1simplifiestheconnections.

Table3.1Organisationaltheory:modelsandstructures

Functionalstructure

A functional structure is a highly traditional structure deriving from theTayloristviewoforganisationsandisoftenfoundinstrongcommandand

controlorganisationssuchasthemilitary.Thekeystrategyoffunctionallyfocused organisations is to maximise margins through leveragingeconomies of scale and functional expertise. Functional structures areeffectivewhen:

• there are stable and undifferentiated markets with well-understoodcustomerrequirements;

•thereisasuccessful,control-focusedenterpriseculture;•thereisasmall,singleproductline;•thereisscaleorexpertisewithineachfunction;•therearelongproductdevelopmentandlifecycles;•theorganisationworkstocommonstandards.

ExxonMobil’supstreamoperation

ExxonMobil’supstreamoperationisan“organisationaldesigncentredonaglobal functional approach”, as Rex W. Tillerson, the company’s seniorvice-president,explainedattheCERAWeekConferenceinFebruary2004:

Each ExxonMobil company will have different approaches as tohowtomeetthevariouschallengesI’vementioned.I’llmakeafewcomments regarding ExxonMobil’s approach in the upstreamportionofourbusiness…Tomaximizeefficiencyandadheretoauniformhighstandardofbusinessapproach…wehaveorganizedour upstream business by function, not geography, with eachfunctionoperatingasaglobalorganization.Webelievethisglobalstructureis themostefficientwaytorunourworldwidebusiness.Theglobalorganizationapproachensures that all explorationanddevelopment opportunities are pursued with a consistent eyetowardquality and it ensures the right expertise and technologiescanbedeployedattherighttimeandwiththerightpriorities.Source:www2.exxonmobil.com/Corporate/Newsroom/SpchsIntvws/Corp_NR_SpchIntrvw_RWT_090204.asp

Divisional/productstructure

Adivisional/product structure is themostappropriate inabusinesswheretherearelowsynergiesbetweenthebuyersandthedistributionchannelsofthedifferentdivisions.Typically, in thisstructureeachdivisionrunsasanindependentbusinessunit.Divisional/productstructuresareeffectivewhen:

•stakeholdersperceivelowsynergiesbetweenproducts;•therearedifferentpurchasingprocess/distributionchannels;•therearedifferentoperatingrequirementsforsuccess;•thereisadifferentcompetitiveenvironment;•thereareshortproductdevelopmentandlifecycles;•thereisaminimumefficiencyofscaleforfunctionsoroutsourcing.

Danone isanexampleofanorganisationstructuredonproduct linesasthefollowingextractfromitswebsiteillustrates.

Freshdairyproducts,beverages,biscuitsandcerealproducts–profitablegrowthonthreefronts

The saleofGalbani’sbusiness at thebeginningof2002markeda furtherstep forward in a strategy pursued over the past five years, aiming for afocused business structure. Since 1998, Groupe DANONE has beenorganisedinthreebusinessdivisionsworldwidewhich,in2004,representedmore than 97% of its consolidated sales: Fresh Dairy Products whichgroupstogetheryoghurts,dessertsandinfantfoodsrepresentabout50%ofthe Group’s consolidated sales, Beverages, essentially packaged water,which represent about 25%of consolidated sales andBiscuits andCerealproducts,whichrepresentabout22%ofconsolidatedsales.This focus on 3 dynamic categories allows the Group to have a

determining strategic asset at its disposal to continue to display a growthratethatishigherthantheaverageinthesector.

Source:www.danone.com

Divisional/geographicormarketstructure

Asorganisationsexpanddomesticallyandinternationally,thetendencyistoorganisebygeographicmarketsenablingrecognitionof localculturesandoperating conditions. These structures aim to operate under the slogan“ThinkGlobal,ActLocal”.Divisional/geographicormarketstructuresareeffectivewhen:

• the business environment varies by geography – different customerneeds, different competitive environment, different externalconstraints;

•theproductsproducedhavealowvalue-to-transportcostratio•theorganisationisclosetocustomersfordeliveryorsupport;•theorganisationwishestobeperceivedaslocal.

Chevron/Texacoisanexampleofageographicorganisationstructure.

Chevron/Texaco’sorganisationstructure

In February 2001, Chevron and Texaco announced the organisationstructurefortheproposedpost-mergercompany:The worldwide downstream organisation reporting to Woertz [Pat

Woertz, then executive vice-president downstream] will be segmentedgeographically into four operating companies for major refining andmarketingoperations,eachheadedbyapresident,plusapipelinecompany.The refining and marketing organisations – North America, Asia/MiddleEast/Africa,Europe/WestAfrica,andLatinAmerica–willhave the scaleand scope to create and share best practices within and across operatingcompanies,will have a criticalmass of competencies in each geographicarea,andwillshareservicesatthelowestpossiblecost.

Divisional/processstructure

Inthisstructurethefocusisonprocesseswherecoreservicesareoperatedacross theenterprise. Internal support servicesare frequentlyorganised inthis way but customer-facing services are equally well served by thisstructure,which is a good alternative to the functional structure.Process-focusedstructuresworkwellwhen:

• there are well-defined processes serving different customers(internal/external);

• there is potential for new processes and/or radical change toprocesses;

•thereisarequirementtoreduceworkingcapital;•thereisaneedtoreduceprocesscycletimes;•thereislittleinterdependencybetweencoreprocesses;•therearedifferentcultures/workforcesbetweencoreprocesses.

AUSstategovernmentinitiatedaprogrammetostreamlinethesituation

outlinedbelow.

PresentationtoFinanceCommittee

Due diligence activities in 2005 uncovered an amazing situation. Aftersurveyingandinterviewing46ExecutiveBranchagenciesregardingjust26businessprocesses,thefollowingwasdiscovered:

• 250 administrative, financial, human resource and supply chainmanagementsystems.

• All shapes, sizes and varieties – manual, spreadsheet, PC, server,mainframeandweb.

• 4,750 FTEs (full-time equivalents, in other words the number ofpeople)areneededtorun/usethesesystems(thisincludestechnicalstafftosupportthem).

•Itcosts$308mannuallytokeepthisenvironmentgoing.• Extrapolated to the rest of the Executive Branch (minus higher

education)theannualcostisestimatedtobe$441m.•Redundantdataentryand,therefore,duplicatedata.

Old and inflexible technology (such as COBOL) that is difficult tochangeandforwhichsupportisgettingmoreandmoredifficulttofindinthemarketplace.

Thedesiredoutcomeoftheprogrammewasclearlystatedbythechiefofstaff. Summarised below, it is one where there are transparent, cost-effectiveandefficientprocessesacrosstheenterprise:

• The primary goal of the Enterprise Applications Program is toredesign and implement new administrative, financial, humanresourceandsupplychainprocessesandsystems.

• The redesign will be based upon industry best practices and alsoaccommodate the unmet needs of business staff in the ExecutiveBranchasdefinedintheduediligence.

• Emphasis will be placed on process and system integration, datasharing, ability to adapt to business change and technologystandards.

•Staffandtechnicalinefficiencieswillbeidentifiedandcorrected.•Wewill be able to see thewhole enterprise.Management and staff

willhavethedataandsystemfunctionalitytheyneedtooperatetheenterprise,closelytrackperformanceandmakebusinesschangestomeetservicedemandsofthestate.

Divisional/customerstructure

Structures around customer segments are successful where there areobvious customer segments defined by need, economics, distribution andotherkeyattributes.Divisional/customerstructuresareeffective:

•wherewell-definedcustomersegmentshavebeenidentified;•whensellingproducts/servicesuniquetosegment;•whenusingbuyerstrength;•whenleveragingcustomerknowledgeadvantage;•whenrequiringrapidcustomerserviceandproductcycles;• when perceiving minimum efficiencies of scale in functions or

outsourcing;•whenpromotingastrongmarketing/customer-focusedculture.

RoyalPhilipsElectronicsisanexampleofacustomer-facingstructure.

RoyalPhilipsElectronics’sdrivetobecomecustomercentric

In the late 1990s, Royal Philips Electronicswas a slow-footed behemothwhose products, from medical diagnostic imaging systems to electricshavers, were losing traction in the marketplace. By 2002, a new CEO,GerardKleisterlee,determinedthatthecompanyurgentlyneededtoaddressthedynamicglobalmarketplaceandbecomemoreresponsivetoconsumers’changingneeds.Strategists recognised a huge opportunity: to be the company that

delivered on the promise of sophisticated technologywithout the hassles.Philips, they said, should position itself as a simple company. AndreaRagnetti,Philips’s chiefmarketingofficer,wasdumbstruck. “I said, ‘Youmustbejoking.Thisisanorganisationbuiltoncomplexity,sophistication,brainpower.’” But he and Kleisterlee responded with an even moreaudaciousplan.Rather thanmerelyretoolingproducts,Philipswouldalso

transformitselfintoasimpler,moremarket-drivenorganisation.Thatinitiativehasbeenfeltfromthehighestrungsoftheorganisationto

thelowest.Insteadof500differentbusinesses,Philipsisnowin70;insteadof 30 divisions, there are 5. Even things as prosaic as businessmeetingshavebeennudgedinthedirectionofsimplicity:thecompanynowforbidsmore than 10 slides in any PowerPoint presentation. Just enough, theydecided,wasmore.The campaign, christened “Sense and Simplicity,” required that

everythingPhilipsdidgoingforwardbe technologicallyadvanced–but italso had to be designed with the end user in mind and be easy toexperience.Early results of the business reorganisation, particularly in North

America,havebeendramatic.Salesgrowthforthefirsthalfof2005wasup35%,and thecompanywasnamedSupplierof theYearbyBestBuyandSam’s Club [giant wholesale hypermarkets]. Philips’s Ambilight Flat TVand GoGear Digital Camcorder won European iF awards for integratingadvancedtechnologiesintoaconsumer-friendlydesign,andtheConsumerElectronics Association handed the company 12 Innovation Awards forproductsrangingfromaremotecontroltoawearablesportaudioplayer.[John]Maeda,who,asamemberofPhilips’sSimplicityAdvisoryBoard

has had a front-row seat for this transformation, is impressed. “The bestindication of their sincerity is that they’re embracing the concept at amanagement level,” saysMaeda. “It isn’t just marketing to them. That’squitearadicalthing.”

Source: Linda Tischler, “The Beauty of Simplicity”, FastCompany,November2005

Matrixstructure

Matrix structures typically operate in two dimensions (for example,functionandproduct,asinFigure3.6)andareusuallyoneofthreetypes:functionalmatrix,balancedmatrixorprojectmatrix.Theaimofthematrixstructureistoprovidecustomerswithinnovative

solutions through effective teams of highly skilled individuals. Matrixstructuresaremosteffectiveinconditionswhere:

• core work is project-based or the work requires small groups ofpeople;

•projectsrequirehighlyspecialisedskillsandknowledge;•projectskillrequirementsvarygreatly;•labourcostisaprimeeconomicdriver.

GeneralMotorsisanexampleofamatrixstructure.

GeneralMotors:amatrixinaction

When Ralph Szygenda became GM’s first corporate chief informationofficer(CIO)in1996,EDShadjustbeenspunofffromGM,butitwasstillrunningallofthecompany’ssystems.Consequently,GMhadnoITstaffofits own. “There weren’t any IT people to speak of; there was no ITleadership,”Szygendarecalls.“Howdoyoutransformthat?”Hisanswer,whichgotquiteabitofpublicityatthetime,wastobuildan

organisational matrix of IT managers unlike that found in any othercompany. Szygenda hired five divisional CIOs to correspond roughly toGM’s business divisions: North America; Europe; Asia-Pacific; LatinAmerica,Africa and theMiddle East; and finance.At the same time, hehired five process information officers (PIOs) to work horizontally indifferent specialities across all divisions around the world: productdevelopment, supply chainmanagement, production, customer experienceandbusinessservices(HR,legalandsoon).TheseCIOsandPIOscameonboard in1997toformthemanagementorganisationofGM’sIT, formallyknownasInformationSystems&Services(IS&S).CIOs and PIOs work from divergent perspectives and have different

reportingrelationships.EachCIOreportsnotonlytoSzygendabutalsotobusinessheads;PIOs report toSzygendaalone. ITmanagers refer to“thematrix” or “the basket weave” to determine their relationship with oneanotherandtoexplaintheiroccasionalclashes.Thismatrix,provenovertime,hasbeenacriticalpartofhowIS&Stook

controlofITspendingfromEDS.Duringthepastsevenyears,Szygenda’steamhas loweredGM’sITbudgetby$1billion(25%).WherepreviouslyGM used 7,000 different information systems, there are now fewer than3,500.Bysettingupoverlapping, intersectingresponsibilitiesamonghisdirect

reports, Szygenda designed the matrix to create internal competition,believingthatwashowtoimproveprocesses.“CIOsaredrivingefficiencyin their world and PIOs are driving efficiency horizontally,” says CherriMusser,PIOforsupplychainoperations,whohastwicebeenaCIOwithinIS&SandwhowasoneofSzygenda’sfirsthires.

Source: Prewitt, E., CIO Magazine, September 1st 2003(www.cio.com/archive/090103/hs_reload.html)

Networkstructure

Network structures are valuable for fast-moving organisations that are

highly innovative and operating in an environment that requires speed,flexibilityandhighlevelsofcustomerfocus.Innetworkenterprisesworkisorganised around team and unit delivery, often because units havedistinctively different ways of working. However, as the units work incombination,thedeliverytothecustomerisseamless.

Themovementofaparcelfrompointofdespatchtopointofdelivery,via

acompanysuchasUPS,isanillustrationofanetworkstructure.

UPS:anetworkedorganisationinaction

UPS’s financial strength is derived from its unique business model,combinedwith a companyculturedevelopedover97years.Thebusinessmodelisbasedonanintegratednetworkwhereallsystemsworkcohesivelytogether.One global network results in the most efficient use of assets and the

highest reliability levels. And it makes it easier to bring products andservicesthataresuccessfulintheUnitedStatestotheglobalmarket.UPS investshundredsofmillionsofdollars in itsnetworkannually for

facilities, vehicles and aircraft. In Europe, construction continued on the

expansionofthecompany’shighlyautomatedairhubinCologne,Germany– thecompany’s largesthuboutside theUnitedStates. Inaddition,UPS’sserviceportfoliowasbroadened to, fromandwithin the tencountries thatjoinedtheEuropeanUnionin2004.IntheUnitedStates,networkimprovementsreducedtransittimesbyone

day on UPS ground service between 20 metropolitan areas, includingAtlanta,Baltimore/WashingtonDC,Chicago,Dallas,Houston,KansasCity,Los Angeles, Philadelphia and Pittsburgh. The company will continueenhancingtransittimesintheUnitedStatesin2005andbeyond.

Source:UPSAnnualReport2004

Clusterstructure

Theclustermodelprovidesanotherexampleofanorganisationalstyleidealfor conditions requiring flexibility, innovation and change. It is a non-organisation in the sense that it doesnot exist as aphysical entity. It is asubcontracting model where, as Gareth Morgan says in his bookImaginization:NewMindsets forSeeing,Organizing,andManaging, “theteamatthecentresteersthewholeenterprise”.4Thesubcontractorsaretheclusters around the central point. Specific and time-related contracts forworkcomefromthecentralpoint.The aim of the cluster model is to provide customers with innovative

solutions through effective teams of highly skilled individuals. Clusterstructuresaremosteffectiveinconditionswhere:

•thereisrapidpaceofchange;•amarketnichemustbequicklyexploited;•subcontractorsarerequiredtodospecificpiecesofwork;•thereisnorequirementfordirectreportingrelationships;•decision-makingandaccountabilityaredelegated to thosedoingthe

work;•clustersarelinkedbycontactsamongmembers.

Nike:aclusterapproach

FirmssuchasNikehavestretchedthisideatosuchanextentthatsomeofthemnowmakenothing:allNike’sshoes,forinstance,aremanufacturedbysubcontractors.Nikeemploysfewpeopledirectly.CompaniessuchasNikehave become the orchestrators of a brand. Their baton has only limitedcontrol over themusicianswho play for them, but that does not preventthemfromproducinggreatmusic(orshoes).

Source:“Partnersinwealth”,TheEconomist,January19th2006

“Life-form”structure

Thestructuresdescribedsofarallderivefromthinkingaboutorganisationsas an assemblage of discrete parts that can be taken apart, replaced,reassembledand re-formedas if theywereacollectionofLegobricks.Adifferent view of organisations comes fromAries de Geus, who talks of

largeinstitutions,particularlyglobalcorporations,asanewlivingspecies–at best, thoughtful evolutionary “beings” collectively participating in theevolution of our universe.5 From this perspective it is impossible todisassemble the elements just as it is impossible to disassemble a humanbeingandremodelone.AsPeterSengesays:6

Ratherthanattributingthechangessweepingtheworldtoahandfulof all-powerful individuals or faceless “systems”, we can viewthemastheconsequencesofalife-form,thatlikeanylifeform,hasthepotentialtogrow,learn,andevolve.

Theoretically,anyofthestructuresdescribedabovecouldbepartofalifeform (in much the same way that a skeleton is part of a mammal). Thedifferenceinoutcomeisthewaythatthe“mind”ofthestructure“thinks”.SengediscussesaU-movement(Figure3.9),notofamechanisticstructurebutofanorganisationallifeformwiththecapabilitytothinkandbeintheworld.Inorganisationswhere thestructure is integral to theorganisational life

form, characteristics that other living species havewould be evident. Forexample,suchorganisationscould:

•continuouslyrecreatethemselves(asthecellsinahumanbodydo);•actfromperceptionsofwheretheyareinrelationtoothers;•“conservefeaturesessentialtotheirexistenceandseektoevolve”;7

•“learntotapintoalargerfieldtoguidethemtowardwhatishealthyforthewhole”.8

Examplesofthistypeoforganisationarehardtofind,buttherearesome

“collectivities”thatareperhapsmovinginthatdirection.TheOpenSourceInitiativeisone,althoughitcouldbearguedthat this iscloser toavirtualstructure(seeTable3.3).

OpenSourceInitiative:alife-formstructure

Open Source Initiative (OSI) is a non-profit corporation dedicated tomanaging and promoting theOpenSourceDefinition for the good of thecommunity, specifically through theOSICertifiedOpenSource Softwarecertification mark and program. You can read about successful softwareproducts that have these properties, and about our certificationmark andprogram, which allow you to be confident that software really is “OpenSource”.Wealsomakecopiesofapprovedopensourcelicenseshere.The basic idea behind open source is very simple:When programmers

canread,redistribute,andmodifythesourcecodeforapieceofsoftware,the software evolves.People improve it, people adapt it, people fixbugs.And this can happen at a speed that, if one is used to the slow pace ofconventionalsoftwaredevelopment,seemsastonishing.

We in the open source community have learned that this rapidevolutionary process produces better software than the traditional closedmodel, in which only a very few programmers can see the source andeverybodyelsemustblindlyuseanopaqueblockofbits.OpenSourceInitiativeexiststomakethiscasetothecommercialworld.

Source:www.opensource.org

Structuredecisions

People in organisations are familiar with restructuring. Who has notenjoyedtheDilbertcartoonsthatexemplifythecynicismandwearinessofthe workforce as they get wind of the next round of downsizing,outsourcing,orsimilar?Restructuringanorganisationcanappearasaknee-jerk reaction to changing operating conditions, as Raymond Galvin (44yearsinthepetroleumindustry,retiredpresident,ChevronUSAProductionCompany,andformerdirector,ChevronCorporation)noted inaspeechatthePetro-Safe’98ConferenceandExhibition:9

For the last five years of my career, I presided over therestructuring of one of the largest oil and gas producingorganisationsintheUnitedStates.Withoilandgaspriceslowandfinancial performance standards rising, we had to change. Thatreality, however, didn’t alter the fact that cutting costs in health,environmentandsafety(HES)lookedlikeablendofhypocrisyandbadbusinessjudgment.Toagoodmanyemployees,itlookedlikenothingmorethanputtingprofitsaheadofsafety.The years of downsizing and displacement had a big impact onmorale–alotofpeoplelefttheindustryfeelingbitter.Butalotofothers, whether they stayed on or left, appreciated the voluntaryseverance programmes, the redeployment efforts and the jobplacement services that many companies provided for surplusemployees.Theseeffortswerefarfromperfect,butIbelievetheymade a big difference in HES performance during the roughest

years of restructuring. In fact, it’s a credit to the people of thisindustrythatwewereabletomakebehavioralandculturalprogressintheHESareaduringsuchatraumaticperiod.

However,asleaderssearchforwaysofincreasingthespeed,flexibility,integrationandinnovationoftheirorganisation–withoutlosingcontrolofit–theyturnfirsttoitsstructure,perhapsbecausethisappearstobeaneasythingtodo(comparedwith,say, lookingat theculture,or thewaypeoplelearnandapplythingsintheorganisation).Basically,leaderswanttoknowwhatstructurewillworkbestfortheorganisationandwhattheoptionsare.Thequestionstheywantanswerstoaretypicallyasfollows:

•Speed–Howoftenandhowmuchrestructuringisnecessarytokeepaheadof

competitors?–What structuresmake for fast decisions and delivery of product or

service?–Whatstructureswillenablekeepinguptospeedoraheadofthecurve

withchangesincustomerandmarketrequirements?–Whatstructuresminimisebottleneckswithoutincurringrisk?•Integration(sizeandshape)–Whatstructurewillmaximisetheflowofknowledgeandinformation

throughtheorganisation?–Whateffectdoparticularstructureshaveontherelationshipsamong

businessunits,divisions,headquarters,customers,suppliers?– Does the way a department, business unit or organisation is

structuredgetinthewayofefficientandeffectiveworkflow?–Whatisthebestbalancebetweencentralisationanddecentralisation?– Does the structure allow everyone’s voice to be heard (high

participation) yet facilitate decision-making by more seniormanagers(centralisation)?

•Flexibility(roleclarity)–Howwilljobsandpaylevelsbedescribedandclassifiedtomaximise

workforceflexibility?

–What levels of autonomy, accountability and participation go witheachofthepotentialstructures?

–Whatarethejobdesignsthatgowitheachtypeofstructure?–Howwell do the relationships between individual departments and

betweendepartmentsandheadquarterswork?•Innovation(specialisation/organisationidentity)–Whatstructurewillbestsupportthedesiredculture?–Whatstructurewillbestsupportorganisationalvalues?– Does the organisational structure attract the best and the brightest

staff(andhelpretainthem)?–Will structuring differently help develop the organisation’s market

positionandcompetitiveness?– What structure would maximise the flow of knowledge and

informationthroughtheorganisation?•Control–Howwillthebalancebetweenlocalandcentralcontrolbeattained?–Howmany layers ofmanagementmake for effective and efficient

control?–Whatistheoptimumspan(ie,numberofpeopleanyonepersoncan

supervise)ofcontrolinagivensetofcircumstances?–Howcanstructuresbeusedtodrivethedesired/requiredbehaviours?–Whatshouldbethechainofcommand/decision-making?–Whowillreporttowhomandwhy?

Becausethestructureofanorganisationisonlyonedesignelementthereare no straightforward answers to these questions as each has to beanswered in relation to the other organisational elements. However,comparing the structures starts to give some useful information on therelativecapabilitiesofeach,asTable3.2shows.Combiningthisinformationwiththeadvantagesandlimitationsofeach

structure (see Table 3.3) gives a reasonable start-point on which to basediscussionsaboutcurrentstructuresandstructuralalternatives.Onepointtobearinmindisthatevenwithinoneorganisationtheremaybenoneedfora

single structural form across the whole organisation. For example, aninternalauditdepartmentmayrequireadifferentstructurefromaresearchanddevelopmentdepartmentwhichmay in turnneedadifferent structurefromaprogrammemanagementdepartment.

Table3.2Comparingstructures

Table3.3Advantagesandlimitationsofstructures

Layersandspans

Layers in an organisation refer to the number of levels of staff there arefrom the most junior to the most senior. Traditionally, governmentorganisations have many layers: for example, US government agenciestypicallyhave15layers(withtenpaygradeswithineach).Thetrendisto

reduce the numbers of layers in an organisation bymerging or removingtheminordertoplaceaccountabilityatthelowestpossiblelayer.Aspanofmanagementisthenumberofemployeesthatasinglemanager

is responsible for, usually in terms of allocating work and monitoringperformance. There is no right number of people that one person canmanage (though a commonly held view is that five is the optimum) asvarious factors affect amanageable span.The relationship between spansand layers is not straightforward either, although wide spans ofmanagementaretypicaloforganisationsthathavefewlayers.There are two frequently asked questions related to structure that

managersandHRstaffareanxioustogetarightanswerfor:

•Howmanylayersofmanagementshouldtherebe?•Whatistherightspanofcontrol?

Neither of these questions has one right answer. Layers and spans arestructured to help managers get work done, so the first part of anorganisationaldecisiononthenumberofmanagementlayersandthespanof a manager’s control requires discussions and agreement on whatmanagersaretheretodo.In general,managers plan, allocate, co-ordinate and control in order to

achievewhatthelatePeterDruckerdescribedastheirthreetasks:11

1Tocontributetothespecificpurposeandmissionoftheenterprise.2Tomakeworkproductiveandtheworkerachieving.3 To manage the social impacts and social responsibilities of the

organisation.

Clearly,determiningwhatconfigurationof layersandspans is likely towork in a given organisation depends on the situation, organisationalpurposeandahostofotherfactorsrelatedtotheinterpretationofwhatthethree tasks entail and the weighting given to each of them. When JohnBrownebecamechiefexecutiveofBPin1995,hereducedthemanagementlayerssignificantlyandchangedtheirspansofcontrolanddecision-makingin order to introduce speed, flexibility and integration. According to anarticleinTheEconomist:12

Theoilgianthadtraditionallyhadahighlycentralisedhierarchicalstructure,butLordBrownecut itshead-officestaffbysome80%andpusheddecision-makingdownto90newlyestablishedseparatebusinessunits.Thehierarchywasflattenedsomuchthat theheadofeachofthe90unitsreporteddirectlytothecompany’snine-manexecutive committee – though as BP subsequently grew throughtakeover, some intermediate layers were introduced again.Individual managers also had much of their head-office supportremoved.Thetopoftheirsilohadsuddenlybeenloppedoff.

Note that in this case some layerswere later reintroduced, demonstratingthatwhatmaybetherightconfigurationinonestateofplaymayneedtobechangedifadifferentgamestarts.Tohelpget agoodenoughanswer to the “howmany layers”question,

therearefourrulesofthumb(relatedtothefourmanagementactivitiesofplanning,co-ordinating,controllingandallocating).Eachlayershould:

•beflexibleandadaptableenoughtoenablemanagerstoforwardplaninacontextofconstantlychangingoperatingenvironments;

• facilitate co-ordination between business units (Michael Goold andAndrewCampbell suggest there are six forms of business unit tounit co-ordinating activity: leveraging know-how; sharing tangibleresources; delivering economies of scale; aligning strategies;facilitating the flow of products or services; creating newbusiness13);

• have appropriate control and accountability mechanisms (note thatany task, activity, or process should have only one personaccountableforitandaccountabilityanddecision-makingshouldbeat the lowest possible level in the organisation; overlap andduplication,fuzzydecision-makingandconflictresolutionprocessesareallsymptomsoflackofadequatecontrols);

• enable its managers to allocate effectively the range of resources(human, time, equipment,money, and so on) they need to delivertheirbusinessobjectives.

If these four attributes are working well, it is likely that the layer isaddingvaluetotheorganisation,inthatitisfacilitatingspeedofoperation,innovation, integration, flexibility and control. If it is not evident that thelayer is doing this, it may be redundant and the reason for its existenceshouldbequestioned.Determininga sensible spanof control ispossible (though infrequently

done)bothforanindividualmanagerandforthetypeofworkcarriedoutina business unit or organisation. The method involves considering thefollowing:14

The diversity and complexity of the work performed by theorganisation,theexperienceandqualityleveloftheworkforce,theextent to which co-ordination or interdependence is importantbetweenemployeesandgroups,theamountofchangetakingplacein the work environment, the extent to which co-ordinatingmechanisms exist and are effective, geographic dispersion, theextent to which job design and tools allow direct performancefeedbacktotheemployee,administrativeburdensoneachlevelofmanagement, and expectations of employees regardingdevelopmentandcareercounselling.

Robert Simons suggests that any job comprises four different spans:control (including people, working capital, facilities, infrastructure andintangibles),accountability,influenceandsupport.15Eachofthespanscanbe adjusted (see Figure 3.10) to reflect the business strategy and meetcurrent organisational requirements, but to ensure high performance thespans related to the supply of resources (control and support)must be inequilibriumwiththespansrelatedtodemandforresources(accountabilityandinfluence).

CASESTUDY:theeffectsofrestructuringratherthandesigning

ATD Consulting was founded in 1992 as a two-person entrepreneurialventuretomeetaneedinthemarketplaceforconsultingservicesfocusingon collaboration techniques. It is now an 80-person company operatingprimarily as a consultant to government departments in a range of rolesfromstaffaugmentationtostrategicpartner.Forseveralyearsitremainedasmallcompany,butin2000itembarked

onanewgrowthstrategycombinedwithabrandingcampaign.By2005thecompany employed 85 people, had moved offices twice, had acquired asmaller organisation and had been named as one of the area’s fastestgrowingcompanies.ATD’smissionwas:

To drive peak performance, to enable clients to collaborate andstructure solutions that achieve maximum efficiency andprofitability, to build trusted partnerships and to help clientsnavigatethroughchangingbusinessenvironmentswithprojectandtransformationmanagement.

Thecompanyalsocitedsevenorganisationalvalues:

•Collaboration:Bringingtogetherdisparatepeople,ideas,thoughtsandexperiencesandblendingthemtocreategreaterqualityandhighestvalue

•MutualRespect:Treating everyone as youwould like to be treatedandvaluingthecontributionsofothers

• Integrity: Acting with high values; doing what is right rather thanwhatisexpedient

•Organisation-centric:Allforone,oneforall•Client-centric:Dedicatedtomakingourclientssuccessful•TrustandSafety:Havingfaithinfellowemployees,theorganisation

andanatmospherethatenablesindividualstotrynewthings,voiceopinionsandbethemselveswithoutretribution

• Professional Excellence: Acting with the utmost professionalism,quality,proficiency,respect,integrityandclassinallaspectsoftheworkenvironment

Onthecompany’swebsitetherewasanassurancethat“thetwopartnersand the executive team work constantly to ensure cross-companycollaboration and communication at all times, particularly during thisperiodofrapidgrowth”.InthereceptionareaonaTVscreenvisitorscouldseeinformationonthecompanymission,itsstaffandproducts,andtheninecompetencyareasitfocusedon:

•Strategicandactionplanning•Programmemanagementandoversight•Cultureandcommunications

•Organisationchange•Businessprocessevaluation•Economicandfinancialanalysis•Informationsecuritymanagement•Technologystudiesandassessments•Requirementsmanagement

Until October 2005 ATD was organised according to these ninecompetences, each with a competency director. The senior managementteamcomprised the twoowners, a chiefoperatingofficer, a chief financeofficerandaheadofbusinessdevelopment.TwosmallsupportteamswereheadedbyachiefinformationofficerandanHRdirector.Allthesepeoplehad their own offices and the consultants were housed in cubicles. Theorganisationhadthreelayerswithanaveragespanofeightpeople.The offices were located on two floors of a new building. A special

leasingdeal,andaneyetofuturegrowth,meantthatthecompanyhadalotmorespacethanpeopletofillit.Therewereanumberofemptyofficesandseveralareasofopenspacewithnothinginthem.In the early summer of 2005, discussions startedwith the competency

directorsabout thefutureshapeandsizeof thecompany.Thefeelingwasthat the structure was unwieldy, difficult to operate and confusing forclients.Thecompanywasalsobeginningtoloseworktocompetitors.Thetwoownerssaidthattheorganisationshouldbemorespeedy,flexibleandinnovative,andintegratedwithmoreappropriatecontrolmechanisms.Agreeing with this, the competency directors discussed the options

among themselves andwith their teams, andmade recommendations thatincluded clearly defining the business strategy and then designing anorganisation to deliver it. They had assumed, from their currentinformation, that the strategy included growth, attraction of commercialclients,andamoveawayfromprogrammemanagement(seeGlossary)andtowardsstrategicplanning.With thisand theorganisationvalues inmind,they consulted their team members and drafted a design andimplementation plan that ensured alignment of all the organisationalelements and supported the collaborative principles on which ATD wasfounded.

The suggested structure (one aspect of the design and implementationplan)includedcombiningsomeofthecompetenceareaswhichwouldthenoperate as self-managing teams in a way that minimised organisationallayersandoptimisedspans.Theirplanincludedaligningallorganisationalelements.At a staffmeeting inOctober 2005, a new structure that had not been

discussedwiththecompetencydirectorsortheconsultantswasrevealedina PowerPoint presentation. It showed the eight competency areas as fivelinesofbusiness(LOBs),headedbyaseniorvice-presidentwhohadjoinedthecompanytwoweekspreviously(seeFigure3.11).EachLOBwasheadedbyavice-president:twowereformercompetency

directors,twowereactingheadsandonewassomeonewhohadjoinedthecompany the previous week. Thus seven competency directors lost theirroles (if not their jobs) publicly and with immediate effect. During thepresentationtheconsultantsweretoldwhichlineofbusinesstheywerenowinandtowhomtheywouldbereporting.The new structure did not incorporate any of the recommendations or

suggestions of the competency directors and added another layer ofmanagement (vice-presidents, senior vice-presidents,CEO and president).It named one of the new staff members senior vice-president operations(giving rise to speculation that hehadbeen recruitedwith thepromiseofthis althoughnothinghadbeen communicated at the timeof his joining).ThetwoowningpartnersbecamepresidentandCEO.Followingthepresentationandtakingalmostnoquestionsaboutthenew

structure, the CEO moved to the meeting’s next agenda item onorganisational values. The stunned workforce was asked to form smalldiscussion groups to discuss the values of “mutual respect” and“professionalexcellence”.A few days after the staff meeting the seven ex-competency directors

weree-mailedarequesttoleavetheirofficesandrelocatetoofficecubicleswithin 30 days – even though this would addmore empty offices to theexistingones.Thenewvice-presidentswereeachgivena largeofficeandthelatestelectroniccommunicationdevices.Sixweeks after the staffmeeting all staff received an e-mail from the

CEOmandating them toattendaworkshop, thepurposeofwhichwas to“dosomevisioning–picturingATDConsultantsinthefuture”.Theowning

partnersnotedintheinvitation:“Thisisthefirststepinourstrategicreviewprocess.Wewanttohearfromyou,sobethereandbepartofit!”Fourmonthslater16peoplehadresigned(sixofthesewerethedemoted

competencydirectors),leavingclientsunhappyasmuchoftheworkhadtobecoveredbycontractors.Theinformalorganisationcommunicationswereabout colleagues looking for jobs in other organisations, and the seniorvice-presidentoperationswasbeingconsistentlydescribedassomeonewith“nopeopleskills”and“icewaterinhisveins”whoexpectedstaffto“saluteand execute”. The owning partners were struggling to keep their growthplans going in the midst of loss of organisational knowledge and skill,lower productivity, negative messages seeping out into the environment,and a developing culture of compliance rather than collaboration andcommitment.

Reflectionsonthecasestudy

Using themodel shown inFigure1.2andapplying it toATD Consulting’scaseexposessomebasicdesignfaults.Althoughtheimpetusforthenewdesignwas,rightly,drivenbytheinput

elementsinthemodel–customerrequirementsforclearerdefinitionoftheconsultancy“offering”andbytheoperatingcontext–thefirstprincipleofrobustdesignisformfollowsfunction.Inthiscasethenewstructure(onlyone part of form)was determined before the business strategy (function)had been developed.The valueswere in place butwere compromised bythemannerinwhichtherestructuringwasannouncedandtookplace.The

otherorganisationalelementswerenotalignedwiththestructure.Theneteffectofintroducinganewstructurewasthatitstartedtodictate

howthestatedstrategicdesires–toenterthecommercialmarket,focusonstrategic planning capabilities rather than programme management andgrowfrom85to250peoplewithintwoyears–couldbeformulated(ornot)intoanexecutablestrategy.Forexample:

• The five lines of business reflected a government parlance andorientationthatdidnottranslatewellintothecommercialmarket.

• The loss of staff with specific and marketable skills made bothchangingstrategicdirectionandrespondingtogovernmentrequestsfor proposals (the predominant way ATD won work) hard as theorganisationhadlessknowledgetodrawonandfewerstafftoactaskeypersonnelonproposedprojects.

• The inability to bid effectively for new work, because of staffattrition, led to increasing pressure on remaining staff to getthemselves to 100% billable on current projects and to developfollow-onworkfromexistingclients.Thischangeofapproachwasnot lost on the company’s clients, some of whom became lessfavourablydisposedtowardsit.

• Requiring consultants to be 100% billable meant that training,administration, research and collaboration had to be done inconsultants’ own time, leading an already demoralised workforceintofurtherdisaffection.

Byoverridingthecompany’sstatedvaluesandoperatingprinciples(seeFigure 1.2), ignoring thework already done on a newdesign and simplypresentinganewstructure inastaffmeeting, theowningpartners lost thegoodwill of their workforce. As well as compromising the values ofcollaboration andmutual respect, the structural change also compromisedthevalueof trustandsafety.Peoplebegan to feel thatspeakingoutaboutthe changeswas dangerous, and an intranet site put up for people to askquestions of the president, CEO and senior vice-president operationsremainedunused.Insteadpeoplegossipedandspeculatedinformallyamongthemselves.As stated, structurewas theonly element addressed in thenewdesign.

The other five elements that comprise the model – systems, people,performancemeasures,processesandculture–werenotalignedintandemwiththenewstructure.Inevitably,theywereallnegativelyaffectedbythechanges,leadingtodisruptionandoperationaldowntime.Forexample:

•ManystafffeltthattheircapabilitieswerenotcongruentwiththeLOBinwhichtheynowsat.Forseveralthissignalledthattheskillstheyhadwerenolongervaluedbythecompany.

•Somebusinessprocessesstalledasthemethodsforoperatingtheminthenewsystemhadnotbeenconsidered.Onewas theprocess forresponding to requests for proposals, another was the process forproject reviews – both were essential in maintaining high-qualitybusiness.

•Conflictssurfacedaroundwhoownedwhichprojects,whichstaffandwhich clients, as several of the projects in hand before the newstructuredidnotnecessarilyfitneatlyintooneofthenewLOBs.

Thus the five elementsof speed, integration, flexibility and innovation,withadequatecontrol,whichtheCEOandpresidentsaidtheywereaimingtoachieve,werecompromisedbyadesignprocessthatbegan(andended)with a restructuring. The resulting output was less than satisfactory. SixmonthslaterATDhadstillnotrealisedanygrowth,gainedanycommercialclients,ormovedfromprogrammemanagementtowardsstrategicplanning.

Toolsforthiscase

HadATD’s owning partners approached the design from a whole systemperspective rather than a structural one they would probably have beenmore successful and carried more staff with them. The lesson is thatstructuralchangesaffectallotheraspectsoftheoperationanditisessentialto identify the right organisational structure as part of the organisationdesignprocess.Beingmindfulofthebusinessissuesthedesignisseekingtoaddressand initiatinga reflectivediscussiononpotential structuresarekeystepsindesigninganefficientorganisation.Twotoolsthathelpframeadiscussionarestructuralevaluationandstructuralflexibility.

Structuralevaluation

This tool (showninTable3.4),preferablyusedaspartofawholesystemdesign,helpsidentifyastructurethatwillsupportbusinessobjectives.

Structuralflexibility

Invite a mixed group of managers (who represent each level ofmanagement) and staff (who represent each levelof staff) toaworkshop.Selectparticipantsnot just for theorganisation level that theycome frombut also for their depth of knowledge about the business (its internal andexternaloperatingenvironment)andtheirabilitytodiscussfuturebusinesspossibilities.Askthemtosuggestatleasttenissuesoropportunitiesthatareinthepipelineorthatmightpresentwithintwoyears(orpresentthemwithsome).Nowlookatthecurrentorplannedstructureandaskthegroupmembers

to assess how they would flex and adapt to meet the new situation if itarose. They should focus particularly on aspects of planning, controlling,co-ordinatingandallocatingforeachissueoropportunity,andshouldcheckthatenoughstructuralflexibilityisinplacetoensurethatthereiscontinuedcontributiontothemission,thattheworkismotivating,andthatthesocialimpactsandresponsibilitiesoftheorganisationarenotcompromised.Foreachissueoropportunityassessand,usingthefourrulesofthumb,

decidewhetherthecurrentorproposedstructurewillhelporhindersolvingof the issue or realising the opportunity. If there appears to be a lack offlexibilityoradaptabilityaskthegrouptodevelopaconfigurationthatcancopewithchanges.Thismightbebymodifying theexistingstructure, forexamplespecifyingrolesandaccountabilities,orclarifyingdecisionpointsandco-ordinationmechanisms.Oritmightbebymakingmoresubstantialstructural changes, for examplemerging units. (If substantial changes areinvolved,theexerciseislikelytobecomeafull-scaledesignprogramme.)

Summary

The aspects of structure discussed in this chapter aim to give enoughinformation to demonstrate that making changes to an organisation chartrequires:

•assessmentofthecurrentstructure;

• reflection on how any new structure can best support the businessstrategy;

• consideration of various internal and external operating factors thatwillaffectthetypeofstructurechosenandthelayersandspansthatcompriseit.

The case study repeats the message of this book that changing thestructurewithoutdueconsiderationoftheotheroperationalelementsofanorganisationisunwise.However,thepointisalsomadethatexaminingthestructure isanessentialpartofdesigninganorganisation,andchanging itmaybecriticaltodeliveryofthebusinessstrategy.

Table3.4Structuralevaluationtool

4Planningandsequencingtheorganisationdesign

Aplanisalistofactionsarrangedinwhateversequenceisthoughtlikelytoachieveanobjective.JohnArgenti,authorandfounderoftheStrategicPlanningSociety

DESIGNS THAT ARE simple, sustainable and deliver business results are theoutcome of careful planning followed by well-managed implementation.Theydonotjusthappen.Butiftheydo,theresultislikelytobebaddesignratherthannodesign.Planningorganisationdesignworkinvolves:

•recognisingthatthetimeisrighttodesignbyassessingtheproblemorissueconfrontingtheorganisation;

•beingclearaboutthedesignobjectives,inordertodevelopadetailedplan;

• getting support for the implementation, so that the transition to thenewdesignrunssmoothly;

• monitoring the new design with appropriate performancemeasuresthatenablecorrectiveactiontobetakeniftherearesignsofinabilitytoembedit.

Aquestionthatisoftenaskedis:howlongdoesittaketogetthroughtheprocessfrombusinesscasetoembeddingthenewdesign?Theansweris“itdepends…”.Thisisnotahelpfulresponsebutitisthetruth.Finishingtobudgetandscheduledependsonarangeoffactorsincludingthescopeandscaleofthedesignandthemodelandapproachesused.Gointoanyprojectmanager’sofficeandonthewallarelikelytobequoteslike“Overrunsareascertainasdeathandtaxes”or“Anyprojectcanbeestimatedaccurately(onceit’scompleted)”.However, some designs can be complete and functioning effectively

withinafewweeks,asagainanIKEAexampleshows:1

IKEA, applying the principle of “whole system in the room”,created a new structure and process for product design,manufacture, and distribution, decentralizing an agglomeration of“silos”thatnolongerserved.Some52stakeholdersexaminedtheexisting system,developed anewdesign, created a strategicplanandformedtaskforcesledbykeyexecutivestoimplementit.In18hours, theplanwasdevelopedandsignedoffonby thecompanypresident and key people from all affected functions,with activesupport from several customers. (Note: The process wasoperationalwithineightweeks.)

Otherdesignscantakeseveralyears,asinthecaseofBarclaysBank.This chapter explains how taking a programmemanagement approach

provides a robust framework for planning and sequencing organisationdesignwork.

High-leveldesignplanandsequence

In an idealworld a neworganisation design has a beginning,middle andend, each of which has been carefully initiated, structured and thoughtthroughinalogicalsequence.Figure4.1providesthehigh-levelviewofastructured design process that is clear to visualise and straightforward toworkwith.The organisation design programme startswith the business case (first

row of Figure 4.1). Once the business case is accepted the organisationdesign programme is established: the governance and day-to-dayoperationalmanagementofthework(secondrow).Thethirdrownamesthefour phases that a design programme typically goes through – assess,design, implement and embed.Critical to organisation design success arefiveaspects–thechangeenablers–thatmustbebuiltintothedetailedplan(fourth row). The fifth row calls out these five enablers of success:leadership support, stakeholder engagement, change readiness,communicationandtraining.Although it is presented as a neat hierarchywith a linear sequence, in

practicetheprocessismuchmoreiterativeandmessy–onethingmerges

with another, things happen and the edges become blurred. View theprocess as a map of how to get from A to B: experience proves thatfollowing the map will often involve getting lost, doing U-turns,backtrackingandgoingalongdead-endstreets.Themapmaybeaccurate,butusingitmaynotbeasstraightforwardasitseems.Justlikefollowingamap,followingasystematicprocessforplanningandsequencingthedesigndoesgivethebasisforahighdegreeoftransparencyandcontrolanddoeshelp things to get back on track as necessary, but it is not necessarily aneasyandsequentialjourneyfromstarttofinish.

Thebusinesscaseforchange

Abusiness case (first row of Figure 4.1) puts the argument for changingfromthecurrentdesigntoadifferentdesign.Ifthecaseiswellpresented,ithelps organisation decision-makers make the right investment decisionsrelated to a range of social, technological, economic, environmental,political, legal, financial and other factors that have an impact upon theproposeddesign(seeTable1.1).

Organisations usually have some kind of template for themaking of abusiness case.Formost largeorganisations these include sectionson fiveaspects:2

• Strategic fit. How well does the proposed way of meeting therequirement support the organisation’s objectives and currentpriorities?Doesthescopeneedtochange?

• Options. Has a wide range been explored, including innovationand/orcollaborationwithothers?

•Achievability. Can this project be achievedwith the organisation’scurrent capability and capacity (given other projects with a highprioritythatmustbedeliveredatthesametime)?

• Value for money. Can this be obtained from proposed sources ofsupplysuchascurrentsuppliers?Doestheprojectneedtobemadeattractivetoawidermarket?

•Affordability.Isthebudgetavailabletodeliverwhatisrequired?Ifnot, can the scope be reduced or delivery extended over a longerperiod,orfundingsoughtfromothersources?

Consideringeachoftheseareashelpsensurethataproposednewdesigniscongruentwithstrategicobjectives, that it isworkableand that ithasaclearly defined purpose. Without a tightly defined business case andsometimesevenwithone,thingscangodisastrouslywrong,astheexampleof theFBI’smajor organisation design programme centred on a new casemanagement systemdemonstrates.Thishada less thanadequatebusinesscaseandtheresultsshowed.

TheFBI’sVirtualCaseFile

By late2004, thewritingwason thewall.TheFBI’sVirtualCaseFile, amuchanticipatedprogramtoelectronicallyorganizeandstoremountainsofinvestigative information, was coming unglued. The project was overbudget. It was late. And a veritable revolving door of chief informationofficers and projectmanagersmeant that VCFwas dangling in thewindwithnoonetosaveit.

Zalmai Azmi, who had been named the bureau’s latest CIO in spring2004, recalls FBI director Robert Mueller asking him, “How did thishappen, Zal? How did this happen?” Looking back now, after VCF hasbeen scrapped and the FBI has wasted $170m and three years of work,Azmisaystheanswerswereobvious.VCF was too ill-defined, it was too ambitious and it didn’t receive

appropriatemanagerial attention,Azmi says, ticking off the reasons as ifhe’d not only committed them to memory, but believed them with acertaintyborderingonfaith.Tohearhimtellit,you’dthinktheFBI’splansweredoomedfromthebeginning.Azmihaslearnedfrompastmistakes.“Weshouldhavedeveloped[VCF]

inphases…notaskedpeopletoswallowitallatonce,”hesays.Withnewcontrolsoverwhobuyswhatsystems,hisstaffnowaskoffices toexplaintheirbusinesscaseforbuyinganynewtechnology.

Source: ShaneHarris, “The Turnaround”,Government Executive,September1st2005

Theorganisationdesignprogramme

The second row in Figure 4.1, Organisation design programme, is the“office”ofthenewdesign.Regardlessofthescopeorscaleofthedesign,agovernancestructureforitmustbeestablishedtoprovideaframeworkfortheupheavalthataneworganisationdesigninevitablycreates.Governance comprises the way the organisation design programme is

directed,controlled,organised,managedandadministeredthroughvariouspolicies and procedures (see the UK Office of Government Commerceexample).

TheUKOfficeofGovernmentCommerce

Thegovernancearrangementsmustdealwithissuessuchas:

•theestablishmentandoperationofbestpracticefortheallocationandmanagementofinformationandphysical/humanresources;

• the distribution of organisational responsibilities for managingchange,andtherelevantdecision-makingprocesses;

•thepolicies,proceduresandpracticesimplementedtoensurethattheorganisationderivesmaximumbusinessbenefitfromitsinvestmentsinbusinesschange;

•meetingrequirementsfortheeffectiveness,efficiency,confidentiality,integrity, availability, compliance and reliability of its informationandinformation-basedservices;

•theimplementationofeffectivestandardsandcontrolsforthedesign,development, implementation, maintenance, use, acquisition andmanagementofservicesandassetstosupportnewwaysofworking.

A governance structure can be simple or complex depending on theorganisation design programme. Figure 4.2 illustrates the governancestructureofaBritishAirways(BA)programmetointroduceaglobalhumanresourcessystem to theorganisation.Asmallerproject is likely tohaveagovernancestructurethat inthisgraphicis labelled“projectmanagement”(thatis,onlythatbelowthedottedline).GiventhescaleandsizeoftheBAprogramme,itwasimperativetohave

a robust programme management office. One of the lead externalconsultantsworkingwithBAonthisprojectnotedthat:

British Airways decided to set up an independent ProgrammeManagementOffice.It’smadeaworldofdifferencetome,asoneof thesystemsintegrators.Therequirementsareclearlyspecified,atlastIhaveaccesstothepeopleandinformationIneed.Everyonecan seewhat this system is designed to achieve andwhere it fitsintothegreaterwhole.There’snomorestone-wallingbetweenthestakeholders.It’sbeenreallyrefreshingtolearnfromotherprojectsandshareoursuccesses and failureswith them.Not that there have beenmanyfailureswiththisnewapproach.Peopleareinvolvedintheprojectand participating – the culture and behaviours are measurably

changing.IfeelI’mdoingagoodjobandtheclientisgoingtobereallyhappywiththeendproduct.Notonlythat,we’retacklingalltheotherissuesthatgowithsystemsimplementation–organisationdesign, change management, transition management,communication, and the other stuff that gets dropped off the listwhenyou’re battling alone in your silowithout a clear direction.I’m now firmly convinced that independent ProgrammeManagementOfficesarearequirementforprojectsuccess.

Thefourphasesofthedesignprocess

ThethirdrowofFigure4.1showsthefourphasesofanorganisationdesignprogramme: assess, design, implement, embed. Figure 4.3 illustrates theactivities that typically take place in each of the phases. Note that theactivitiesembracethechangeenablersshownonthefifthrowofFigure4.1

(leadership support, stakeholder engagement, change readiness,communication, training)and thesixorganisationalcomponents (systems,structure, people, performance measures, processes, culture – shown inFigure1.2)thatneedtobealignedasthedesignworkproceeds.

The blueprint discussed in the following sections forms the basis for

planningduringeachofthephasesoftheorganisationdesignwork.Amongthe documents that come fromworking with the blueprint are a detailedplan with activities, tactics, milestones, critical success factors and othermeasuresaimedathelpingemployeesmakethetransitionfromthecurrenttothefuturestate.

Phase1:Assess

Vision(alsomissionorpurpose)

All proposed organisation designs require a description ofwhat theywilllook like when they are complete. In much the same way that anarchitectural model of a building describes what the completed buildingwilllooklike,soanorganisationdesignvisiontellspeoplewhattoexpectintermsofnewcapabilities,servicelevels,competitiveposition,andsoon.An example is a description of a vision for the Commonwealth of

Virginia developed when the Council on Virginia’s Future started toconsiderways of designing theCommonwealth’s government agencies tomakethemfittomeetthefuture.

AvisionfortheCommonwealthofVirginia

Building on a centuries-old heritage of leadership, achievement andcommitment to the success of all its citizens, and with an abidingcommitment to the rich historic and natural resources of thisCommonwealth,weaspiretoresponsiblygrowoureconomytoprovideanenviable quality of life. To do so, wemust ensure an attractive businessenvironment, challenging and rewarding jobs reflective of a changingmarketplace,andstronggrowth inpersonal incomethroughoutall regionsintheCommonwealth.We aspire to increase the levels of educational preparedness and

attainment of our citizens throughout all regions in the Commonwealthbecauseaneducated,well-trainedcitizenry,committedtolifelonglearning,providesthegreatestopportunitytoresponsiblygrowoureconomy.Wehavearesponsibilitytobethebest-managedstateinthecountry.To

doso,wemusthaveafocusedvision,andafiscallyresponsiblesystemthatprovides clear, measurable objectives, outcomes and accountability, andthatattracts,motivates,rewardsandretainsanoutstandingstateworkforce.Weaspiretohaveaninformedandengagedcitizenrysothatourcitizens

canprovideknowledgeableinputtoshapethevisionoftheCommonwealth,identifyappropriateservicelevelsandassessprogress.

Source:InterimReportofTheCouncilonVirginia’sFuture.ReportDocument No. 15 (Rd 15), 2005, Commonwealth of Virginia,

Richmond,Virginia, January 12th 2005 (ReferenceHB 2097 – §2.2-2687)

Notethatthisvisionisforthewholeenterprise.Iftheneworganisationdesign programme is for only part of an enterprise – a department orbusiness unit – be certain that the vision for the design is completelyaligned with the vision for the whole enterprise. (Nadler’s UpdatedCongruence Model shown in Table 2.2 illustrates the need for a singleoverarchingvisionthatbusiness-unitvisionsmust“playinto”.)Every leader and manager directly and indirectly affected by the new

design must be able to communicate its vision to their people in acompellingway.Peoplehavetounderstandwhythenewdesignisrequiredrightnowandinthewayproposed.Theyalsoneedtoknowwhatparttheywill play in realising the vision and why they shouldmake the effort toparticipate.Thevisionmustthenbecommunicatedconsistentlywithinandacross the enterprise, allowing for different slants to reflect the differentcircumstancesofbusinessunitsordepartments.Asmentionedabove,partof communicating the vision includes leaders showing their belief in itthroughpersonalpassionandemotionalenergy.Theyneed toconvey thateveryone, including themselves, isaffectedby thenewdesign.Theymustalso acknowledge the human elements that will be involved: stress, fear,resistanceandconcernaboutlong-termsecurity.

Objectives

Frame theobjectivesof theorganisationdesignprogramme in away thatalignswiththevision/mission,valuesandstrategies.(Figure1.2illustratestheflow-downofobjectivesfromvision.)InthecaseofWPP,aworldwideadvertisingandmarketingcompany,theobjectivesreflecttheorganisation’smission.

Ourmission

Todevelopandmanagetalent;

toapplythattalent,throughouttheworld,forthebenefitofclients;todosoinpartnership;todosowithprofit.

Futureobjectives

We will continue to focus on our key objectives – improving operatingprofits and margins, increasing cost flexibility, using free cash flow toenhance share owner value and improve return on capital employed,continuingtodeveloptheroleoftheparentcompanyinaddingvaluetoourclientsandpeople,developingourportfolioinhigh-revenuegrowthareas,both geographically and functionally, and improving our creative qualityandcapabilities.

Source:WPPAnnualReport,2004

In the assess phase of an organisation design programme the linksbetweenthevision/missionandtheobjectivesareconfirmed.Inlaterphasesspecific performance measures for each objective are determined,implementedandembedded.MeasuresarediscussedfurtherinChapter5.

Leadershipsupport

ThisisoneofthechangeenablersshowninthefifthrowofFigure4.1aswell as in the blueprint currently being discussed. Building leadershipsupportisintegraltogettingthebusinesscaseforthedesignworkacceptedandcontinuesduringtheassessphase.Ahighlevelofleadershipsupportisessential foranysizeoforganisationdesignwork,anditmustbeobviousanddemonstrated. If leadersaresignedupandunderstand their role, theywill:

•makethechangevisionclear,inspiringandshared;

•communicate thecompelling rationale forchange thatwillmotivatepeopletomakeitwork;

•makeresourcesavailableandclearblockages;•demonstratecommitmentandenergytothenewdesign;•ensurethatthedesignworkisgivenaclearpriorityinrelationtothe

businessplan;•maintainthedesignasahighpriorityontheorganisation’sagenda;•enrolanddeveloptheirownmanagementteam,keepingthemonside;•modelnewbehaviourandwaysofworking;•increasevisibilityandavailabilityinordertoanswerquestions,tella

compellingstoryandkeepstakeholdersonboard;•celebrateandpublicisethereachingofmilestonesandsuccesspoints

asthenewdesignisimplemented;

Noteveryleaderisabletodothiseffectivelyorskilfully.Manyleadersfailtoappreciatethattakingpeoplethroughachangeprocesshasadifferentemphasis from the role of operational or strategic leadership. In theseinstances the type of approach Allan Loren took in turning round D&B(formerly Dun& Bradstreet), a business information provider, is a goodexample:3

Theculturewe’vecreatedhereisallaboutleadership.Leadershipdevelopmentisvirtuallythemostimportantcontrolleveryouhavefor achieving success.You can’t control customers; there are toomany of them, and they are, of course, independent. You can’tcontroltheenvironment;lookatallwe’vebeenthroughinthepastfouror fiveyears.But ifyouhave leaderswhoareadaptableandcapable of leading just about anything you can be successful. Tomake better leaders we have tomodify their behaviour not theirpersonality. We spend a lot of energy helping team membersbecomebetterleaders.

Stakeholderanalysisandengagement

Stakeholder engagement is one of the change enablers shown in the fifthrowofFigure4.1andanareaofactivityintheblueprint.Itisimportanttoidentify earlyon the individuals andgroupswhocanhaveagoodorbadinfluence on the success of the intended organisation change. Figure 4.4illustratesthemajorgroupsofstakeholderstypicallyfoundinorganisationdesignprojects.Mappingstakeholdersat thestartof thedesignprocess isessentialinordertotracktheirengagementduringtheproject.TheprocessofstakeholderengagementisdiscussedinChapter6.

Thegoalofstakeholderengagementisto:

•identifyindividualsorgroupsaffectedbyandcapableofinfluencingthedesign;

•explaintheinitiativetothekeystakeholders;•assesstheirinterestsandareasofresistance,andhowtheymighthelp

orhinderprogress;•agreetheirrolesandresponsibilitieswithintheprogramme.

Note that although this activity is initiated in the assess phase of the

blueprint, it is one that is continued throughout the life cycle of theorganisation design programme (as stakeholders can rapidly change theirviewsandpositions).

People/internalcontext

Theamountofactivityinthiscategorydependsonthescopeandscaleofthe organisation designproject. In launching the low-cost subsidiaryTed,United Airlines carried out a significant amount of people and internalcontext assessment because it faced vast challenges in getting internalsupportforthenewairline:4

The expectations for employees were high. They had to achievequick “turn times” (the time it takes to park the plane, clean it,boarditandpushitbackfromthegate);presentarelaxed,funandfriendlycustomerexperienceonboardtheplane;andmaintaintheoperationalintegrityofafleetofaircraftwhileupholdingUnited’scommitmenttosafety.Compounding thischallengewas that the launch tookplace threemonths after it was announced to the public, and was plannedduringthecompany’sbankruptcyproceedings.Tosucceed,Tedhadto change the opinions of many of United’s 56,000 domesticemployees from apprehension about launching a new productduringbankruptcy,totherealizationthatTedwasanecessarypartofUnited’sfuture.

Changereadiness

ThisisoneofthechangeenablersshowninthefifthrowofFigure4.1;italso appears as an area of activity in the blueprint. The change readinesscurveshowninFigure4.5illustrateswherepeopletypicallyareinrelationto a new product, service, or system. The example of the BlackBerryillustrates the change readiness curve.Only a few years agomost peoplehadlittlecontactwithaBlackBerrybeyondreadingabouttheproduct.Butitdidnottakelongforreaderstobecomeawareofotherpeopleusingitand

for their curiosity to be aroused. Visits to websites and retailers, andconversationswithusersof theproduct, ledtoanincreasedunderstandingofitscapabilitiesandusesandpeopleweretemptedtotrialuseit.Limitedadoptionoftheproductquicklyfollowed,anditwasonlyashorttimelaterthatuseofaBlackBerryorequivalentwaswidespreadeventothestateofdependency.Thisisthestageofinstitutionalisation.

It is the samewith change associated with a new organisation design.

People affected by a change have to reach the top of the change curvebefore thechange is successfullyembedded.Assessinghowchange readytheyareinprinciple–willtheybeearlyadoptersorwilltheyonlyslowlyorperhapsneveradapt–helpsgetthedesignandimplementationphasesoftheprogrammerightforthoseitwillhaveanimpacton,usingtacticsandstrategies to move them up the change curve. Corrado Passera, CEO ofBancaIntesa,aleadingItalianbank,commentsonchangereadiness:

At thebeginning, it isbetter to remainasquiet aspossiblewhiletheplan isbeingprepared.Whenyoupresent itexternallyfor thefirsttime,whichwillinvolvealotofpublicity,youshouldacceptthat the reactionwillbe sceptical and that thismay last for sometime, even for years in extreme cases. You shouldn’t expectpeople’s minds to change until you have some facts to persuade

them–anumberofhigh-profileprojects,for instance,whichyoucanrolloutandwilltherebydemonstratethatyouaredeliveringonyourpromises.

The extent to which stakeholders recognise and accept the need forchange is determined by assessing aspects such as leaders’ ability tomanage change, levels of commitment to change, and the strength andextent of barriers to changes in the organisation’s culture and processes.Changereadinessassessmentsarevaluablebecausetheyhelpclarifywhereadesignprogrammemight run intoproblemsand theyenableplans tobedevelopedtomakepeoplereadyforchange.Theyidentifypossiblebarriers,enablers and risks, which in turn helps identify where to focus changeimplementationmanagementactivitiesandresources.Depending on which is used these assessments will highlight, for

example:

•howfarpeoplesubscribetotheorganisationdesignvision;•howmuchcommitmenttotheplannedinitiativeneedstobebuilt;•what impactpeople’scurrentperformanceandskill levelsare likely

tohaveonthesuccessoftheinitiative;•theneedforanychangesinleadershipbehaviourandactivity;• the degree of support for the proposed changes throughout the

organisationandfromotherstakeholders;•thebarrierstoanddriversofchange;•theissuesthatmustbetackledtofacilitatethechangeprocess.

With this information to hand, recommendations can be made onreducingtheriskoffailure,andtheimplicationsforachievingasuccessfuldesign,given the currentorganisational conditions, canbe set out.Figure4.6 illustrates the results of a change readiness assessment, from whichinsightintowhatneedstobeaddressedcanbegained.

Intheassessmentphaseofanorganisationdesignprogramme,theusual

form of change readiness assessment is a survey combinedwith face-to-face interviews of individuals or groups, with follow-up interviews asappropriate.Assessingchangereadinessisnotaone-offprocessanditmustbemonitoredasthedesignphasesproceed.Toavoidsurveyfatiguearangeofassessmenttoolscanbeused,including:

• cross-section of individual interviews by stakeholder, function andlevel;

• electronic groupware sessionswith small groups of employees andotherstakeholders(seeUsefulsourcesofinformation);

• review of any existing survey data and other appropriate existingstudiesordocumentation;

•targetede-surveys;•FutureSearchconferences(seeChapter2);•organisationalcultureinventory(seeUsefulsourcesofinformation);•teameffectivenessinventory(seeUsefulsourcesofinformation);•changereadinessquestionnaire(seeUsefulsourcesofinformation);•riskassessmentofchange;•changehistoryassessment;•changereadinessworkshops;

•storytelling(seeChapter2)

Phase2:Design

Organisationdesignprogrammeoffice/team

This is row 2 in Figure 4.1 and an element of activity in the blueprint.Aspectsofaformalprogrammemanagementofficefororganisationdesignwork are described earlier in this chapter and in Chapter 7. Small-scaleprojectswillnotneedtheformalityofaprogrammeoffice,butnotethatitisimportant tohavemore thanonepersonworkingonorganisationdesigns.Whatever their sizedesignprojectshaveadegreeofcomplexity,and it isuseful togeta rangeofperspectivesonprogress towardsobjectives.Ataminimumadesign teamshouldcomprisea representativecross-sectionoftheorganisationunderreview.TheapproachesadvocatedinChapter2giveinsighttowaysofinvitingparticipationandinvolvementfrompeoplewhowillbeaffectedby thenewdesign.Todesignand implementa transition,the programme teammembersmust have a clear picture of the processesmanaged at each level in the organisation and be capable of influencingothers,negotiatingandlobbyingeffectivelyonbehalfoftheproject.The role of the programme team in the design phase is to plan the

implementation path, aligning all the various stakeholder interests andcomponents(seeFigure1.2)oftheorganisationtosupportthenewdesign.Monitoring, evaluation, risk management and quality assurance areessential programme management activities. Together they create anenvironmentthatkeepspeoplemotivatedandinvolvedduringthetransitionwhilecontinuingtodotheirnormalday-to-daywork.The design team’s composition may change as the implementation

proceeds. Choosing the right people is crucial as they must not only becapablebutalsobeseentobecapable,theymusthavesufficientexperienceand,ofcourse,theymustbefullycommittedchampionsoftheproject.

Processes,structures,systems,humanresourcepolicies

The design phase task is to plan the alignment of processes, structures,systems and human resource (HR) policies with each other and with the

objectivesandvisionofthedesignwork.Theimportantthingtorememberisthatchangesinoneareahaverepercussions, intendedornot, inanotherarea.Depending on the objectives of the organisation design programme,therewillbeworkonthefollowing:

• Business processes, including internal work flows, such asrecruitment, and work flows between companies, such asprocurementofproducts.

•Structures.Structuraloptions arediscussed inChapter3, butwheretheorganisationdesigndemandsstructuralchangetheworkmustbeplannedandcarriedoutbythedesignteam(s)incloseliaisonwithrelevantstakeholders.Structuralworkmay includemajororminorchanges to the main structure, reporting structures, managementlayers, spans, communication and decision-making betweendifferentpartsoftheenterprise,workforceprofile,andsoon.

• Systems, including financial systems, management informationsystems,andotherITdependentsystems.

•HRpolicies,includingrewardandrecognition,jobdesigns,headcount,career progression and training. One of the reasons for lack ofsuccess inmany new organisation designs is thatHR systems andprocesses fail to keep pacewith the scale and implications of thechange. All human resources plans, policies and systems mustsupport the intended design outcomes as the Netflix examplesuggests.

Netflix’sHRpolicies

Netflix, an onlineDVD subscription service, designed its HR policies torespondinnovativelytocustomerdemandsandtokeepemployeeshappytodothis.Netflixcouldbecalledanemployeeinnovator,too.Warehouseworkers–

those closest to the customer – get free Netflix subscriptions and DVDplayers inorder tounderstandwhat customersgo throughwhen“FindingNemo” doesn’t arrive in time for their kid’s birthday party. Corporate

employees stay happy – and therefore eager to solve tough engineeringproblemstoimprovetheuserexperience–withperkslikenohardlimitsonvacation time and free trips to Sundance each January. “Tomorrowwhenyou come to work, if it doesn’t make the customer happy, move thebusiness forward, and save us money, don’t [do it],” recalls chief talentofficerPattyMcCord.“Anythingwe’redoinghastomeetallthreecriteria.”

Source: McGregor, J., “High Tech Achiever: Netflix”, FastCompany,October2005

Changeleadership

Leadership support (discussed earlier) is a requirement through the lifecycleoftheprogramme.Leadersofdesignchangecanneveraffordtotaketheir eye off the ball or become complacent.Theunpredictable is alwayslurking on the sidelines and if the context changes it is likely that thestrategywillneedtochangetoo.Leadersneedtobeactiveandvisible, toreinforce and communicate the reasons for the change, demonstrate andbuildcommitmentforthechange,actasarolemodelforanynewskillsandbehaviours the change requires, and accept accountability for progress ofthedesignwork.CorradoPasseraofBancaIntesadescribestheroleofthetop team and of leaders throughout the organisation during the designprocess:5

Change initiatives only take root through a well-functioning topteamandcommittedleadershipacrosstheorganisation.Thatmeanshavingacredibleorganisationandmodelinthefirstplace.Ithastobecleartoeveryonewhoisdoingwhat.…Peopleinthecompanymust understand that you are part of a group that works welltogether.Thewaytofailinatransformationistohavemanagersatthetopwhoarefundamentallyreluctanttopushthroughchange.Ifthat is thecase,peoplewill try to exploit the situationand togetbetweenyou,astheleader,andyourcolleagues.

Stakeholderengagement/communicationandinvolvement

Acommunicationplanshouldbedevelopedandput intoeffectduring theassessment phase. Early and adept communications stall the rumourmillandpavethewayforbuildingtrustthatpeoplewillbekeptinformedasthedesignisshaped.Usingavarietyofmediaandtechniquestocommunicatewith thevariouscategoriesofstakeholders ismoresuccessful thanaone-size-fits-allapproach.PasseratalksaboutcommunicatingBancaIntesa’stransformationplanto

refocustheorganisationonretailbanking:6

Idevotedalotoftimetothecommunicationeffort,which,afterall,had to reach 60,000 people at Intesa. For example, I personallywrote what amounted to a short book – not like an analyst’spresentationwithfiguresandgraphs,butabookwritteninhumanlanguage, tellingpeoplewherewewere,wherewewanted togo,andhowweweregoingtogetthere.Eachindividualreceivedapersonalcopyandcouldaccessitviaawebsite,and the textalsobecame thefoundationforanextensivetraining programme. … I travelled round the country myself,directly explaining the mission to groups of managers andemployees. It’s a long process but you have to put your face infrontofthepeopleifyouwantthemtofollowyou.

Differentcommunicationandinvolvementapproachesshouldbeadoptedfor internal and external audiences. Typically, there are four types ofinformationtocommunicatetobothgroups:

•Whytheorganisationdesignisnecessary.•Whatprogressisbeingmadewiththeplan.•Specificexamplesofsuccess,failure,andpeople’sresponses.•Generalrelatedinformation–forexample,whatisbeingreportedin

thepress,commentsfromtheleadershipteam,orsuggestions.

Communicationexperts typicallydescribe thechangecurve in termsof

foursteps–awarenessandunderstanding,buy-in,adoptionanduse–andtalkofstakeholdersas“audiences”.Intheawarenessstep,theorganisationdesign programme ismarketed to the appropriate audiences, highlightingthe specific benefits to those audiences. The objectives of the awarenessandunderstandingstepare toeducate theaudiencesonthefeaturesof theprogrammeand to solicit their input on theprogramme’suse.Thebuy-instep requires communications strategies and tactics that encourage andsupport embracing the programme. The adoption step reinforces andrewards the use of the organisation design programme with persuasivecommunication (withoutwhich negative concerns can solidify into activeopposition). The use step involves consistently and regularlycommunicatingmessages thatembed theworkof theorganisationdesign,for example reporting on successes, reviews, lessons learned and themilestones.TaketheexampleofTyco(aglobaldiversifiedcompanycomprisingfour

business segments: electronics, fire and security, healthcare, engineeredproducts and services), where CEO Ed Breen considered a radical newdesign for the organisation butmet a negative response from a group ofexternalstakeholders–theanalysts.

Tyco:anegativeresponse

TohearEdBreentellit,splittinghiscompanyinthreeisthemostnaturalthingintheworld.On this lateFebruaryday, theCEOofTyco International (Research) is

sitting in a conference room in the company’s New York outpost, twoblocks from the regal former seat of his disgraced predecessor, DennisKozlowski.The50-year-oldBreen,whocomesacrossmorelikeafriendlydadina1950sTVseriesthananimperialchiefexecutive,cheerfullyticksoffreasonsitmakessensetorendthe$40billionconglomerateintopieces.“Flexibility”isonethathecites;also“clarity”,“focus”,andgivingtheunits“theirowncurrency”.[But]comingwith theearningsmiss, theannouncementof thebreakup

plan has led some Wall Street analysts – most of whom endorse theproposal– toconclude thatmanagementdoesn’thaveanybetter ideasfor

fixing the company. “They did a terrific job of recapitalizing the balancesheet and paying off a substantial amount of debt, improving the cashflows,andimprovingtheoverallprofitability,”saysMerrillLynchanalystJohnInch.”Theypickedoffsomelow-hangingfruit.Butthequestionnowbecomes,Havetheyrunintoawall?”

Source: Varchaver, N., “What is Ed Breen Thinking?”, Fortune,March15th2006

Whenthisbookwenttopress,Tycowasintheprocessofsplittingintothree and, given the range of interested parties, the use of a mix ofcustomised communications tactics with each audience was in the plan.Table 4.1 gives some examples of the type ofmix and tactics commonlyused.

Table4.1Communicationstacticstosupportchangeadoption

In the early stages of a design project, communication has a strong

change management purpose, as in the Tyco example where Breen issuggesting the idea rather than implementing it.As theproject continues,communication providesmore of a front-end to knowledgemanagement.Thusaffectedaudiencesknowwheretogetmoreinformationoncontinuingstrategy and plans, training programmes, or other resources that can helpthemunderstand theorganisationdesignprogramme, its impactsand theirrole in itssuccess.It isgoodpractice toprepareproceduresandtemplatesforcrisiscommunications,shouldtherebeaneedforafastresponsetoan

emergingissue.

Culture

Questionsaboutcultureusuallycentreonhowtodesigntobreakdownthesilomentality(seeGlossary)intheorganisation.SimonLondonnoteswhythismentalityisaliabilityandsuggeststhatultimately“thetoneissetfromthetop”:7

If silos are such a liability, why do they persist? Because, likeviruses, they occur naturally. Ask any large group of normallydefensive, insecure people to work together on a project. Thenstand back and watch the silos emerge. Our society of large,complexorganisationsisaperfectbreedingground.Thisisnottosaythatmanagersarepowerlesstocombatthem.Theexperience of General Electric suggests that concerted effort toencourage cross-company co-operation can yield results. JackWelch’s “boundarylessness” initiative of the mid-1990s got themessage out in no uncertain terms. GE’s subsequent adoption ofSixSigma,theprocessimprovementmethodology,iscreditedwithfurtherbreakingdownbarriersbygivingmanagersfromacrosstheorganisationacommonlanguage.Likesomuchofwhatgoesonwithinorganisations,however, thekind of defensive, political behaviour that encourages silos is afunctionofcorporateculture.AquickflirtationwithSixSigmaorany other management technique is unlikely to change the tacit“waywedothingsaroundhere”.Moreimportantisthesteadyflowof signals about the types of people who will do well in anorganisationandtheattitudesthatarefrownedupon.Ultimately,then,thetoneissetfromthetop.Chiefexecutiveswhodemonstrate an uncompromising all-or-nothingmanagement stylecan hardly complainwhen their subordinates are reluctant to co-operatewithoneanother.

Like leaders sending “the steady flow of signals” about acceptablebehaviour,designscanalsoreinforceculturesofcollaboration,knowledge

sharing, innovation, or whatever is thought to be a desirable culture byaligning other organisational components in support. After leadershipsignals,rewardandrecognitionsystemshavethemostsignificanteffectonchangingormaintaining theculture.Beyond thesealignedvalue sets, jobdesignsandorganisationalstructuresallbolsterthedesiredculture.TaketheapproachofNordstrom,aUSdepartmentstore,wherealltheorganisationalcomponentsarefocusedonhelpingstafftosticktotherules.

WELCOMETONORDSTROM

We’regladtohaveyouwithourCompany.Ournumberonegoalistoprovideoutstandingcustomerservice.Setbothyourpersonalandprofessionalgoalshigh.Wehavegreatconfidenceinyourabilitytoachievethem.NordstromRules:Rule1.Useyourgoodjudgmentinallsituations.Therewillbenoadditionalrules.Pleasefeelfreetoaskyourdepartmentmanager,storemanagerordivisiongeneralmanageranyquestionatanytime.

TheresultwasthatinApril2006comparablestoresalesincreased7.3%comparedwithayearearlier,easilyexceedinganalysts’expectations.(Theconsensusopinionofallanalystswhocover theSeattle-basedretailerwasan increase of 4.8%.) This success is part of a trend that Nordstrom hasenjoyedovermanyyears–anotableoneintheharshworldofretailing.

Training

Asthenewdesignisdevelopedandimplementednewskills(softandhard)required for successful outcomes will be teased out. Obviously, trainingpeopleintherightthingsandingoodtimeiscrucial(butdoesnotalwayshappen) and appropriate methods of developing staff must be instituted.Changemanagementskillsdevelopmentshouldbe includedaspartof theoverall skills and training programme. Organisation design initiativetrainingisusuallyrelatedtothefollowing:

•Going through thechangeprocess itself.Employeesaffectedby thenew design will be in the front line of the change process andthereforemustknowhowtocontributetothechangeaseffectivelyaspossibleandhowtoworkwithinchangingcircumstances.

• New systems, technologies, or processes – the way new systemsoperate and the technical aspects of doing work with differentequipmentordifferentinterfaces.

• Thework of the businesswhen it has been “re-engineered”. If thenature of employees’ activities and responsibilities changes, theemployees are likely to have to acquire new expertise in thewaytheyfulfiltheirroleordotheirjobs.

Within these three areas the training should be tailored to specificstakeholder groups and provided in appropriate ways (for example,coaching, e-learning, face-to-face instruction, self-paced learning and on-the-jobtraining).Tailoring the training related to change, new ways of working, new

systems and processes and new job roles requires careful thought andsensitivity.Forexample:

•Develop training that is linked to the overall business strategy, thatpositionstheneworganisationdesignasabusinessbenefit,andthatisdeliveredatappropriatepointsintheprojectlifecycle.

• Establish collaborative relationships that pool resources in order totrainemployeesinatime-andcost-efficientway.(Oftentraininganddevelopment costs are discretionary, so training efforts may be

limitedasaresultofbudgetconstraints.)• Make training available in a variety of formats, acknowledging

differentlearningstylesandaccesstotrainingprogrammes.•Recognisethattrainingrelatedtoanewdesignputsanaddedburden

onstaff.Thislimitstimethatcanbespentonactivitiesthatarenotessentialtoday-to-dayproductivity.

• Build training content from employees’ current strengths (forexample, knowledge of their customers, insights into organisationculture,historyofhowworkgetsdone),givingthemthecapabilityandmotivationtobehigh-performinginnewroles,todotheirworkinnewways,andequipping themtobemorefullyable toprovideeffectivecustomerservice.

Phase3:Implement

Performancemeasures

Astheorganisationdesignis implementedall theelements thatcontributetoit–systems,processes, technology,structures,capabilities,andsoon–must be monitored and measured, as must risks, successes, milestones,smallwinsandlessonslearned.Withoutadequatetrackingitisimpossibleto keep the project heading in the right direction. Powerful businessintelligence and the use of analytics will help achieve the necessarymomentum.As an example of the power of analytical information, Thomas

Davenportsuggests that“businessprocessesareamongthe last remainingpointsof[organisation]differentiation”andthatthepowerofanalyticsisto“wring every drop of value from these processes”.8 He cites severalorganisations which are closely analysing the performance of theirprocesses, making organisation design changes as appropriate, andcontinuingtomonitorandfollowup.Hemakesthepointthat:9

Companiesjustnowembracingsuchstrategies,however,willfindthattheytakeseveralyearstocometofruition.Theorganizationsinourstudydescribedalong,sometimesarduousjourney.TheUKConsumer Cards and Loans business within Barclays Bank, for

example, spent five years executing its plan to apply analytics tothe marketing of credit cards and other financial products. Thecompanyhadtomakeprocesschangesinvirtuallyeveryaspectofits consumer business: underwriting risk, setting credit limits,servicingaccounts,controllingfraud,crossselling,andsoon.Onthetechnicalside,ithadtointegratedataon10millionBarclaycardcustomers, improve the quality of the data, and build systems tostep up data collection and analysis. In addition, the companyembarkedona longseriesofsmall tests tobeginlearninghowtoattractandretainthebestcustomersatthelowestprice.Andithadtohirenewpeoplewithtop-drawerquantitativeskills.

Note that this example encapsulates the principles of alignment of allorganisationalelementstoachieveanintendedoutcome.Beyond the quantitative monitoring and because organisation design

activities inevitably involvepeople’s emotional reactions to change, thesequalitativeaspectsmustbemonitoredtoo.Failureto“takethetemperature”of thepeople constitutes a significant risk to organisationdesign success.Othermorequalitativeaspectsincludelookingforsignsthat:

•transitiontothenewstateisdisruptingnormalbusinessoperation;•relationshipsarebeingfracturedorbroken;•thingsarenotgoingwell.

Chapter5discussesmeasuresandmonitoringinmoredetail.

Jobdesign/rolechanges

Organisationalchangeinevitablybringswithitchangesinjobdescriptionsand the creation of new jobs. This is sensitive, and so requires the closeinvolvement of the organisation’s HR managers, whose knowledge oftiming, content and impact of any suggested changes in job descriptions,career paths and succession planning should help ensure a smoothtransition.Generally,approachestojobdesignshouldresultin:

•logicalentrancelevelsandcareerpatternsforemployeestomovetomoreskilledandhighergradedpositions;

• strategies to enable suitably qualified personnel to occupy new orcontinuingpositions(sometimesthismeansstaffhavingtoreapplyfortheirjobsorapplyfornewones);

• the identification of training and development needs tomeet futurestaffingrequirements.

Phase4:Embed

Planning and implementing the embedding of a new organisation designoftentakesabackseattotheworkthatgoesonintheearlierthreephases.Itis as if all energy has been expended in assessing, designing andimplementing,soactuallylivingthenewdesignbecomes“Hohum,we’rethere now”, rather than an energetic exploration ofwhat isworkingwellandwhatisnot.If therehasbeena truealignmentofall thevariouscomponentsduring

the earlier phases, embedding should be a straightforward matter of athorough post-implementation review or reviews, listening attentively tofeedbackandmakingadjustmentsinthelightofanyareasfoundwanting.Inacomplexdesign,ifembeddingistobesuccessfulaseriesoffurther

steps and stages is likely to be necessary.Nike’s design for sustainabilityprovides a good example of an organisation implementing an ambitiousprogramme, reviewing it, learning and seeking ways to embed it moredeeplyovertime.

Makingsustainabilityreal

CHALLENGE:Move a large and global organization into organizationallearningandsustainablepractices.ACTION:Launchtheorganization’ssustainablelearninginitiativethroughaprogramthattouchesallcornersofthecompany.OUR GOAL: Spread the understanding of sustainability throughout thecompanyanddemonstrateitsvaluetothebusiness.

Global Reporting Initiative (GRI; see Glossary) CATEGORY: 5.ManagementSystemsInFall 1998,Nike adopted its firstCorporateEnvironmentalPolicy.Thisformal commitment to sustainabilitywas amajor step, but howwerewegoingtoensurethatwecould“walkthetalk?”Sustainabilityprinciplesandapplicationwere foreign to themajority ofNike employees.Therewas aneedtocommunicatethatthisiseveryone’sjob,butalsotoeducatepeopleonsustainabilityissues.Itbecameamatterofstartingsomewhere.ThatsomewherebeganwhenLailaKaiserandJillZangerofourNEAT

departmentsetouttoaffectsystemicchangeamongst22,658people.Theyenlisted the help of external consultants with expertise in organizationalchange, sustainability knowledge, and leadership. (Many thanks to SEEDSystems, Polaris Learning,Wood and Associates and The Natural Step.)Together, we developed an organizational learning program focused on“actionlearning”aroundenvironmentalprinciplesandapplication.SelectedNike employees from around the world were engaged to review casestudiesandattend3–4trainingsessionsoverninemonths.Theseemployeeswere also challenged to apply what they learned to specific businessprojectsalreadyunder-wayorgrowingoutofthelearning.Theprogram included about 35 “champions” (mainly seniormanagers,

vice-presidents, general managers and directors), who were tasked withprovidingsupportfor65“captains,”oremployeesinthetrenchesdesigningproducts, running logistics and sourcing materials. Sustainability expertsspoke at the training sessions to broaden the horizons of the group as itsoughtsolutionstoenvironmentalchallengesinourbusiness.The goal of the program was to create a critical mass of change

agents who might individually and collectively lead the transition tosustainabilityforNike.Didweachievethisgoal?No.Dowethinkitwassuccessful?Yes.Inretrospect,itwasthewronggoal.Agroupof100peoplealonecannot

lead the transition tosustainabilityata largeorganization likeNike.Theycancertainlybeacriticalgroupinthatchange,andpavethewayforothers.We learned the hard way that if you don’t have 100 percent of seniormanagement actively engaged in systemic change, then you are onlychippingawayat the iceberg’sedge.Wealsoerred in that themajorityofthe participants were from the product and supply chain side of our

business.Themore consumer-oriented parts of our business –marketing,sales and retail –werenot aswell represented.While thismix allowed adefinite focus on areaswhere environmental impact ismore obvious,wehavealongwaytogowithtrulyeffectingsystemicchangeintherestofthebusiness.Weweresuccessfulinotherways.Wecreatedastrongnetworkofpeople

who learnedhow to thinkofNikeasacomplexsystemrather than just agroup of distinct departments. The value of that changed perspective isimmeasurable.Also,eachcaptainconvenedateamoftheirpeerstoidentifysustainability goals against business issues. Real business objectives arebeing achieved with a sustainability return. Sixty-five projects wereinitiatedoraffectedbythisprocess,withenvironmentalsustainabilityasakeyconsideration.Sixofthoseprojectsarehighlightedhere.Manyoftheseprojects saved the company money, some innovated new processes andproductideas,andafewmightevenrevolutionizethewaywedobusinessinthefuture.

Source:www.nike.com/nikebiz/gc/r/pdf/environment.pdf(page6)

CASESTUDY:sequencinganewdesign

OnMarch 21st 2006 Susan Lamb, chief operating officer of Alder Park(one of the largest and historically most successful not-for-profitorganisations in the Eastern Atlantic region, with over 1600 employees),presented her team’s recommendations for a radically differentorganisationalformtotheboard.When she joined a year previouslyLamb inherited a reversal ofAlder

Park’sfortunes:

•Donationsrevenueshadshrunkby20%.•Revenuehaddeclined(from£41.5mto£40m).•Therewastobenonewgovernmentfunding.

•Thegovernmentfundingtheyhadwastobedecreased.

This presentation marked a watershed for Alder Park. With a cashshortfall of over £1m and funding hard to comeby, the organisationwasfacingadifficultfuture.Lambwasconvincedthatboldstepswereneeded,andshewasconfidentthatasaresultofherdealingswiththeboard,AlderPark’semployeesandotherstakeholdersovertheyearherproposalswouldbeaccepted.Lamb had joined an organisation with an admirable track record. For

more than40years ithadprovided job trainingandsupport, employmentopportunities,residentialservicesandrecreationalactivitiesforpeoplewithdevelopmentaldisabilitiesatsevensitessteeredbytheCEOwhowasalsothefounder.ButtimeshadchangedandAlderParkwasnotingoodshape.Lamb’s first taskon joininghadbeen topersuade theboard that itwas

timetorevisitAlderPark’svision,mission,values,strategiesandgoalsforthenextfivetotenyears.Havinggottheirsupport,shebroughtinasmallmanagementconsultingcompany toadviseon thenext stepsand toworkwithAlderParkintakingthem.At a three-day offsite session (only 12 weeks after her start date)

involving all 17 boardmembers and allAlder Park’smanagers theworkbegan. The agendawas to assessAlder Park’s current condition, explorefuturepossibilitiesanddrawupanoutlineplanforchange.Outofthethree-daysessioncameanewvisionandmission(Table4.2)andthesettingupofastrategytaskforcemadeupofboardandstaffmembers.

Table4.2AlderPark’soldandnewvisionandmissionVisionold VisionnewAlderParkwillbearecognisedleader inprovidingresourcestopromoteandprovidefull economic and social empowerment for people with disabilities in integratedenvironments,increasingvocational,employment,residentialandrecreationalserviceslocallyandworldwide.

A world where people withdisabilitiesarefullyincluded.

Missionold MissionnewToeffectthebest,mostfar-reachingopportunitiesforpeoplewithdisabilities,workingwiththemasindividualswiththeirowntalents,abilities,andpersonalgoals.

Empowering people withdevelopmental disabilities toenrich theirown lives throughourservices.

Lambwasadamantaboutinvolvingtheboardandthestafffromthestart.

Todeveloptheirskillsforhandlingtheradicalchangesthatthenewvisionand mission implied, she endorsed a programme of internal education,development,communicationandon-the-jobpracticeinstrategicthinking,planningandscenariotesting.Sixmonthsafterthefirstoffsitemeetingthestrategytaskforcepresented

theirreportandrecommendationsonthewayforwardtoLamb.Drivenbythe requirements to embrace a customer focus, target efficiencies forimproved effectiveness and integrate the service deliverymodel, the taskforce presented a design (Figure 4.7) that significantly streamlinedAlderPark. It would be effective in facilitating the sharing of information,building and leveraging organisational capability, eliminating silos andreducingoperationaloverlaps,duplicationandcosts.

Accompanyingthemodelweresevenrecommendedgoalsdevelopedby

small teams,eachheadedbyoneof the taskforcemembers.Oneof thesegoalsisshowninTable4.3.

Table4.3OneofAlderPark’ssevengoalsGoal7–Finance,HumanResourceandServiceswilldeliverbestinclassresultsinquality,innovation,andcost.By January (two years out), we will implement amanagement information system (MIS) to provide participant andfinancial information across all departments and real-time access to current and historical data. The objective is toenhanceprogrammeeffectivenessandbecostneutralwithinvestmentsrepaidbysavingsinoperatingexpenses.ThisMISwillprovideallreportingandinquirycapabilitiesfortrackingprogressagainstourfive-yeargoals.ByJanuary(oneyearout),abusinessplan foraccomplishing thisgoalwillbepresented to thestrategy task force/boardwithspecificdetailsandgoalswithatimelineforimplementation.

7.1 Implement management information systems that provideprograms, business, HR, and financial information across thethreeserviceareaswithreal-timeaccesstohistoricalandcurrentdata.

7.1aIdentify and address immediate opportunitiestoimprovesystemsanduseofsystems.7.1b Conduct comprehensive assessment ofexistingMISwithrecommendationsforcurrentandfuture needs (FY1); implement recommendations(FY2).

7.2Alignmanagementtosupportplannedexpansioninservicesandprogrammes.

7.2a Address short-terms needs to standardiseprocessesandintegratesystems.7.2b Develop management plan for expectedgrowthinprogrammesandservices.

Lambwasimpressedbythedetailandthethoughtthathadgoneintothispieceofwork. ItbuiltonAlderPark’shistoryandstrengthsyet took it innew directions. She felt that the range of collaborative, participative andinvolving organisation design and development techniques, tools andapproachesusedbytheteamshadproducedareportthatwouldhaveagoodchanceofbeingadoptedbyallthestakeholders.However,shewasnotyetreadytopresentthereporttothefullboardfor

approval.Therewasstillalotofdetailedworkthatshewantedcompleted,inparticular:

• a proposal on a governance structure thatwould handle the designandimplementationphases;

•amorerigorousstakeholderanalysis–shehadheardrumblingsaboutthefounder,andsomeofthestakeholdergroups;

• an organisation-wide change readiness assessment to give herinformation on whether work had to be done to bring people onboardbeforestartingtheimplementationphase;

•acomprehensivecommunicationsplanrelated to thefindingsof thestakeholderanalysisandthechangereadinessassessment(therewasalready an awareness-raising communication plan beingimplemented);

•atimelineforimplementationwithrecommendedmilestones,successfactors,measuresandquality-assuranceprocesses.

At thispointLamb felt that theconsultantshaddoneagood job.Theyhad helped create the vision and the strategic planning process, and theyhad transferred sufficient skills to Alder Park employees and otherstakeholders to enable them to continue with the organisation designthemselves.Itwasthereforetimeforthemtobowout.Thegovernancestructureproposedwassimple(basically thatshownin

the lower half of Figure 4.2), establishing straightforward but robustcontrols and decision points. The team members were wary ofrecommending a governance process that was top heavy or time andresource intensive. The project board (or steering group), which hadevolvedfromthestrategytaskforce,comprisedsixboardmemberswiththechairmanassponsor.TheprojectmanagerwasLamb,towhomeightworkstreamleadersreported.Thestakeholderanalysishighlightedanumberof issues.Themanagers

andstaff,facedwiththerealityofimplementationandaradicalnewwayofoperatingAlderPark,mettoconsidertheirnervousnessandanxietyaboutchange. They realised that they would have to manage the day-to-daybusinesswhilemakingthetransitiontothenewdesign.Theywouldhavetocommitevenmoretime,effortandresourcestoputnewstructuresinplacethantheyhadindrawinguptheplan.Additionally,thefounderwasbeginningtofeelpushedoutashesawthe

proposed future of Alder Park come into sharp focus. He feltdisenfranchised and unappreciated.He began towithdrawhis support fortheplanandstartedtolobbythoseboardmembersclosesttohimtodothesame.Thechangereadinessassessmentsuggestedthatalthoughthenewvision

andmissionwerewellaccepted,thebusinesscaseforchangewasnotfullyunderstood.Peoplefeltthingswerefineastheywere.Italsohighlightedthefactthatpeoplewerenot,ingeneral,changereadyorcapable.Over thefollowingfourmonthsLambworkedwithher teamstosetup

the governance structure and address the issues raised by the stakeholderanalysis and the change readiness assessment. They also worked on theimplementationtimeline

andplans.Atmonthly intervals they reviewedprogress.By thedateofthe board meeting all participants in these first two phases of theorganisationdesignprocessfeltconfidentthattheywouldgainapprovaltomoveforward.Lambandtheworkstreamleadersemergedfromtheboardmeetingwith

bigsmilesontheirfaces.Theyhadunanimousendorsementfrommemberstoproceedintotheimplementationphase.Althoughtheywerejubilantthatall thework todatehadbornefruit, theyalsounderstoodthat the journeythrough implementation and into embedding the new design would be asubstantial challenge. However, it was one that they felt they wouldcollectivelyandsuccessfullyriseto.

Reflectionsonthiscase

In her previous organisation Lamb had participated in large-scaleorganisationdesignwork,andhadlearnedfromthisexperience.InstartingthedesignworkatAlderParksheknewshehad topaycloseattention tofiveaspectsoftheorganisationdesignprocess.

1Leadershipsupport

WithoutthesupportoftheCEO,theboardandAlderPark’sseniormanagers,Lambwouldnothavebeenabletocarrythroughthenewdesign.Althoughnewtotheroleshehaddoneasignificantamountofduediligencebeforeshe joined and knew she would have to tread carefully through theminefield of politics in the organisation. She had been appointed by theboard,withtheCEO’sunenthusiasticblessing,soherfirsttacticwastoenlistsupportforherproposalsfromboardmemberswhomtheCEOrespectedandlistenedto.Lamb also started a conscious process of developing rapport with her

senior management team. She was determined to build from what wasworkingwellatAlderPark(anappreciativeinquiryapproach)assheknewonly toowellhowworkforces respond tonewlyappointedslash-and-burnexecutives.Throughouttheyearittooktogettothepointofapprovaltoimplement

her plan for change, Lamb worked on maintaining and developing

commitment.With hindsight (and evidence from the detailed stakeholderanalysisshecommissionedsixmonthsin)LambacknowledgedthatshehadspenttoolittletimeworkingwiththeCEO,andsoughttoremedythisinthesecondphase.

2Carefullyplannedphase-in

Ayear toget to the implementationstagemayseem longbut itwas timewell spent.Thestakeholders’education,developmentandskillshad tobebuilt.AlderParkhadnot seenmuchchange in its 40-yearhistory, and tointroduce sudden changewould not havebeen right for its culture.Lambranworkshopswith staff andother stakeholders discussing approaches tostrategicplanning, the sequencingof anorganisationdesignproject,whatelements would be involved and how the process would play out (seeFigures4.1and4.3).Because her approach was participative, she was able to gauge how

thingsweregoing.Shewassensitivetotheneedsofmoststakeholders,andwas able to push them when they needed it and stand back whenappropriate.

3Focusonthedetailsofimplementation

SomepeoplefoundLamb’sinsistenceondetailedplanningtiresome.Theywanted to get on and do something and baulked at meetings to go overMicrosoft project plans that had hundreds of lines of sequenced andinterdependentactions.However,when thepointof implementationcamepeople were aware that Alder Park was going to operate radicallydifferently–theyhadnoillusionsthatthiswasgoingtobeoldwineinnewbottles.Theyalsoknewthatarangeofimplementationactivitieswouldbegoingonsimultaneouslyindifferentworkstreamsandthatlifewouldfeelchaoticanduncomfortableduringtheprocess.Theyknewthispartlybecausetimelines,criticalmilestonesanddecision

pointswerepublishedontheorganisation’sintranetforstafftoreacttoandcomment on; partly because the principle of “no surprises”was one thatwasembracedbythedesignteams(forexample, theyenlistedthesupportofHRstaffandothersinhavingconversationswithstaffwhoserolesweregoing tochange); andpartlybecause therewascontinuousandconsistent

communicationthatkeptpeopleinformedatallstages(seeTable4.1).

4Workingcollaborativelytoremovesilosandinstilcustomerfocus

FrompastworkLambknew that cross-functional teams (whosemembersrepresented all levels at Alder Park) working on specific aspects of thedesignwouldnotonlyget thedesignworkdonebutalso start todevelopnew,informalsocialnetworksthatwouldhelpbreakdownthesilos.Overthecourseoftheyearteamswereestablishedtoconductspecificpiecesofwork,forexampletoidentifyareasofobviousefficienciesandcostsavings,and to determine new business opportunities. Teams were encouraged tofocus all their suggestions and recommendations on actions that wouldsupportthenewvisionandmission–clearlyputtingthecustomers(peoplewithdevelopmentaldisabilities)atcentrestage.Thiswasabigchangeformany staff, who were of the view that their customers were passiverecipientsofwhatwasoffered to them, rather than individualswhocouldmaketheirownchoicesanddecisions.

5Flexibilitytomakerefinements

Anaspectthatthedesignteamsfounddifficulttohandlewasdistinguishing“noise” (see Glossary) from important information in the operatingenvironment.Forexample,wastheannouncementthatgovernmentfundingwouldbecutextremelysignificantorofmarginalsignificance?Oncetheyunderstood how to ask the right questions, they were able to makeadjustmentstotheirplans(orinsomecasesalmoststartoveragain).Asawayofhelpingtheteamsmanagethisconstantcontextualchange,

LambdiscussedwiththemNadler’sUpdatedCongruenceModel(seeTable2.2), demonstrating how operating conditions affected the organisationalcomponents and noting that the challenge was to keep the componentsalignedandinbalanceinordertodeliverthestrategy.With the understanding that being responsive to changeswas essential,

the teams began to build flexibility into their plans. For example, theystartedtopresentoptionsandtogiverelativeweightingstosuggestionsandrecommendations. This developing openness to adaptability became avaluableorganisationalcapabilityastheimplementationprocessgotunderway.

Ayear after the board had given Lamb approval to go aheadwith theproposedchanges,AlderParkwasenjoyingthebenefitsofthenewdesign.Customers were happy, revenue forecasts were on track, staff weremotivated and working productively, and after a difficult series ofdiscussions the founderwasusinghis skills to fund-raise rather than leadandmanagetheenterprise.

Toolsforthiscase

Of the tools thatwereused in this case, twowereparticularlyhelpful forstaffnewtotheprocessoforganisationdesign.Thefirstwasachecklistofstepsinthestrategicplanningprocess(seeTable4.4).Thisformedthebasisforactivity in thefirst three-dayworkshop,andsubsequentlyat townhallmeetingsandworkstreamskillsdevelopmentsessions.Thesecondtoolwasaclarificationof theroleof theprojectboard(see

Figure 4.2). In this case the project board (or project steering group)comprisedsomeofAlderPark’sexecutiveboard.Formostofthemthiswastheirfirsttimeworkingasmembersofsuchagroup.Theyhadatendencyto try tomanage theday-to-dayrunningof theproject rather than takeanoversight role. Initially, this led to friction between them and the projectsponsor(thechairoftheboard)andtheprojectmanager(SusanLamb).

Table4.4Checklistofthestepsinthestrategicplanningprocess

Table4.5Roleofprojectboard(steeringgroup)Overview

• Effective business change programmes and projects require clear, active andvisibleleadershipfromthetop.

•Theprojectboardisresponsibleforensuringthattheprogrammemeetsitsoverallobjectivesanddeliversthebenefitsoutlinedinthebusinesscase.

•Realisationofbenefitsshouldbe included in theprojectboard’sobjectives.Theproject board has accountability to stop or realign the project if the originalbenefitscaseisnotlikelytoberealised.

• The project board should comprise thosewho have themost interest, and themosttogainfrom,thesuccessfulimplementationoftheproject.

SpecificaccountabilitiesoftheprojectboardGatekeeper •Ensureonlyprojectsthatsupportthebusinessstrategyareinitiated.

•Ensurethosewhichnolongersupportthebusinessstrategy,orwheretherisksofachievingtheoutcomesandbenefitsarejudgedtobetoogreat,arecancelled.

•Ensuretheprojecthascleartermsofreferenceandbusinesscase.•Signoff thetermsofreferenceandbusinesscasebeforetheyaresubmittedforreview.

•Atkeymilestones(qualitygates)throughthelifeoftheproject,ensurethattheyaresatisfiedbeforetheprojectisputforwardforapprovaltoprogresstothenextstage.

• Ensure any corporate programme management and project managementprocessesarefollowed.

• At the closure of the project, see that the benefits are realised and a post-implementationreviewiscarriedout.

Monitor •Validatetheplan.•Hold regular reviewsofprogressagainstplanatahigh level (atanoperationallevel,thisistheresponsibilityofaprojectmanager).

• Ensure the business case (terms of reference for smaller projects) is reviewedregularly and any proposed changes of scope, cost or timescale are checkedagainsttheirpossibleeffectsonthebusinesscase.

•Ensureriskshavebeenidentified,andarebeingtrackedandmitigatedasfaraspossible.

•Giveoverallguidanceonpolicy,directionandscope.•ApproveandmonitorprojectswithanITelementagainsttheprojectcharter.

Supportandcoach •Givesupporttotheprojectmanagerasrequiredbyhimorher.• Support may be in the form of direction, guidance, lobbying for additionalresourcesandresolvingseriousproblems.

Decision-maker •Ifdecisionsarerequiredthatareoutsidethescopeoftheproject,theseshouldbereferredtotheprojectboard.

Champion/communicator •Championtheprojectinternallyandexternally.•Holdregularprojectboardmeetings.•Maintainasenior-levelrelationshipwithkeyexternalsupplierstoensuretheygivetheirfullsupporttotheproject.

Problemsolver •Resolvethemoredifficultproblemsthattheprojectteamdoesnothavetheskillsorexperiencetoresolve.

Resourcenegotiator • Ensure that adequate and appropriate resources are available to ensure thedeliveryofprojectbenefitsontime.

Summary

Itisevidentfromthedescriptionoftheorganisationdesignprocessthatitisnotonethatcanbeprescribedaccurately.Ratherit isasequencedprocessthatemergesfrominformationaboutaspecificorganisationinitsoperatingcontext.Theimportantthingstorememberarethat:

• the process is based on a progression of activities thatmay iterateseveraltimesthroughtheprojectlifecycle;

• good organisation design work seeks to find the best methods ofdelivering a business strategy through aligning the variouscomponentsoftheorganisation;

• well-designed projects are implemented through a combination ofgoodgovernance,clearcommunicationandmeticulousplanning.

5Measurement

FriendtoGrouchoMarx:“Lifeisdifficult.”GrouchoMarxtofriend:“Comparedtowhat?”

MEASUREMENTOFORGANISATIONdesignisathornytopic.Atdifferentstagesof the process, people want to knowwith a high degree of certainty theanswerstofourquestions:

1 What analysis and assessment need to be done to give a reliablediagnosisofwhetherornottoinitiateanewdesign?

2 Will the design achieve what it is intended to achieve: fix thebusiness issue and at the same time develop the culture andbehavioursforcontinuingsuccess?

3Isthegapclosingeffectivelyandsmoothlybetweentheoriginalstate(olddesign)andthefuturestate(newdesign)?

4 Are the desired benefits and outcomes being realised in the newdesign?

Peoplealsowant tobeable tomeasurewhat theyare losingaswellaswhattheyaregainingasthenewdesigncomesintoplay.Forexample,theymay be losing existing organisational knowledge if key people leave.However,theymaybegainingnewandvaluableorganisationalknowledgeasnewnetworksandconnectionsareestablished.Highlevelsofcertaintymaybedesired,butbecauseorganisationsarein

a constant state of flux and not in laboratory-controlled conditions,mostorganisationalmeasuresarenomorethan“dipsticks”atapointintime.Bythetimeofthenextmeasuringroundthecontexthaschangedandthesetsofmeasuresarenotdirectlycomparable.Alsoanyoutliersinthemeasures(for example, in a customer satisfaction survey) are often removed anddecisionsmade based on the average. But there is always the possibility

thatoneoftheoutliersisthe“blackswan”–therareeventthatbringslargeconsequencesthatcannotbeignored.1

Thevalueofmeasures lies ingivingasenseofcomfort (albeitperhapsfalse)and inhelpingmakesenseof thesituationanddeterminingwhat todo next. This apparently true story, which took place during militarymanoeuvresinSwitzerland,isinstructive:2

TheyounglieutenantofasmallHungariandetachmentintheAlpssentareconnaissanceunitintotheicywilderness.Itbegantosnowimmediately,snowedfortwodays,andtheunitdidnotreturn.Thelieutenantsuffered,fearingthathehaddispatchedhisownpeopletodeath.Butonthethirddaytheunitcameback.Wherehadtheybeen?Howhadtheymadetheirway?Yes,theysaid,weconsideredourselveslostandwaitedfortheend.Andthenoneofusfoundamapinhispocket.Thatcalmedusdown.Wepitchedcamp,lastedout the snowstorm, and then with the map we discovered ourbearings. And here we are. The lieutenant borrowed thisremarkablemap and had a good look at it. He discovered to hisastonishment that itwasnotamapof theAlps,butamapof thePyrenees.

Themapinthestoryservedasayardstick(measure)toorientthesoldiers,but itwasactingon themap thatgot themback.Theywereable togetagoodoutcomefromthewrongmapbecause:3

Theyhadapurpose,andtheyhadanimageofwheretheywereandwheretheyweregoing.Theykeptmoving,theykeptnoticingcuesandtheykeptupdatingtheirsenseofwheretheywere.

Similarly,usingmeasuresasgeneral indicatorsandsourcesoffeedbackto spur action is sensible. But believing that they will point to the rightanswertoanyofthefourquestionslistedaboveisamistake.In almost all situations, if good enough answers to the questions are

available, they are sufficient for success. This chapter discusses ways ofusing measures to achieve organisation design objectives. It does not

consider measures from the perspectives of statistics, mathematics,economics or academic research design; rather, it takes a pragmatic andlargely practical look at measurement tools and their applications. Someasurement in this context means formalised activity (assessing,monitoring, gauging, ascertaining, surveying, and so on) aimed atproducingstructureddata.Thedataaretheninterpretedand,ifappropriate,appliedintheprocessofmakingjudgments,decisionsandchoices.

Choosingmeasurementtools

Thereisabewilderingrangeofquantitativeandqualitativetoolsavailableto gather and produce structured data, so a systematic approachmust beadoptedtodecidewhichonesshouldbeused:

1Decidethepurposeofthemeasurement.Inmostcases,measurementofanorganisationdesignhastwopurposes:

•tomeasureanorganisationdesign’simpactonachievingthebusinessobjectives – this can be an existing design or progress of a newdesign;

• to monitor the programme or project management aspects ofdesigning,implementing,andembeddinganeworganisationdesign.

These are high-level purposes and because each organisation design isunique,themeasurementactivitymustbeselectedforthatparticulardesign.

2Choose themeasurementmethod. There are three types: quantitative(numbers),qualitative(words),ormixed(numbersandwords).Again, thechoicedependson the individual design as each typehas advantages anddisadvantages,andnoneisperfect.

3Getasuitabletoolforthejob.Sometoolswillbebetterthanothersforparticular jobs. For example, a screwdriver ismost suitable for driving ascrewintowood,butatapinchaknifebladeorother instrument that fitsintotheslotonthescrewheadwilldo.

4Agree how the tool will be applied. Almost any tool, quantitative orqualitative,canbeappliedinanumberofways.Forexample,thechoiceof

aquantitativesurveyraisesanumberofquestions:Shoulditbepaper-basedor web-based? Should it be administered to a sample of the population(whattype/sizeofsample)ortothewholepopulation?Shoulditbeatonetimepointorseveraltimepoints?

5 Prepare the ground for success. In applying a tool there can beunexpectedconsequences,asthecontextisusuallycomplex.Forexample,deciding to do a skills level analysis could result in labour unioninterventionifitwasfelttheresultswouldbeusedtoselectindividualstolayoff.Tomanagetheriskofthingsgoingwrong:

•testtheinstrumentormethodchosen;• prioritise the objectives of the measurement (often the list is too

long),reducingittoachosenfew–nomorethanfive;•thinkwhereuncertaintywillcomefromanduseschemestoreduceit,

for example focusing on a sub-population rather than the wholetargetpopulation;

•agreetheprotocolforthecollectionofmeasures(ifthecollectionisby interview, for example, train all interviewers to use the sameapproachesandquestions).

Thefollowingsectionselaborateoneachofthesefivesteps.

Decidethepurposeofthemeasurement

Asstatedearlier,thefirstpurposeofmeasurementistogaugetheimpactoftheorganisationdesignontheachievementofbusinessobjectives.Sogoingbackastep,thepurposeofanyorganisationdesignistomaketheenterprisehighperforming–thatisitmustsatisfyitscustomersprofitablyandsustainitscompetitiveadvantage.Much has been written about high-performance organisations and the

practices they have in common that appear to keep them leading theirsectors. Although there are minor variations, there is remarkablecommonality across industries and countries. Both the US GovernmentAccountabilityOfficeandtheUKDepartmentofTradeandIndustryhavepublishedreports(withcasestudies)onwhatmakesfororganisationalhigh

performance in their respective countries as an encouragement toenterprises to adopt high-performancepractices.Someof the findings arereproducedinTable5.1.Thustheearlyorganisationdesignchallenge–metintheassessphase–

isdeterminingwhatfuturehighperformancelookslikeintermsofcarryingout the business strategy, deciding which of the characteristics of highperformance aremost likely to deliver it (or are currently doing so), andthenagreeingwhattomeasureandhowtomeasureit.Ofcourse,fortheseactivities to produce useful results theremust be expressed clarity on thebusinessstrategy(seeChapter2).Timpson, a UK retailer, is a good example of a high-performance

organisationwherethevision,missionandstrategyareclearandwheretheorganisationisdesignedtorespondrapidlytotheenvironmentalcontextbyadjustingtheproductsandservicesitproduces.

Table5.1USandUKgovernmentfindingsonhigh-performingorganisationsUSGovernmentAccountabilityOffice UKDepartmentofTradeandIndustry

High-performing organisations have a focus on achieving results andoutcomes and a results-oriented organisational culture is fostered toreinforce this focus.Key characteristicsandcapabilitiesof high-performingorganisationsthatsupportthisresults-orientedfocusincludehavingaclear,well-articulated, and compelling mission, strategically using partnerships,focusingontheneedsofclientsandcustomers,andstrategicallymanagingpeople. High-performing organisations have a coherent mission, thestrategicgoalsforachievingit,andaperformancemanagementsystemthataligns with these goals to show employees how their performance cancontributetooverallorganisationalresults.

To manage people strategically, most high-performing organisations havestrong, charismatic, visionary, and sustained leadership, the capability toidentifywhatskillsandcompetenciesemployeesandtheorganisationneed,and other key characteristics including effective recruiting, comprehensivetraining and development, retention of high-performing employees, and astreamlinedhiringprocess.

A widely accepted definition of HighPerformanceWorkPractices(HPWPs)isthat they are a set of complementarywork practices covering three broadareas.1.Highemployeeinvolvementpractices,eg, self-directed teams, quality circlesand sharing/access to companyinformation.2. Human resource practices, eg,sophisticated recruitment processes,performance appraisals, work redesignandmentoring.3. Reward and commitment practices,eg, various financial rewards, familyfriendly policies, job rotation and flexihours.These broad areas are sometimesreferredtoas“bundles”ofpracticesandcover35workpractices.

TherangeandmannerinwhichHPWPsareusedbythecompaniesdependsonthe specific performance goals of theorganisation, the industrial context, andhow the relevant product strategy in aparticular organisation is employed toachieve results … different HPWPs or“bundles” of practices are likely to beused in different sectors to achievedifferentbusinessoutcomes.

Central to the effective implementationof HPWPs is organisational leadershipandtheculturethiscreates.

Sources:High-PerformingOrganizations:Metrics,Means,andMechanismsforAchievingHighPerformanceinthe21stCenturyPublicManagementEnvironment,February2004.GAO-04-343SPHigh-PerformingOrganizationsForum(www.gao.gov);HighPerformanceWorkPractices:linkingstrategyandskillstoperformanceoutcomes,

DepartmentofTradeandIndustry,URN05/665,02/05(www.dti.gov.uk)

Timpson’sapproachtobuildingasuccessfulbusiness

TimpsonisoneofthefewBritishhigh-streetbusinesseswithalongfamily

history – stretching back to 1868 when the first shop was opened inManchester.Thecurrentchairman,JohnTimpson, is thefourthgenerationofthefamilywhotransformedTimpsonfromtheoriginalshoebusinesstoamulti-producthigh-streetshop.Having made a successful transformation from selling shoes to shoe

repairs in the 1980s, the business environment for Timpson continued tochange. In the early days, shoe repairs represented 95% of Timpson’sturnover but this business has since steadily declined. The shoe repairsmarketisnow[2004]10%ofitsformersize.Timpson’sstrategytoaddressthis has been to diversify into complementary services that it can deliverfrom its existinghigh-street shops and to constantly seeknew services toreplace declining demand. Key-cutting, engraving and watch repairs areexamples of successful replacement services that have been developed.Newservicessuchas locksmithsandjewelleryrepairsarecurrentlybeingputintoplace.Interestingly, despite the continuous change in the variety of services

provided, Timpson has not altered its approach to building a successfulbusiness,namely:acustomerfocused/qualityservicestrategy.TheTimpsonstrategy is built on motivating and empowering staff to maximise saleswhileworkingwithouttheconstraintofmanyrules.“Firstly,weinvesttotalauthority inourshopstaff todowhat they think isbest,nocompanyrulemustgetintheway.Secondly,wehaveto‘amaze’ourcustomers.Ifwecando that with every customer, thingswill start to change.” The aim of itsqualityserviceandempowermentapproachistoharnessthepoweroftheircustomersandgetthemtodotheiradvertising.Thismeansthatifthereare250,000 customers a week, the target is 250,000 word-of-mouthrecommendationsforTimpson.

Source:DepartmentofTradeandIndustry(seeTable5.1)

Timpson’s two-pronged strategy is to diversify into complementaryservicesthatcanbeofferedfromitshigh-streetshopsandtogrowthroughcustomer recommendation. The strategy informs the design of theorganisationinthattheorganisationalcomponentsarealignedtodeliverthestrategy. For example, Timpson uses a range of supporting high-

performanceworkpractices(HPWPs).Measuresarefocusedonthreeareas:the continuing effectiveness of the HPWPs, the customer recommendationtargets and the diversification strategy. This example illustrates the twopointsthatmeasuresofdesignareorganisationspecificandthattherehastobe a clear purpose, related to the business strategy, for themeasurement.Nordstrom(seeChapter4,)hasaremarkablysimilarstrategyofputtingthecustomerfirstandasimilarfocusonempoweringstafftoactintheinterestsofcustomerswiththeminimumofrules.

Table5.2DocumentsformeasuringprogressonprogrammesandprojectsDocumenttitle Whatthedocumentisusedfor

BenefitProfile Todefineeachbenefitandtrackitsdeliveryandrealisation

BenefitRealisationPlan Totrackdeliveryofbenefitsacrosstheprogramme

BenefitsManagementStrategy Todefineandsetuptheapproachtomanagingbenefits

CommunicationsPlan Toplanandmonitorthecommunicationactivitiesduringtheprogramme

Highlight Report or Status Report/ProgressReport

Tosummariseprojectprogressandhighlightareasrequiringmanagementintervention

IssuesLog Tocaptureandactivelymanageprogrammeissues

LessonsLearnedReport Todisseminateusefullessonsforfutureprojectsandprogrammes

ProgrammeBrief To initiate the programme and provide the basis for the programme’sbusinesscase

ProgrammeBusinessCase Toapproveinvestmentandassesstheongoingviabilityoftheprogramme

ProgrammePlan Todesigntheoverallprogrammeandthenmonitorandcontrolprogress

ProjectInitiationDocument(PID) Thebasisformanagementandcontroloftheproject

QualityManagementStrategy Todefineandsetup thenecessaryactivities formanagingqualityacrosstheprogramme

RiskLog Tocaptureandactivelymanagetheprogrammerisks

RiskManagementStrategy To define and set up the required activities and responsibilities formanagingrisks

Stakeholder Management Strategy andPlan

To define, implement and track the activities and responsibilities formanagingstakeholders

Source:AdaptedfromOGCSuccessfulDeliveryToolkit(www.ogc.gov.uk/sdtoolkit)

Thesecondpurposeofmeasurementinanorganisationdesignproject(orprogramme) is to monitor project progress against agreed criteria – forexample, to determine whether or not the project is running to time andwithin budget,whether stakeholders are adequately engaged andwhetherthecommunicationsarehavingtheintendedeffect.Projects or programmes set up conforming to Association for Project

Management (www.apm.org.uk) or Project Management Institute(www.pmi.org) guidelines have specific frameworks and templates onproject measurement. Table 5.2 provides an overview of a typical set ofmeasurementdocumentsforaproject.

Choosethemeasurementmethod

Given the two purposes of measuring an organisation design project(gauging the impact of the design on organisation performance andmonitoring project progress), the choice of measurement method(quantitative,qualitative,ormixed)isgovernedbythefollowing:

•Whatistobemeasured.•Theaudience/marketforthefindings.• The resources of the investigator (or investigation team), such as

experience,cost,timeavailable.

The first factor in measurement choice, knowing what to measure,involves identifying specifics that will give meaningful information inrelation to the two measurement purposes. In the British Airways (BA)example(seeTable5.3),theindicationswerethatsalesthroughretailshopsweredecreasingandonlinesaleswereincreasing.Theorganisationdesignhad tochange tomeetnewcustomerdemandsanddeliversufficient salesrevenue through the new channel.A projectwas initiated to implement anewdesign.

BA chose quantitativemeasures in situations thatwere regular, precise,countable, objective and comparablewithin each data item: for example,thenumberofsalesmadeeachmonthandthenumberofphonecallstakenper hour. Qualitative measures were chosen in situations involvingbehaviour that was situational, dynamic, uncountable and subjective andhadarangeofperspectives:forexample,thefeelingsofstaffaboutclosureandprogresswithlabourunionconsultations.Mixedmethodswerechosenin situations thatwere amenable to both quantitative and qualitative datacollection andwhere results from onemethod supported results from theother: for example, customer satisfaction, measured by comparing thenumberofsalesmadeineachchannelandbyinterviewingcustomersabout

theirpurchasechoices.Theaudienceormarketfortheinformationgatheredisthesecondfactor

in measurement choice. Qualitative information is presented in narrativeform, often with contextual information and quotes from people.Quantitativeinformationisusuallypresentedinoneofthreesimpleforms:a table, a line or bar chart, or a pie chart, that is, a statistical reportsometimeswithbriefcommentary.(Remember,though,thatthereareotherformsofpresentation,suchasscatterplots.)AsTable5.4shows,tablesandlineorbarchartspresent twodataelements,butapiechartpresentsonlyone.

Table5.3BA’sredesignofsaleschannels

Table5.4Datapresentationmethods

Notethatthestylesofinformationpresentation–useofcolour,shading,

highlighting,tone,supportinggraphics/illustrations,numbersorwords,andsoon–haveanimpactonthewaytheaudienceperceiveandinterpretthedata.Whenchoosingameasurementmethoditisimportanttothinkabouthowthedatamightbestmatchtheneedsofitstargetaudience.Marks&Spencer,underCEORogerHolmes,measuredprojectprogress

against plan in a “dashboard” (see Figure 5.1). The audience was thesteeringgroupmembersoftheHRorganisationdesignprogrammewhometmonthly. With the dashboard, steering group members got a visual andcomparativemonth-by-monthsynopsiswithspecificsofinterestorconcern

being“calledout”,usuallybytheprojectmanager,anddiscussedduringthemeeting.The presentation of data is not something to be taken lightly. For

provocativeviewson thehazardsofpresentationandhow toavoid them,seetheworkofEdwardTufte,awriteronandteacherofanalyticaldesign(www.edwardtufte.com/tufte).Figure5.2showsacommentaryhegaveonthepurchaseofEnronstockasthecompany’sfortunesstartedtofail.The third factor that helps determine the choice of method is the

resources available formeasurement.Briefly, time, cost and expertise areinstrumentalinshapingmeasurementchoices,andgenerallythereisatradeoffbetweenthese(Figure5.3).

•Time isinvolvedatallstagesofthemeasurementprocess:selectingor designing the tool, testing it, running the full measurementprocess,analysingtheresultsandpreparingapresentation.Clearly,buyinganoff-the-shelfonlinequantitativeinstrumentthatproducesimmediate reports brings a quicker result than designing aqualitative process that, for example, requires designing aparticipative event or focus groups, analysing narrative anddeveloping a report. Quantitative methods of measurement areusually quicker and easier to administer than qualitative. Forexample,a“quickanddirty”internallyconstructedwebsurveymayyield good enough information for the purpose. Qualitativemeasures involving focus groups, workshops or interviews takelongertosetup(astheyinvolvepeopleandschedules)andanalyse.Theycanbelabourintensive,buttheyareusefulfordiggingdeeperintoanissue.

•Costcomes intoplaywhenmakingbuild-or-buydecisions.Balancethe cost of buying a software licence to use a survey tool, or thehardwaretorunone,againstapriceperuserwiththecostoflabourandexpertisetodesignandadministeranin-houseprocess.Itmaybepossibletopiggy-backonexistingorganisationalmeasuressuchas balanced business scorecards and thus negate the need foradditionalmeasuresrelatedtothesuccessof thedesigninmeetingbusiness objectives. But measuring progress of the design projectagainstplanwillprobablyneedspecificmeasures.

•Expertise iscriticalwhenitcomestodesigningmeasures.Askingafew questions may appear to be an easy task, but getting valid,reliable,comparable,valuable,high-qualityinformationisnoteasy.All sorts of design decisions have to be made: for example, onquantitative versus qualitative methods, survey questions, ratingsscales, sample or whole population. When making trade-offsbetween time, cost andexpertise it isbetter tocompromiseon thetimeandcost.Measurementdesignexpertiseisessentialinordertoavoidjunkinformation.Thenextsectiondiscussesthisfurther.

This is a superb narrative of a stock price (graph), a narrative of thecollapseofEnron(wordsannotatingatimescale),andanarrativeoflousyinvestmentsbytheFloridastatepensionfund(table).Thegraph,table,andwords are linked together very nicely. The caption at the top suggests apossible cause of the lousy investments. (The Florida state pension fundbehavedlikesomeonewholeftajacketontheairplane;theyweretryingtoget back on while everyone else was getting out.) Data sources are alsoindicated.Themajor defect is that no designer is named.Someonedid this good

work and they should get credit for it. The Times gives the names ofreporters and photographers; this graphic is a substantial piece ofjournalism,asvaluableasaphotographornewsstory.Whodidit?Itwouldbeusefultohavealongertime-horizon,perhapsreachingbacka

full year.Maybe the Florida pension fundwas buyingEnron stock everyweek for ayearonautomaticpilotor something.Ormaybenot; a longertime-horizonwilltellusthatandtherebystrengthenorweakentheevidenceformischiefwithregardtostockpurchasesduringthecollapse.

This is an excellent, first-rate news graphic. And it was done underdeadlinepressureatadailynewspaper!

Source:EdwardTufte,February6th2002

Getasuitabletoolforthejob

Boundaries to both resource availability and intended audiencemay helpnarrowmeasurementchoices,butnotbymuch.Expertiseisrequiredtohelpdeterminewhat tomeasure andwhy it is beingmeasured – that is,whatinformation themeasureyields that contributes to oneor bothof the twopurposes ofmeasuring an organisation design and design project. InBA’sdecisiontochangeitsfocusfrom“brick”salesto“click”sales(Table5.3),one of the elements being measured was customer satisfaction.Measurement showed decreasing levels of satisfaction with retail shoppurchases and an increasing desire for better online purchase availability.Designing an organisation to respond to this meant, among other things,bringing better co-ordination between business units, more sharing ofcustomerdataandimprovedinternalflexibility.Table 5.5 shows that in this instance there are potentially valid

measurement points which will indicate whether the new design isdeveloping customer satisfaction in at least four areas: customer service,

businessprocess,humancapitaland financial. If allweremeasured, therewouldbeninesetsofdata–andthis isforonlyoneaspectof thedesign.Additionally, all nine points could be measured quantitatively andqualitativelyeitherassolemethodsorasamixedmethod.Clearly, measuring all of these would be resource intensive so the

challengeistogetthemostvalidandusableinformationfromtheminimumamount of measurement, to get actionable information rather than noise.Thischallengecanbemetinthreeways.

Table5.5Improvelevelsofcustomersatisfaction

1Narrowingthefield.Identifyoneortwomeasuresthatwillprovidegoodenoughinformationtotriggeractionorprovideinformationinanumberof

areas: a couple of measures that act as surrogates for a much greaternumber of measures. The following extract from Frederick Reichheld’sarticle “The One Number You Need to Grow” tells how US car rentalcompanyEnterprisedidthis:3

Taylorandhissenior teamhadfiguredoutaway tomeasureandmanage customer loyalty without the complexity of traditionalcustomer surveys. Every month, Enterprise polled its customersusing just two simple questions, one about the quality of theirrentalexperienceandtheotheraboutthelikelihoodthattheywouldrentfromthecompanyagain.Becausetheprocesswassosimple,itwasfast.Thatallowedthecompanytopublishrankedresultsforits5,000 US branches within days, giving the offices real-timefeedbackonhowtheyweredoingandtheopportunitytolearnfromsuccessfulpeers.

2Agreeingcriteriaandboundaries forchoice. In the first instance thismeansidentifyingtoolsthat:

•liewithinresourceboundaries(time,cost,expertise);•measurethenarrowedfieldthatwillinformthewideraction;•recognisetheaudience/market;•adheretotheKISSprinciple(keepitsimplestupid).

Enterprise, for example, used a short online survey4 that met thesecriteria. The survey lay within resource boundaries as it was quick togenerate reports,wasappropriatelypricedandwas reliable. Itmeasuredanarrow field through a small number of questions, but the answersencouraged managers to seek more information, for example: What haschanged?Why?Whatcanbedoneaboutit?ThusfromtheregularflowofdatareturnedbyroutineadministrationofthesurveyEnterprisewasabletoinformaction, tailored to theorganisation, in all the cells shown inTable5.5. Furthermore, the design and administration of the survey recognisedthatthepeoplecompletingthesurveyandthepeopleusingtheresultshadlittletimetospendonlengthyformcompletionorinterpretationofresults;

inotherwords,itrecognisedtheaudience.

3Decidingthemeasurementtool.Therearethreechoices:buyatoolofftheshelf;customiseanexistingtool;designa toolforaspecificsituation.Generally, a tool bought off the shelf ismore likely to be valid, reliable,current and generalisable (that is, the sample results can be universallyappliedorextendedto thepopulationfromwhich thesamplewas taken–thoughthisshouldbecheckedbecause,forexample,atoolforanAmericanaudience may not work for a British one). Customisation takes time, isoften expensive and there is the possibility of losing the rigour of theresults.Designing for a specific situation is also costly and brings addedrisksifpeopleinexpertinmeasurementdesignarechargedwithdevelopingtheinstrument.An ideal scenario is onewhere a organisation designer partnerswith a

measurement expert, possibly from an external third party independentorganisation, toquickly scan themarket for suitableoff-the-shelf tools. Ifnooff-the-shelftoolisavailable,thenextbestoptioniscustomisationandthe last recourse is developing a measurement tool from scratch. TheAmerican Society for Quality, www.asq.org, and the Chartered QualityInstitute (UK), www.thecqi.org, are both good sources of advice andinformationonmeasurementissues.

Agreehowthetoolwillbeapplied

What to measure, why to measure it and the audience for it inform thechoice of tool. Thinking about how to apply the tools is also part of thechoiceprocess.Ineitherqualitativeorquantitativedatagatheringtherearetwopossibilities:censusdatagatheringandsampledatagathering.Census data gathering draws information from every individual entity.

So, for example, in the case of an employee satisfaction survey everyemployeewouldbeaskedtorespond.Orinthecaseoffinancialreportingevery department or business unit would be asked to supply information(usuallyautomaticallygeneratedbyfinancialsoftware).Sample data gathering draws information from a smaller group of the

targetedpopulationinawaythatrepresentsascloselyaspossiblethewholepopulation.Airlines,forexample,oneveryflightaskasmallpercentageof

passengers to complete customer satisfaction surveys. The sample isidentifiedbyusingarandomisedselectionofseatnumbers.(Thismethodisknownasprobabilitysamplingwheretheselectionoftheunits,inthiscasepassengers,islefttochancetominimisebiasinthestudy.)Samplesizedependsonthelevelofcertaintyrequiredfromthedata.The

biggerthesamplesizethemorelikelihoodthereisofcertaintyandthelessoferror.(Assumingthemeasurementtooldesignisgood.)However, in identifying the right sample even a randomisedmethod is

not necessarily perfect. A vivid example is given in Jenny Diski’s novelRainforest,wheretheprotagonistisaresearcherstudyingtheecologyoftheforestusingasamplingmethod.Oneoftheothercharacterscomments:

“There’s one thing that occurred tome though, about your gridsandyoursearchfortheultimatetruthaboutrainforests.Supposingthey’reinthewrongplaces,yoursquares?Supposingthey’reintheone place that doesn’t give you a representative sample of thewholeforest?Supposing,”heconcludedwithasuddenlaughasthethought came to him, “the truth you’re searching for is betweenyoursquares,orconcealedbythelinesthatmaketheframeworkofthegrid?All thosebits ofpaperwouldbemeaningless,wouldn’tthey?”

Preparethegroundforsuccess

Toget good results frommeasurementprocesses, firstmake sure that theuseofthemeasurementtoolwillnotcauseproblemsandthenmaximisetheresponserate.Useandimplementationissuescanbeavoidedbyinvestinginapilotof

the full-scale study. Pilotingmay be seen as adding time and cost, but itmitigatestheriskofthingsgoingwrongandiswellworththeinvestment.In the example below, which comes from an internal audit of the fourthemployeeopinionsurveyrunbyMarks&Spencer,thedecisionwastakennottopilotthestudy.However,apost-implementationreviewhighlightedanumberof issues thatcouldhavebeenspottedandworkedoutbefore thefullroll-out.

SummaryEmployeeOpinionSurvey

The Employee Opinion Survey (EOS) is not being used effectively toaddressemployeeconcerns.88%ofstaffcompletedthisfourthsurveyandHRmanagementbelieves

thatitisavaluabletooltomeasureemployeeattitudes;however,thereareweaknessesthroughoutthesurveyprocess:

•TheEOSproductisnotfullymeetingorganisationalrequirements.Asignificant number of staff interviewed found questions irrelevantanddidnotfullyunderstandtheresults.

• The EOS team has taken the survey from concept to delivery butimprovements to management control have been identified toimprovetheefficiencyandeffectivenessoftheprocess.

• The EOS has not been sufficiently embedded into the organisationdesign. Line management is not communicating results or actionplans to staff and action is not consistently taken to address lowsurveyscores.

In this example the problems highlighted stem from the mechanics ofdesigningandimplementingthesurvey–apilotwouldhavehelpedpreventtheproductfailing tomeetrequirementsandinadequaciesofmanagementcontrol.Evenwheremeasurementtoolsareboughtofftheshelfitisworthpilotingtheprocess.Ithighlightsthegoodandthebadnotonlyoftheusebutalsoofthedesignofthemeasurementtool,savesmoneyandtimeinthelongrun,andhelpsimprovesurveyresults.Maximisingtheresponserateisnotanissuewhentheoutputisgenerated

automatically, for example on number of units sold. But where themeasurement involvespeopleparticipating in aworkshopor focusgroup,or completing a survey, participation can be problematic.A low responserateaffectstheaccuracyoftheresults.Itmaybe,forexample,thatpeoplewhodonotprovide informationdiffersystematicallyfrompeoplewhodoprovideinformation.

One of the principle factors inmaximising participation and returns iseffective communication with all stakeholders, not only the targetedparticipants but also those people who have to communicate or act onresults.LearningfromtheEmployeeOpinionSurveyexperience,Marks&Spencerplannedasubsequentsurveydifferently.Inanorganisationdesignproject that aimed to measure (map) the gap between the currentcapabilitiesoftheworkforceandtheabilitytodeliverthebusinessstrategy,two things were built into the plan: a pilot and a highly detailedcommunications process. The example below is an extract from the pilotphasecommunicationsplan.

MaptheGapCommunicationsPlan

Themainaim/outcomeofthisproject(includingtheme)

• To communicate to key stakeholders the purpose of Map the Gapproject

•ToproduceatimetableofkeymilestonestocommunicatetoProjectTeam

•Toprovideabriefingtoolforteammemberswhencommunicatingtoexternal parties, eg, Management team, Trade Unions, BIG onDivision5&DivisionWest

•ToproduceWorkshopmaterialforDivision5&DivisionWest•Tosupport thedeliveryofaclearconsistentmessageon theproject

throughout theorganisationbyprovidingbriefing tools forSectionManagers for Division 5 and Commercial/Performance ManagersforDivisionWest.

Thescopeofthisproject(howwideisit?)

Itincludes:

•Timetableofevents

•Communicationplanforstakeholders•BriefingnotesforProjectTeamtocommunicatetorelevantaudience•ProducingtrainingmaterialforMaptheGapworkshops• Producing a tool to communicate to all employees onDivision5&

DivisionWestthepurposeofMaptheGapproject

Itdoesnotinclude:

•Technologyplatformtocapturethedata•Identifyingcriteriatomeasurewaysofworking•Producingtoolstobridgeskillsgaps•BudgetPlanning•WaysofWorking/Jobprofilecommunication

Keyprojectobjectivesandoutcomes

All stakeholders and employees on Division 5 & Division West tounderstandandcommittothe“MaptheGap”project

CommunicationWorkshopOutcomesoftheDay

Sothateveryone

•Understandstheprojectobjectivesandhowtheywillhelpstorestodeliverthecommercialobjectivewhichinturnwillincreasesales

•Understandshowtheirrolesareimportanttothebusinessvisionandwhatparttheyhavetoplay

• Is clear about their skills and competences and knowswhere theirdevelopmentneedsare

•Feelsinformed,involvedandconfidentincompletingtheSurveyandseesthelinkofbeingabletotakethebusinessforwardandimproveoverallbusinessperformanceandproductivity

The plan also included steps to encourage participation: a personalisedinvitation from a high-level sponsor to attend a workshop, a prize forcompletingaquestionnaire,andsoon.Preparing the ground for success involves supporting people in taking

actions suggestedby the findingsof themeasurement.Wordquicklygetsaroundifnothinghappensasaresultofasurvey,andwhenthisoccursitisdifficult togetsupportandparticipation infurtherdatagathering.Follow-upactionisoftenneglected,astheEOSexampleshows.Insomecasesthisisbecausemanagementandstaffdonotknowwhattheirresponsibilitiesareinrelationtoactionplanningandactiontaking;inothercasestheresultsofmeasurementareunpalatableordeemedunbelievableandthusignored.Rememberthatpartofpreparingthegroundforsuccessincludesthinking

about follow up. This frequently falls by the wayside when otherorganisationaleventsovertaketheorganisationdesignworkorthecostsoftakingactionappeartooutweighthebenefits.

Measurementprinciples

As highlighted above, effective measurement is not as precise an art aspeoplemight like to believe.There are no rightmeasures. For any givenorganisation, measures of organisation design success and programmeprogress vary, depending on its mission, its environmental context, thenature of its work, the product or service it produces and customerdemands.However,therearetwoprinciplesthatmustalwaysunderpinanyformofmeasurement:respectforpeopleandrespectforqualityofoutput.

Respectforpeople

This involves theprincipleofgetting informedconsent,whichmeans thatparticipants have voluntarily agreed to give the information, understandwhat they are agreeing to andhavebeen informedof thepurposesof therequest for information, why it is being sought and how it will be used.Applying theprinciplemeanscommunicatingeffectivelywithparticipants(as discussed in the previous section), maintaining confidentialitythroughoutthemeasurementprocessandsecuringmeasurementdata.Maintainingconfidentialityiscrucialtomeasurementactivity.Response

ratesarelowerwhenpeoplefeeltheirviewsmaybeexposed.Itisimportantto take active steps, regardless of whether themeasure is quantitative orqualitative,toensureparticipantsareclearthattheinformationtheyprovideis kept both confidential and secure.This ismore easily donewith print,web-basedorcomputer-generatedquantitativeinformation,whenformscanbeprintedwithinformationaboutthepurposesofthesurveytogetherwithastatement that responses are anonymous and/or confidential. Participantsthentickaboxagreeingthattheyhavereadandunderstoodthepurposesofthesurveyandagreetoinformationbeingusedonthetermsstated.Inworkshopsandfocusgroupswherequalitativeinformationissought,

maintainingconfidentialityeitherbecomespartoftheparticipants’contractwith each other, or can be structured using web-based groupware thatallows people to record views anonymously. Where technology isunavailableandconfidentialitymaybean issue, theChathamHouseRulecanbeinvoked.

TheChathamHouseRule

“Whenameeting,orpart thereof, isheldunder theChathamHouseRule,participantsarefreetousetheinformationreceived,butneithertheidentitynortheaffiliationofthespeaker(s),northatofanyotherparticipant,mayberevealed.”The world-famous Chatham House Rule may be invoked at meetings toencourageopennessandthesharingofinformation.Thevalueofthisruleisthatitallowspeopletospeakasindividuals,andtoexpressviewsthatmaynot be those of their organisations, and therefore it encourages freediscussion. People usually feelmore relaxed if they don’t have to worryabouttheirreputationortheimplicationsiftheyarepubliclyquoted.ChathamHousecantakedisciplinaryactionagainstoneof itsmembers

whobreakstherule.Notallorganisationsthatusetherulehavesanctions.Therulethendependsforitssuccessonbeingseenasmorallybinding.

Source:www.chathamhouse.org.uk

Reassureparticipants thatwherequotesor attributionsaremade inanyreports, names will not be mentioned without gaining the expresspermission of the participant. When using cameras, there is a risk thatparticipants’ identities may be revealed and that their privacy may beaffected in unanticipatedways. Informparticipants if you intend to showvideosorusephotosinseminarsorconferencepresentations.Tomaintainconfidentiality, secure data carefully and allow only authorised personnelaccesstoit.

Respectforqualityofoutput

Thismeanstakingthestepsoutlinedinthischaptertoensurethatthedatagained are valid, reliable and current and reflect conditions accurately. Italsomeansethical,carefulandobjectivereportingofthefindings.Threatsto objective reporting come from several directions and can be related toself-interest,self-review,advocacy,familiarityortrustandintimidation.6

Unfortunately, the quality of output is often determined retrospectivelythroughreviewsorinvestigations.Whenmeasurementisfoundtobeoflowquality, fabricated, misleading, or misreported (either internally orexternally) there is usually deep damage done to the reputation of theresponsible party, as the example of Shell’s measurement of oil reservesillustrates.

Shell’soverstatementofoilreserves

By way of illustrating how aggressively reserves had been overbookedwhen Sir Philip Watts, the now-deposed Shell chairman, was chiefexecutiveofEP[ExplorationandProduction],considerShell’streatmentofitsGorgonprojectinAustralia.Shell had booked 500 million barrels of oil equivalent (boe) as of 31

December 1997. But as one City oil analyst pointed out to FinancialDirector,nogashasyetbeenproducedfromtheproject,andby2004noneofShell’sotherpartnersinthisprojecthadbookedacubicfootofgasfromthisfieldaspartoftheirprovenreserves.ThissameanalystmadethefurtherpointthattheSECguidelinesrequire

companiesnot simply todiscoveroil inorder tobook reserves asprovenbut tohaveconcreteprojects inplaceandready to run:oil thatcannotbeextractedissimplyaninterestingstatistic,notavaluedcommodity.Having this500millionboeon thebooksundoubtedlydidgood things

forthemarket’sperceptionofShellasasolidcompetitortoBPandExxon.AsPhilipNichol,globalsectordirectorforoilatinvestmentbankABN

Amro,says:

Whatwenowdiscover is that,wherewe all thoughtShellwas agreat company, the company has basically been in decline for adecade. Management have been focusing on profitability andallowing the reserves to wind down without that fact becomingvisibletothemarket.Source: www.accountancyage.com/financial-director/features/2049846/stringing-along. Harrington, A.,FinancialDirector,June4th2004

Robust measurement reporting requires a mindset of scepticism,detachment and neutrality.With these qualities there is less likelihood ofstating,conveying,suggesting,oromittingresultsinordertopresentarosyview.

CASESTUDY:measuringaturnaround

Four months into the project Matthew Davis was anxious. He had beenchargedwithturningroundawholenewdivisioninthecompanyandthingswerenotlookinggoodatthisstage.The turnaround project had been glossy andwell publicised internally.

Zed, as it was named, was to be a bold and innovative venture in thenotoriouslydifficultchildren’swearmarket.Itsvisionwas“tobeaclothingcompanywhereheroesaremadeandfantasiescometrue”,anditsmissionwas “to put clear blue water between Zed children’s wear and thecompetitionandbecomethebestchildren’swearretailerintheworld”.

From the start, there were rumblings in the parent company about thevision – people did not seem to understand the heroes and fantasieslanguageeventhoughDavisexplainedit:

Webelieve theexperienceweneed tooffer isanalogouswith thecinemaexperience.We’redevelopingasenseofanticipationinthekids – much as film trailers do. We want them to feel that theshopping experience is going to be fun and exciting, that they’reseeing a “great film” with product stories that are relevant andmotivatingsothatwhentheyleavetheshopthey’llhaveasenseoffulfilmentorreward.

Hepresentedthevisionwithpassionandvigour:

Think of your own kids – wouldn’t they want to live out theirfantasies ormeet their heroes?Our plan is to drive kids’ footfallinto the stores, through our promotions tied to spend thresholds.The younger kids will live their fantasies say by visitingDisneylandorTussaud’sThemeparks,andtheolderoneswillmeettheir heroes by, for example, winning a place at ManchesterUnited’sSummerSoccerSchool.

Along with the vision and mission, Davis’s team developed threeperformancegoals for the firstyearof theproject.The firstwashardandmeasurable,andnoonecoulddisagreewiththenotionofsupplyingbettertargeted(morefashionable)product,deliveredfasterandcheapertomarket.The second was more qualitative, and Davis’s team had a harder jobpresentingthistoasometimesscepticalaudience:

Imagine that, through improvements to thestoreenvironment,wewillmaketheshoppingexperienceattractivetoadultsandchildrenalike.We’replanning todesignaplacewherechildrenWANT toshop – one that’s cool and aspirational – using a theatricalapproach.We’ll communicate [what the] key themes [are] to beeach month, and have linked event zones, new ranges andcollections in store, promotions and advertising, news and

information.

The third goal was also qualitative and as Davis admitted to himself,perhaps thehardest toachieve:hewas to turnaroundchildren’swearbutwith staffwhohadbeenwith the company for years andwhohad strongviews on the way things should be. New to the organisation himself, hestrongly believed that the onlyway hewould get things on trackwas byestablishingacultureofownershipandaccountabilityamongcolleagues.Inhismeetingswith them he repeated the point that: “Iwant you all to beindividually responsive, to take measured risks and be capable of swiftdeliveryofourgoals.”Davis’steamchosefourmeasuresforthethreegoals:

• Restoration of clear market leadership for children’s wear with atargetof7.5%marketshare(current6.2%)bytheendofthesecondyearandtheachievementofP&Lobjectives.

•Zedhaving“whatkid’swant”upfrom14%to35%bytheendofthesecondyear.

•Asupplychaincapableofdeliveryfromconcepttostorein12weeks.• A culture change tracked by an organisational culture inventory

administeredatregularintervals.

But even with these measures Davis couldn’t get the organisationalsupporthewanted,ashereportedtohisteam:

We’vegotthegreenlightonsomeaspectsofthestoresrevamp–mainlysmallscalestuff,butwecan’tgoforwardonmakingthings“childfriendly”inthewaywewanted–therearefundingproblemssothat’sbeenputonholdforayear.AlsoI’vejusthadwordthatouradvertising isdelayeduntilwehaveproved thatourbusinessmodelworks (ie,nextSpringallbeingwell– it’s imperative thatwegetthemodeltodeliver!)–we’vebeenheldtoransomontheserious slip in sales in the previous two months that we’ve hadlargelybecausewetookoureyeoffkeepingthebusinessrunningin favour of the organisation design work.Wemust recover oursales.

Staffweredemoralisedbythespringdeliverybeingoffby£6mandtheresignationofaseniormemberoftheteamasaresult.Davis,workingflatout himself, acknowledged that overall his people’s workload and stresswere high and resources were stretched. That weekend he talked to hisfriend,AndrewCollet:

Here’sthestory.AsyouknowIwashiredtoturnaroundthefailingchildren’swear divisionof the clothing retailer.Thosewhohiredmewereclearthattheywantedanew,innovative,andcompetitivebusinessmodeltoregainlostground.IthinkI’vegotthatbutI’mnow facing the requirement to produce results long before it’spossible to do so. I’ve got to keep the business running – not asusual,butbetter thanthat–andsimultaneouslythetransitionintothenewmodel.ThemeasuresthatI’vegotdon’tseemtobegivingmetherightinformationtomakechangestotheplan,andIseemtohaveanimpossiblenumberofprioritiestojuggle.Communication isn’t working – not just with our suppliers, butamongourselves,there’snoteamworkandwedon’tseemtotrusteachother.Then there’s the relationship,or lackof it, thatwe’vegotwith the supplier – communication and trust are rock-bottomtheretoo,andlookatthesizeofthemountainahead.

Davisgloomilysketchedhisview(seeFigure5.4).

Almostdesperatelyhelistedtheprioritieshesawintheimmediatethreemonths,groupingthembyfunctionalteam:

Look, IT, HR, Finance, Marketing, Selling, Category, Design,CommercialandTechnical,andTransitionallhaveatleastfourandsomehavefiveprioritiestoworkon–it’sjustcrazy!

Collet,recognisingtheedgeofpanic,responded:

Matthew,stepbackandtakeacalmlook–having38priorities,andyouhaven’tmentionedtacklingcultureandcommunicationissuesacrossthewholedivision,issimplynotdoable.You’renotoneoftheheroesinZed’svision.You’reahardpressedexecutivetryingtodotherightthingunderpressure.

Furtherdiscussionmade itclear that ifZedwas togetbackon track,atotally different approach would be needed for Davis to demonstrate histurnaround capability to the parent organisation in the given timescale.“You’reright,”saidDavis,pullinghimselftogether,“I’mrememberingthatIknowacoupleofpeoplewho’vefacedsimilarsituations.MaybeIcouldlearn from their experiences.” On Monday morning, with Collet’sencouragement,hepickedupthephoneandmadesomecalls.It was a surprise to Davis that one of the most thought-provoking

conversations he had was with Nigel Trant, a bond trader andmathematicianwhomsomeonehadsuggestedhecall.Trantsaid:

Takeaclose lookat themeasuresyou’reusing to trackprogress.Most traditional measures view organisations as predictablemechanisms. They look at issues one-by-one – just as you’veoutlinedeachofyourfunctionalareashavingfourorfivepriorities.Notonlythat,theyoftenmeasureshort-termwhichleadstoshort-sighteddecisions.Inyourcaseyou’reinanunpredictablesituation.The problems are complex and contingent but yourmeasurementapproachisgravitatingtothemoreobviouspartsofthechallenge

andsteeringclearoftherest.Trytakingawholeorganisationviewand measuring only a few aspects, common to all, but that willenableconcertedactionacrossthepiece.

Davis pondered this and then remembered the five enablers oforganisation design success: leadership support, stakeholder engagement,change readiness, communication and training (seeChapter 4). It dawnedonhim that thecommon themewas lackof stakeholderengagement.Theparentorganisation’sleaderssaidtheyweresupportivebutacteddifferently,hisownstaffandstaffinthe

supplier organisations lackedmotivation and energy, and customerswerevotingwiththeirfeet.AtthenextmeetingwithhisteamDavisoutlinedhisthoughts:

Thingsaren’tgoingaswellasweexpectedandhopedatthisstage.I’mwonderingifwe’refocusingenergyonthewrongthings.Let’sdiscuss the possibility of tracking stakeholder engagement andtakingcollaborativeandalignedactionstodevelopandsustainthis.I think that doing so would significantly reduce the number ofprioritieswe’ve got on the table and at the same time direct ouractionstowardsmoreefficientlyachievingourbusinessstrategy.Idon’twant to change the goals but I dowant to change thewaywe’reapproachingthem.

There was a pause as people took in this new idea. Then the financeofficerspoke:

I don’t know if this will work, but there’s a StakeholderEngagementStandard7–itmaynotexactlymatchourneedsbutIthinkwecouldadapt theapproach. It’s comprehensivewith toolsandtemplates,andthestandardisrecognisedinthemarketplace.8

Fourmonthslater,withtheentireteamfocusedonthestrategicobjectiveofengagingstakeholdersinmusteringbehindhelpingZedachieveitsthreeperformancegoals,therehadbeenasignificantshiftinZed’sfortunes.By

focusing on one question, asked weekly – How engaged are ourstakeholders?–closelymeasuringtheresults,ensuringappropriateaction,and communicating clearly and frequently with stakeholders, Davis hadbuilt trust in his capability to take the division to success. This led torelationships all round improving,motivation andproductivity increasing,and,notcoincidentally,businessresultschangingforthebetter.By theendof theyear,Davisandhis teamfeltconfident theywereon

track and had won support not only from the staff but also from thecustomers.AsDavisreportedtoCollet:

It’sbeenatoughperiodandonethatbeganbadly.I’mgladtosaythat things are looking good – it had never dawned on me thatchoiceofmeasurecouldhavesuchadramaticknockoneffectonoutcomes.Takealookatthis.

Davis pushed the current issue of a trade newspaper across the table toCollet:

Agreatreport,don’tyouthink?“Zedisshowingsignsofregainingshareinthechildren’swearmarketandhasmadegoodprogressinadifficultenvironment.Itstillhasmuchtodotoensuresustainedgrowth in the long termbut thenewdesignof thedivisionalongwithbettervalue,betterbuying,andbetterstylingresultedinbetterperformanceastheyearprogressed,thecompanysaid.”

Reflectionsonthiscase

This casehighlights the complex relationshipbetweenbusinessgoals andperformance measures. Davis had business goals and started off bymeasuringeachofthesebothdirectlyanddiscretely.Thishadtheeffectoffragmentingeffortandalienatingstakeholders.Realising thishestarted todoseveralthingsright:

•Hetookthebravestepoflookingforadifferentapproachandseekingsupport to do this. Some leaders find it difficult to admit to

themselves, letaloneothers, that theyare inaquandaryor inovertheir heads. However, in stressful times leaders who are able toadmitfallibilityandfindsupportandguidancetohelprethinktheirapproacharemorelikelytobewinnersthanlosers(formoreonthisseeChapter 7). People coming new to an organisation at a seniorlevel often have a tendency to either try to drive performance orbuild social networksof influence.Daviswasmore inclined todotheformer,butherealisedbeforeitwastoolatethattosucceedhealsohadtodothelatter.Inhismindhehadbeenfocusedongettingonratherthanfittingin.Thenatureofthecompanyrequiredhimtodobothifhewastobeeffectiveandsuccessful.

•Helookedforameasurethatwasimportantanddurable(ratherthansomething easy to measure). The Enterprise example on suggeststhatonequestionskilfullyusedcangeneratearangeofactionsthattogether drive the business goals. The Gallup Organisation hasfound similar strength in fewer focused measures, making apowerful case for gaining employee engagement by asking 12questionsusingtheGallupQ12(seeUsefulsourcesofinformation).Careful choice of a few overarchingmeasures that lead to actiontowards the goals is a better route thandirectmeasurement of thegap between current state and end-goal state. It also changes thefocus from fire-fightingonpriorities to concentratingon adjustingas the context changes (moving from addressing urgent items toaddressingimportantones).AsDavislearned,themeasureschosenmustalsobeadaptabletochangingcircumstances–inhiscasethereductioninfundingmeantachangeofplansrelatedtostorelayout.Hisfirstmeasureonthis–Areweontrackfordeliveringnewstorelayouts?–didnotstaythecourse.Hisnewmeasure–Howwellareweengagingstakeholdersinourstorelayoutplans?–wasadaptableascircumstanceschanged.

•Heinvolvedhisteaminthedevelopmentofacommonmeasurementprocess.Recognising thatmembers of hismanagement teamwerefocused on their individual priorities and thus fighting with eachother for resources,Davis used the approachof involving them inhis thinking. This led to a more collegial and then productiveapproach to achieving the goals. With a common measure rather

than individual priorities, team members started to align theirfunctional and operational decisions, sharing ideas and insights asthey went along. Parallel with this they started to use thecollaborativeapproachwiththeirownteams.TheresultwasthatthemindsetofallstaffgraduallychangedfromoneofworkingatZedtooneofworkingforZed.

•Hemonitoredconsistentlyandregularly,thusinculcatingacultureofmeasurement throughout. In the weekly meeting, Davis and histeamreviewedthelatestresponsestothequestion:Howengagedareourstakeholders?Dataweregatheredthroughseveralmeans(focusgroups,one-to-onemeetings, a sample survey, and soon)but inasystematicway,sothattheteamwasseeinganevolvingbutreliablepicture each week. The approach was carefully implemented toavoid over-surveying the same stakeholders and to keep responserates high. As people saw the effectiveness of the approach theybecameadvocatesforit,thusstrengtheningtheprocess.

•He communicated progress with stakeholders. Davis was quick toadmit that he had neglected targeted and frequent communicationwithstakeholders(thereismoreonthisinChapter6).Withhisheaddown among the weeds, he had missed opportunities to involvethem in progress and assure them that he was looking after theirinterests,theinterestsofZedandtheinterestsofthecompanyasawhole.Ashe started to learnmore about stakeholder engagement,Davis continued to ramp up communication flows, encouragingfeedbackandtakingideasonboard.Bybecomingmorevisibleandapproachable and acting on what he heard Davis showedstakeholders that he was a person they could get to like and behappy towork for.A culture of “we’re all in this together – let’smakeitwork”startedtodevelop.

Toolsforthiscase

TheacronymFABRICprovidesausefulchecklistformakingdecisionsaboutmeasurementtoolsandmethods.9

AFABRICmeasureshouldbe:

Focusedon theorganisation’saimsandobjectives;excludemeasures thatare interesting but not directly relevant. Make sure everyone involvedagrees that themeasurements aregoing tobeuseful and relevant towhattheorganisationisaimingtoachieve.Appropriate to, anduseful for, the stakeholderswho are likely to use it.Rememberthatmeasurementsandanalysishaveresourceimplications–thebenefitofeachmeasuremustbeinproportiontotheeffortrequiredtotakeit.Existinginformationsourcesshouldbeconsideredbeforenewonesarecreated.Balanced,givingapictureofwhat theorganisation isdoing,coveringallsignificantareasofwork;choosemeasuresforallimportantareas,andatalllevels – costs, output volumes, efficiency, quality, progress towardsstrategicaims–evenifthemeasureshavetobesubjective.Robustinordertowithstandorganisationalchangesorindividualsleaving;the information gatheredmust be accurate enough for its intended use asmanagement decisions will be based upon it. Additionally, it must beverifiable,withcleardocumentationbehindit,sothattheprocesseswhichproduce the measure can be validated. Further the measures should beresponsive to change; measures that are relevant both before and after aradical change are useful in judging its success; those that focus ontemporaryaspects,orthosethatmaychange,arelessuseful.Integrated into the organisation, being part of the business planning andmanagement processes; the activity measured must be capable of beinginfluenced by actions which can be attributed to the organisation; and itshould be clear where accountability lies.With this, measures should betimely, producing data regularly enough to track progress and quicklyenoughforthedatatostillbeuseful.Cost effective. Thismeans that themeasures balance the benefits of theinformation against the costs of collecting it. This can be facilitated byensuringtheyare:

• clearly and unambiguously defined so that data will be collectedconsistently,andthemeasureiseasytounderstandanduse;

• comparable with either past periods or similar programmeselsewhere;

•avoidingperverseincentives,ie,theydonotencouragebehaviourstomeet a target rather than to improve. (For example,measuring thequantityofcallsansweredbutnottheusefulnessandqualityoftheresponsesmaynotproduceabetterservice.)

Oneoftheissueswithvariousmeasurementapproachesandframeworksisthattheyremainattoohighaleveltobeofpracticalbenefit.Theydonothelpwithspecifyingthemeasure,discussingwhatmethodologyshouldbeused, or how often measurement should take place. Useful practicalguidance is provided in a short document from theNationalOceanic andAtmosphericAdministration(NOAA–anagencywithintheUSDepartmentof Commerce) called Performance Measurement Guidelines.10 Davis’steam found the flow chart (Figure 5.5) and accompanying narrative ahelpful tool in defining the performance indicators under the mainmeasurementquestion:Howengagedareourstakeholders?

Summary

Measurementisaslipperyfish:difficulttocatchanddifficulttoholdonto.Like fish it suffers from the angler’s story: “I caught one this big ….”Peoplecanchoosetobelieveordisbelievetheresultsofthemeasurement.Nevertheless,fromtwoperspectivesitisanimportantandnecessarypart

ofasuccessfulorganisationdesignimplementation.Goodmeasurement:

• indicates whether the movement from current design to intendeddesignisworkingtoachievebusinessgoalsandstrategies;and

•trackstheprogressoftheorganisationdesignproject.

Thefocusof thischapterhasbeenmoreon theformerbecause it ismorecomplex – unlike programme or project management no standardmethodologiesexist.There are many methodological approaches and tools available, and a

systematicandreflectiveapproachtodecidingwhichtouseworksinfavourof a robust outcome and usable results. Deciding on a small number of

things to measure is a good option and taking an ethical approach tomeasurementguardsagainstchargesofmisreportingandbias.

6Stakeholderengagement

How do you get happy shareholders? Start with satisfiedcustomers.Howdoyougetsatisfiedcustomers?Startwithhappyemployees.Howdoyouplease employees?Trynot towreck thecommunitytheylivein.

JohnMayberry,formerCEO,DofascoInc

STAKEHOLDER ENGAGEMENT IS an intentional process of interacting withindividuals and groups who have the power to affect (positively ornegatively) an organisation’s financial, social responsibility andenvironmentalperformance(knownasthetriplebottomline).Theoutcomeof effective stakeholder engagement is an alignment of mutual interests,reducedriskstotheorganisationandimprovedresultsinthetriplebottomline.J.Sainsbury,aUKretailer,explains:1

Werecognise thatourengagementwithstakeholdersgoesbeyondour 16m customers, 153,000 colleagues and our many suppliersand investors.Theorganisationswe seek to engage activelywithrangefromthosethatcanhaveanimpactonourbusiness,suchasgovernment, politicians and regulators, to thosewhose views arerelevanttothewaywerunourbusiness,suchasnon-governmentalorganisations, charities, trade unions and trade associations.Developingandbuildingrelationshipswitharangeofstakeholdershelps us to understand issues, develop our business and managerisksbetter.

Asdiscussed inChapter4,organisationdesignworkbeginswithbeingclear about the business case for change. This frames the reasons fordevotingtimeandenergytoengagingstakeholders,raisingquestionssuchas:

• How knowledgeable are stakeholders about the current state ofaffairs?

• How much do they understand and believe that a new design isnecessary?

•Howcanwebalancewhatstakeholdersmightwantinanewdesignwithwhatisbestforthebusiness?

•How andwhenwill stakeholder needs be considered as the designprogresses?

• What is the best way of communicating and working withstakeholders during the design process to ensure that they have asenseofownershipofthedesign?

•Whatresources(time,money,expertise,andsoon)isitreasonabletobudgetforstakeholderengagementwork?

• What outcomes will a successful stakeholder engagement strategyachieve?

Toanswerthesequestionsthischapterfirstconsidersthefivestepsofastakeholderengagementprocess:

1Clarifyingobjectivesforengagingstakeholders2Identifyingthestakeholders3Mapping(categorising)thestakeholders4Determiningwhatwillengagethem5Planningpreciselyhowtoengagethem

Itthenlooksatthreespecificfactors–trust,loyaltyandadvocacy–that,ifevident, indicate stakeholder engagement. If they are not obvious,stakeholdersmaynotbeengagedinthenewdesign,whichisarealrisktoitssuccess.

Fivestepsofthestakeholderengagementprocess

Step1:Clarifyingobjectivesforengagingstakeholders

Inorganisationdesignworktheobjectivesofengagementarespecificallyto

getsupport forandbuy-in to thenewdesign.Theultimateobjective is tohave employees performing highly in the new design, and customers,shareholders, and other stakeholders showing enthusiastic support for it.Thus the objectives for engaging them relate to the four phases of thedesignsequenceasillustratedinTable6.1.

Table6.1Stakeholderengagementobjectives

Step2:Identifyingthestakeholders

Mostorganisationshaveawiderangeofstakeholders,anditissignificantthatorganisationdesignprojectsfrequentlycasttootightanetaroundthosethat they consider will be affected by the new design.When identifyingstakeholders it is important to cast widely to begin with. Look atstakeholders not just inside but also outside the organisation. Figure 6.1shows a fairly detailed identification of stakeholders in nine differentsectors at ANZ, an Australian financial institution. Note how theidentification also includes potential employees, customers, partners and

thoughtleaders.To aid identification of stakeholders, adapt the STEEPLE tool (see Table

1.1)slightlytoprovideatemplate.AcompletedexampleatahighlevelisshowninTable6.2.

Table6.2Tooltoaididentificationofstakeholders

Step3:Mapping(categorising)thestakeholders

MappingthestakeholdersmeanstakingeachofthoseidentifiedandplacingtheminrelativepositionsonamatrixwhichhastwoaxesofinfluenceandimpactasshowninFigure6.2.Themapenablesanat-a-glanceoverviewofwherestakeholderengagementworkneedstobefocused.Stakeholders judged to be highly impactedby the newdesignbutwho

havelowinfluenceonitssuccessorfailurearemappedintothelowerright-handsegment (supervisorsare theexample in this instance).Stakeholderswhohavehighinfluenceonitssuccessbutareonlysomewhatimpactedbythenewdesignaremappedintothetopleft-handsegment(analystsaretheexampleinthisinstance),andsoon.Beforemappingitisimportantto:

• develop assumptions about each stakeholder’s power, support andimportancetoprojectsuccess;

•determinethecurrentanddesiredlevelsoftrust,loyaltyandadvocacyof each stakeholder (there is more on trust, loyalty and advocacylaterinthischapter);

• validate these assumptions through, for example, one-to-oneinterviewswith key individual stakeholders or facilitated sessions,focusgroupsandsurveysoflarger,aggregatedgroups.

Areastoprobeinthissortofassumptiontestingincludethefollowing:

•Knowledgeofnewdesignprogramme–whoknowsandwhocares?• Perceptions – relevance of new design to “what’s really important

aroundhere”.•Levelsofcommitmenttonewdesign–willthelevelofcommitment

lastthroughtheroughspots?•Beliefsandfears–whowillgainandwhowilllose?•Conventionalwisdom–whyisthisnewdesignjustlikethelastone

(ie,thishasbeendonebefore)?

The engagement work involves moving stakeholders into a segment

wheretheyarecommittedtoandadvocatingthenewdesign.Beawarethattheworkofstakeholderengagementcontinuesthroughthelifecycleoftheprojectasany individualorgroupcanswiftlymovefromonepositiononthematrixtoanother.Treatingastakeholdermapasastaticandstablepieceofinformationishighlyrisky.

Step4Determiningwhatwillengagethem

Briefly, there are five methods available to engage stakeholders assummarisedinTable6.3.

Table6.3EngagementmethodsMethod Whyuseit?

Communication Tellingandsellingarepowerfultools

Education Informingchoiceshelpspeoplemakegoodchoices

Involvement Encouragingparticipationbuildsownershipandcommitment

Incentives Tapping intopersonal or financial goalsand showing “what’s in it forme”work to bringpeopleonboard

Power Usingpowerintherightcircumstancesandintherightwayisaneffectivetool

Usetheseonapick-and-mixbasiscustomisedtoaddresstheconcernsofeach individual or group of stakeholders. Christoph Brunner, chiefoperatingofficerofCreditSuisse’sprivatebankingunit,notesthepowerofencouragingcustomerinvolvementinredesigninghisorganisationwhenheparticipatedin“ExperienceImmersion”,aprogrammethatgetsexecutivesouttobankbranches,talkingtocustomers,doingbankingtransactionsandobserving the customers as they interact with bank staff. Each sessionbringsaboutreflectionontheorganisationdesign:2

In some cases, we actually make it hard for customers to dobusinesswith us. [I saw] that little thingsmake a big difference.For example, just having signage that people understand.Havingfriendlyandhelpfulemployees.Asabank,weoftenthinkthatonlythe financial products themselves matter – but there is so muchmorethatgoesaroundthat.

Step5Planningpreciselyhowtoengagethem

Engagement requires a strategic, systematic yet flexible approach tocreating buy-in, minimising opposition and developing ownership andcontinuingcommitment.Agoodmeasurableplanestablisheskeyinputforcommunications,trainingandcompensationaction.Thestakeholdermap(anexampleisshowninFigure6.2)canbeusedas

abasisfordeterminingtheengagementplanandactivitylevel.Putsimply,stakeholders in the top leftquadrant shouldbekept satisfied, those in thetop right should be managed closely, those in the bottom left can bemonitored and those in the bottom right should be kept informed (seeFigure6.3).Withthestakeholdersinmind,andknowingwhetherthetaskistomove

themfromonequadranttoanotherortokeeptheminthecurrentquadrant,deviseadetailedandcustomisedplan for each individualorgroup.Table6.4 is an example from an organisation design initiative undertaken atXerox.Notethattheremaybebudgetorotherconstraintsontheplanandtheseshouldbetakenintoaccount.

Table6.4Exampleofstakeholderengagementplandetail

Factorsindicatingstakeholderengagement

Consciousstakeholderengagementisessentialnotonlyinanorganisationdesignproject but also in the day-to-day runningof an enterprise. If it isdone effectively, it encourages, develops and maintains a sense ofcommitment and common purpose that creates value. Triodos Bank, forexample, has a well-conceived approach to employee engagement, as astatementonitswebsite

illustrates:3

Triodos Bank could not achieve its mission without the whole-heartedsupport,effortandcommitmentofallitsstaff.Itwillonlybe able to make a name for itself as a pioneering force insustainablebankingifitsstaffcontinuetobeabletoidentifywith,andmakearealcontributiontowards,theBank’smission.

Triodos’s engagement strategy is not limited to employees. It alsoembraces customer engagement, for example by inviting individual

customers to see how business customers benefit from their relationshipwiththebank.The result of this form of day-to-day engagementwith employees and

customersisdemonstratedinthebank’sannualresults,asthisextractfromaTriodospressreleaseshows.

Triodosshowssymptomsofrealhealth

WhiletheUK’shigh-street’sbankingbehemothsreportmultibillionpoundprofits, a much smaller bank is showing (2005) increasingly significantsignsof health.Withgrowth in returnsof 41% for its shareholders and a25% increase in funds under management to £1.6 billion, the TriodosGroup’s best results in its 25-year history have come from a radicallydifferent approach to money, which puts people and the environmentalongsideprofit.

Source:www.triodos.co.uk/uk/whats_new/latest_news/press_releases/222367?lang=

Results like this owe a lot to the earning andmaintaining of staff andcustomer commitment. Companies which foster commitment do so invariousways,forexampleby:

•learningfromfeedbackonproductsorservices;•collaboratingtosolveproblemsoraddressopportunities;•improvingthequalityoflifeintheirlocalcommunities;•operatinginaresponsibleandethicalway;•seekingtocontributemorethansimplebottom-lineprofit.

Theresulting“face”ofcommitmentisstakeholdertrustinthecompany,loyaltytoitandadvocacyofittoothers.Thesethreestakeholderattributesarealsofundamentaltoorganisationdesignprojectsuccess.Designprojects

thatcanbuildonmethods,techniquesandapproachesalreadyinuseintheorganisationenjoyaheadstartinstakeholderengagementactivity.Thefollowingsectionsconsidertrust,loyaltyandadvocacyinthewider

organisational context and indicate where organisation design projectsbenefit in developing these qualities in their specific stakeholderpopulations.

Trust

Trustisthewillingnesstobevulnerableto(orrelyon)anotherpartywhenthat party cannot be controlled or monitored.4 Trust involves risk. Forexample, when customers buy a product they put their trust in themanufacturerthatitissafetouse.Whentheybuyaservicetheytrustthattheyaregettingvalueformoneyandthattheservicewillconformtotheirexpectations. It takes constant investment to maintain trust at a level atwhichcustomersfeelthattheycanbelievewhatthecompanysaysandwillbetreatedwell.Manycompaniesexplicitlyrecognisethis.Vodafone,whichlike many telecoms companies faces a number of market challenges,recognises that investing in trust maintenance is a stakeholder activitycriticaltoitssurvival:5

Several issues are key tomaintaining the trust of our customers.Theseare the clarityofourpricing, thewaywehandle customerprivacy and the responsibility of our advertising and marketingmaterial. Underpinning this is the need for our communicationswith customers and potential customers always to be clear,transparentandfair.Responsiblemarketingandtheclearpricingofourservicesarekeytomaintainingconsumertrust.

Companieshavetoworkhardatmaintainingtrust.Itisanattributethatiseasy to lose if something goes wrong and the organisation’s response ispoor. Even though it happened more than 25 years ago, the way thatJohnson&Johnsonmanaged the1982Tylenoldisaster is still citedasanexemplarywayofrespondingtoacrisis.Thedecisiontakenatthetimewasto use the company’s Credo as a guide to taking the correct actions.Knowingthat“Webelieveourfirst responsibility is to thedoctors,nurses

andpatients,tomothersandfathersandallotherswhouseourproductsandservices”,leaderswereabletoactswiftlyandwithintegritytothesituation(cyanidebeingfoundinsomeTylenolproducts).Followingtheimmediatewithdrawal of all Tylenol products, Johnson & Johnson designed a newpackagingprocessthatcustomerstrusted.Asaresultofitsopenandclearcommunications,whichwere in perfect alignmentwith its actions duringthecrisis,thecompanysucceededinmaintainingitscustomers’trust.In contrast, Dell has experienced problems with trust. On its website

(www.dell.com)itstates:

Dell’ssuccessisbasedonmaintainingdirectrelationshipsbuiltontrust.Tosustainthistrustwithouremployees,customers,suppliersand investors,wemustholdourselves to thehighest standardsofbusiness.

Butpressreportsandcustomerdissatisfactionduringlate2005andearly2006indicatedagapbetweenwhatDellwassayingand thewayitacted.Two of the many negative comments posted on the blog sitewww.consumeraffairs.comillustratethis:

In summary, the laptop I bought was shoddy and their technicalsupport was not helpful. I’ll NEVER buy fromDell again, ever.(Posted06/26/06)I did not get the software that I purchasedwithmy computer. ItwouldbeeasiertogotothemoonthangethelpfromDelltechnicalsupportwhosentmetocustomerservicewhosentmebacktotech.(Posted04/14/06)

Customer feedbackof this typewas reinforcedbymediacommentalsoimplying that the business model mitigated against developing customertrust.AsTheEconomistnoted:6

Increasing sales to consumers is difficult for Dell becauseindividualstendtowanttoseeandtouchcomputersbeforebuyingthem.They also like to be able to return themachine easily if it

breaks.Dell’slackofretailpresence,onceballyhooedasabenefit,has turned intoagravedisadvantage.Likewise, sales incountriesoutsideAmericaareoftenbasedontheadviceofsalesstaff,whichplacesDell’s“direct-only”businessmodelatadisadvantage.

Dell’s response (in May 2006) was to unveil a turnaround plan “toimprove customer service and product quality while shaving billions ofdollarsincosts”.Dell’sspokesmanJessBlackburnadmitted:7

Intheconsumerspace,weshippedalotofsystemsandgrewveryquickly andwe have acknowledged thatwe did not increase ourserviceandsupporttomeetthedemandsofalotofnewcomputerusers.

The organisation design work involved in Dell’s turnaround plan issignificant. It involves bringing in new executive talent from outside thecompany; re-evaluating suppliers; improving customer service (spendingmore than $100m) by hiring new supportworkers and retraining existingones; expanding new offerings such as a remote-repair service; pricingproducts better; and changing chip supplier from Intel toAMD. Note thattheseactivitiesrelatetoeverycomponentoftheorganisationmodelshowninFigure1.2.

Table6.5LinkbetweenorganisationdesignmodelandDellturnaroundactivityOrganisationaldesignmodelcomponent

RelatedDellactivity

Systems Hiringnewsupportworkers(HRsystems)

Structure Expandingremote-repairservice

People Bringing in new executive talent from outside the company, hiring new supportworkers,retrainingexistingones

Performancemeasures Re-evaluatingsuppliers

Processes Changingchipsupplier(procurementprocesses)

Culture Focusingoncustomerservice

The scale of the organisation design work implied in the turnaround,aimed at improving customer service and support, presents a significantstakeholdertrust-buildingchallengeforDell,asTable6.6illustrates.

Table6.6Dellturnaroundactivitylinkedtotrust-buildingchallengesOrganisationdesignactivity Examplesoftrust-buildingchallenges

Hiringnewsupportworkers(HRsystems) Dellgainingthenewemployees’trustasagoodemployertoworkfor.

Customers trusting thatnewemployeeshave theskillsandexperiencetoprovideaccurateresponsestoserviceissues.

Expandingremote-repairservice Customers trusting that remote-repair services are asefficientasmorelocalrepairservices.

Employeestrustingthatexpansionwillopenopportunitiesforcareerdevelopment.

Bringing in new executive talent from outside thecompany,hiringnewsupportworkers,retrainingexistingones

Employees trusting that new executive talent will have theskillsandcapabilitiestohandletheturnaround.

New executive talent trusting that their efforts will not beundermined by too early (or pre) judgments on theircapability.

Re-evaluatingsuppliers Existingsupplierstrustingthattheywillbetreatedfairlyinthere-evaluationprocess.

Changingchipsupplier(procurementprocesses) AnalyststrustingthatsellingmoreAMD-basedmachineswillnotbringmorecomplexityandcosttoDell’sbusiness.

Focusingoncustomerservice Shareholders trusting that the reputational damage can berestoredresultinginimprovedbusinessperformance.

InDell’sfavouristherecognitionthathoweverwelcometheturnaroundmovesare,theirimpactwillnotbefeltforsometime.AsJasonMaxwell,analystatTCW,alargeDellshareholder,said:8

It’ll take awhile to repair the reputational damage. It’s a longer-termfix.In theshort term, itdoesn’thelpDellmakeitsquarterlytargets.

This implies thatDell has some time available tomove through the fourphasesofanorganisationdesign(assess,design,implementandembed)inaconsideredway,toalignallthecomponentswithitsstatedmission–“Tobe themost successful computer company in the world at delivering thebest customer experience in markets we serve” – and simultaneously tobuildandrebuildstakeholdertrust.Engagingstakeholdersbybuildingandmaintaining their trust isawise

investment,astheEdelmanTrustBarometer,anannualsurvey,pointsout:9

Trust has important bottom-line consequences. In most markets,more than 80% say they would refuse to buy goods or servicesfrom a company they do not trust, and more than 70% will“criticize themtopeople theyknow,”withone-thirdsharing theiropinions and experiences of a distrusted company on the Web.(2006survey)

Employeetrust–whichcanbewonorlostinsimilarwaystocustomertrust – is necessary for a new organisation design to succeed. In theworkplace, if employees trustmanagementand leaders theywill focusonthe job (and thus remain productive), rather than spend time and focusattentiononvarious formsof defensive and self-defensive (covering theirbacks)risk-mitigationbehaviour.Researchstudies10 showthatemployees’trust in all levels ofmanagement, particularly their immediate supervisor,improves organisational performance, openness in communication andinformationsharing,andacceptanceoforganisationaldecisions.Inconditionsofchangeanduncertainty there isagreaterneedfor trust

because people feel vulnerable. The more trust employees have inmanagement the more smoothly things will go. This is partly becauseemployees will be less concerned with how the new organisation designaffects their jobs thanwith theway the transitionprocess isdesignedandimplemented and the types of decisions that are made by managementduring this period.Organisational design changes can produce or destroyemployee trust depending on how the implementation is structured andmanaged.When organisation design work involves employees, levels of trust in

management rise. Researchers in this field conclude that this is becauseparticipation gives employees a voice in the way the change process isplannedandcarriedout.Employeesdevelop trust in thedesignobjectivesandmethodswhentheyseethat“theirinterestsandvaluesareunderstoodandtakenseriously”.11

Anorganisationdesignprojectbasedonmaintainingordevelopingtrustis one where managers, design leaders and project team membersdemonstrateenoughself-confidenceandtrustintheemployeesto:12

• speak openly about the design work and their own feelings andresponsestoit,includingvoicingdoubtsandfearsaswellashopesandaspirations;

•demonstratewillingnesstolisten,learnaboutandrespectemployees’views of the organisation, and appreciate how they think and feelabout their workplace, in the way that Sam Palmisano, chairman,presidentandCEOofIBM,suggests:13

So, for 72 hours last summer [2004], we invited all 319,000IBMersaroundtheworldtoengageinanopen“valuesjam”onourglobalintranet.IBMersbythetensofthousandsweighedin.Theywerethoughtfulandpassionateaboutthecompanytheywanttobeapartof.Theywerealsobrutallyhonest.Someofwhattheywrotewaspainful to read,because theypointedoutall thebureaucraticand dysfunctional things that get in the way of serving clients,working as a team or implementing new ideas. But we wereresoluteinkeepingthedialogfree-flowingandcandid.AndIdon’tthinkwhat resulted–broad, enthusiastic, grass-roots consensus–couldhavebeenobtainedinanyotherway.

•demonstratetheirbeliefinemployeesandthebusiness,pointingouthow thedesignwork is trying tohelpemployeesaccomplish theirworkgoalsmore effectively and reminding them regularly that allpartiesareworkingforthesamething;

• highlight risky situations and help employees deal with them bymodelling risk taking, thus showing employees that they too arewillingtorisktoservetheendsofthedesignproject;

• relate to employees in the way they themselves would want to berelatedto,includingdemonstratingthattheyarenotfearless,justasemployeesarenot;

• follow through on all their promises and commitments, and shareresponsibilityforgettingworkdone;

•put intopractice lessons learned frompreviousprojects– includingencouragingemployeesinthecurrentprojecttodiscussapproaches

withemployeesinvolvedinearlierprojects.

Remember that people easily lose trust in periods of instability andchange.

Loyalty

Loyalty is the emotional and functional state of being unswerving inallegiance,orfaithfultoaninstitutionorproduct.Itisnotthesameastrust–peoplecantrustothersbut thisdoesnotneedto involveloyalty.So,forexample,airtravellerscantrustthatalmostanyairlinewillbesafetotravelwith,buttheymayhavenoloyaltytoaparticularairline,purchasechoicesbeingmadeonthebasisofcost,schedule,orwhatever.Loyalty is a functional, emotional and enthusiastic dedication to a

relationship that people believe will improve their lives in the long run.Functional loyalty is quantitative and trackable. Emotional loyalty isqualitativeandindicatedbystatementsabout thefeelorexperienceof theorganisation.Table6.7showssometypesofmeasuresofeachinrelationtotwoimportantstakeholdergroups:staffandcustomers.

Table6.7Examplesofmeasuresofstaffandcustomerloyalty

Measuresoffunctionalaspectsofloyaltycanbemisleading.Functional

loyalty is vulnerable to a better offer: a valued employee may enjoyworking for an organisation but still be lured away by a competitor; acustomerwhomovestoadifferenttownmayhavenochoiceormayfinditmoreconvenienttoshopinadifferentsupermarketchainthantheonetheyhadbeenshoppingin.

Building and maintaining emotional loyalty – which transcendsfunctional loyalty and is less vulnerable to changing circumstances –requiresdevelopingarelationshipoverthelongtermthatstakeholderscareaboutandwanttomaintain.In many organisation design projects, unless actions to maintain or

increasebothfunctionalandemotionalloyaltyareplannedintotheproject,stakeholders becomemore likely to move on because uncertainty affectstheirrelationshipwiththeorganisation.Thuswhenmappingstakeholdersitishelpfultolabeltheircurrentandaimedforlevelsofloyalty.Within organisation design work, project loyalty development and

maintenanceactivitywillbe focusedon twostakeholdergroups:staffandcustomers(thereislessneedtobuildloyaltyinothergroupsalthoughtheirtrustisstillrequired).Buildingstaffloyaltyincludesmakingthemfeelthattheyaretreatedfairly, that theyarecaredfor, that theyaretrustedtodoagoodjob,thattheircontributionisvaluedandthattheirneedswillbemet.American Apparel is a good example of an organisation that currentlycommandsemployeeloyaltyandiscarefullyalignedinall itscomponents(seeFigure1.2)tomaintainit.

AmericanApparel:achievingemployeeloyalty

American Apparel is a vertically integrated manufacturer and retailer ofclothing for men, women, kids and dogs. This means that we’veconsolidatedallstagesofproductionunderoneroofatourDowntownLosAngelesfactory–fromthecuttingandsewingofthegarment,rightthroughtothephotographyandmarketing.Ultimately,itisverticalintegration,anefficientsystemthatcutsoutthe

middlemen,thatenablesthecompanytobesweatshopfree.Becausewedonotoutsourcetolocalordeveloping-nationsweatshops,theentireprocessistime-efficientandthecompanycanrespondatbreakneckspeedtodemand.Thisenablesustobecompetitivewithintheglobalmarket.ForAmericanApparel, being sweatshop freemeans offering all of our

employees, sewers and administrators alike, basic benefits. We provideaffordable health care forworkers and their families, company-subsidisedlunches,buspasses,freeESLclasses,on-sitemasseurs,freeparking,proper

lightingandventilation,andthemostup-to-dateequipment(beitthelatestcuttingmachineorsoftware).Weoffertheseasamatterofpolicy,notonlybecausewecareaboutouremployees,butalsobecauseweunderstandthatapositiveworkenvironmentisamoreproductiveone.Mostimportantly,wepaythehighestwagesinthegarmentindustry(the

average sewer atAmericanApparel earns $13 anhour but this canbe ashigh as $27 an hour), we offer year-round employment and job security,withthegoaloflifetimeemployment.Thereisvirtuallynoturnoverwhenitcomestoourgarmentworkers,andtheirloyaltytothecompanyisahugesourceofpride.

Source:www.americanapparel.net/mission/vertical.html

Investingindevelopingemotionally(not just functionally) loyalstaff isgoodforbusinessresults.Conversely,whenstaffarenotloyalandtheresultis high turnover, it can be costly for organisations, as the example belowillustrates.

Thecostofhighstaffturnover

DavidRusso,formerly inHRat theSASInstitute(abusiness intelligencecompany),didacalculationinmyclassoneday.AstudentaskedhimwhySASdoessomuchfamily-friendlystuff.Hesaid,“Wehavesomethinglike5,000employees.Ourturnoverratelastyearwas3%.What’stheindustryaverage?”Somebodysaid20%.Russoreplied,“Actually,20%islow,butIdon’t care.We’ll use 20%.The difference between 20%and 3% is 17%.Multiply17%by5,000people,andthat’s850people.Whatdoesturnovercostperperson?Calculateitintermsofsalary.”Thestudentsestimatedthatthecost isoneyear’ssalaryandthat theaveragesalaryis$60,000.Russosaid,“Bothofthosefiguresarelow,butthatdoesn’tmatter.I’llusethem.Multiply $60,000 by 850 people, and that’s more than $50 million insavings.”

Source:Webber,A.M.,“Danger:ToxicCompany”,FastCompany,

October1998

Buildingcustomerloyaltyissimilartobuildingstaffloyalty.Customerstoo want to feel that they are human beings and not simply a source ofrevenue.Customerswhofeel theyarevalued, that theircustommatters totheorganisation, that theyaretreatedwellandfairlybythestaff,andthattheir needs will be met are more likely to be emotionally, not justfunctionally,loyaltothecompany.Againthistranslatesintogoodbusinessresults. Frederick Reichheld of Bain & Company, a managementconsultancy,notes:14

Seemingly insignificant changes in customer retention rates inseveral of our clients’ businesses resulted in eye-poppingimprovements in profits. Then, we studied a wide array ofindustries, and found that a 5 percentage point shift in customerretentionresultsin25–100%profitswings.

The message is clear for an organisation design project: developingand/ormaintainingstaffandcustomerfunctional,andespeciallyemotional,loyaltywillpaydividendsbothquantitativelyandqualitatively.Rememberthatlosingloyaltycostsmorethanmoney,sousethedesignprocessasanopportunitytodevelopandretainit.

Advocacy

It is not enough simply to develop, retain, maintain or grow stakeholdertrustand loyalty if thesestakeholdersarenot thenactiveadvocatesof theorganisation, promoting, supporting and enthusiastically recommending ittoothers.Toinitiateadesignthatpromotesadvocacy,themostpowerfulfirststep

is to see the organisation through the eyes of stakeholders. A popularBBC/OPBTVco-production,Back to theFloor, highlights thepowerof thisexperienceandtheorganisationdesignchangesthatfrequentlycomeaboutasaresult.Wedgwoodisonecompanyfeatured.

Astakeholder’sview

Thechiefexecutiveis inforashockwhenhejoinstheproductionlineofhis largest factory in Stoke-on-Trent. Disillusioned workers are living infearofredundancy.FortyofYvonneMorrall’scolleagueshavealreadylosttheir jobs and she isnervous andunhappywith the threatofmore robotsthat don’t work. “Less people, more machines, more profits,” is howYvonnethinksthetopmanagementviewthings.Shetells[Brian]Patterson:

Weseeanothermachineandthink,“Howmanyjobsisthatgoingtocost?”Peopleontheshopfloorfeelthatpeoplelikeyourselfareall about profits.They feel as if they are notworth anything anymore.Why bother, becausemy job’s probably going to be takenoverbyamachineanyway.YoudriveoffinyourBMWsandthat’sit,youdon’tcare.

Her candour is abreakthrough forPatterson,who is sodeeply affectedthat it keeps him awake that night for hours. The next morning he actsimmediately,callingameetingwith20workerstofindoutwhattheythinkofthenewWedgwood.ForPatterson, thishasbeena truly revelatoryweek thathasmadehim

thinkagainoneveryreformandeveryaspectofhiscompany:

I’vehadmyeyesopenedinanamazingwayintowhatpeople…thinkand feel. Iwouldneverhaveknown that really through thenormalsystemsofmanagementcommunication.Source:www.pbs.org/opb/backtothefloor/wedgwood/index.htm

Active word-of-mouth advocacy is a major contributor to highperformance. A three-year study carried out by the London School ofEconomicsfoundthatnetpromoterscores(NPS–anindustrymeasurementestablished by Bain & Company in 2003) are a statistically significantpredictorofsalesandgrowth.Specifically,theauthorsofthereportnote:15

• A 7% increase in word-of-mouth advocacy unlocks 1% additionalcompanygrowth.

•A 2% reduction in negativeword-of-mouth boosts sales growth by1%.

• Inmonetary terms, for the average company in the analysis, a 1%increaseinword-of-mouthadvocacyequatedto£8.82mextrasales.

•A1%reductioninnegativeword-of-mouthfortheaveragecompanyinthestudyresultedin£24.84minadditionalsales.

• Companies with above average positive word-of-mouth and belowaverage negative word-of-mouth grow four times as fast as thosewith below average positive word-of-mouth and above averagenegativeword-of-mouth.

It goes without saying that to recommend or praise an organisationstakeholders have to trust it (although they may not have to feel anyfunctional or emotional loyalty towards it). Again, two groups ofstakeholders that have great power in affecting the success of anorganisationbyactingaspositiveornegativeadvocatesforitarestaffandcustomers.Staff advocacy is important in maintaining turnover at cost-effective

levels, contributing to motivation and also to performance. ReliefResources, a US-based temporary staffing agency, is committed todevelopingrelationshipswiththeirstaffbasedonhonestyandinclusion:16

What’simportanttousisthatyoubeconnectedtoourmissionandhaveanopportunity tocontribute inmeaningfulways.You’ll feelsupportedandguided,respectedandtrusted,andtrulyappreciated.

Thisinturninspirestrustandloyalty,asexemplifiedbythiscommentbyPatrickS.Sempala,ReliefResourcesFieldStaff,WellesleyHills,MA:17

Youhavealldonesuchagreatjobsupportingmewithwork.Iamthankful to be involved with Relief Resources. Everyone theresharesthesamecommitmenttodoingourbestforalltheprogramsweserve.

Theresultsare twofold(aswithAmericanApparel): first, thecompanyhasamuchlowerturnoverratethantheindustrystandard;andsecond,staffbecomeadvocatesoftheorganisation,recommendingittoothersasagoodplacetowork:18

Mostofourworkerscomefromreferralsfromotheremployeesorfrompeople in thecommunity.Thatmeanswehardlyhave todoany advertising, which is the biggest expense for most tempagencies. Our investment in relationships has yielded incrediblebottomlinebenefitsintermsofcostsavings.

DougHammond,presidentandfounder,ReliefResources

A new organisation design is the idealmoment to consider developingpositive advocates among staff. The design challenge is to recognise thatsocialandtechnologicalchangesarebringingrapidshiftsinpower,andthatthisishavingaconsiderableimpactontherelationshipsbetweenstaffandorganisations.This requiresdesigns flexibleenough to respondquickly tonewdemands.Forexample,TheEconomistnotes:19

For some time to come, talentedpeople in theWestwill demandmore from employers, and clever employers will create newgewgawstoenticethemtojoin.Thoseemployersshouldnotethatforagrowingnumberoftheseworkersthemostappealinggewgawofallisthefreedomtoworkasandwhentheyplease.

Organisations that are unable to respond to this type of thingwill findthatstaffwillnotadvocateontheirbehalf,turnoverwillincreaseanditwillbedifficulttorecruitnewtalentintotheorganisation.Customeradvocacyissomewhatdifferentfromstaffadvocacyasthereis

no contractual bond between customer and organisation. Customers formjudgmentsbasedontheirexperienceoftheorganisation,thetrusttheyputinitandtheloyaltytheyfeeltowardsit.Customersaremuchlesslikelytobe loyal now than they were in the past, partly because they have easyaccess toextensive sourcesofweb-based information that enable them tomakeinformedjudgmentsonproductsandservices.Theynolongerrelyon

companies’feedingtheminformation.Theresultis:20

[Somecompanies]areprovidingcustomerswithopen,honestandcompleteinformation–andthenfindingthebestproductsforthem,even if those offerings are from competitors. They are trulyexpressing their customers’ best interests, essentially becomingadvocatesforthem.Thestrategyisthis:ifacompanyadvocatesforits customers, they will reciprocate with their trust, loyalty andpurchases – either now or in the future. The firm might thencommand higher prices for its products and services, as manycustomers will be willing to pay for the extra value. And whenpeopletrustacompany,theywilloftentellothersaboutit,helpingtoreducetheorganisation’scostsforacquiringnewcustomers.

Withthis inmind,eachcomponentof theneworganisationneedstobedesignedtoalignwithconceptsofmakingcustomerssuccessful,inessenceproviding a design answer to the question:How can this organisation bedesigned to support customers and advocate for them? This requires aprofoundchangeinthinkingformostorganisations.Itcan,however,bedonesuccessfully.Pampers,afirmthatmakesdiapers

(nappies), is an example. Rather than focusing on the product, theorganisationpresentsitselfas:21

The Pampers Parenting Institute committed to providing parentswiththebest ininformationandsupportfromtheworld’s leadingexpertsinchildhealthanddevelopment.

More than presenting itself as a diaper manufacturing and salesoperation,Pampers suggests it isa reliable sourceof informationoneachstage of child development from pregnancy through new baby, baby,toddler and pre-schooler. Parents thus start to trust the brand less for thediapers and more for the way the company acts on their behalf as aninformationprovider.The lure to theproducts is through relatively subtleplacementinside-barsandthroughpromotionsandcompetitions.Insteadofbeing persuaded to buy products, customers are “invited” to joinPampers.com. One result of this is that they act as advocates for the

productsonnon-Pamperswebsites:22

I have twin boys and these Pampers are the best. To attach thePamper isextremelyeasy. Iwillnotmentionanotherwellknownnamebrandbutnothingcomparestothese.

Asanewdesignisbeingplannedandimplemented,afocusonwhatwillmake itworkforstaffandcustomerscreates theconditions inwhich theywillbecomeadvocatesfortheorganisation.Sothedesignworkneedstobedonewiththisinmind,alignedandreinforcedthroughsuchthingsas:

• Buzz techniques “that use the trendsetters in each community andsubtly push them into talking up your brand to their friends andadmirers”.23

• Referral programmes that reward staff or customers forrecommendingtheorganisationtoothers.

•Comparisonsofproducts,services,employmentconditionswiththoseofcompetitors.

• Investment in quality products, services, employee benefits – thebaselinethingsthatensureacertainlevelofsatisfaction.

•Reliableandeffectiveservice levels– forexample in responding tocustomerorstaffenquiriesorsupportneeds.

• Loyalty and trust building activity (see previous sections) thatencourages advocacy, as implemented by Chris Benham, a retailprojectmanageratJ.Sainsbury:24

39%ofcustomerawarenesscamefromtheactivityandadvocacyofin-storeemployees…thatwascompletelyunprecedentedforus.

• Communication that is open, clear and honest so that staff andcustomersknowwhatthedealisandwhattheycanexpectfromit.

CASESTUDY:developingstakeholdertrust,loyaltyandadvocacy

ThedateforthespinoffofHighMarkFinanceasanindependentcompanyfromitsparent,aglobalcreditcardandbusinessservicesorganisation,wasfastapproaching.Itwouldbeoneofthelargestfinancialadvicefirmsinthecountry with over 12,000 financial advisers and 2.8m clients. In thepreceding two years High Mark had had a patchy record in clientsatisfaction, as measured by J.D. Power & Associates, and there wereworriesabouthowbothadvisersandcustomerswouldreacttothechange.Employees and customers were blogging away and their posts were notfriendly.TheviewofJonPeacock,regionalmanagerforthenorth-west,wasthat

HighMark’sfocuson“reinventingretirement”aimedatrelativelywealthypeoplecouldbeadifficultnewareaforhisemployedadviserstoengageinasmostof themwereunder30andwerenotconfidentinadvisingpeopleolder than themselves. Equally, he was uncertain that his self-employedadvisers, franchised underHighMark (and in hismanagement portfolio),would be able to refocus their businesses. For many it would meandropping some clients because they did not have the profile HighMarkwantedtoinvestresourcesinforotherswhodidhavetherightprofile.Furthermore,theregionforwhichPeacockwasresponsiblewaslargelya

youngcommuterareawhichdidnothavethemoreaffluentsegmentsofthepopulation or people who were old enough to start worrying about theirfinancial well-being in retirement. To meet this challenge High Markadvisers,bothemployedandself-employed,wouldhavetofocusongettinghigh-earningpeopleintheir30sand40storecognisethatnowwasthetimeto start to prepare for their financial comfort against the day when theystoppedworking.Peacockwasalsoworriedthateventhoseinthecurrentclientbasewho

couldberetainedinthenewtargetbasewouldnotactasadvocatesforHighMark.Heaskedacolleague:

Wouldtheyrecommendustotheirfriends,eitherwhenweweretheold company or as we become the new High Mark? There’s a

certain amount of inertia around financial services clients thatmakesstickingwithacompanylooklikeloyalty.Butloyaltydoesnotmake a recommendation.Maybe some clients are getting theimpressionthatwe’renotinterestedinthem.Lastyearwehad93%clientretention,butthemostrecentquartershowedadramaticdrop–to88%.Ifitdropsfurtherfollowingthespin-offdatewe’llhaveavery hard time recovering ground. It’s the same picturewith ourfranchisee adviser retention – last year it was 91% and now it’s87%.Turnover amongour employees is on the increase too.Themainreasonforthisseemstobethat their trust inmanagementisdropping and they have become much more likely to leave..Dangerous rocks are looming and we need to take action nowbeforewehitthem.

RealisingthatPeacockneededguidanceandsupportinleadinghisregionofHighMark through the transition frombeingabusinessunit ina largeorganisation to being an independent entity, Peacock’s colleaguerecommendedthathetakeuptheofferofbusinesscoachingfromtheparentcompany.AweeklaterPeacockmetthecoach,whosaid:

What kinds of things could be done in the north-west region toreinforce adviser trust, loyalty and advocacy beyond the headofficemandated ones of optimising compensation, incentives andawards, rolling out enhanced training, having the right tools onadvisers’ desktops, strengthening recruitment processes, andkeeping an even keel between productivity and growth in thenetwork?

Peacockhadbeenthenorth-westregionalmanagerforanumberofyears,and his region had always been the benchmark for others in terms ofmeetinggoalsandtargets.Hispeoplewerelicensedandwelltrainedandhefeltdistressedabout thecurrent situation.Thinkingof it in termsof trust,loyaltyandadvocacyputadifferentslantonthings.Hethoughtbackoverthe past year or so from the time the spin-off was first mooted. Aftermullingoverthecoach’scommentsforsometime,Peacocksaid:

Those are good questions. Iwonder if I’ve takenmy eye off thethings thatmakepeoplecommittedandmotivated–relationships,responsibilityandautonomy,encouragement,avoiceinthechange,a quality of working life. The things that you’ve just mentionedI’ve seen countless times in corporate presentations and it’s juststruck me that they’re about processes, systems and numbers.They’re not about what we’re doing to keep people feeling thatthey’re valuable assets rather than simply productivity units, orprofitability generators. Yes we need some of that but we’vedeveloped an organisation design targeted on trying to make thebusinesssuccessfulratherthantryingtomaketheadvisersandthecustomerssuccessful.I’vefeltitmyselfbuttriedtoignoremyownfeelingsofincreasingpressure to perform with too little conversation and discussionaboutthevaluesandpracticesofthenewHighMark,whereIstandinit,whatIcanexpectfromit,whatishappening.Thespin-offhasput a great stress on everyone to design an organisation thatconvincedshareholders thatHighMarkwas theright thing todo.Maybeworrying toomuchabout the analysts and too little aboutouradvisersandcustomersisshowinginwhat’shappeningnow.

Sowhenaskedwhathewasgoingtodo,Peacockresponded:

I’m going to clear my calendar and spend part of next weekalongside an employed adviser, and part of it alongside afranchisee.WhenIgetbackI’llcallmymanagementteamtogetheranddescribewhatIseegoingon,andhowIfeelaboutit.ThenI’mgoingtooffersomeexplanationsforwhythingsseemtobegoingdownhill.I’llsuggestsomewaysforwardfrommyperspectivebutbefore I do that I’mgoing to invite them todescribe andexplainfrom theirviewpoints. I’mhoping that togetherwecan suggest arangeofwaysforwardfordesigningintotheneworganisationthecommitted, motivated advocates we want our advisers andcustomerstobe.Idon’tknowifmyapproachwillworkbutIhopeitwillstartthingsrollingintherightdirection.

OverthenextsixmonthsPeacockandthecoachworkedondevelopinganorganisationdesignthatwouldcreatetheconditionsfortrust,loyaltyandadvocacyinthenorth-westregion.Theygaveparticularattentiontogettingbetter alignment between the systems, structures, people, performancemeasures, processes and the culture, involving employees and staff in thediscussions about how best to do this. Because a large proportion ofrevenuecamefromself-employedadvisersrunningfranchises,therehadtobeasingleoverarchingvisionthattheyallsubscribedto,butthishadtobecombinedwiththeflexibilitytooperatecompetingstrategies(seeNadler’sUpdatedCongruenceModel,Table2.2).Peacock set up a project team comprising a cross-section of the

organisation.Hetaskedteammemberswithassessingthecurrentsituation,evaluating the change readiness of the advisers (employed and self-employed), conducting a stakeholder analysis and mapping exercise,preparing a high-level communications plan that focused on the specificneedsofthenorth-westregion’sstakeholders,anddeterminingthelevelofmanagerialsupportneededtomakethenorth-westregionhighperforming.Healsoaskedthemtogaugetheleveloftrainingthatwouldberequiredtogiveadviserstheconfidencetoworkwiththetargetedcustomergroup.ThefindingsofthisexerciseconvincedPeacockthathehadtofocuson

building and rebuilding the trust and loyalty of his stakeholders, inparticular the advisers and existing customers who were in the segmentHighMarkwasfocusingon.Havinggottothatpoint,Peacockfeltthathewouldstarttoseeadvocatesemerging.Itwashardwork.Trustandloyaltylostarenoteasilyregained,soitwasparticularlygratifyingwhenthephonerangonedaywhilePeacockandhiscoachwerediscussingtheoutcomesofthat week’s “listening post” with customers. It was the manager of theneighbouringdivision,whosaid:

Hey, Jon,what’sgoingonover there? I’ve just seenyouradviserandcustomersatisfactionrates,andthey’rewayaheadofmineandback to the level they were when we were all part of the largerorganisation.Tellmehowyou’redoingit.

Jonlaughedandreplied:

I’vedesignedinsomeprocessesforlookingthroughtheeyesoftheadvisers and customers rather than through the eyes of theshareholdersandanalysts.It’sworking–listentowhatoneoftheparticipantsinthelisteninggroupjustsaid:“IamaclientofHighMark,theotherdayIcalledtheirfreephonenumberandwasshocked.ThepersonItalkedtowasveryniceandhelpful.HewalkedmethroughtheoptionsthatIhadforwhenmycertificatecameupforrenewal.Hedidnottrytosellmeanything,justgaveme the facts. It’snice toknoweven in today’sdayandage that one can call and get someonewho is genuine and kind.Frommyexperiencetheyareaverydown-to-earthcompany.I’vejustrecommendedthemtoafriendatwork.”

Commentslikethatareontheincreaseandwiththemarecomingbetterfinancialresults.Sonotonlyareourcustomersbenefiting,thenewdesignfocusisbringingshareholdersatisfactiontoo.

Reflectionsonthiscase

Amajorchange,suchasaspin-off,acquisitionorstart-upofanewproductor service line, bringswith it hugeupheaval andmore thanusually closescrutiny from shareholders anxious about the value of their stock. AnexamplewaswhenVolkswagen recruitedWolfgangBernhard to cut costsandbringin5–10newvehicleswithinfiveyears:25

Investor confidence inhim ran sohigh thatVolkswagen’smarketvalue rose nearly $1.25 billion on the day his appointment wasannouncedinOctober2004.

Withall typesoforganisationthere isa tendencytofocusondesigningthe“hard”aspectsofthenewstate–thesystems,processes,structuresandtechnologies–andtoneglectthedesignofthe“soft”aspects–behaviours,culture and relationships. This is a mistake, but an easy one to makebecausethehardaspectsareeasiertoquantify,measureanddosomethingabout.Itisbesttotaketheviewthatalthoughthesoftstuffisthehardstuff

todesign,beingsuccessfulatitbringsresultsthatmorethanrepaytheworkinvolved.InthecaseofHighMark,Peacockdidseveralthingsonceherecognised

thedesignwasgoingwrong:

•Hewentonfieldtripstoseewhatwashappeningwithcustomersandstaff day-to-day. It is easy for managers to lose touch with thefrontline operation and therefore not to experience it as customersandstaffdo.Recognisingthis,someorganisationshaveintroducedprogrammesthatencouragecontactwithpartsofthebusinessfromwhich managers are normally remote. The programmes takedifferent forms: shadowing staff, becoming a staff member for ashortperiod,buyingthecompany’sgoodsthroughthechannelsthatthe customers use and variations on these themes. The idea is tohelp managers identify and understand what the blockage is andwhatneedstohappentoencouragestaffandcustomerstotrust theorganisation,developanactiveloyaltytoitandspeakhighlyofittoothers.

•Heestablishedlisteninggroups.Theseareforumswherestakeholdersparticipate infacilitateddiscussions toair theirviewsonparticulartopicsorrespondtoquestionsaskedbymanagers.Usuallyaseniormanager is present or may be conducting the group. Groups aregenerallymadeupofnomorethan15peoplerepresentingacross-sectionofthetargetedpopulation:thatis,thosepeoplewhohavetheprofileof thegrouptheorganisationis interestedin.In thecaseofstaff it might be a supervisor group; in the case of customers itmightbemenbetweentheagesof30and40.RogerHolmes,formerCEOatMarks&Spencer,startedhisreportonsomelisteninggroupsheattendedasfollows:

IhavejustcompletedaseriesofcolleaguelisteninggroupsinHeadOfficeandstoresinthe Midlands and North West regions. Participants represented a good cross-section ofresponsibilitiesfromstoretoofficeandfromsalesadviserto“headof”.

Overall,theatmosphereis,notsurprisingly,muchmorepositive.Thekeyconcernsexpressedintheearlygroupshavebeenaddressed,ie,we’reproudofwhatwe’reofferingourcustomersinstores,pleasedthatcustomersandthepressaremorepositive,andwheninoutside company aremuchmore likely tovolunteer that theywork for us.There are,however, anumberof significant concerns related tohowwework internally, and Iwas

struckatthenumberofgroupsrelatingpoormoraleasaconsequence.Withthechallengesofanincreasedbusinessagendaandamoredemandingexternalenvironment,Isensethattherearesomeimportantissuesthatwemustaddressifwearetobeequippedtosucceed.

•Ofcourse,listeninggroupsarenottheonlywaytolistentocustomersandstaff,asTable6.8shows.

•Hewentbacktosomebasicdesignmodelstodiagnosewherehehadmissedpieces.PeacockhadadoptedNadler’sUpdatedCongruenceModel (see Table 2.2) for his design. This comprises fourorganisational elements: people, culture, formal organisation andcritical tasks.He recognised that themain focusofhisHighMarkdesign was on the systems, processes and structures (that is, theformalorganisationandthecriticaltasks),andthathehadneglectedthepeopleandcultureelements.ThismeantthatHighMarkwasoutofalignment.Theresultwaspoormoralebringingwithitaloweringof loyalty, trust and advocacy.Using amodel tohelp identify andhighlight any lack of alignment is helpful, as is doing somestraightforwardalignmenttests(seeToolsforthiscasebelow).

• He recognised the power of designing the “soft stuff” to createconditions of loyalty, trust and advocacy. The people and cultureaspectsofanorganisationarethemoredifficultonestodesign,soitistemptingtopaylessattentiontothemandhopethingswillworkout.However, a quick scan of employee blogs or customer reportsites often reveals the power and influence that these stakeholdershave and the numerous ways they can wield this power. In ThePowerofAlignment,GeorgeLabovitzandVictorRosanskypresentguidelinesforverticallyandhorizontallyaligninganorganisation’sdesign to deliver its strategy.26 In HighMark’s case, the strategywas centred on the vision of “reinventing retirement financialplanning”. Peacock’s decision to involve customers and staff indiscussions on this resulted in not only organisational alignmentdecisions but also the restoration of trust, loyalty and advocacy.Once these stakeholders felt that they had a voice and that theirviews would be translated into actions they started to trust HighMarkandrallybehindit.

Table6.8WaysoflisteningtocustomersandstaffStakeholders Howtolisten

Customers SalesinformationWeeklyandmonthlymonitoringofviewsSurveyingcustomerswhohavevisitednewandrefurbishedstoresCustomerpanelsAnnualindependentsurveysCommunicationstoheadofficeCommunicationstospecificbusinessgroups

Staff Company-widelocal,regionalandnationalemployeerepresentationforumsConfidentialhelplineRegularemployeesurveysInternalcommunications,includingemployeemagazines,regularbusinessupdatesandteambriefingsFocusedconsultationprogrammesListeninggroupsconductedbyseniormanagement

Toolsforthiscase

Inthiscaseitwasnotalwayspossibletobringappropriatestakeholderstoworkshops and focus groups. High Mark made use of technology-basedcollaborative software and groupware to get optimum attendance atmeetings.Many different technologies exist for this and they are rapidlydeveloping in sophistication and ease of use. Good practice seems tosuggest that people meet face-to-face in the first instance to establishrapport, develop a sense of each other and feel comfortable workingtogether.However,itseemsthatafteraninitialmeetingpeoplearehappytousetechnologytosupporttheircollaborationanddiscussion.Agoodforumfor finding out more about collaborative technologies iswww.ctcevents.comwhichdescribestheannualCollaborativeTechnologiesConference.People usually need to remind themselves of the option to listen but

rarelyof theoption to talk.Attentively listening isaskill to learn. In thiscase executives attended a skills workshop and received the checklist inTable6.9asareminder.Lastly,Peacockworkedwithhiscoachonanalignmentdiagnosisprofile

(seeTable6.10).Hescoredthestatementsontheprofile,totalledthescorefor each section, and then plotted and connected the four scores on the

diamondinFigure6.4.ThisallowedhimtoseethatHighMarkwasweakinsomeareasandstronginothers.

Summary

Stakeholder engagement is a crucial activity in the organisation designprocess.Analysingandmappingstakeholders revealswhat tobuild intoadetailed and flexible engagement plan that builds trust, loyalty andadvocacy.Staffandcustomersaretwostakeholdergroupswithwhichitiscriticalto

developtrustingandloyalrelationships.Generatingeitherorbothoftheseattributes does not necessarily lead to advocacy. However, organisationsthathavestaffandcustomerswhoaretrustingandloyalaremorelikelytobeadvocatesofthatenterprise.Trustandloyaltyaredevelopedbytakingstepstodesigntheorganisation

from the perspective of those stakeholders, the objective being to answerthe question: What design will lead to our staff and customers beingsuccessful?Encouragingstaffandcustomerstoparticipateandcollaborateinthedesignprocessisarecipeforsuccess.

Table6.9KeystoeffectiveandactivelisteningListeningiswantingtohear.Itrequiresadegreeofconcentrationthatinvolvesmentalreceptivenesscoupledwithphysicalalertness

Keys to effective and activelisteninginclude

BeingintentonhearingwhatissaidDetectinganyunderlyingorhiddenmeaningthataccompaniesaspeaker’swordsSeparatingoutthespeaker’sfactsfromtheirfeelingstogetthemeaningPreventing emotional reactions to the speaker from conflicting with accurateperceptionsofmeaningsWithholding the tendency to be thinking of a response before the speaker hasfinishedReviewingandsummarisingthespeaker’smessagecontentAskingclarificationquestionsofthespeakerWantingtohearsonotfillingsilencesbutwaitingFocusingonkeypointsTakingnotes,whenpossible, toexpress interestandto improveretentionof themessage.

Table6.10Alignmentdiagnosticprofile(shortversion)

7Leadershipandorganisationdesign

Hard it is to learn themindofanymortal,or theheart, ‘tilhebetriedinchiefauthority.Powershowstheman.

Sophocles,Antigone

FORMAL LEADERSHIP OF an organisation design project may lie with onepersoninthehierarchy,butinpracticedesignsaredeveloped,implementedandledbymany.Typically,dependingonthesizeof theorganisationandthedesignproject,anindividualwillsponsorabusinessplanforthedesignbut the day-to-day operational leadership will be delegated to a steeringgroupandthenontoprogrammedirectors,projectmanagers,teamleaders,andsoon.Figure7.1(alsoshowninChapter4asFigure4.2)illustratestheproject leadership roles,who is accountable towhom, andwho is to leadwhominorderfortheprojecttosucceed.Note that some of the roles shown in Figure 7.1 include the word

“manager”. This does not mean that people in these positions are notleading – they are both leading andmanaging. Thismight seem obviousbut, given themany perspectives on leadership versusmanagement, it isworthmakingthepoint(takingfairlystandarddefinitions)thatifleaderssetand spearhead a new direction or vision for a group, and if managerscontrol or direct people and resources in the group to realise the newdirection or vision, then as far as an organisation design project goes theindividuals shownon the chart are in both roles.With this perspective inmindthereisnoreasonwhyapersoncannotbesimultaneouslyaleaderandamanager. Inevitably, within an organisation design project, this is whatmanyoftheplayersare.

Combining leadingwith doing is crucial, as Phil Evans andBobWolf

explain inaHarvardBusinessReview article that looks at thewayLinuxandToyotaProductionSystemsensureithappens:1

At every level, Linux and TPS leaders play three critical roles.They instruct community members – often by example – in thedisciplineswe’ve just described.They articulate clear and simplegoals for each project based on their strategic vision. And theyconnectpeople,bymeritofbeingverywellconnectedthemselves.ThetopLinuxprogrammersprocessupwardsof300or400e-mailsdaily. Fujio Cho, the president of Toyota, manages by similarlynumerous daily interactions that transcend the normal chain ofcommand.Neithercommunitytreatsleadingasadisciplinedistinctfrom doing. Rather, the credibility and, therefore, authority ofleadersderivesfromtheirproficiencyaspractitioners.Thecontentof leaders’ staccato communications is less aboutwork than it iswork.(WhenLinuxcreatorLinusTorvaldsdashesoffhisscoresof

daily e-mails, he writes almost as much in the C programminglanguageashedoes inEnglish.)Occasionally, leadersdohave toperform traditional leadership acts, such as arbitrating conflicts.That,however,istheexceptionandisviewedasabitofasystemfailure.

WhatEvansandWolf are implying is that leadership isnotonlyaboutposition but also about use of various other sources of power, in thisinstance proficiency as practitioners. Considering formal leaders oforganisationdesignworkintermsoftheirabilitytowieldpower(definedashaving themeans to influence thebehaviourofothers) ishelpfulbecausetherearemanysourcesofpower that leaderscandrawon.Someof theseareasfollows:2

•Formalauthority•Controlofscarceresources•Useoforganisationalstructure,rulesandregulations•Controlofdecisionprocesses•Controlofknowledgeandinformation•Controlofboundaries•Abilitytocopewithuncertainty•Controloftechnology•Interpersonalalliances,networksandcontrolofinformalorganisation•Controlofcounterorganisations•Symbolismandthemanagementofmeaning•Structuralfactorsthataffectthestageofaction•Thepoweronealreadyhas(personalpower)•“Ownership”ofacontractvehicle• Reputation, credibility, or charisma (sometimes called referent

power3)•Controlofdefinitionofcertainsituations,forexamplethedifference

betweenterrorismandfreedomfighting

Typically, designated organisational leaders draw on formal authority,control of resources and use of organisational structure, rules andregulations. But they have to draw on other sources depending on thesituation.Inmanyorganisationdesignprojectsformalleadershipisvestedin consultants or contractors who are not directly employed by theenterprise. These leaders have to use different sources of power – whiletheymayhaveformalauthority,theymaynotcontrolresourcesortheuseof organisational structures. If these “outsider” leaders are not skilled atidentifying and using the power sources at their disposal, they are oftensidelinedfornotbeing“oneofus”.As well as the organisation design leaders – those in the formal

designated roles shown in Figure 7.1 – there will be others inside theorganisation who can wield power to influence or control organisationdesign work. These may be people with positional power (in otherleadership roles but not directly involved with the organisation designproject)orpeoplewhodonothaveanyformalleadershippositionbutcaninfluencethebehaviourofpeoplebywieldingothertypesofpower.Theseinformalleadersmayhavemoreimpactonanorganisationdesignthantheformal leaders. Take this example of trying to unioniseWal-Mart, whereWal-Martchangeddesignasaresultoftheaction:4

TheServiceEmployees InternationalUnion (SEIU) fundedgroup“Wal-MartWatch”alsokickedoffitscampaigninAprilwithfull-pageadsinmajornewspapers thatfocusedonwhat itcalledlow-level wages the retailer pays to its workers. Chris Kofinis, aspokesman for the United Food and CommercialWorkers union(UFCW)campaign, said the shift from traditionalorganizing toagrass-rootspubliccampaignwasnecessarybecauseofWal-Mart’sability toblockunionefforts. InApril, forexample, thecompanyclosedastoreinQuebec,Canada,afteritsworkersvotedtojointheUFCW. In2000, it eliminated allUSmeatpackingpositions aftermeatpackersinTexasvotedtounionize.

Determinednot to recognise labourunions,Wal-Mart took thedecisionto close a store, leading to a shake-up of the organisational design inCanada.And ineliminatingallmeatpackingpositions ithad to findother

methodsofdoingthiswork,againchangingthedesignoftheorganisation.Beyondtheorganisationitselfthereareexternalformalleaderswhohave

thepowertoaffectthesuccessofthecurrentornewdesign.ManyBritishAirwaysemployees still recall thedisastrous launchof theirnewairplanetailfinwhileBobAylingwaschiefexecutive:5

During that period [January 1996 to March 2000] BA sharesunderperformedthemarketby40%asMrAylingbattledwithlowstaff morale, rising fuel prices, the Asian economic crisis,competitionfromlow-costairlines–and,inevitably,fallingprofits.MrAyling tried tobe innovative, in1997even introducing funkytailfin designs for BA’s aircraft based on Chinese calligraphy,Polish tower blocks, the Kalahari desert and Delft pottery. Theexercise,however,provedapublicrelationsdisaster.AtthelaunchLadyThatcherdrapedherhandkerchiefoveranoffendingmodel.Mr Eddington [has since] announced a return to British livery,reintroducingtheUnionFlagoneachtailfin.

External audiences saw this tailfin project as the failure of a marketrepositioning of the airline. What they did not see was the internalrepercussionsof this failurewhich led tosignificantorganisation redesignworkinthebusinessunitsinvolved.InthisinstancetheUK’sformerprimeministerusedherpersonalpowertoinfluencethewaythemediaandothersperceived what could have been seen as a bold and imaginative move.(Imagine the difference if Thatcher had heaped praise on the tailfins fortheircreativewayofshowingthatBritishAirwayswasatrulyglobalairlinewelcomingadiversityofpeopleandacknowledging“oneworld”).MorerecentlyNASA,theUSspaceagency,feltthestingoftheUSOffice

ofManagementandBudgetredirectingitsworkinthebudgetallocatedin2007. Here a body using the power of its control of scarce resourcesdirectedtheagencyinaparticularway:thefundingcutforcedNASAintoaneworganisationdesign.

Restructuringtoimproveresults

In support of the president’s goal tomake government spendingmoreeffective, some NASA programmes that are not directly relevant to theexplorationmissionorotheragencypriorities,haveunderperformed,orarefinancially unsustainable,will be reformulated or terminated to allow forgreaterfocusontheagency’shigh-priorityprogrammes.

Commenting on this, NASA administrator Michael Griffin said that theagencyhadtotakea“couplebillionoutofscienceandabillionandahalfoutoftheexplorationline”tofundthespaceflightprogrammes.“Iwishwehadn’thadtodoit. Ididn’twant to,but that’swhatweneededtodo,”headded.6

Fundingcutsofanyscalehaveadirectimpactonthesizeandshapeoftheorganisationsaffected.LookagainatFigure1.2andimaginehowtakingouta“coupleofbillion”wouldaffecteachoneofthecomponents(systems,processes,people,performancemeasures,structure,culture).Externalinformalleaderscanalsousetheirpowertogoodorbadeffect

(dependingonpointofview).AnexampleofaninformalexternalleaderisshareholderactivistMichaelMessmore.AccordingtoanarticleinBusinessWeek:7

Delta Air Lines pilotMichael H.Messmorewas incensed at the$28m golden parachute handed to former Delta Chief ExecutiveRonaldW.Allenwhenheresignedin1997.Tostopsuchexcesses,Messmore, with the backing of the Air Line Pilots Association,submitted a proxy resolution in 2000 demanding shareholderapprovalofsuchdeals.Theinitiativewasrejectedthreeyearsinarow.ButatDelta’sannualmeetingonApril25[2003],widespreadshareholderangerover revelationsofbankruptcy-proof retirementpackagesforcurrentexecutivesputMessmore’sresolutionoverthetop,witha54%majority.Anotherpilot-sponsoredproposalcallingfor thecostofstockoptions tobedeductedfromearningsrackedup a 60% majority. “Executive compensation is out of whack,”saysMessmore.

Histypeofactivismpromoteschange,asthearticlegoesontopointout:

The current spate of shareholder votes is likely to spur a fairamount of reform. For example, both companies that lost proxybattlesoverexecutivepaylastyear,BankofAmericaandNorfolkSouthernCorp.,eventuallyadoptedthemeasures.“Everyone’salotmore sensitive to majority votes now,” says Rosanna LandisWeaver,ananalystat theInvestorResponsibilityResearchCenterinWashington…andjustdaysbeforetheApril29annualmeetingat Exelon Corp., labor withdrew a similar resolution after theelectriccompanypledgedtostopgivingexecutivespensioncreditfor more years than they have worked. “It is better for us to beviewedasproactive,” saysanExelonexecutive. “Itbecameclearthat a number of shareholders were interested in changing thepolicy.”

From these examples it is evident that organisation design successdepends on the complex interactions of four broad leadership groups:internal formal leaders, internal informal leaders, external formal leadersand external informal leaders. Each of these groups has at their disposalvarioussourcesofpower,andalthoughformalleadersmayhaveaccesstomore of these than informal leaders, theway the power is wielded is animportantdeterminantof theoutcome.Asmartial artspractitionersknow,softascottoncanbeashardassteel.Accesstoanduseofpowerisoneofseveralvariablesdeterminingability

to lead. Others include style of attracting and holding on to followers;stability of circumstances; personal motivation; and the organisation’spoliticallandscape.Theefficacyofaleaderchangesasthecontextchanges,and someone who cannot adjust their style of leadership or draw on adifferentsourceofpowerisopeningthedoorforsomeoneelsetoseizetheleadershiprole.Thischapternowexaminestheinternalformalandinformalleadershipof

organisation design work, focusing on the formal leaders within theenterprisechargedwithdeliveringthenewdesignandtheinternalinformalleaderswhocanacttosupportorstymieit.

Formalleadershipinorganisationdesign

Figure7.1showstheformalorganisationoftypicallarge-scaleprojectsandprogrammes. The names of the formal leaders of an organisation designprojectappearintheboxes.Smallerprojectswillnothavethesamenumberofpeopleinvolved:insomecases,alinemanagerwillleadaprojectsingle-handedly. Whatever the number of designated leaders they all have, byvirtue of their position, three specific power sources: formal authority;control of scarce resources; and use of organisational structure, rules andregulations.Theymayhaveadditionalsourcesofpower,butitisthesethreethatareusuallyassociatedwithhierarchicalposition.Howwelltheyuseorareabletousetheirpowerdependsonthecontextandontheirleadershipstyleandbehaviour.Thecontextfororganisationdesigntypicallypresentsformalleaderswith

sevenchallenges.Inessence,theymustsimultaneously:

•balancethedemandsofthedayjobwiththedemandsoftheproject;•managea rangeofcompeting importantandurgentpriorities, tasks,

andactivities;•helpstaffcopewithwhatisinevitablyseenasyetanotherchange(in

someorganisationsthisiscalledmanaging“changefatigue”);•satisfytheneedofthebusinessforafastchangethatalsogetsthings

right;• get the timing right on leadership issues – knowwhen to push and

whentoletgo;•motivatestakeholderswhodonotreport to thembutwhoseinput is

criticaltotheproject;• work effectively with other leaders both inside and outside the

project.

Thisisdifficulttoaccomplishbutitcanbedone.Oneleaderwhoappearsto have succeeded inmeeting these seven challenges isAaron Schwartz,who joinedBrunoMagli, a high-end shoe company, in 2004 as presidentNorth America. He had a mandate to redesign the organisation and theleadershipskillstodoiteffectively.HisreportontheexperienceisshowninTable7.1.

Table7.1TheleadershipchallengesinorganisationdesignworkReport Challenge

“NorthAmericahadalwaysbeenaprecariousmarketforBrunoMagli,anditwasespeciallysoafterSeptember11th.Thebusinesswasundersiege.Wehadtreacherousretail leasesand currency pressure from the euro, andwere undergoingmanagement changes as theBrunoMaglifamilyretired.By2004weneededtocleanupthebusiness.Frankly,thefastest,mosteffectivewaytodothatintheStateswastofileforChapter11bankruptcy.

1Balance thedemandsof the day job with thedemandsoftheproject2 Manage multiplecompeting importantand urgent priorities,tasks,andactivities.3Satisfytheneedofthebusiness for a fastchange that also getsthingsright.

“Eventhoughwewereusingitasastrategictool,theveryword‘bankruptcy’cancauseheartpalpitations.Theparentcompany in Italywasdumbfounded– theypicturedusclosing thebusinessandsellingthefurniture.Butthiswasallverycarefullyplanned.

4Motivate stakeholderswho do not report tothembutwhose input iscriticaltotheproject.

“Still,Iwasanxious.Infact,Iwasanervouswreck.NomatterhowmuchexpertadviceyougetfromlawyersandPRfirms,it’sstillbankruptcy.Ikeptthinking,I’mplungingthis74-year-old company into ruin. But it was such a release to be able to tell employees that I wasnervous,too.Don’thideit.Youabsolutelyhavetobehonestwithpeople.Wesaid,‘We’renotgoingtotellyouthatnobody’sgoingto losetheir job.’Althoughwehadto layoffabout50people,therewerenosurprises.

5 Work effectively withother leaders bothinside and outside theproject.6Getthetimingrightonleadership issues –knowwhentopushandwhentoletgo.

“Iknowthisdoesn’tsoundright,butthebankruptcywaslikeagift.Everyoneknewwewerechanging, so a buzzbuilt aroundwhat our futuremight be. Itwas like a start-upwith thesafetynetofanestablishedbrandandastrongcorporateparent.Andtheresultsshowed.By this spring, we couldn’t deliver enough products to meet demand. That was a realvindication.”

7 Help staff cope withwhat, inevitably, is seenas yet another change(in some organisationsthis is called managing“changefatigue”).

BrunoMagliNorthAmericaemergedfrombankruptcyinJanuary2005.AfterclosingitsretailstoresintheUnitedStatesaspartoftherestructuring,theluxuryshoemakeropeneditsfirstshop-within-a-shopconceptinMayattheArthurBerenshoestoreinBeverlyHills.

Source:Underwood,R.,“LeadingThroughLimbo”,FastCompany,September2005

Thecompany’snewlydesignedUSarmstarteddoingwell–annualsalesin2005were$35.8m,about50%ofworldwidesales–andaftertwoyearswithBrunoMagliSchwartzmovedontoPoloRalphLauren.Although there are some roles in organisation design work that are

dedicatedtotheproject,forexampletheprogrammemanager,muchofthework is led by people holding dual roles. Schwartz typifies a leaderwhosimultaneouslyspearheadedanorganisationdesignprogrammeandledtheday-to-dayoperationofanenterprise.Whatevertheleadershiplevelinthebusiness, to lead project work and day-job work successfully – meaning

managingthesevenchallenges–itisnecessarytodeterminethedemandsoftheroleintheprojectanddevelopanappropriateleadershipstyle.

Determinethedemandsoftheroleintheproject

Haveacleargraspofthevision,missionandpurposeoftheproject

Thismaysoundobviousbutwhensomeoneisgivenaleadershiproleinaproject that is already under way, it is easy to leap into action withoutproperly understanding the project’s objectives. To understand what isbeingtakenon:

•identifyandassesswhatisgoingonbehindthescenes;•meetatleastsomeofthestakeholdersandgettheirviews;•make certain there is high-level agreement (sponsor or accountable

executive)onoutcomesanddeliverables;•agreeanddocumentthecontextandboundariesoftheleadershiprole;•assessandgetarealisticviewoftheprojectinthecontextofallthe

otherworkthatmakestimedemands.

Determinewhetherworkneedstobereprioritisedorresourcesreallocated

This will involve discussions within the business and may involverenegotiating personal performance objectives and balanced businessscorecard measures and taking steps to reset performance expectations.Leaders who try to take on large pieces of project work on top of theirnormalworkloadwithoutmakingagreedadjustmentsarenotdoinganyoneafavour.

Clarifyandestablishtheboundariesoftherole

Usually it is up to the leader to get some statements from stakeholdersabout the boundaries of the role so that people are not going into theorganisationprojectwithuntestedassumptions.Consultantsandcontractorscoming into project leadership roles must be diligent in deducing how

consistenttheviewisthatinsidersholdabouttheroleanditsdeliverables.

Establishlevelsofaccountabilityandresponsibility

Accountabilityandresponsibilityarenotthesamething.Ateamleadermayberesponsiblefortheeffectiveperformanceofteammembersandmaybeaccountableforensuringthattheydelivera10%increaseinproductsalesinthenextquarter.Alternatively,theteamleadermaybeaccountableforthe10%increaseinproductsalesbutit issomeoneelse’steammemberswhoare the prime agents. Check that there are clear linkages betweenaccountabilities and responsibilities and/or clear methods of resolvingissues that may arise in trying to deliver outcomes using resources forwhichtheleaderisnotresponsible.

Secureresources

Securing resources includes appointing an effective deputy who is fullybriefedandengagedinboththeprojectandtheday-to-dayworkandisableto stand in for the leader as the situation demands. It alsomeans leadersmakingsuretheyhaveenoughtimeinwhichtoplan,eliminateduplicationofactivities,andcommunicateconsistentlyandregularlywithstakeholders(inboththeprojectandday-to-daywork).

Developanappropriateleadershipstyle

Mobilisetheformalandinformalleaderstoworktogether

Thisisahardtricktopulloff,particularlyforpeoplebroughtinspecificallyto turn around a project in trouble. It is a matter of achieving the rightbalance of getting on with colleagues and staff and getting on withachievingtheobjectivesoftheproject–bothwithinashortperiodoftime.8

Buildtrustquicklybybeingbothcredibleandcompetent

Beyondleadershipstylepeoplelookforcertainbehavioursbeforetheystartto trust their leaders(seeChapter6formoreontrust).Staffobservewhatleaders pay attention to, measure and control on a regular basis; for

example:

•howtheyreacttocriticalincidentsandorganisationalcrises;•howtheyallocatescarceresources;•instancesofdeliberatemodelling,teachingandcoaching;• criteria for allocating rewards and status and recruiting, selecting,

promoting,retiringandexcommunicatingorganisationmembers.9

Leaderswhoareunpredictable,volatileoreccentric,orwhoaremicro-managersorhaveothercharacteristicsknownas“derailers”(seeGlossary),cannot build trust. Derailers can have devastating effects on the lives oftheir followersand theirorganisations.“Chainsaw”AlDunlap, fired fromhisroleasCEOofSunbeamin1998afterjustlessthantwoyearsinpost,isoneexampleofatyrannicalleaderwhosemethodsdestroyedmoraleinthecompanyandalmostdestroyedthecompanyitself:10

Rarely does anyone express joy at another’s misfortune, butDunlap’s ouster elicited unrestrained glee from many quarters.Formeremployeeswhohadbeenvictimsofhislegendarychainsawnearly danced in the streets of Coshatta, La., where Dunlapshuttered a plant. Says David M. Friedson, CEO of Windmere-Durable Holdings Inc., a competitor of Sunbeam: ‘‘He is thelogical extremeof an executivewhohas novalues, nohonor, noloyalty,andnoethics.Andyethewasheldupasacorporategodinourculture.Itgreatlybotheredme.’’Otherchiefexecutives,manyofwhomconsideredhimanextremist,agreedthatDunlap’sdemisewasawelcomerelief.

DuringhistimeatSunbeam,Dunlap’sorganisationdesignworkreducedthe number of factories from 26 to 8, cut $225m of costs, reduced theworkforceby6,000andcutcharitablecontributions.11AsFigure7.2shows,the result of his approach, far from saving a failing company, caused theshare price to dropbelow the price itwaswhenhe took the helmwith amissiontosaveit.

Recogniseandreducethefearpeoplemayhave

Evenpeoplewhotrusttheirleadersmaybefearful,forallsortsofreasons,at the thought of an impending organisation design change. Fear has astultifying and demoralising effect, as Edmund Burke, an 18th-centuryphilosopher, remarked:“Nopassionsoeffectively robs themindofall itspowersofactingandreasoningasdoesfear.”People’sfearofuncertainty,disruptionandunknownoutcomesmayinhibitthemfromaskingquestions,participatinginthedesignworkorexpressingaviewaboutit.AsMichaelCarrollsaysinAwakeatWork:12

When the assistant who is rudely dismissed by his boss in ameetingbecomessullenandwithdrawn,weseethesilenceoffear.When the accountant keeps her eyes down as the sales managerpresentshighlyquestionable salesnumbers to theCEO,weagainseesuchsilence.

It is rareforpeople toadmit tobeingafraid,so lookingforwhat isnotbeing said and recognising that people are likely to be fearful is the firststep towardscreating theconditions inwhich theycan face their fearandworkwithitpositively.Foraleaderofanorganisationdesignproject,thismeans encouraging communication, involving people in the design workanddecisions,andbehaving ina respectfulway toothers. (SeeChapter6formoreoncreatingconditionsforopennessanddialogue.)

Usepowerwisely

Leaders who consistently use the same power source(s) usually fail,sometimesspectacularly,inachievingtheirmission.NASAisanexampleofanorganisationthathadleaderspredominantlyusingtheirformalauthority,controlofdecisionprocessesanduseoforganisationalstructure,rulesandregulations. This led, in part, to the tragic crashes of the space shuttlesChallenger and Columbia. The Columbia Accident Investigation Boardreportnotesthatwithintheagency:13

With Columbia, as with Challenger, the board found, decision-makerswereoverly influencedbypressures to launchontime.Inblindadherencetosafetyrules,theyignoredhunchesandintuition

about faulty equipment. They valued organizational charts overgood communication. The report chastised the agency forhabitually turningadeafear tooutsidecritics,andforclinging tothebelief thatNASAaloneknewbest how to safely sendpeopleintospace.Signals were overlooked, people were silenced. Communicationdid not flow effectively up and down the formal chain ofcommand.

Workskilfullywith“followers”

LaoTzu,authorandfounderofTaoism,describedtheidealstatein6BC:

A leader is best when people barely know that he exists, not sogoodwhenpeopleobeyandacclaimhim,worstwhentheydespisehim.“Failtohonourpeopleandtheyfailtohonouryou.”Butofagood leader, who talks little, when his work is done, his aimfulfilled,theywillallsay,“Wedidthisourselves.”

The way leaders do this depends on their style, and there is no best

leadershipstyle.Whatwillworkinonesituationmaynotworkinanother.Knowingthis,itpaystobealerttothenuancesofdifferentsituations,andto behave consistently in similar ones. Random and unpredictablebehaviouronlyconfusesandalienatespeople;thisistheoppositeofwhatisrequiredinanorganisationdesignprocess.Ahelpful framework forconsidering leadershipstyle isPaulBlanchard

andKennethHersey’s Situational LeadershipModel.14 It is based on thetheorythatleadershipstyleisdemonstratedbytheamountofdirectionandsupport thataleadergivesto“followers”andisrepresentedinagrid(seeFigure7.3).Thepremiseisthatleadersflextheirstyledependingontheneedsofthe

follower.Thisresponsivenesscreatesacultureofopennesswherefollowersfeelrespectedandvalued.

Beconsciousoftheinterestsandmotivationsofotherleadersintheprogrammeorproject

Gareth Morgan, in his discussion of organisations as political systems,

suggests:15

Peoplemustcollaborateinpursuitofacommontask,yetareoftenpitted against each other in competition for limited resources,status,andcareeradvancement.

Organisation design projects by definition shake things up – coalitionschangeastheprojectprogresses.Inmostcasestherearesomeleaderswhofeelthattheywilleitherwinorlosefromanyproposeddesignandwillthenacttopreservetheirowninterestsattheexpenseoforganisationalinterests.Being able to build what John Kotter calls a “guiding coalition” thatbalances both collaboration and competition becomes essential to projectsuccessonthebasisthat:16

Efforts that don’t have a powerful enough guiding coalition canmake apparent progress for a while. But, sooner or later, theoppositiongathersitselftogetherandstopsthechange.

So formal leaders of organisation design projects face dauntingchallenges, but these can be met. Wayne Hale, the space-shuttleprogrammeratNASA inchargeof theeffort toget theshuttleflyingagain,talksabouttheColumbiaspaceshuttledisasterin2003:

We dropped the torch through our complacency, our arrogance,self-assurance,sheerstupidity,andthroughcontinuingattempt[s]topleaseeveryone.Itistimetoadjustourthinking.

Three years later, following significant organisational design work atNASA(ithasestimateditsColumbiainvestigationandreturntoflighteffortscost about $2.3 billion in 2006),Discoverywas successfully launchedonJuly4th2006. In theweeks leadingup to the launch, twoNASA officials,chiefengineerChrisScoleseandchiefsafetyofficerBryanO’Connor,gavea“no-go”forthelaunch:17

[Michael]Griffin [NASA administrator] called the disagreements

abouttherepairsagoodsignthatthecultureatNASAhaschanged.The agencywas faulted by theColumbia investigation board forhavingaconformityofopinion.“Ipersonallywanteveryengineertoexpressthebestopinionthattheycangiveus,”Griffinsaid.

Following Discovery’s touchdown on July 17th, the commander of theshuttle,StevenLindsay,noted:18

Ithinkwe’rebacktospacestationassembly,toshuttleflights,butwe’re still going towatch andwe’re still going to pay attention.We’reneverevergoingtoletourguarddown.

AchievingDiscovery’s mission took a coalition of leaders in variousleadershiproles.AlongthewayanycompetinginterestsweremanagedandnowNASA looks designed to achieve its goal announced in a speech byPresident Bush on January 14th 2004: to use the shuttle to finish theinternationalspacestationby2010,developthecrewexplorationvehicleby2014,returnhumanstothemoonby2020andeventuallymoveontoMars–albeitat theexpenseofotherNASAprojects.AsGriffinnotedatapressbriefing inWashington,DC:“NASA simply cannot afford to do everythingthatourmanyconstituentswouldlikeustodo.”

Informalleadership

Informal leaders emerge in organisations usually because they have aparticularpassionorbeliefandhavecharacteristicswhichengagepeopleintheircause.Theseinformal leadersarefoundatanylevel in thehierarchybecausewhattheyspearheadisindependentofhierarchy.

Lesson9of18lessonsonleadership

Organizationchartsandfancytitlescountfornexttonothing

Organization charts are frozen, anachronistic photos in a workplace that

oughttobeasdynamicastheexternalenvironmentaroundyou.Ifpeoplereallyfollowedorganizationcharts,companieswouldcollapse.Inwell-runorganizations, titles are also pretty meaningless. At best, they advertisesomeauthority, anofficial status conferring the ability togiveorders andinduceobedience.Buttitlesmeanlittleintermsofrealpower,whichisthecapacity to influence and inspire.Have you ever noticed that peoplewillpersonally commit to certain individuals who on paper(or on theorganization chart) possess little authority, but instead possess pizzazz,drive,expertise,andgenuinecaringforteammatesandproducts?

Source:ColinPowell,formerUSSecretaryofState

PatriciaPearceandDerekPereiraareformerBritishAirwayscabincrewwho in 1986 decided that they would find a way to fly sick children toDisneyworld on a dream flight and persuadedBA to support them in thisventure. TodayDreamflight is an independent registeredUK charity, stillenjoying considerable support from BA, which sends one full flight ofchildren on their Dreamflight each year. Sir Cliff Richard, patron ofDreamflight,says:19

If anyone has any doubts about the value and impact of theDreamflightcharityonthelivesofsickchildren,theyshouldwatchthe faces of youngsters boarding a BA 747 for their trip of alifetimetoDisneyworldinFlorida.I’m always humbled by their courage and inspired by theselflessness and compassion of so many of BA’s staff and otherescortswhogiveuptheirleavetoaccompanythesechildren.I’veoftensaid that I find involvementwithacharityoftenbringsme far more than I could ever offer. Unarguably, that’s true ofDreamflight.

Thisearlyventureintowhatisnowcalledcorporateresponsibilitypavedthe way for the current design of BA’S department of corporateresponsibility,which supports an extensive andwide-rangingprogramme.(In 2005 the company supported 130 projects with direct and indirect

donationsof£5.4min2005–06.)In an engaging book, Tempered Radicals, Debra Meyerson describes

peoplesuchasPearceaswanting“torocktheboatandtostayinit”.20Shedescribesfourapproachesthattheyusetoleadchange:21

Mostsubtleis“disruptiveself-expression”indress,officedécor,orbehavior,whichcanslowlychangeanunproductiveatmosphereaspeopleincreasinglynoticeandemulateit.Byusing“verbaljujitsu”an individual can redirect the forceof an insensitive statementoraction to improve thesituation.“Variable long-termopportunists”spot, create, and captitalize on short-and long-term chances forchange.Andthrough“strategicalliancebuilding”anindividualcanjoinwithothers topromotechangewithmoreforce.Byadjustingtheseapproachestotimeandcircumstance,temperedradicalsworksubtlybuteffectivelytoalterthestatusquo.

Informal leaders muster support not only by their approach (in theDreamflightexampleusingstrategicalliancebuilding),butalsobytheiruseofreferentpower(whichderivesfromthebelief thatpeoplehavein themafter seeing them in action) and their personal characteristics. Theseinclude:22

•supportofsubordinates;•intoleranceofpoorquality;•lackofpoliticalorientation;•highregardforcompetence;•admissionoferrorandfailure;•standingupforvaluesandbeliefs;•outspokennessandcandour;•highethicsandintegrity;•calmnessandeffectivenessincrises;•sharingofvictoriesandasenseoffairplay;•abilitytoinfluencewithoutauthority.

Whistleblowers–thosewhoexposemisconductintheworkplace–sharethese characteristics and also have the power to change the design of theorganisation.However, theyusuallyfindthat theyarenotabletorocktheboatandstayinit:23

Despiteprogressonthelegalfront,blowingthewhistleremainsarisky business. Whistleblower advocates say retaliation doesn’talways occur, but the whistleblower should anticipate it. “Thewhistleblowerwillgethammerednomatterwhattheprotections,”said Kris Kolesnik, executive director of the US NationalWhistleblower Center, which has lobbied successfully for betterlegalprotectionsforwhistleblowers.Kolesnikcautionedthatevenemployerswhoappeargratefulforthedisclosuresmaybeplottingtogetridofthewhistleblower.

Exposingorganisationmalfeasancemaywellbebetterledbyanoutsider.ErinBrockovich,anadministratorinalawfirm,helpedrunacampaignthatled to Pacific Gas and Electric paying $333m in compensation to thefamiliesof thosewhohad suffered illnessanddeathas a resultofPG&E’spollutionof landaround itsgascompressorstation inHinkley,California.PG&Ealsohadtocleanuptheenvironmentandstopusingchromium6,thecauseof thepollution.Bycontrast,KarenSilkwood,who ledacampaignagainst her employer Kerr-Mcgee, a plutonium fuels producer, ended updyinginacarcrashin1974.Thiswasthesubjectofmuchspeculationasshewas in themiddleof collectingevidence for theunion to supportherclaimthatKerr-McGeewasnegligentinmaintainingplantsafety,andatthesame time was involved in a number of unexplained exposures toplutonium.Theplantclosedtheyearafterherdeath.Informal leaders can initiate new organisation design work by their

actionsortheycaninterveneinanalreadyinitiatedproject.Toachievetheirgoals they use predominantly referent power combinedwith an approachand a set of characteristics that enable them to muster support withoutjeopardisingtheirposition.Being able to influence without authority is at the heart of informal

leaders’abilitytogetwhat theywant.This isoftena trickythingtodoindifficultsituationswhere,forexample,thereisnoopportunityforasecond

chance,orthereisalotofresistancefromanotherpersonorgroup.Intheseinstancesasystematicapproachtoinfluencinghelps(seeFigure7.4).

Table 7.2 gives an example of the model in action. Ellen Thomas, a

youngAfrican-Americanconsultant,wasgivenadvicebyhermentor,Joe,to unbraid her long cornrow braids before giving a high-profile publicpresentation.Sheinterpretedthisasmeaningthatshewasto“lookaswhiteaspossible”.

Table7.2InfluencingwithoutauthorityEllenknewitwasarisktoignoreJoe’sadvice,butherhairwastootiedtohersenseofselftogivein.

1AssumeallarepotentialalliesIt is easy to leap into anadversarial mode but imagine,instead, that things can beworkedout inpartnershiporbyforminganalliance. (AlliesherearebothJoeandthepeopleshewaspresentingto.)

After some thought,Ellenwasable to see thisencounterasa test not just of herwillingnesstoconformtofitthisdefinition,butoftheinstitution’swillingnesstoadaptto the reality of its diverseworkforce.She realised shehad choices.This incidentposed an opportunity to challenge Joe’s biases and to help him appreciate theconnectionbetweenthisconcreteincidentandtheorganisation’sespousedpromiseofvaluingdiversity.

2ClarifygoalsandprioritiesThere are usually severaloptions, possibilities andchoices in any situation. Thinkcarefully about the trade-offs,cost benefits and outcomes ofeach of these. Depending onprioritiesitmay,forexample,bebettertoloseabattleandtowinthewar.

thewar.

Ellen prepared for her presentation and delivered it with unimpeachable authority.She wore her hair in neat cornrow braids and dressed in a new conservativebusinesssuit.…Sheknewshesucceededinconveyingexpertise;shealsohopedthat…shesignalledtoothersthatprofessionalscomeinmanydifferentpackages.

3Diagnosetheally’sworldThismeansfindingoutwhattheother person cares about andseeing the world through theireyes. Someone who sees anorganisation as a politicalsystemwillhaveaverydifferentperspective from a person whosees an organisation as apsychicprison.

Shewantedtomakesurehermentorlearnedsomethingfromthis,butnotinawaythatjeopardisedtheirrelationshiporputhimonthedefensive.ImmediatelyfollowingthepresentationEllenthankedJoeforcaringenoughtogiveheradviceandgentlyaskedhimifheknewhowithadaffectedher.Asshesuspected,hedidnot,andheaskedher toexplain.Ellendescribedwhyherhairwasnot just about “style”, andwhytoheritwasemblematicofherethnicity.Shelethimknowthatsheunderstoodthat he had not meant to offend her. She then explained that she chose thiscompanybecauseshethoughtitwouldacceptherasablackwoman.

4IdentifyrelevantcurrenciesPeople value and ‘trade’ indifferent things and these canbecome bargaining chips in aninfluencingexchange.

5DealwithrelationshipsCohen and Bradford describethis as having two aspects: thenature of the relationship –positive, neutral or negative –and the way each participantwantstoberelatedto.

6 Influence through give andtakeOnce someone knows whatthey want, what the desiredrelationship is, and whatcurrency isavailable to trade inthen the exchange can takeplace.

She diverted the issue away from hairstyle and appearance to themuch broaderissues of the existing parameters of fitting in and the company’s willingness toexpanditsimplicitdefinitionsofprofessionalism.

TheresultofthiswasthatEllenbegan to be known in theorganisation as an informalleaderofdiversityissues.

Sourceofscenarioinfirstcolumn:Meyerson,D.E.,TemperedRadicals,HarvardBusinessSchoolPress,2001,p.66

Workingtogether

Collaborativeworking,wherepeoplefeelgoodabouttheirinteractionsandtheresultstheyproduce,ishardtoachieve.Whateverthemixofformalandinformal leaders in an organisation design project, the barriers to goodoutcomesarethesame:territorialgameplaying,poordecision-making,thetendencytomakeassumptions,seeingthingsfromonlyoneperspectiveandfailingtolearn.Removingtheseisanimperative.

Territorialgameplaying

Who does not recognise that survival games are played in organisations?JosephHeller exposes thesebrilliantly inSomethingHappened.24 Here isanextractfromthechapter“TheofficeinwhichIwork”:

People in the company, for example, do their best to minimisefriction.…It is consideredmuchbetter form towageourbattlessneakily behind each other’s back than to confront each otherdirectly with any semblance of complaint. … We are all on acongenial, first name basis, especiallywith peoplewe loathe.…The right to this pose of comfortable intimacy does not extenddownward.

Territorialgamesinterferewithgettingworkdoneeffectively.Theycausebad feeling, poor-quality decisions and defensive behaviour. Yet there isgreatreluctancetoexposeanddiscussgameplayingopenly.Overcoming this reluctance is the first step to understanding territorial

instinctsandchoosingtoworkinmoreproductiveways.Themorepeoplelearnaboutthegamestheyplaythelesseffectivedestructivegamesmanshipis(seeTable7.4).

Poormanagementofagreement

Commitmentisassumedwhenpeoplepubliclysaytheyagreetoadecisionorcourseofaction.(Sometimestheyremainsilentwhenaskediftheyagreeand this is taken as tacit agreement.) If they have reservations about thedecisionbut forvarious reasons arenotwilling to raise them, all sortsofproblems can arise. The Abilene Paradox25 (see Glossary) is a goodillustration: a groupmakes a decision to drive for several hours to havedinnerinthetownofAbilene,butwhentheyreturnittranspiresthatnoonewanted to go but no individual was willing to say so. This paradox iscommonly seen in organisations and results in loss of motivation andproductivity.TheDESCprocess(seeTable7.3)isastructuredwayofhelpingpeopleto

ownuptoanddiscussmisgivingstheyhaveaboutdecisionsthathavebeenmadeorareabouttobemade.Butsomeonehastotakethefirststep.

Table7.3TheDESCprocessDescribe howyoufeel

Iwanttotalktoyouabouttheproject.Iknowweall,includingmyself,havebeengoingalongwithitsofar,butIdon’tthinkit’sgoingtowork,andIamanxiousaboutit.IamconcernedthatImayendupmisleadingyouandwemayendupmisleadingoneanother.

Explain whatyou think arethecauses

I think I’ve felt pressured to pursue a course of action because I’m fearful of reporting what oursponsormaynotwanttohear.I’m conscious that the reputation of the organisation is riding on this new design andwe’re in thepubliceyetodeliveronit.

Suggestvarious optionson waysforward

WecancontinuetogoalongapathwhichIthinkislikelytoendindisaster.Wecandiscussoptionsandseeiftherearewayswecanmakeitwork.Wecanrecommendpullingtheplugonitnowifthatmakesthebestsense.

Come to anagreement onhowtoproceed

I’dliketoknowwheretherestofyoustandandIwouldappreciateanythoughtsabouttheproject.

Thetendencytomakeassumptions

Makinganassumptionispresumingorbelievingsomethingistruewithoutfirst asking questions to determine if it really is. This has the effect ofblocking thinking and/or shutting downpossibilities.Often people donotknow that theyaremakinganassumptionuntil theyarequestionedon it,but once the assumption is challenged new options emerge that allowpeopletomoveforwardinmorepositiveways.“These young people are smart, but in ways that can be dangerous.

They’resosure they’re right.”26 Imagine theeffect thisassumptionmighthaveifthe“owner”ofitwereworkingwithyoungerpeopleontheteam.Agood, well-received challenge will open up the doors to new ways ofcollaboration.

Seeingthingsfromonlyoneperspective

On its “your point of view” website(www.yourpointofview.com/hsbcads_airport.aspx ),HSBC, a global bank,hasaseriesofairportadvertisements.Theseconsistoftwophotosrepeatedoncetoformafour-photosetillustratingopposingperspectivesofthesamething.Forexample,oneset,“WorkPlay”,hasalaptoplabelledas“work”and a baby labelled as “play”.Thephotos are repeatedbut the labels are

switched,withthelaptoplabelled“play”andthebabylabelled“work”.Astatementonthewebsitepointsout:

As the world gets more and more the same, we can each valueother’sopinions,howeverdifferenttheymaybe.

Leaders should heed this statement: “walking in another’s shoes”establishesempathywhich, in turn, leads to thepossibilitiesofproductivedialogue,mutualtrustandco-operation.

Failingtolearnislearningtofail

Well-structured organisation design projects have review points built intotheirmanagementprocess.Evenso,mistakesarerepeatedandlessonsarenot learned. During the 1990s many companies spent time and effort intryingtobecomelearningorganisations,butthereislittleevidencethatanyachievedthis(orconsensusonwhatitwouldlooklikeiftheydid).Nevertheless,makingsmalleffortstolearnduringthecourseofaproject

meansthatthereislesslikelihoodofhavingamajorfailureattheendofit.Thereare all sortsof small and informalways to encourage learning,notjust frommistakes and failures but during the normal course ofworkinglife.Lookout for them.Ask “What have I learned from this experience?What could I do differently next time?”NASA’sWayneHale periodicallysends e-mails to staff about what he is learning as he goes through hisworkingday.Hereisoneexample.

From:HALE,N.W.,JR(WAYNE)(JSC-MA)(NASA)

Sent:Friday,April01,20058:01AMTo:[email protected]:Subject:WhatIlearnedatISOSIspentacoupleofdaysattheIntegratedSpaceOperationsSystemsreview

atNashville,TN.…However, thebiggest lesson I learnedat ISOSoccurredbeforeanyof themeetingsattheconventioncenter.

Source:www.spaceref.com/news/viewsr.html?pid=16028

In this e-mail Hale describes the big risks his great grandparents’generation took as pioneers and urges his staff to learn from them andconsiderthequestions:

Havewelostthecapabilitytoweighriskandreward,hardshipandhope,difficultyandopportunityastheydid?…dowehavethosequalities that made our ancestors successful? Do we have thejudgmenttoweighitallinthebalance?Dowehavethecharactertodaregreatdeeds?Historyiswatching.

CASESTUDY:CTC–designofthecriticalinfrastructureprotectionpractice

CTC International, a publicly quoted company, was founded by MilesHuberman to offer information technology consulting services.After twodecadesof steadygrowth, thecompanyadoptedamuchmoreaggressive,primarily acquisition-basedgrowth strategy.Six firmswere acquiredoverthenextfiveyears, takingemployeenumbersfromaround1,000to4,500andannualrevenuefrom$312mto$882m.Each of the acquired companies had some expertise and leadership in

infrastructureprotection(oneoftheITconsultingservices),butnooverallleaderofaspecificinfrastructurepracticeemergedwithinCTC.Thereforetheorganisationasawholedidnotbenefit from thecritical infrastructureprotection (CIP) knowledge and skills of the individual firms.Customerswere confused as the acquired organisations were reluctant to shed their

pre-acquisitionidentities,continuingtorefertothemselvesbytheiroriginalcompanyname,usingtheirmethodologiesandoperatingaccordingtotheirownphilosophiesandprinciples.Asaresultofthislackofcoherence,CTCunder-leverageditsCIP.CTC was spurred into acting only when it unintentionally and

unknowinglysubmittedtwodifferentproposalstoarequestfromapotentialclient. The conflict was highly embarrassing and damaging to CTC’sreputation,soexpertsrepresentingtheparentcompanyandeachofthesixacquisitionsmettofigureouthowtoworktogetherinamoreefficientandco-ordinatedway.Theimmediateconcernwastoavoidsuchoverlapsinthefuture,but theoverallgoalsof thediscussionweretoprovideclientswithhigher-quality work, win new business, develop business opportunities,increaserevenuesandstrengthenthegroup’sreputation.Aninitialstumblingblockwasdeterminingwhotoinvitetothemeeting.

TherewasnocommondefinitionforCIP–peopleusedanumberoftermsto describe work that fell broadly in the area. There was no way ofsearchingemployees’CVsforkeywords thatwouldpinpointpeoplewiththe relevant skills and experience. And few people knew others outsidetheirownimmediatenetwork(whichtendedtobelimitedtotheiroriginalcompany)whomtheycouldrecommend.However,informalnetworks,referralsandgettingthewordoutenableda

list of people to be drawn up. Theywere sent a one-page outline of thecurrentCIP situation, preliminary thoughts onwhat the future could looklike and some reasons for working towards this. This caused a flurry ofqueries and comments that were coloured with a mixture of hostility,curiosity and appreciation for the effort to bring people together. It alsoflushedoutahandfulofpeoplenotonthelistwhofelttheyoughttohavebeen.The36people eventually invited from the parent company and the six

acquiredcompanies includedaseniorvice-presidentofCTCand13vice-presidents. Some invitees led programmes, projects, or businessdivisions/units and others were leaders by virtue of their specialistexpertise.Theorganiserssuggestedthattheoutcomeofthismeetingwouldbeagreementon thevalue that a critical infrastructureprotectionpracticewouldbringtoCTCandasketchofthedesignofsuchapractice(ifitwasagreedthataCIPpracticewouldbringorganisationalbenefits).

17peopleattendedandthemeetingfacilitatorknewtheyhad:

• aswell as formal leadership roles, a variety of informal leadershiproles, related to factors such as their length of service in thecompany, their social networks, their positions on externalcommitteesandboards;

•accesstodifferentsourcesofpower;•competingloyalties–toCTC,totheiroriginalcompany(whichhad

beenacquiredbyCTC)andtotheirclients;• conflicts of individual interests (personal, career and what each

wantedasmeetingoutcomes);•assortedwaysofplayingterritorialgames.

Talking about the meeting after the event, one of the vice-presidentsremarked:

Forme,oneof thepositivesof themeetingwassimply toextendmy network. Even though I’ve been with CTC 20 years andthoughtIkneweveryonerelevanttoCIP,theintroductionsexposedsome gaps. I don’t think I’ve kept up with who we got in theacquisitions.We’ve got farmore expertise at our disposal than Iwasawareof. It’scertainlyhelpedme thinkmorecarefullyaboutwaysofusingourstrengthsmoreeffectively.I see the strengths as being the blend of policy, functional andtechnical expertise, which is also geographically dispersed andcoversabroadcustomerbase.Thechallengeisknittingthisintoarecognised CIP Practice if that’s an appropriate thing to do. It’ssomething Iwould like to seehappen, and tobeblunt I’d like toheadit.

Anotherparticipantinvolvedinbusinessdevelopmentnoted:

CIPisawideopenfieldofexpandingopportunitiesandifwedon’tget organised and co-ordinated as a company someone else willmarket themselvesandestablish theirbrandof “CIPexpert”with

ourcustomerbase.We’resufferingbecausewe’renotcohesiveinouroffering.Tobefrank, my job would be a lot easier if we could agree on adefinition of CIP. We could then design a practice along thedefinition.Thiswouldmitigatethecurrentriskofmissingbusinessopportunities because we are fractured in our organisation anddon’thaveanysharedorrepeatableCIPprocessesacrossCTC.ThecurrentlackofintegrationmeansthatweapproachCIPwith“smallhatthinking”basedontheclientswehadbeforewewereacquiredbyCTCratherthanwith“bighatthinking”–aimingfortheclientsweshouldbetargetingifwetookawholeCTCview.

Athirdperson,involvedinbidsforwork,hadanotherperspective:

Inanidealstatewe’dknowwhoallourclientsareandwhatwe’redoing for them.We’d be up in front of theRequest for Proposalprocesstomakesurewearehelpingtheclientcreateit.We’dhaveaccesstoviableperformancequalificationsandpastexperienceandknow the leads on similar projects. We’d share best practicesthrough a knowledge management system and have a robustgovernancestructureinplace.Currentlymy job is a nightmare.We don’t knowwhat proposalshaveaCIPcomponentbecause there isn’ta singlepointofentry,and beyond that it’s very difficult to find the right people tocontribute to the proposal-writing effort because there’s no CIPrallyingpoint,regularroutineconnection,orusableinformationtodraw from. I’m all in favour of having some form of CIPorganisation initially. It could be a loose confederation (there arelotsof egos to contendwith, so I don’twant to suggest anythingthat will provoke turf battles) with centralised co-ordination. I’dliketoseeadesignthat’snottooheavyonprocessbutenoughformetobeabletogettheinformationIneedtobeabletowriteanddeliverhigh-qualityproposalstoourclients.

TheindependentmeetingfacilitatorreflectedonsomeoftheobstaclestoachievingthegoalofdesigningaCIPpractice:

Itseemedtomethatpeopleclearlyarticulatedthevalueofhavingabetterway of doingCIP clientwork and this led to a number ofactions being suggested, all based in the notion of some form ofCIPpractice.Theacidtestwillbeifpeoplearewillingandabletoputresourcesintomakingsomethinghappen.Alltoooftenthissortoftalkresultsineither“strategicnon-compliance”–thatis,peopleagreetotakeactionwhentheyactuallyhavenointentionoftakingitoraretryingtobuytimeinordertofindawaytoavoidtakingit– or “the invisible wall game” when people start to preventprogress that to theirminds invades their territorywhether that isbusinessarea,expertise,orsomethingelse.Here,we had in the room a number of leaders.Myguess is thatseveral of them are jockeying for the position of CIP “pointperson” although only one has come right out and declared hishand. This means that individually they’ll be using their variouspowersourcestoformacoalitiontosupporttheirinterestinbeingtheCIP practice leader. This could be fine if theywere allmoretransparent about declaring their ambition – it would help avoidsomeofthemud-slingingthatgoesoninthesetypesofundercoverpower play situations.Outside of thismeeting, for example, I’veheardsomeofthemopenlycastdoubtsontheabilitiesofsomeoftheirpeerstotakeontheleadershiprole.Evenwithoutindividualinterestsbeingbroughttobear,they’llfindit difficult to collaborateon formingaCIPpracticewhile they’realso expected to compete in other arenas. The performancemanagement system (both individually andorganisationally)doesnotreinforceorrewardthecollaborativeworkwhichisrequiredfordesigningaCIPpractice.For example, the focusonbillable timemeans that non-billablework –which this is –will take amuchlowerpriorityontheirtaskliststhanbillablework.Could a viable CIP practice be designed? Of course, and I’moptimistic that it will be. They’ve identified their ideal state andthey’ve founda commonenemy in thepotential for a competitorcompany beating them into the CIP expert space. RememberAesop’sfable:

“Onahot,thirstysummer’sdayalionandaboarcametodrinkata small spring. They started quarrelling overwhich should drinkfirstandprovokedeachothertonearmortalcombat.Butstoppingforamoment to takebreath, they looked roundand sawvultureswaiting to devourwhichever of themwas killed.The sightmadethemstoptheirquarrel.‘Itisbetterforustobefriends,’theysaid,‘thantobeeatenbyvultures.’”

Myfeelingisthatwithin12monthsyou’llseeawelldesignedandhighlyperformingCIPpractice.

Reflectionsonthiscase

Thiscaseillustratesleadersinanorganisationstartingtoworkondesigninganewsphereofoperationforthecompany.Asiscommoninorganisations,thedesignisbeingconsideredagainstabackdropofmanyfactors:thereareseveralformalleaderswithavestedinterestinthegameandeachhasathisdisposalavarietyofsourcesofpower.TheseformalleaderswantdifferentthingsfromaCIPpractice:somewant to lead it,somewant toguard theirexisting client relationships, and somewant to develop its reputation andexpertiseinspecificaspectsofCIP.Noneoftheseismutuallyexclusiveinafinal design. But the leaders are faced with the usual challenges ofbalancing the work of designing a new area with the demands of theirconsultingdayjobs,whichrequirethemtomaintainhighlevelsofbillableclient work. Inevitably, the design process sparks various turf-protectionbehaviourswhichcouldslowdownorhalttheintentiontoformanewCIPpractice.Behind thescenesare the internal informal leadersand theotherinternal and external stakeholderswho are likely to emerge as the designworkproceeds.At this stage, to keep the formal leadership of the designprocessflowing,thefacilitatorrecommendedseveralactions:

•Putting togethera smaller leadership team todrive thedesignwork(bearingcertainconsiderationsinmind).Inmostcasesitisdifficultto get agreed actions initiated and followed through if the team isbigger than six people. However, the six people have to form abalanceofcapabilitytoworksuccessfully.Agroupofsix“shapers”

andno “evaluators”,27 for example,will struggle to carry throughthedesign.

•Determiningteamoperationalprocesses,suchasdecision-makingorconflict handling. Too frequently leaders foul up by having knee-jerkreactions,makingintuitivedecisions,gettingheated,andsoon.Having some simple processes or ground rules allows moreconsidereddiscussionswhenthegoinggetshard.

• Engaging the formal leaders in open discussions about aspectsgenerallyrelegatedtothe“toodifficult”box.Evenwithestablishedoperationalprocessesorgroundrules it isworthsettingaside timetoreflectontheteamprocess–sharingleadership,territorialgames,power sources and the capabilities team members need tocollectively exhibit. Leaders have very different motivations,interests and expectations and it helps oil the wheels if peoplediscuss their ways of approaching the job. Steve Jobs and PeterSchneiderdifferedintheirapproachtoadeal,astheextractbelowshows. Knowing and discussing the differences helps the partiesinvolvedworkthroughthem.

Differentapproachestoadeal

FollowingPixar’shitwithToyStoryin1995,JobsandthenchieffinancialofficerLawrenceB.Levygavethemselvesacrashcourseinmoviebusinesseconomics. That helped Jobs persuade Disney to agree to a far morelucrative distribution deal than Pixar had had in the past. FormerDisneyexecutive Schneider, who negotiated that deal with Jobs, says he appliesequalpartsindustryknowledge,intensity,andsheercharisma.Jobsprefersto negotiate one-on-one, and let lawyers tie up the details after thehandshake is done. “He says ‘Fine, we have a deal,’ and you’re saying,‘Wait,wait, Ineed tocheckwithMichael [Eisner],’andhe’ssaying, ‘No,it’sdone.’”

Source:Burrows,P.andGrover,R.,“SteveJobs’MagicKingdom”,BusinessWeekOnline,February6th2006

Toolsforthiscase

Understandingyourterritorialdrive

Acknowledging thegamespeopleplay toprotect their territoryhelpsstopthe unco-operative and partisan behaviour that often accompaniesorganisationdesignwork.Onewayof doing this is to useTable 7.4 as aframeworkfordiscussionwithintheleadershipgroups.

Table7.4Understandingyourterritorialdrive

BATNA28

BATNA stands for best alternative to a negotiated agreement. BATNAs arecritical to negotiation because a good decision aboutwhether to accept anegotiatedagreementcanonlybemadewhenthealternativesareknown.IftheproposedagreementisbetterthantheBATNA,acceptit.IftheagreementisnotbetterthantheBATNA,reopennegotiations.Iftheagreementcannotbeimproved,thinkaboutwithdrawingfromthenegotiationsandpursuingthealternative–thoughalsoconsiderthecostsofdoingthat.

BATNAs arenot always readily apparentbutmaybedetermined for anynegotiation situation. Roger Fisher and William Ury outline a simpleprocessfordeterminingyourBATNA:29

•developalistofactionsyoumightconceivablytakeifnoagreementisreached;

• improve some of the more promising ideas and convert them intopracticaloptions;and

•select,tentatively,theoneoptionthatseemsbest.

Complex situations require the consideration of a broader range offactors and possibilities. For example, a community in the United Statesdiscovers that its water is being polluted by the discharges of a nearbyfactory.Communityleadersfirstattempttonegotiateaclean-upplanwiththe company, but the business refuses to agree on a plan of action thatsatisfiesthecommunity.Insuchacase,whatarethecommunity’soptionsfortryingtoresolvethissituation?Theycould:

•suethebusinessbasedonstipulationsoftheCleanWaterAct;• contact the Environmental ProtectionAgency and seewhat sort of

authoritythatagencyhasinsuchasituation;• lobby the state legislature todevelopand implementmore stringent

regulationsonpollutingfactories;• wage a public education campaign and inform citizens of the

problem. Such education could lead voters to support moreenvironmentallymindedcandidatesinthefuturewhowouldsupportnewlawstocorrectproblemslikethisone.

In weighing these various alternatives to see which is best, thecommunitymembersmustconsideravarietyoffactors:

•Whichismostaffordableandfeasible?•Whichwillhavethemostimpactintheshortestamountoftime?•Iftheysucceedinclosingdowntheplant,howmanypeoplewilllose

theirjobs?

ThesetypesofquestionsmustbeansweredforeachalternativebeforeaBATNAcanbedeterminedinacomplexenvironmentaldisputesuchasthis.Considertoothealternativesavailabletotheotherside.ThirdpartiescanhelpdisputantsaccuratelyassesstheirBATNAs through

realitytestingandcosting.Inrealitytesting,thethirdpartyhelpsclarifyandgroundeachdisputingparty’salternativestoagreement.

Summary

Specificknowledgeofsourcesofpower,territorialgames,thewayinformalandformalleadersinteractandthebarrierstocollaborativeworkingallhelpleadersget to successfuldesign implementation.But technicalknowledgeabout leading organisation design projects is not enough. Leading designprojectsalsotakesgutsandagreatdealofawareness–ofselfandofothers–tocarrythingsthrough,keeponlearning,admitfallibilitiesanddealwithconsequences.NASA’sWayneHaleinane-mailtostaffdescribeshisworldof leading space projects – any organisation design leader will echo histhoughts:30

IhavegiventheGo28times.EverytimewasthetoughestthingIhaveeverdone.AndIhavenevereverbeen100percentcertain,ithas always been gray, never a sure thing. But the team needs tohave confidence that the decision was good. It is almost arequirementtospeakthewordsmuchbolderthanyoufeel,likeitisaneasycall.Thenyoupraythatyouwereright.

8Cultureandgroupprocesses

Organization doesn’t really accomplish anything. Plans don’taccomplishanything, either.Theoriesofmanagementdon’tmuchmatter.Endeavorssucceedor failbecauseof thepeople involved.Onlybyattractingthebestpeoplewillyouaccomplishgreatdeeds.

ColinPowell,formerUSSecretaryofState

IN MOST CASES a “visioning” process kicks off an organisation designproject. In these sessions executives and others gather to “blue-sky” theneworganisationdesign, describe the ideal future state, and layplans forbecomingthe“bestwecanbe”.In these and subsequent sessions the cultural and group processes –

typically the hidden dangers that block the route – are not discussed.Because they are caught up in the mindset of the “infinite possibility”,participants choose not to acknowledge that the path between the currentstate and their desired future state is perilous and that they are often ill-equipped to take it. Unless design leaders ask and answer the sorts ofquestions listed below, they will be exposed like those Scott Fitzgeralddescribes in The Great Gatsby as careless, smashing up things and thenretreatingto“letotherpeoplecleanupthemesstheyhadmade”:

•Howmuchisorganisationaldesignsuccessdependentonfactorssuchaslocalculture(bothnationalandorganisational)andhumanfactorssuchaspersonalities?

•Whatspecificaspectsofanorganisation’sculturegetinthewayofachangeprocess?Howarethesetackled?

•Aregroupprocesses–decision-taking,makingsoundjudgmentsandmanagingconsequences–effective?

Gettingtheculturalandprocessaspectsofanorganisationdesignjourneyrightischallenging.ErnestShackleton’sapocryphaladvertisementformen

toaccompanyhimtotheSouthPolein1914ontheEndurancewasratherdifferentfromthevisionstatementofmostorganisationdesignprojects:1

Men Wanted for Hazardous Journey, Small Wages, Bitter Cold,LongMonthsofCompleteDarkness,ConstantDanger,SafeReturnDoubtful.HonourandRecognitioninCaseofSuccess.

In mid-trip the Endurance was crushed by ice. Circumstancesnecessitated a complete new organisation design, including a change ofpurpose.(Somewouldsayatthispointthattheirprojecthadfailedbecauseitdidnotachievetheintendedmission.However,itillustratesthepointthatfailure is relativeandmustadapt tocircumstances.) In theeventandaftermonthsofenduringstaggeringlyharshconditions, the28-man teamunderShackleton’sdirectcommandreturnedsafely.To achieve this took strong group processes and a robust, well-

functioning organisation culture. Indeed, Shackleton’s report of the triptendstomentiononlythepositiveaspectsofthese–friendlyfootballgamesontheice,andsoon.2However,arecentperspectivebyKellyTyler-Lewis,writingabouttheexpedition’sbase-campparty(membersofwhomdidnotaccompanyShackleton’steam),suggestsalessrosypicture:3

Shackleton’s lack of clarity about the chain of command pittedMackintoshagainsthissubordinate,ErnestJoyce.“Ihaveneverinmyexperiencecomeacrosssuchanidiotinchargeofmen!”Joycewrote,whilerefrainingfromoutrightmutiny.

Bothperspectivesareprobablyright.However,imaginethelikelihoodofexpedition success if groupmembers had started with less of an idea ofwhattheywerelettingthemselvesinforandthen:

•blamedsomeoneelseforthesituationtheywerein(ablameculture);•wantedtohearonlygoodnews(agood-newsculture);• refused todiscussaspectsof theexpedition (theshadowsideof the

organisation);•wereunabletomakequickdecisions;

•failedtosolvetheproblemstheyfaced;•escalatedratherthanmanagedconflicts.

Oneormoreofthesesixfactorscommonlyblocksanorganisationdesignimplementation. (Note that the first three relate to the culture of theorganisation and the second three to group processes.) Clearly, there areotherblockersandsomearediscussedinpreviouschapters–forexample,leadershipissuesorstakeholderconcerns–butrealisticappraisalofaspectsof culture and group process followed by effectivemanagement of themgoes some way towards achieving either the desired outcome of anorganisationdesignorbeingsuccessfulinitsfailure.ShackletonacknowledgesasmuchintheclosingsectionofSouth:4

Thatwe failed in accomplishing theobjectivewe setout forwasdue,Iventuretoassert,nottoanyneglectorlackoforganization,buttotheoverwhelmingnaturalobstacles…Tothecreditsideofthe Expedition one can safely say that the comradeship andresource of the members of the Expedition was worthy of thehighest traditionsofPolarservice;anditwasaprivilegetometohavehadundermycommandmenwho,throughdarkdaysandthestress and strain of continuous danger, kept up their spirits andcarriedouttheirworkregardlessofthemselvesandheedlessofthelimelight.

This chapter looks at three aspects of organisation culture – blameculture,good-newscultureandtheshadowsideculture–andthenat threegroup processes – making decisions, solving problems and dealing withconflict.

Organisationalculture

It is surprising how few of the organisation design models shown inChapter 2 specifically mention culture. They focus on aspects oforganisationdesignthatareexplicit,whereasmuchaboutcultureisimplicitanddifficult todescribebecauseit issociallyconstruedandmanifestedinnorms, behaviours, expectations and “thewaywe do things round here”.

Nevertheless, as Edgar Schein says in The Corporate Culture SurvivalGuide:5

Culture matters. It matters because decisions made withoutawarenessoftheoperativeculturalforcesmayhaveunanticipatedandundesirableconsequences.

ThinkingaboutorganisationalcultureatthreedistinctlevelsasshowninTable8.1makesiteasiertogainawarenessoftheoperativeculturalforcesthataffectneworganisationdesignimplementation.

Table8.1ThreelevelsofcultureArtefactsandbehaviours

Thisistheobservablelevelofculture,whichconsistsofbehaviourpatternsandoutwardmanifestationsofculture:perksprovided toexecutives;dresscodes;whogets the latest technologydevice;and thephysicallayoutofworkspaces.Allmaybevisibleindicatorsofculturebutdifficulttointerpret.

Espousedvalues

Valuesunderlieand toa largeextentdeterminebehaviour,but theyarenotasdirectlyobservableasbehavioursare.Theremaybeadifferencebetweenvaluestatementsthatorganisationsmakeandthevaluespeopleusefromdaytoday.Peopleattributetheirbehaviourtounderpinningvalues.

Assumptions Assumptionsderivefromvalues,whicharedifficulttoidentifyastheyaretakenforgrantedanddropoutofawareness.Peoplemaybeunawareoforunable toarticulate thebeliefsandassumptions formingtheirdeepestlevelofculture.

Source:Schein,E.H.,OrganizationalCultureandLeadership,3rdedn,Jossey-Bass,2004

Organisationdesignworkhasagoodchanceofsuccesswhenculturesarealigned, collaborative and open at all three levels. Take the example ofMicroStrategy, a builder of business intelligence software, which wasforced intodesignchangefollowingan investigationby theUSSecuritiesandExchangeCommission.

MicroStrategy:aforceddesignchange

Nearly every element of MicroStrategy’s business model has beensubjected to scrutiny and forced to change.But amidst these deep-seatedstrategic reforms, one element of the organization has remained intact sofar:itsequallydeep-seatedcultureandvalues.Thefactthatmostemployeeswereabletokeeptheirheads,evenassome

headswererolling,confirmedforSaylor[founderandCEO]thatforallof

hismistakes, he and his senior colleagues had done one important thingright. Their obsession with building a sense of shared purpose, theircommitmenttoschoolingalloftheirpeopleinthebig-picturevisionbehindthecompany’sbusiness,and theirwillingness tospendmillionsofdollarsand hundreds of hours of CEO time to create a sense of sharedresponsibility,hadbecomethegluethatheldthingstogether.“The past 12months have really shown that culture is by far themost

important thing in a company,” Saylor says. “If we had constructed aculturethatwasbasedsolelyonstockpriceoronprestige, therewouldn’tbe a reason to be here now. At the end of the day, the thing that drivespeoplethroughallofthispainandturmoilisthebeliefthattheworldisabetterplacebecauseofwhattheydo.”

Source: Salter, C., “Updating the Agenda: MicroStrategy Inc.”,FastCompany,May2001

Culturesthataremisaligned–forexample,wherethereisastatementofvaluesbutthesearenotseeninpractice,orarenotopen,forexamplewherethere is finger-pointing and back-biting –must be changed as part of theorganisationdesignprocessifthereistobeanychanceofsuccess.Culture change is easy to effect atone level, for examplechanging the

dress-code, or giving everyone the same size of office or workspace.Changingbehaviour isharderand takes time,patienceand resilience–asanyonewithchildren(ordogs)knows.ATVseries,SuperNanny,providesamodel for behaviour change that organisation designers could well learnfrom:6

Her simple methods stress consistency, communication andreasonable consequences for poor behaviour, all delivered withlovingfirmness.Sheemphasizestheimportanceofspellingoutthenew rules of the household to children in advance, as well asexplaining the consequences for infractions. She also candidlypoints out to parentswhere they need to bemore decisive,moreflexibleorevenhowtheymayneedtoadjusttheirexpectationsofachild’sreadinessforcertainbehaviours.

However,aswithindividualssowithorganisations:itgetsprogressivelymoredifficulttochangeespousedvaluesandassumptionsanditisattheselevels that culture change is either not addressed in organisation designprojects and/or fails to take root. Three types of culture which areparticularly hostile to new organisation design and thus are essential tochange are the blame culture, the good-news culture and the shadowsideculture.

Theblameculture

Briefly, a blame culture is one where there is a search for someone orsomething to attribute lapses, mistakes or misdeeds to. In other words,people in a blame culture seek to pin responsibility, usually for awrongaction,onsomeoneorsomethingotherthanthemselves.Theexampleoftheresponsetoaninternetvirus,discussedinrelationto

a generalised “software culture” similar to that found in manyorganisation’s IT departments, illustrates the fact that blame cultures costmoney,cutproductivity,hinderinnovationandlearning,builddysfunctionalrelationshipsandstemtheflowofgoodinformation.

Blameculture:responsetoaninternetvirus

Thiswinter[2003],awormknownasSlammerrattledtheinternetviolentlyenough to becomewhat youmight call a “CNN-level virus” – that is, itburroweditswayintothenationalconsciousness.The old game was to blame Microsoft. “Microsoft did not protect its

customers”,readalettertotheNewYorkTimesaftertheMelissavirushitin1999.Ayearlater,aftertheILoveYouvirusinfectedMicrosoftOutlook,aWashington Post editorial stated: “This is a software developmentproblem.”Slammer, though, hasn’t followed the old pattern. A developing

consensualwisdomsuggeststhataswoefulasMicrosoft’sproductsmaybe,CIOs have been equally sloppy. A February poll of more than 200 ITprofessionals, by antivirus company Sophos, showed that 64% of

respondents blamed their peers’ lax security practices for Slammer. Only24%blamedMicrosoft.What frustrates … security experts is the fact that this seemingly

intractable problem is actually quite tractable. The tools and strategies topreventanotherSlammerarejustwaitingtobeused.Infact,thenumberoftoolsandstrategiesavailable–andavailableatareasonablecost–makesitinexcusableforanyCIOtofiddlewhilethesoftwareburns.Thereis,afterall,$60billiononthetable.A2002studybytheNational

Institute of Standards and Technology (NIST) developed that number todescribebuggysoftware’scosttothenationaleconomy.Improvedsoftwaretestingalone,NISTsuggests,couldshave$22billionoffthat.Whycan’tthesoftwarecommunitymotivateitselftograballthatcash?

Theanswerliesinsoftwareculture.

Source:Berinato,S.,“TheBugStopsHere”,CIOMagazine,May2003

ThethreelevelsofablameculturetypicallyappearaslistedinTable8.2.

Table8.2ThreelevelsofblamecultureArtefactsandbehaviours CYA(coveryourarse)behaviour

“Ifatfirstyoudon’tsucceed,removeallevidenceyouevertried”

Espousedvalues “Eaglesmaysoarhigh,butweaselsdon’tgetsuckedintojetengines”ThesecretofsuccessisknowingwhomtoblameforyourfailuresNosingleraindropbelievesitistoblamefortheflood

Assumptions PeopleareouttogetyouSomeonewillstabyouinthebackifyou’renotcarefulTheharderyoutrythedumberyoulook

Organisationdesignprojectsdonot succeed inblameculturesbecause,inevitably, the project implementation process hits snags, bottlenecks andunforeseencircumstances.AlthoughShackleton’sexpeditionhitallofthesethe prevailing culturewas not one of blame, illustrating the point that indifficult conditions success relies on a culture of being accountable andtakingresponsibility.Peopleknowthat“thebuckstopshere”andareableandconfident toadmit toerrors,workwith thesituationas it isand learn

from it, not waste time and energy casting around to find someone toscapegoat.An example of successful culture change is Motorola, where CEO Ed

Zanderturnedaroundablameculture.Theorganisationhasseenanumberofchangessincehejoinedin2004,oneofwhichisthewaythatteamshavelearnedtoco-operatetodevelopnewhandsets:7

Cooperationimproved…becauseeachgroupbecamewillingtotrysomethingdifficult thatmighthelp theothers–withoutworryingtoomuchaboutwhowouldgetblamediftheyfailed.

This sort of atmosphere is hard to achieve unless the boss takes itseriously,andunlesseveryone in thecompanyknows that therules reallyhavechanged.ByencouragingMotorola’speopletopushthemselvesinthisway,MrZanderhaschangedthecompany’sframeofmind.

Thegood-newsculture

Similartoablamecultureisthegood-newsculture.Herepeoplerefusetolistentotheoperationalrealitiesofasituationthatisnotgoingasplanned.Thethreelevelsofagood-newscultureareillustratedinTable8.3.

Table8.3Threelevelsofgood-newscultureArtefactsandbehaviours Presentdataselectivelytoshowonlythegoodnews

PushbadnewsunderthecarpetDismissnegativefindingsormakethemmorepalatable

Espousedvalues Youaren’tbeingpaidtodowhatyoubelieveisrightAvoidcandourRemaincocooned

Assumptions You’llbepunishedforbeingthebearerofbadnewsItisacareerlimitertodiscussdifficultiesopenlyThere’snosupportforadmittingerrorsormistakes

Good-newsculturesoftenreflecttheneedofleaderstohavetheirimageofthemselvesassuccessfulleadersbolstered.Consequently,peopleintheseculturesarenotvaluedfortheirsuccessintheirjobsbutfortheirabilitytoprovide evidence that things are going well, do deals and make their

superiors look good. Typically, senior executives are unwilling to hearanythingwhichsuggeststhatthereareproblems.Bob Woodward in his book State of Denial illustrates the good-news

cultureinactioninhisdescriptionofJayGarner,headoftheIraqPostwarPlanningOffice,meetingPresidentBush:8

Ofcoursewithallthestories,jocularity,buddy-buddytalk,blusterandconfidenceintheOvalOffice,Garnerhadleftouttheheadline.Hehadnotmentionedtheproblemshesaw,orevenhintedatthem.HedidnottellBushaboutthethreetragicmistakes.Onceagaintheauraofthepresidencyhadshutoutthemostimportantnews–thebadnews.ItwasonlyoneexampleofavisitortotheOvalOfficenottellingthe president the whole story or the truth. Likewise, in thesemomentswhereBushhadsomeonefromthefieldthereinthechairbesidehim,hedidnotpress,didnot try toopenthedoorhimselfand ask what the visitor had seen and thought. The wholeatmosphere too often resembled a royal court, with Cheney andRice in attendance, some upbeat stories, exaggerated good news,andagoodtimehadbyall.

In another example, the good-news culture prevailing at the NationalAustraliaBankledtomassiveforeign-currencylosses:9

A key finding of both the Australian Prudential RegulationAuthority report and a controversial PricewaterhouseCoopersinvestigation into the currency losseswas the need for sweepingchangestothebank’sculture.Itwasdescribedasbeingtoobureaucraticandfocusedonprocessand documentation, rather than understanding the substance ofissues,“takingresponsibilityandresolvingmatters”.Alllevelsofmanagementwerecriticisedforencouraginga“goodnewsculture”thatcocoonedtopdecisionmakersfrominformationthat might have enabled the bank to avoid a string of corporatemishaps, ranging from the $3.5 billion HomeSide losses to the

currencyscandal.

The issue for people introducing new organisation designs into a goodnewsculture is that they feelpressured tocoverupaspectsof theprojectimplementation thatwouldbebetterexposedanddealtwithbefore itgetstoolateorspinsoutofcontrol.HelenFraser,formerlymanagingdirectorofPenguinBooks,makesthepoint:10

Youhavetomakeiteasyforsomeonetobeabletotellyouthebadnews.Weall likehearinggoodnews,but theyhave tobeable totell you that they havemade themost terriblemistake and knowthatyouwon’tcompletelyloseit.Themistakesmaynotalwaysberedeemable,butyouhopeyouhavelearnedfornexttime.

Theshadowsideculture

InhisbookWorkingtheShadowSide,GerardEgandefinestheshadowsidecultureas:11

All the important activities and arrangements that do not getidentified,discussed,andmanagedindecision-makingforumsthatcanmadeadifference.Theshadowsidedealswiththecovert,theundiscussed,theundiscussable,andtheunmentionable.Itincludesarrangements not found in organisational manuals and companydocumentsoronorganisationalcharts.

Although it appears from this definition that there is somethingwrongabout theshadowside, this isnotnecessarily thecase.Andcharacterisingtheshadowsideintermsofthreelevelsofcultureisnothelpfulasitdoesnotexhibitinthatway.Abetterwayistothinkoftheorganisation’scultureasbeingabrainwithaleftandrighthemisphere:theleftbeingtherational,logical side and the right being the intuitive, and creative. Using thisanalogythetwosidesmanifestasshowninTable8.4.

Table8.4RationalandshadowsidesofanorganisationRationalelements(lefthemisphere) Non-rationalshadowsideelements(righthemisphere)

DirectivesStrategicplansOrganisationchartsJobtitlesPoliciesTrainingcoursesBudgets

TrustFriendshipsJealousyFearandinsecurityPowerstrugglesAmbitionGrapevine

Source:“AnIntroductiontotheShadowSide”,www.organisational-leadership.com/intro_shadowside.cfm

Takingthisbrainanalogy,itisclearthathavingashadowsideisnormalandthatorganisationsarelikelytosurvivebestbyworkingwithbothpartsof the “brain”, in exactly the same way that human potential is realisedthrough the whole brain and not through only one hemisphere.Unfortunately,organisationdesignprojectsareoften initiatedandplannedusing predominantly the rational (left side) of the cultural brain whichmeans that the mess, unpredictability and chaos of day-to-dayimplementation creates anxiety and lack of confidence in project leaders.Thosethathavetheskillstoengageopenlyintherightsideoftheculturalbrainaswellastheleftaremorelikelytoadapt,innovateandfindcreativesolutionsastheyworkontheirdesign.

Groupprocesses

Organisationdesignworkdependsongroupsofpeoplebeingabletoworkeffectively together to meet the project’s goals. This is easier said thandone.Althoughgroupmembersmayknowwhattheyhavetoachieve–theoutcomesorobjectives–theymaylackskillstodoit.Consequently,groupscommonlystallonthingslikemakingdecisions,problem-solving,handlingconflicts, communication and boundary management (which includesobtaining resources, sharing information, admittingpeople into thegroup,and relationships between the group and the widerorganisation/environment). A meeting at Marks & Spencer when SirRichard Greenbury was running the company illustrates difficulties onalmostallthesecounts:12

OneofGreenbury’sformeraidessaid:“ThethingaboutRickisheneverunderstood the impacthehadonpeople–peoplewere justtooscared to saywhat they thought. I rememberonemeetingwehad todiscussanewpolicyand twoor threedirectorsgotmeonone side beforehand and said theywere really unhappy about it.ThenRickmadehispresentationandasked forviews.Therewastotalsilenceuntilonesaid,‘Chairmanweareall100%behindyouonthisone.’Andthatwastheendofthemeeting.”

Group process knowledge and skill in handling interpersonal dynamicsarecriticalcompetencesfororganisationdesignersbecausetheyworkwitha range of groups including project teams, advisory committees, task-forces,steeringboardsandstakeholderconstituencies.Withouttheprocessskills to build confidence, bring people along, generate commitment andhelp people listen to each other, designers will struggle to make theirprojectssuccessful.Reportingannuallyonwhatmakes ITprojectswork–andlargescale IT

implementations are a commondriverof aneworganisationdesign– theStandishGrouphasnotedthatlackofusergroupinvolvementtraditionallyhas been the principal reason for failure. Recognising this, the groupdevelopedaone-dayworkshopcalledTheSixSenses(sight,hearing,touch,smell, taste, instinct),allofwhicharerelatedtodevelopinggroupprocessskillsinITprojectmanagers.Thisisaninteresting,touchy-feelyforayintoaworld traditionally associated with geeks and techies (see Glossary) notknownfortheirpeopleskills.

FirstWorkshop:SenseofSight

Whatisthenecessaryexpertiseaprojectmanagerneedsindevelopmenttobe able to fully use the sense of sight to improve project managementsuccess? Can a projectmanager see the future andmove people and theprocessinwayswithoutcriticizing,condemningorcomplainingtokeeptheproject moving in the right direction? In this workshop we will worktogether on this sense to improve the sense of sight and eliminate blind

spots.

Source: “The Six Senses of Project Leadership”,www.standishgroup.com/events/chaos.php

Aswellasbeingskilledingroupprocesses,designersandmanagerswhodevelopandusethemindsetofacriticalpractitionerastheyworkwillfarebetterthanthosewhodonot.Thismeans:13

•beingconstructivelynotnegativelycritical;•copingwithuncertaintyandchange;•usingknowledgewithawarenessofpersonalbiases;•adoptingnomoraldirection,apartfromthefundamentalprofessional

commitment to social justice for others and empowering, anti-oppressivework.

Developingtheseskillsincriticalpracticeinvolvesfiveinterlockingandoverlapping domains. The InternationalMasters Programme in PractisingManagement (IMPM), a radically different alternative to a traditionalMBA,co-founded by Henry Mintzberg, Cleghorn Professor of ManagementStudiesatMcGillUniversityandauthorofManagersNotMBAs, aims todevelopmanagersabletomanage:14

•themselves(thereflectivemindset);•organisations(theanalyticalmindset);•context(theworldlymindset);•relationships(thecollaborativemindset);•change(theactionmindset).

Thecriticalpractitionermindset that this typeofstudydevelopsshouldbe a mandatory mindset for managers in group situations where peoplehaveatendencytodoextraordinarythingsforgoodorbad.Inmostcasesthegoodthingsgolargelyunrecognised–nonewsisgoodnews–whilethebad things surface, wreaking all kinds of damage. This is cleverly

documented in “The Human Behaviour Experiments”, produced by AlexGibney, in which past social psychology experiments are re-enacted anddiscussed in order to answer questions aboutwhy human beings commitunethicalactsunderparticularsocialconditions:15

Why would four young men watch their friend die, when theycould have intervened to save him?Why would a woman obeyphone commands from a stranger to strip-search an innocentemployee?What makes ordinary people perpetrate extraordinaryabuses,liketheeventsatAbuGhraib?…[Thereis]afiercedebateaboutjusthowmuchthesituation–orthesystem–determinesouractions,andhowmuchindividualpersonalitiesaretoblame.

Three situations particularly relevant to management practice inorganisation design work are the group processes involved in decision-making, problem-solving and managing conflict, where an experiencedcriticalpractitionercanhelpheadoffdisasterandnavigatetowardssuccess.

Decision-making

Decisionsaretheessenceofmanagement.They’rewhatmanagersdo–sitaroundalldaymaking(oravoiding)decisions.Managersarejudgedontheoutcomes,andmostofthem–mostofus–haveonlythefoggiestideahowwedowhatwedo…decisionmakingisakindoffortune-telling,abetonthefuture.

ThomasStewart16

Making this kind of bet on the future is risky. Take the case of HewlettPackard,alargecomputerandprintercompany,whoseCEOMarkV.Hurdmadethedecisiontoapproveanelaborate“sting”operationonareporterinFebruary 2005 in an attempt to plug leaks of competitive and sensitiveinformationtothemedia.AccordingtotheWashingtonPost:17

Internal e-mails show senior HP employees who were given the

taskofidentifyinganonymousnewssourcesconcoctedafictitious,high-level HP tipster who sent bogus information to a SanFrancisco reporter in an attempt to trick her into revealing hersources.

In this instancewhat startedoff as an apparentlygooddecision to findout how the leaks occurred resulted in an internal investigation into thestingoperationthatthenledtocriminalprobesandbecamethesubjectofacongressional hearing. Hurd explains in his Congressional WrittenTestimonyonSeptember26th2006:18

WhatbeganasaproperandseriousinquiryofleakstothepressofsensitivecompanyinformationfromwithintheHPboardbecamearogue investigation that violatedHP’s ownprinciples and values.Thereisnoexcuseforthis.…Howdidsuchanabuseofprivacyoccur inacompanyrenownedforitscommitmenttoprivacy?Theendcametojustifythemeans.Theinvestigationteambecamesofocusedonfindingthesourceoftheleaksthattheylostsightoftheprivacyofreportersandothers.TheylostsightofvaluesthatHPhasalwaysrepresented.

The resultof thiskindof reputationaldisaster,whichhaswide-rangingrepercussionsinrespectofshareprice,employeetrustinmanagement,andsoon, inevitably leads toorganisationdesignworkas rolesandprocessesare realigned to keep the business stable.Hurd, continuing his testimony,explainsthemeasurestaken:

WehaveappointedBartSchwartz,theformerheadofthecriminaldivisionoftheUSAttorney’sOfficeunderRudyGiuliani,todoanassessmentofcurrentpracticesanddevelopfuturebestpracticessothat our processes will always be legal, ethical, appropriate andwithoutpeer.We are putting into place new measures to maintain the highestlevels of information privacy. Letme elaborate on those internalpolicies.

Inanattempttominimisetherisksinherentingroupdecision-makinginorganisations, various tools and techniques are brought into play.Simplifying considerably, these come from two schools of thought: first,teachingthatgooddecisionscomefromastructured,analyticalandrationalapproach; second, teaching that decisions are made in a naturalistic wayinvolving experience, intuition, sense-making, and so on. Generally,managers are taught to make organisational decisions using the first – astructuredwayofgettingtoasituationaldecision.AcommonmethodistheVroom-Yetton-Jagomodelofdecision-making,whichhastwosteps:19

Step1:Answersevenquestionsinorder.Eachquestionhasonlyayesornoanswer.Follow the treediagramshown(Figure8.1) from left to right.Thequestionsare indicatedon the toprowbya letterof thealphabetandthe boxes in the column under each letter indicate the point to ask eachquestion.

•A.Isthequalityofthedecisionimportant?• B. Is there sufficient information to make a high-quality decision

rightnow?•C.Istheproblemstructured?• D. Is acceptance of the decision by subordinates important for

effectiveimplementation?• E. If the leader was to make the decision by him or herself, is it

reasonablycertainthatiswouldbeacceptedbysubordinates?•F.Aresubordinatesmotivatedtoattainorganizationalgoals?•G.Aresubordinateslikelytodisagreewithproposedsolutions?

Step2:Applyoneofthedecisionprocessesthatisshownattheendofthepaththroughthetree.Therearefivepossibleprocesses.

Table8.5DecisionprocessesAutocraticdecision-making

AI:Leadermakesdecisionwithcurrentinformation.AII:Leaderobtainsneededinformationfromsubordinates,thenmakesthedecisionhimorherself.

Consultingdecision-making

CI:Leadershares theproblemwithsubordinates individuallyandgathers their input.Leadermakesthedecisionthatmayormaynotreflecttheirinput.CII:ThesameasCIbuttheleadergathersinputfromsubordinatesinagroup.

Groupdecision-making

GII: The leader shares the problem with subordinates as a group. Collectively, group membersgenerateandevaluatealternatives.Theychooseasolutionthathasgroupconsensus.

For example, in the case where the quality requirement is low (forexample,thenatureofthesolutionisnotcritical),choosethe“no”branchat point A. If in reference to question D acceptance of this decision bysubordinatesisalsonotcritical,choosemethodAI.AlternativelyatpointD,ifacceptanceiscritical,askquestionEregardingcertaintyofacceptanceifthe decision is made without reference to others. If people are likely toacceptthedecision,againchoosemethodAI.If,however,acceptanceofthedecisionisnotreasonablycertain,optforaconsensualgroupmethod(GII)

tohelpovercomethis.Thenaturalisticmethodsuggeststhatdecisionsaremadeinamuchless

analyticalwaydrawingonarangeofsources.GaryKleinpresentsamodel(Figure8.2) forassessingwhethera teamis likely tohavegooddecision-makingprocesses.20Theanswerstothequestionsineachofthefourareasgiveanindicationofthesoundnessofateam’sdecision-makingprocess.

Inthisnaturalisticmodelateamwithasoundprocessusuallyhas:

• high skill levels, and shared practices and routines (teamcompetencies);

•agoodsenseofwhattheycollectively,ratherthanindividually,ownandcontrol(teamidentity);

• a sharedunderstandingof the situation theyare inwithmethodsof

communicatingchangesandpreparingforthem(teamcognition);• an ability “to create new and unexpected solutions, options, and

interpretations, drawingon the experience of all teammembers togenerate products that are beyond the capabilities of any of theindividuals”21(teammetacognition).

Researchingthecharacteristicsofteamdecision-making,Kleindescribesateamofnewlyorganisedwildlandfirefighterswithgoodprocesses:22

MarvinThordsenwason locationduring a forest fire in Idaho, alarge one that covered six mountains. He watched the commandstaffassembleateamof4,000firefighters,drawingthemfromalloverthecountry.Theyputtogetheraworkingorganisationinonlyafewdaysandsentthemouttofightthefire.Itishardtomanageanintactorganisationof4,000people,togivedirectionsandmakepolicies,eveninstableandsafebureaucraticsettings.Here,inlessthan a week, theywere building that organisation and trusting itenoughtorisklives.Whyaretheysogood?…The command staff met twice a day tomake difficult decisions.Afteryearsofworking together, the teammembersknewhow toplantogether.Theydidnotwastetimeonpoliteness,andtheiregoswerestrongenoughto takecriticismwithoutbristling.Theywerealsosensitivetoissuesofmorale.Someonewhodisagreedwiththecommander’sactionwouldconfrontthecommanderinthemeetingonly if it was necessary. Otherwise, the disagreement would beexpressed in private. They did not want to waste staff time onlower-priorityfightsorcreateafeelingofdivisiveness.

Inrealityteamsuseablendofthetwoapproaches,sometimeshelpedbytechnologytoolslikeDecisionLensorCogNexus,bothallowinggroupstoparticipateinarangeofdecision-makingsituationsbyidentifyingdecisionoptionsandenablingelectronicvoting.Because organisation design work is complex and involves decisions

being made across a range of objectives, processes, policies, systems,technologies,skills, incentives,andsoon(seeFigure1.2),makingdesigndecisions usually requires trade-offs whatever the method used. John

Mackey, CEO ofWhole Foods, a US natural and organic food retailer, isdesigninganexpansiontohisorganisation.Hisanswertothequestion“Arethere sustainablemeasures that youwish you could implement, but can’tbecauseofpracticalbottom-lineconcerns?”illustratesthis:23

If you speak to the totally pure, you will cease to exist as abusiness.Imadethesedecisions25yearsago.Myfirststorewasalittle tiny store called Safer Way. I opened it in 1978. It was avegetarianstore.Wedid$300,000insalesthefirstyear.Andwhenwemadethedecisiontoopenabiggerstore,wemadeadecisiontosell products that I didn’t think were healthy for people – meat,seafood,beer,wine,coffee.Wedidn’tthinktheywereparticularlyhealthy products, but we were a whole food store, not a “holyfood”store.We’reinbusinessnottofulfilsometypeofideology,buttoserviceourcustomers.

Going through a process gives a group the opportunity to look at adecision from various angles and consider the consequences of differentcourses of action. But even a good process is no guarantee of a goodoutcome.Thevalueoftheprocessliesin“checkingtheresultsofadecisionagainstitsexpectations,showingexecutiveswhattheirstrengthsare,wheretheyneedtoimprove,andwheretheylackknowledgeorinformation”.24

Problem-solving

Some problems are so complex that you have to be highlyintelligentandwellinformedjusttobeundecidedaboutthem.

LaurenceJ.Peter,ThePeterPrinciple25

Fromthemomentthedesignworkisconceived,organisationdesignteamsare faced with problems that may be latent, showing signs of becomingproblems,oralreadyevident(seeFigure8.3).

Atwhatever stage they are, the problemsmay have existed before the

projectwasconceivedortheymayariseatanystageduringtheprogressoftheproject.Thismeansthatorganisationdesignteamsneedtheskillto:

• anticipate problems before they emerge – this is linked to riskassessment;

• identify the symptoms of a problem early enough so it can bemanaged before it gets bigger – an analogy here is containing agrievancebeforeitdevelopsintoastrike;

•takeactiononanevidentproblem–oftendesignworkfocusesononeaspectwhileignoringothers.

TheBPexample illustratesanorganisation thathadproblemsateachofthestagesshownabove.

BP:problemsateverystage

AninterimreportintoafataloilrefineryexplosionaccusesBPofignoring“catastrophic safety risks” and of knowing about “significant safetyproblems”atanother34facilitiesaroundtheworld.The US Chemical Safety Board (CSB), which publishes the damning

findings today, believes thatBPmayhavebeen aware for years ofmajorproblems at its Texas City refinery, which exploded in March last yearkilling15workersandinjuring180.Carolyn Merritt, the CSB chairman, said: “The CSB’s investigation

shows that BP’s global management was aware of problems with

maintenance,spendingand infrastructurewellbeforeMarch2005.BPdidrespondwithavarietyofmeasuresaimedatimprovingsafety.However,thefocusofmanyoftheseinitiativeswasonimprovingproceduralcomplianceand reducing occupational injury rates, while catastrophic safety risksremained.”

Source: Hotten, R., “BP ‘ignored safety risks over refinerydisaster’”,DailyTelegraph,October31st2006

In this case the recognised problem was ignored and people focusedinsteadonimprovingcomplianceandreducinginjuryrates.Theyfailedtoidentifythesymptomsofdisasteratthatparticularplantwiththeresultthattherewasacatastrophicexplosion,andtheydidnotanticipatetheproblem(reputationalandotherwise)thatanexplosionwouldcause.Inotherwords,they did not manage the risks of this. The result of the explosion is aninvestmentofanestimated$1billionoforganisationdesignworkaimedatimprovingandmaintainingthesite.

BP:repairingthedamage

“The report clearly describes the underlying causes and managementsystem failures which contributed to the worst tragedy in BP’s recenthistory,” said Ross Pillari, president of BP Products North America Inc.“Weacceptthefindings,andweareworkingtomakeTexasCityacomplexthat attains the highest levels of safety, reliability and environmentalperformance.”Someof theactions recommendedby the investigation teamhavebeen

completed.Manyareunderway.TexasCitysitemanagerColinMacleanhasestablished a special project team to plan and drive execution of theimprovementprogram.Thecompanywillinstallmodernprocesscontrolsystemsonmajorunits,

transition to amore powerful maintenancemanagement system, improveworker training, remove blow down stacks and implement the otherrecommendationscontained in the final report.Theproject teamwill also

developplansforreconfiguringandsimplifyingtheoperationoftheTexasCityrefinery.

Source: BP press release, December 9th 2005,www.bp.com/genericarticle.do?categoryId=2012968&contentId=7012963

Problem-solving, like decision-making, is best approached in adisciplinedway, selecting toolsandapproachesappropriate foreachstageinthelifecycle(seeTable8.6).NotethatTable8.6showsbothrationalandnaturalistictools.Blendthese

as the situation demands and also realise that although the tools areassociatedwithaparticularstage,thisdoesnotprecludeusingtheminotherstages.Remember,too,thatnomethodcanpredictallpossibleproblemsasMichael Saylor, founder and CEO of MicroStrategy, ruefullyacknowledges:26

Whatadifferenceayearmakes.Saylorisstillyoung,butitseemsas though he’s aged 10 years in 12 months. His dark hair hasstarted to turn gray. He says that he’s much more cautious as aresultofMicroStrategy’smeteoricriseandfall–andmorehumble.While he still answers questions in long, eloquent passages, theysound less like a lecture andmore like a confession. “If Iwas abettermanager,ifIhadhadmoreexperience,ifIwasmorecareful,ifIwasmorecompetent,maybethiswouldn’thavehappened,”heconcedes.“It’slikebeingaparentwhosechildrenwereplayinginthefrontyard,andoneofthekidsgotstruckbylightning,andnowhe’s dead.Youdidn’t have a lightning rodonyour roof, becauseyouwereplanningtotakecareofdoingthatnextyear.Nowpeoplewalkbyyourhouse,point,andsay,‘Look,that’swherethekidgotstruckbylightning.’It’sanawfulfeeling.”

Table8.6ExamplesoftoolsforeachstageofaproblemlifecycleProblemlifecycle Groupprocesstoolsforeachstage

Anticipate problemsbeforetheyemerge

Usetoolsandapproachesassociatedwithriskassessment:BrainstormingQuestionnairesBusiness studies which look at each business process and describe both the internalprocessesandexternalfactorswhichcaninfluencethoseprocessesIndustrybenchmarkingScenarioanalysisSimulationexercisesRiskassessmentworkshopsIncidentinvestigationAuditingandinspectionHAZOP(HazardandOperabilityStudies)a

Identify the symptomsofaproblemearly

SpottinganomaliesPatternrecognition“Connectingthedots”Usingintuition–“somethingdoesn’tsmellrighthere”TrackingtrendsSeekingconfirmatoryordisconfirmatoryinformationComparisonofpastandcurrentexperienceSeeingtheinvisibleFilteringoutnoise

Take action on arecognisedproblem

Use tools and approaches associated with Six Sigma DMAIC (define, measure, analyse,improve,control)methodology,eg:KaizenSIPOCWork-OutParetoChartRegressionAnalysisCauseandEffect/FishboneDiagram5Whys

aTheInstituteofRiskManagers,TheRiskManagementStandard,2002,availabletodownloadfromwww.theirm.org

Managingconflict

Those involved inorganisationdesignprojects frequently find themselvesinconflictwithothers.Recognisingthatconflictisinevitableandlearningtomanageitconstructivelyratherthantryingtoavoiditiscritical.RichardDuran, senior director of human resources at Ben & Jerry’s Homemade(boughtbyUnileverinApril2000),makesthepoint:

Ihavecometoexpectit[conflict]asapartofmyeverydayroutineindealingwithbusinessissues.Ifwewalkawayfromconflictanddon’t understand it, we are doomed to repeat and recreate theconflict. Not working through problems just slows down theprocess of understanding. Avoiding conflict creates tension andfrustration.Ontheotherhand,ifIworkthroughtheconflict,Icanbothunderstand theother person’s point of viewand expressmyperspective. The process then begins to build trust andunderstanding.Iwouldnotbesuccessful,orasurvivor,ifIdidnotdealwith conflict openly. Itwould eatmeup insideor causemepoliticalproblemswithintheorganization.

People’sattitudestoconflictdependonarangeofvariables–whatwillinflameonepersonmaynotevenbenoticedbyanother.Conflictsaremostlikely to occur when a person or a group feels that their social,psychological, emotional, physical or other space is threatened, and onlysome form of dialoguewill resolve the conflict. There are six steps in aconflictcycle(seeFigure8.4).

Conflictisoftenthoughttobeanegativegroupdynamic,butifmanagedeffectivelyatstepsfourandfive(interpretationofsituationandresponsetosituation),itcanbepositive(seeTable8.7).

Table8.7PositiveandnegativeoutcomesofgroupconflictPositiveeffectsofconflict Negativeeffectsofconflict

CausesproblemstosurfaceandbedealtwithClarifiespointsofviewStimulatesandenergisesindividualsMotivatesthesearchforcreativealternativesProvidesvividfeedbackCreatesincreasedunderstandingofindividualconflictstylesTestsandextendscapacitiesofgroupmembersProvidesamechanismforadjustingrelationships

FrustratesindividualsReducescooperationDestroystrustDiminishesperformanceandmotivationCauseslastingdamageCommunicationbreakdownBuildsstressBreaksuprelationships

Source:Mitchell,R.C.,“ConstructiveManagementofConflictinGroups”,2002,www.csun.edu/~hfmgt001/cm_gp.htm

Individual conflict style and the process a group uses for managingconflict have the greatest impact on the outcome of a potential conflictsituation. It is therefore helpful to know what individual and team rolestylesareandhowconflictstylescanbeassessed.Thereareseveral toolsandmodels available for individual conflict style assessment,most basedon a five-mode responsemodelwith two dimensions (see Figure 8.5).ApopularoneistheThomas-KilmannConflictModeInstrument.27

Inthismodelthe“concernforself”axisisthedegreetowhichaperson

aimstosatisfyhisorherpersonalconcernsorneeds,andthe“concernforothers”axisreflectshowmuchsomeoneisconcernedwithmeetingothers’needsorconcerns:

• The competing or dominating style emphasises winning at theexpenseofotherpeople–itishighlyassertiveandunco-operative.

•Thecollaboratingor integratingstyle involveshighconcernforselfandhighconcernforothers–itisbothassertiveandcooperative.

•Theavoidingorneglectingstyleshowslowconcernforselfandlowconcernforothersevidencedbywithdrawal,denialorsidesteppingconfrontations.

•Theaccommodatingorappeasingstylereflects lowconcernforselfandhighconcernforothers,akintoself-sacrificingandacquiescing.

•Thesharingorcompromisingstyleshowsmoderateconcernforselfand for others. It takes a middle ground that involves tradingconcessions,splittingthedifference,andsoon.

A tool such as Belbin’s team-roles, which is an inventory designedaroundnineclusters(team-roles)ofbehaviour,eachhavingacombinationof strengths and areas for development, can be used to assess the partindividualsplayingroups.28Usingthisformofassessmentincombinationwith an assessment of team-member conflict style is a powerful way ofthinkingaboutmanagingconflictsthatmayarise.Someinterestingresearchby Aitor Aritzeta, Sabino Ayestaran and Stephen Swailes, who used theBelbinteam-roletool,suggeststhat:29

Creating a high performing work team is not just about puttingwell-trainedindividualstogetherandgivingthemtheautonomytotake decisions. Such teams also need to be built in acomplementary way where different team role preferences arepresent and individuals have the abilities to manage conflict.Knowing how team role preferences are related to conflictmanagementstyleswillhelppractitionerstobuildbalancedteams.

Otherways ofmanaging conflict focus on the processes and strategiesusedbyparticipantseitheratthepointofconflictorastheconflictescalatesupthemanagementladder.30Strategiesformanagingatthepointofconflictinclude:

•devisingandimplementingacommonmethodforresolvingconflict(forexample,collaboration,mediation,teamcounselling);

• providing people with criteria for making trade-offs (for example,betweenspeedingettinganewprocessupandrunningandensuringitsseamlessintegrationwithexistingones);

• halting the escalation of conflict, rather than accepting it, andcoachingpeople tomanage itat their level. IBM, forexample, runstrainingprogrammeswithback-upresourcesforstaff.Oneoftheseliststhetypesofconversationsthatmightoccurandsuggestssomemethodsofmanagingthese.

Strategiesformanagingconflictastheystarttoescalateinclude:

•establishingandenforcinga requirementof jointescalation (that is,

people present a disagreement jointly to their manager ormanagers);

• requiringmanagers to resolve escalated conflicts directlywith theirpeers;

•makingtheprocessforescalatedconflictresolutiontransparent.

JamieDimon, CEO of JPMorgan Chase, notes his way of stopping theescalationofconflictsashedesignsthecompanytobelessbureaucratic:31

You have all these meetings, and people come and see youprivatelyafterwardandsay,“Well,Iknowwhatwesaidthere,buthere’swhatIreallythinkaboutit.”Andmyreactionis,“Hey,amIyourmessenger?Youcouldn’tsayitinthemeeting?”Theresponseis,“Well,Ithoughtso-and-sowouldgetupset.”AndIsay,“Idon’tcare whether he or she gets upset. Say it next time.” I have noproblemwith someone coming in and saying, “Hey,wemet.Wedon’t agree. Here are the facts on which we agree; here are thethingswedisagreeon.Canwe talkabout thisnow?”That’swhatmaturemanagementdoes.

CASESTUDY:managementofrolesandconflicts

Enterpriseaccess.org is the official business link to a major westerncountry’sgovernment,andismanagedbytheDepartmentofEnterpriseinapartnership with more than 20 other government departments. Thispartnership, known as Enterprise Access, is an initiative that provides asingle access point to government services and information to help thecountry’sbusinesseswiththeiroperations.Enterprise Access initially focused on starting, growing and financing

smallbusinesses.Morerecentlyuserssaid theyneededhelp incomplyingwithgovernment regulations, aneed thatwasnotbeingmetbyanyothergovernment programme. To meet that need Enterprise Access was

relaunchedtoprovideaone-stopcomplianceassistanceshopforbusinesses.It held over 20,000 compliance-related documents from 94 governmentwebsitesandforthefirsttimebusinesseswereabletogotoasinglewebsiteforalltheircomplianceassistanceresources.Onebusinessownerreported:

It’sarealbreakthrough.I’vebrowsedthesiteandalreadyIcanseeit’sgoingtosavemehoursoftimeandalotofmoney.Themazeofstuff I have to submit to comply is a nightmare and Iwas neversureifIgotitright.Theburdenhasalmostputmeoutofbusiness,butwith this resource and theway it’s organised I don’t have toknowwhichofthe90ormoredepartmentstocontact,ornavigatemillions of documents returned fromgeneralweb directories andsearchengines.

The team behind the portal’s new look comprised Enterprise Agencystaff and external consultants and the project had not gone smoothly.MalcolmSilcock,theprogrammemanager,said:

Quitehonestlythishasbeenadifficultproject.Ontheclientside,we’ve had five changes in the client we reported to, thegovernment stakeholders have been inconsistent and unreliable,we’vehadtohandlealotofbudgetunknownsbecausethefundingcomes from the 20 partnering departments which all have theoption to withdraw funding. On our side, our company wasacquiredwhichhas led to team turnoverwithall thatentails, andweweren’tsureforalmostayearpreciselywhattheprojectaimedtoachievewhichcausedalotoftensionandin-fighting.I clearly remember the day when we had everyone together andfinally nailed the direction. It was a real turning point. Peoplestoppedblamingeachotherforhold-upsandtherewasareductionin gossip and emotional responses. Other issues remainedunresolvedbutoncewehadacommongoalwebecamemotivated.Westartedtosay“let’sdothistogether”, insteadof“thisisnevergoingtowork”.I’mreallyproudthatwe’veachievedthefirstgoalofgettingthesiterenewedandrelaunched.Nowourtaskistodrivetraffictothesiteandgivetheusersgoodreasonsforreturning.Ina

year from now I’d like to be seeing an extended user base andhearingsuccessstoriesthattheyputdowntothesite’scontentandeaseofuse.

To recalibrate the project (starting again but fromwhere the companywasthen)andsetthetoneforthenextphase,Silcockdecidedtorunaone-dayworkshop:

WhatI’dliketocomeoutofitisthatwehaveacommonviewofwhatthecurrentsituationis,andwhatwewouldliketoachieveinthecomingyear.Todothisweneedtoagreewhyweshouldbotherworkingtowardsthis–what’sinitforalltheplayers?Ofcourseitcan’tbejustatalkingshop,wealsoneedtodraftahigh-levelplanofwhatworkhas tobedone togetherwitha timelineandcriticalmilestonessowe’reinabetterpositiontorespondasthesituationchanges.

Silcockandthefacilitatorhebroughtintoorchestratethedaycarefullydesigneditinthespiritofappreciativeinquiry(seeChapter2).Theopeningsessionincludedquestionslike:Whatdoyoumostenjoyaboutyourwork?What works well in the team you currently work with? What surprisedparticipantswastheirrealisationthattheyhadsuccessfullymettheirtargetbecause, for the most part, once they had an agreed direction they hadmanaged to achieve anopen teamculturewhere they shared information,soughtcreativesolutionstoissuesandvaluedthediversityintheteam.The morning progressed in a similar vein, and the client manager

reported:

My eyeswere really openedwhenwe did that transferable skillsexercise[seeToolsforthiscasebelow]whereweallidentifiedthethree or four things we were most competent at and I saw howmuch capability we had available to us. It made me see moreclearlythatpeoplearewireddifferentlyandthatwecouldusethisdiversitymoreeffectively.Inthediscussionwehadaboutsomeoftheconflictswe’dhadIcouldseethatalotofitwasprobablyduetopeopletryingtoplacetheirstandardsonothers.Alsowe’dbeen

underverytighttimepressurestogetthesoftwarerightanddidn’ttake time to have face-to-face discussions.Hadwe done thatweprobablywouldhaveidentifiedtherootproblemsandsolvedtheseratherthanarguingaboutthesymptomswehadtodealwith.

Theexerciseoncapturingachievementstodateledtootherinsights.Thesoftwarearchitectsaid:

What I enjoyed hearing was not just the range and level ofachievementswe’dhadbutthediscussionaroundwhatmadethesepossible.Itpulledoutthereasonswhyweweresuccessfulinsomeaspects and suggested that if we applied similar approaches inthosecaseswherewe’dhaddifficultiesthingsmighthaveworkedoutdifferently.Forexample,Irememberatremendousblow-upintheearlystageswhenthetechnicalsolutionfailedonallcounts–Idon’tthinkwerealisedthatsomeofwhathappenedwasduetoournot defining our terms properly. There was frustration becausesomeofourpartners felt their territorywasbeingencroachedon,andweworriedtoomuchabout tryingtohideourproblemsfromtheclientratherthansharingopenlyandhonestlywhatwasgoing.The client, whowas our point of contact at that stage,was verydifficult too. To protect ourselves we felt obliged to hide all theissuesfromhimashecouldn’tcopewithanythingbutgoodnews.Thisledtoallkindsofcomplicationswhich,withthecurrentclientmanager, we simply don’t have. Her view is that an unhealthyculturedevelopsifpeoplecan’texpressopenlywhat’sgoingon.

The afternoon session focused on the practicalities of drafting a high-levelplan,andagaintothesurpriseofsomeoftheparticipantsthesessionransmoothly.Itbeganwiththefacilitatorremindingpeopleofsomeoftheattributesforgroupsuccessthatparticipantshadidentifiedinthemorning:listeningcarefullybeforeresponding,stickingtotheissuesinhand,keepingthebehaviourandvocabularylevel,notoverreacting,andcallingtrucesforrethinking,coolingoff,orrecovering.Sixmonthsaftertheeventtheprogrammemanagercommented:

I had in mind what the streams of work should be but as thediscussion progressed I started to change my mind, and in fact,stoppedeventhinkingaboutmysolutionandwentwiththeflowofthegroup.ItmadealotofsensebecauseIwasnewtotheprojectandthey’dallbeenworkingonitforvariouslengthsoftime.Whatwe came upwithwas radically different fromwhat I planned topropose but I could see how itmade sense to start from a cleanslate.What wasmore important was that we arrived at a jointlyagreedsolutionthateveryonesubscribedto.ImustadmitthatI’mratherimpatientandoverthecourseofthethreehoursorsothatittook Iwondered ifwewere ever going to get to closure but I’mgladthatIstuckwithit.Thethingthatcatalyseditformewasthatgraphicthatthefacilitatorshowed(Figure8.6).

My approach was going to be that of the common design scenariobuilding on what already existed, and what we’ve got now is the moresuccessful design scenario reflecting a whole view of the project in thesystem and not a piecemeal view. By celebrating their success andacknowledging the different strengths people bring to the table, the teamhasbeenabletofindacreativesolutiontorecalibratingtheproject.What’sstrikingisthatwe’regettingalotofkudosforthewaythingsaregoing.Forexample,we’venowgot tradeassociations’supportandothergovernmentdepartments are using us as amodel of success for one-stop informationandareseekingourinputonhowtoapplyourlearningtotheirprojects.Ofcourseithasn’tallbeeneasy.We’vehadtoputalotofeffortintodefiningour own operating processes – decision-making, problem-solving andmanaging the inevitable conflicts. But it seems that this investment ispayingoffandwearealmostabletosaythattheEnterpriseAccessprojectisrunninglikeawell-oiledmachine.

Reflectionsonthiscase

Having to redesignprojectorganisationswhen theyhave reached specificmilestones (in this case the website launch) or when some other eventoccurs (such as a significant change in stakeholder support) is extremelycommon.Thiscaseisinterestingbecauseonthefaceofittheprojecthadachieved

successinthatitwasonschedule,withinbudgetandwellreceived.Probingmoredeeplyusingappreciativeinquiryrevealedanumberofaspectswhereparticipantsagreedthattheycoulddothingsdifferentlyandmuchbetter.Italso revealed how they had been able to be successful in the first phase.Crucialtotheirsuccesswasagreeingthevisionandmissionoftheprojectand thus having a common direction for their work. With this and theconstraints of time and budget they had tight boundaries toworkwithin,andwereabletomovefromacultureofblametowardsamoreparticipative“one for all and all for one” approach.With the appointment of the newclientcontacttheywereabletomoveawayfromagood-newsculture.Boththese eventsmeant a shift in the shadow side of the project organisation

towards a healthier, more trusting working environment. The shiftingcontexthadclearimpactsontheproject.Team members handled decision-making less well than they felt they

should. For example, they knew they had to make a decision on dataharmonisation as theywere getting information in different formats fromthe various departments, but they had procrastinated on thiswhich led toupstreamdifficulties.They all felt pretty good about problem-solving. But looking again at

how theydid it, theyunderstood that theywerenotusing thediversityoftheteamtocomeupwithinnovativesolutions.Theyhadatendencytolimitdiscussion to people in their work streams which they felt could lead tomissedopportunities.Managing conflictwas an aspect that they felt they could improve on.

Team members recognised that negative conflicts arose over things likeadministrative procedures, resource issues, deadlines, overruns and notprioritisingcarefullyenough.However, teammembersalsosawthat therewere some positive conflicts that they found energising and capacitybuilding provided that they followed the “rules”: listening effectively,acknowledging people’s positions, responding without defensiveness andlooking for the causes of issues rather than trying to deal with thesymptoms.

Toolsforthiscase

Transferableskillscards

These cards, available from Lifeskills Publishing,32 are used to helpindividuals and groups identify and apply their skills and values toworkchoices.Usersidentifytheirtransferableskillsandthenclassifytheirlevelof ability in applying them, choosingoneof four levels (very competent,competent,adequatefor task,undeveloped)foreachskill.Skillscardsareclassifiedunderdata, ideas,peopleand things.Workvaluesare identifiedby levels of importance and considered with respect to paid and unpaidwork. Guidelines and support materials are available inBuild Your OwnRainbow.33

Theprisoner’sdilemma

The prisoner’s dilemma shows that, in certain circumstances, if themembersofagrouptrusteachother,theycanchooseacourseofactionthatwill lead to the best possible outcome for the group as awhole.Withouttrust,eachindividualwillaimforhisorherbestpersonaloutcome,whichcanleadtotheworstpossibleoutcomeforall.In the prisoner’s dilemma, twoplayers act as prisonerswhohavebeen

jointly charged with a crime (which they did commit) but they arequestioned separately. The police have enough evidence to secure aconvictionforaminoroffencebutnotenoughforthemoreseriouscrime.The prisoners made a pact that if they were caught, they would not

confess or give evidence against each other. If both prisoners keep theirword,theywillonlybeconvictedofthelesseroffence.Thedilemmaoccurswhenthepoliceoffereachprisonerareducedprisontermiftheyconfesstotheseriousoffenceandgiveevidenceagainsttheotherprisoner.This isagoodexercise ingroupdynamicswhenplayedwithapackof

playing cards (instructions are available atwww.indiana.edu/~econed/issues/v31_3/3.htm). Individuals can also playthe Open University’s interactive prisoner’s dilemma(www.open2.net/trust/dilemma/dilemma_game.htm).

Summary

Thischapterdiscussesaspectsofgroupcultureanddynamics,putting theview that successful organisation design work is characterised by a no-blame culture, telling it like it is and reducing the negative power of theshadowside.Teammembersworkingonorganisationdesignprojectsmustbeabletoworkeffectivelywithgroupprocessesanddynamics,specificallymethodsofdecision-making,problem-solvingandconflictmanagement.Evenso,successisnotguaranteed.ReturningtoShackleton’sexpedition:

Whether there is one book or 20, the fate of theRoss Sea Partydeserves to be told and retold. “There are,”wrote the EdinburghEvening Dispatch, “some failures as glorious as successes. SirErnest Shackleton’s is one of them”. No less important, no less

memorable,isthestoryofTheLostMen.35

9Morphingnotfutureproofing

Thingsfallapart;thecentrecannothold.W.B.Yeats,TheSecondComing

Predictionisdifficult,especiallyaboutthefuture.YogiBerra,baseballcatcher(1925–)

ORGANISATIONDESIGNERS look forassurances that theirdesign is rightandthat it will endure. They aspire to “future proof” its success, but this isimpossiblebecausetheyarenotdesigningastaticbuildingoramonument.An organisation is a dynamic system with its own life cycle. Considerdesigningtherightshape,sizeandoperatingprocessesforashoaloffish.Organisation design is done in an analogous context – environmentalconditionsandconstituentpartsareconstantlychanging.Thus:1

there is no common (design) solution that fits all organisations;thereisnocommonapproachtoevenfindingasolution;andthereisnoagreementonwhatconstitutesanadequatesolution.

Noorganisationdesignwilllastforever(orevenverylong),butthisdoesnotmeanthattheorganisationitselfisnecessarilyunderthreat.Likeashoaloffish,anorganisationcontinuouslychangesshape,sizeandmembership,yet lasts over time. Threats generally come from externalities, such asenvironmentalchangeorpredators,whichcanbesubtleorcataclysmic.Soitiswithorganisationdesigns.Gointoadesignprocessknowingthatitwillnotendure.Thisisnotdefeatist,justrealistic.Beginwiththeviewthatthedesignisdynamic,hasalifecycleandwill

changeas thecontextdemands,and therewillbefewerchargesofdesignfailureandmoresupportfromstakeholders(whousuallywantquickresults

fromanewdesignyetcold-shoulderthenotionofaredesigniftheresultsare not delivered).Gooddesigns are not a one-shot effort; they allow formeeting continuous change while simultaneously keeping the businessoperations runningsuccessfully.Thebestdesignsconsciouslydevelop theorganisational capacity to morph2 from one form to another in the sameway that Morph, a plasticine being who could change shape at will,demonstratedinaUKtelevisionshow,TheAmazingAdventuresofMorph.This chapter discusses why morphing capacity is required and then

presentsseveralwaysinwhichorganisationdesignscanworktoinvigorateand revitalise an organisation while building renewal and regenerationcapability.

Whymorphingcapacityisrequired

Everybody has accepted by now that change is unavoidable. Butthatstillimpliesthatchangeislikedeathandtaxes–itshouldbepostponed as long as possible and no change would be vastlypreferable. But in a period of upheaval, such as the one we arelivingin,changeisthenorm.

PeterDrucker3

The list in Table 9.1, forwarded by e-mail in March 2006, reveals whychange is thenormbecauseevenamonthor twoafter itwascirculated itseemeddated.

Table9.1YOUKNOWYOUARELIVINGIN2006when…1 Youaccidentallyenteryourpasswordonthemicrowave.2 Youhaven’tplayedsolitairewithrealcardsinyears.3 Youhavealistof15phonenumberstoreachyourfamilyof3.4 Youe-mailthepersonwhoworksatthedesknexttoyou.5 Yourreasonfornotstayingintouchwithfriendsandfamilyisthattheydon’thavee-mailaddresses.6 Youpullupinyourowndrivewayanduseyourcellphonetoseeifanyoneishometohelpyoucarryinthe

groceries.7 Everycommercialontelevisionhasawebsiteatthebottomofthescreen.8 Leavingthehousewithoutyourcellphone,whichyoudidn’thavethefirst20or30(or60)yearsofyourlife,isnow

acauseforpanicandyouturnaroundtogoandgetit.10 Yougetupinthemorningandgoonlinebeforegettingyourcoffee.11 Youstarttiltingyourheadsidewaystosmile.:)12 You’rereadingthisandnoddingandlaughing.13 Evenworse,youknowexactlytowhomyouaregoingtoforwardthismessage.14 Youaretoobusytonoticetherewasno9onthislist.15 Youactuallyscrolledbackuptocheckthattherewasn’ta9onthislist.

Take, for example, number 3 (you have a list of 15 phone numbers toreach your family of 3). Bymid-2006 companies started to offer a one-numberservice,eliminatingthemultiplephonenumberissue:4

GrandCentral,anewservice[setupin2006]basedinCalifornia,providesyouwithonenumber thatyoucanessentially“forward”anywhere,keepingyouintouchforeverandeverwithyourfriends,family,andassociates.Italsocentralizesyourvoicemailande-mailfunctions.The interactivewebsiteprovides someunique features,such as letting you record customized greetings for each caller,switch phones in mid-call, listen in on voicemail while a callerleavesamessage,andblockunwantedcallers;italsoofferslifetimevoicemail storage,access tovoicemailviaweb,phone,ore-mail,andcallannouncementandhandling.

Ortakenumber4(youe-mailthepersonwhoworksatthedesknexttoyou).DuringtheyearIM(instantmessaging)becameacommonrivaltoe-mailamongco-workers:5

Ifwepay close attention to theonlinehabits of people using theWeb,wecan’thelpbutseethatthisisahugeseachange.Thetideisnowmovingoutonemail.Movingawayfromstandaloneemail

astheprimarymessagingtoolisahugedeal,forplatformmakers,softwaremakers,andthepeoplewhousethem.Google also did an interesting thing along these lines. Theycombinedemailandmessaging inGmail. It startedoffasa“hey,thatwould be cool” type of idea.But itmorphed into somethingthat really speaks to theconvergenceofmessaging.Sowhenyougotoyouremailaccountyouhaveachoice,doyouwanttosendsomeone email or simply start a chat? If they’re online and youhave a coupleminutes, you’ll probably chat. If they’re offline oryoudon’twanttohaveafullconversation,you’llprobablyemail.It’skindoflikecallingyourneighbour…youcalltheminsteadofgoingoverwhenyoudon’twanttotalklong.

These examples illustrate that organisations exist in a context ofcontinuousflux,wheresmallandbigthingshappenintheenvironmentandpeople respond (or not) to them. Interestingly, people appear moreresponsive to contextual changes in their personal lives than they do atwork. One explanation for this is that organisations often encourageemployees to be narrowly focused and therefore blinkered. Organisationcontroldevicessuchasreportinglines,performanceappraisals,scorecardsandmeasures suggest that employees have to achieve certain targets to aspecificschedule,sothewiderperspectiveisnotconsidered.Because the systems and processes that control organisations militate

against those organisations developing morphing capability, organisationdesigners find itdifficult todesign inadaptability.However,adesign thattakesanarrow,short-termfocusand ignores thewidercontext is liable tofailtoachieveitsobjectives.Tolaythefoundationsfordesignflexibilityitisnecessarytokeepabreastofthreeparticularaspectsintheorganisation’sexternalcontextandthreeintheinternalcontext:

•Externalcontext–newbusinessesandmodels–ourresponsibilityforthefuture–newmarkets•Internalcontext

–corporategovernance–psychologicalcontracts–workforcedemographics

Ofcoursethereareotherexternalandinternalcontextfactorstobearinmind, but these six are the ones currently having the most impact uponorganisations.

Externalcontext:newbusinessesandbusinessmodels

Anastonishingarrayofnewbusinessesandbusinessmodelshaveemergedsince2000.Theriseofblogsandallthebusinessesassociatedwiththemisoneexample,andthetimelineshowninTable9.2 illustrates justhowfastthismethodofinterpersonalnetworkinggrewinitsfirsttenyears.

Table9.2Abriefhistoryofblogs1997,December

JornBargerinventstheterm“weblog”todescribehisownwebsite

1998,December

Aninventoryofallknownweblogsistaken;ittalliesallof23sites

1999,April PeterMerholzcoinstheshorterterm“blog”1999,August

PyraLabslaunchesBlogger,afreeblog-hostingservice

2001,October

SixApartreleasesMovableTypeformakingblogs

2002,December

PoliticalbloggersdriveTrentLottfromUSSenatemajorityleaderpostoverallegedlyracistcomments

2003,February

GooglebuysPyraLabsanditsBlogger.com;becomestheworld’stopbloghost

2003,March

TheOxfordEnglishDictionarylistsblogasanounandaverb

2003,September

Worldwideblogcountsoarsto1m

2004,August

BloggersareclearedtocoverUSpoliticalconventions

2005,May Blogosphereexplodesto10mblogs2005,September

Googleintroducesblogsearchfeatures

2005,November

Blogospheredoublesinsizeagain;nowat20moutposts

2006,December

Technoratiistracking60mblogsandaccordingtoTechnoratidata,thereareover175,000newblogs(thatisjustblogs)everyday.Bloggersupdatetheirblogsregularlytothetuneofover1.6mpostsperday,orover18updatesasecond

Sources:Upto2005,Forbes,November14th2005;2006,www.technorati.com/about

This example illustrates the swift riseof anew typeofbusinessmodelthat directly competeswith amore traditional one. Blogs are now a richsourceofmaterial thatwas traditionally the territoryofprintpublications:newspapers,newsletters,journalsandmagazines.With the rise of blogs came a shift in the print newspaper industry.

According to the World Association of Newspapers, in 2005 circulationsales increased by 1.7% in Asia, 3.7% in South America and 0.2% inAfrica,anddecreasedby0.24%inEurope,2.5%inNorthAmericaand2%inAustraliaandOceania, comparedwith thepreviousyear.These figuresrepresent a trend evident over the previous five years of decreasingcirculation in themore developed countries. In response to the growthofalternative online sources of news, many traditional newspapers openednew distribution channels, ranging from daily free newspapers to onlineeditions.As theNewspaperAssociationofAmerica in itspublicationTheSourcereported(withgeneroususeofboldface):

Thekeytothefutureofnewspapersistheefforttobuildabroadportfolio of products around the core product, the traditionalnewspaper, and to connect with both general and targetedaudiences. Newspapers across the country have established theirpresenceon theWeb and are aggressivelydevelopingadditionalonline products. They are launching niche publications andreachingouttonewaudiences,particularlyminorities.It’sallpartof a critical transformation: from newspaper companies toinformationcompanies.

Blogswereonlyone exampleof new typesof businesses andbusinessmodels appearing in the early 2000s. Table 9.3 lists many others thatthreatenedmoretraditionallyofferedproductsandservices.

Table9.3TraditionalandnewbusinessmodelsTraditionalmodel Newmodel

Pressrelease RSSfeedMarketingcollateral BlogMediatour WebcastEvent SocialnetworkCustomerreference CommunityadvocateDatasheets e-newslettersNewspapers BlogsE-mailnewsletters Syndication(RSS)Encyclopaedia WikipediaPhone Skype,IMClassifieds Craig’slistMusicstores iTunesBlockbusters NetflixTraditionalmusicindustry MySpace,PodcastingTV Richwebmedia,VideobloggingRadio Podcasting,XMradioTravelagencies OnlinetravelwebsitesMagazines Blogs,RSSTalentagents(music,film,modelling) MySpace,Blogs,othersocialnetworkingMiddleperson InternetBanks/financialservices Onlinebanking

The impact that networking and other technologies have had and arecontinuing to have on businesses cannot be underestimated. With whatseemslikehyperbole,FastCompanynoted:6

It’s hard to overstate the coming impact of these new networktechnologies on business: They hatch trends and build immensewaves of interest in specific products. They serve giant, targetedaudiencestoadvertisers.Theyedgeoutoldmediawiththelovinglaborofamateurs.Theyeffortlesslyprovidehyperdetaileddata tomarketers.Ifyourcustomersaresatisfied,networkscanhelpbuildfanatical loyalty; ifnot, they’llamplifyeverycomplaintuntilyoudosomethingaboutit.Theyarefund-raisingplatforms.Theyunifyactivists of every stripe, transforming an atomized mass ofindividualswithfewresourcesintoaninternationalmovementableto put multinational corporations and governments on thedefensive. They provide an authentic, peer-to-peer channel ofcommunication that is far more credible than any corporate

flackery7.

Nevertheless, the message is clear and rings true. The traditionalnewspaper industry is only one ofmany that are under possible terminalthreat; others include retailing, telecommunications, software,pharmaceuticalsandadvertising.Organisations must take account of changing businesses and business

models.Thisiseasiersaidthandone,althoughtherearesomeexamplesofestablishedorganisationsbeingsuccessful.AgoodexampleisNokia,whichbegan in 1865 as awood-pulping company, between the twoworldwarsturnedtopaper,rubberandcables,andin1966mergedwithFinnishRubberWorksandFinnishCableWorks.In1991thecompanytransformedfromaconglomerateintoonethatfocusedontelecommunications.Therearesomeorganisations, however, which may not be able to achieve the radicalredesigns necessary to survive and prosper; the challenge for them is toensurethattheirdemiseisaswellplannedandpainlessaspossible.

Externalcontext:responsibilityforourfuture

Wearemadewisenotbytherecollectionsofourpast,butbytheresponsibilityforourfuture.

GeorgeBernardShaw

Globalissuesloomlargerbytheday.Table9.4lists20thathaveanimpacton organisation design and highlight the increasing responsibilityorganisationsfeeltheyhavetohelpshapeasustainablefuturefortheworldatlargeaswellastheirownbusiness.

Table9.4GlobalissuesaffectingorganisationdesignEnvironmentalissues

GlobalwarmingBiodiversityandecosystemlossesFisheriesdepletionDeforestationWaterdeficitsMaritimesafetyandpollution

Humanitarianissues

ThefightagainstpovertyPeacekeeping,conflictprevention,combatingterrorismEducationforallGlobalinfectiousdiseasesDigitaldivideNaturaldisasterpreventionandmitigation

Regulatoryissues

TaxationBiotechnologyrulesFinancialsystemsIllegaldrugsTrade,investmentandcompetitionrulesIntellectualpropertyrightsE-commercerulesInternationallabourandmigrationrules

Source:Rischard,J.F.,HighNoon:20GlobalProblems.20YearstoSolveThem,BasicBooks,2002

Organisations designing in aspects of global responsibility include GE,whichlaunchedecomaginationinMay2005.

GE:ecoimagination

A broad portfolio of new technologies that will provide solutions to ourenergyneedsandrevolutionizehowwepowertheworld.It’sallpartofthecompany’sexcitingnewgrowthinitiativecalledecomagination.EcomaginationisGE’scommitmenttohelpourcustomersandsocietyat

large solve itsmostpressingenergyandenvironmental challenges.Underecomagination,GEhascommittedto:

• Doubling its research investment in environmentally friendlytechnologies from $700m tomore than $1.5 billion over the nextfiveyears.

• Introducing new products and services that offer significant andmeasurableenvironmentalperformanceadvantagestoitscustomers.

• Reducing its greenhouse gas emissions (GHG) and improving itsenergyefficiency.

•Keeping thepublic informed.GEhaspledged topublicly report itsprogressinmeetingitsgoals.

GE’sphilosophyinthisrapidlychangingenergymarketisthat“GreenisGreen” – good environmental policy makes good economic sense. Thebillions of dollars we are investing in new, eco-technologies today willmeanbillionsmoreinsalesandrevenuesforthecompanyinthefuture.

Source:www.ge.com/research/grc_2_1_1.html

Almost every day other household name companies, not previouslyassociated with greenness or sustainability, join the ranks of thoseannouncingtheirintentionandcommitmenttoaddressoneormoreofthese

aspectsofcommonconcern.Indoingsotheyareeffectinganewdesignoftheirorganisation.Take the example of the Mojo Bar produced by Clif Bars. Michael,

categoryinsightsmanager,whenasked“WhichClifproductbestdescribesyou?”,said:8

IthinkI’dhavetogowiththeMojoBarbecauseinitspriorlife,itwas a lot less organic than it is now. Since coming here, I’velearnedalotaboutingredients,whatgoesintofood,organicfoodsversus conventionally-farmed foods and also about using lessenergy,ridingyourbiketowork,aboutbio-dieselandalloftheseother things that aremuchmore sustainable for the environment.Mojo,initsoldversion,wasn’treallyallthatorganicbutnowit’supto70%.

Thinkoftheorganisationdesignworkthatfollowedthedecisiontomakethisonebar70%organic.Itincludedrethinkingsourcingprocesses,makingculturalchanges,adjustingproductionsystems,andsoon.Responses to global issues such as those made by GE and Clif Bars

requirethemorphingcapacitytotransformtheorganisationdesignfromoldproductorservicetonewproductorservicewithoutmissinganoperationalbeat.

Externalcontext:emergingeconomies

Besides the business challenges of technology and global responsibilitiestherearethetwinchallengesofenteringnewmarketsintheemerging–andfastergrowing–economiesandcompetingwithrapidlygrowingbusinessesbeingestablishedwithintheemergingeconomies.(Definitionsofwhatisanemergingeconomydifferbutgenerallyspeakingtheyareeconomieswhereincome per head is low to middle.) The Economist tracks more than 30countrieswithin the six groups shown in Figure 9.1, which indicates theannualaverageGDPgrowthofemergingeconomies.

Organisationsusedtodoingbusinessinthedevelopedworldareentering

thesenewmarketswithgreater or lesser success.Wal-Mart, for example,pulledoutofSouthKoreabecauseof“sluggish”business:9

USgiantWal-MartStores,theworld’slargestdiscountstorechain,willsell itsSouthKoreanbusinesstolocalretailgroupShinsegaefor825billionwon(US$874million),officialssaidyesterday.Shinsegae, which operates discount chain E-Mart as well asdepartmentstores,saiditwouldbuyall16outletsrunbyWal-MartinSouthKoreainabidtoexpanditsdiscountstorebusiness.Underthedeal,thestoreswillbeabsorbedbyE-Martandoperateunder the E-Mart brand name. The US chain has invested 812billionwonsinceitopeneditsfirststoreinSouthKoreain1998.

Butmany companies are expanding successfully in emergingmarkets.Intel, for example, is investing $1bn (£522m) in building two productionplants in a science park outside Ho Chi Minh City in Vietnam, andMotorolaisoneofmanycompaniesinvestinginChina:10

BEIJING, China – 14 November 2006 –Motorola, Inc. (NYSE:MOT) today announced the opening of its Broadband WirelessChina Research Center in Beijing. The center will focus on

researchingkeytechnologiesforfuturebroadbandwirelesssystemsandhelpingdevelopglobalstandards.“TheopeningofthecenterisafurthertestamentofMotorola’sChinastrategy:todevelopChinaasaproductionandR&Dbase.TodayMotorolahasnearly3,000engineersworking in18R&Dcenters inChina, the largestR&Dpresence any global company has established here,” said GregBrown,presidentofMotorolaNetworksandEnterprise.

Conversely, some emerging-market companies are expanding into thedevelopedworld.Lenovo (originally namedLegend), for example,whichwasestablishedin1984by11computerscientistsinBeijing,by2004hada25% market share in China and went on to acquire IBM’s personalcomputingdivisioninMay2005,givingthecompanyglobalreach.TodayLenovoisaleaderintheglobalPCmarket,withapproximately$13billioninannualrevenue.Competing in this emerging-economy space requires careful thinking

about an organisation’s design.Wal-Mart, for example, tried to export asuccessful US-based design and failed to adapt the design to meet localrequirements.StarbucksinChinafacedanuphillbattlein2003:11

Walking the tightrope between hip and Western is difficult inChina. After Starbucks opened a store in Beijing’s hallowedForbiddenCity inDecember2000,outraged localmedia reportedthat 70%of people they surveyedwould rather not see the chainthere. Chinese customers have different priorities than theirAmerican yuppie counterparts.… Tweaks to the furniture, storelayout,artworkandfoodoptionsmakeStarbucksmorefriendlytoChineseeyes,butcoffeeremainsthecoreoffering.

However,threeyearslaterStarbuckschairmanHowardSchultzwasabletoreport:12

Starbucks has grown from a single Beijing shop in 1999 to anetwork of 238 now [2006]. The secret was “respecting theconsumerand theculture,”Schultz said. “Especially in a countrylikeChina,” he said, “you have humbly to earn their respect and

gaintheirtrust.”OneofStarbucks’firstactsinChinawastocreatea $5 million scholarship fund for disadvantaged children. Thecompanydidit“notjusttoissueapressrelease”buttoshowthatitwascommittedtobalancingprofitandsocialconscience.

In October 2006, the company confidently announced its internationalgrowth strategy for 2007, including opening in Brazil, Russia, India andEgypt(allemergingeconomies):13

“Our international growth strategy balances accelerateddevelopment in linewith the long-termretailpotentialofexistingcountries, while entering several promising new markets,” saidColes. “The company’s entrance into the three large markets ofBrazil, Russia and India aswell as establishing our first Africanlocation will propel Starbucks’ International expansion towardsmeetingitslong-termstorepotentialof20,000locations,whichisupfrom15,000previouslytargeted.”

Internalcontext:corporategovernance

Definitionsofcorporategovernancevarywidely.Theytendtofallintotwocategories.Thefirstsetofdefinitionsconcernsitselfwitha set of behavioural patterns: that is, the actual behaviour ofcorporations,intermsofsuchmeasuresasperformance,efficiency,growth,financialstructure,andtreatmentofshareholdersandotherstakeholders. The second set concerns itself with the normativeframework:thatis,therulesunderwhichfirmsareoperating–withtherulescomingfromsuchsourcesasthelegalsystem,thejudicialsystem,financialmarkets,andfactor[labour]markets.

StijnClaessens14

Regardlessofdefinition,anorganisation’sboardinfluencesitsdesign,andthisistruewhetherboardmembersareactive,aimingtocontributevalueto

the organisation, or passive, doing little more than ensuring regulatorycompliance.Corporate governance continues to be a fast-changing aspect of

organisational life. It has been moving up organisational agendas forvarious reasons since the early 1990s, following a number of corporatescandalsorcrisesthatledtoboardmemberstakingaction,oftentoreplaceachiefexecutiveorotherdirectors.Beyond the scandals and crises (themselves a symptom of weak

organisationdesign),otherfactorshaveledtogovernanceissuescomingtothefore:15

•Theprivate,market-basedinvestmentprocess–underpinnedbygoodcorporate governance – is now much more important for mosteconomiesthanitusedtobe.

•Because of technological progress, liberalisation and opening up offinancialmarkets, trade liberalisation and other structural reforms,the allocation within and across countries of capital amongcompetingpurposeshasbecomemorecomplex, ashasmonitoringoftheuseofcapital.

•Themobilisationofcapitalisincreasinglyonestepremovedfromtheprincipalowner,giventheincreasingsizeoffirmsandthegrowingroleoffinancialintermediaries.Theroleofinstitutionalinvestorsisgrowing in many countries, with many economies moving awayfrompay-as-you-goretirementsystems.

•Programmesofderegulationandreformhavereshapedthelocalandglobalfinanciallandscape.

• International financial integration has increased, and trade andinvestmentflowsareincreasing.

Allthishasledtoboardmemberspayingcloserattentiontotheirroleinproviding their organisations with strong and appropriate direction andoversight. This in itself has given rise to organisation design work thatreflects themeasures of corporate governance that are becoming parts oforganisational reporting. Governance Metrics International, for example,has developed ratings for six aspects of corporate governance (see Table9.5) based on securities regulations, stock-exchange listing requirements

and various corporate governance codes and principles. It monitorscompanies by geographic region and red flags aspects of governanceconcern.16

Table9.5GovernanceMetricsInternationalsamplerating

Incarryingouttheirrole,boardmembershavetoengageinsomeorall

ofthefollowingactivities:17

•Approvingacorporatephilosophyandmission.•Selecting,monitoring,evaluating,compensatingand–ifnecessary–

replacing the CEO and other senior executives, and ensuringmanagementsuccession.

•Reviewingandapprovingmanagement’sstrategicandbusinessplans,including developing a depth of knowledge of the business beingserved,understandingandquestioningtheassumptionsuponwhichsuchplans arebased, and reachingan independent judgment as tothe probability that the plans can be realised (referred to as“constructiveengagement”instrategy).

•Reviewingandapprovingthecorporation’sfinancialobjectives,plansand actions, including significant capital allocations andexpenditures.

• Reviewing and approving transactions not in the ordinary course

obusiness (if the transactionwould cause the disappearance of thecorporationorthesaleofallitsassets,thenonlytheboardcanmakethis decision; it may not be delegated to a committee or tomanagement).

•Monitoringcorporateperformanceagainst thestrategicandbusinessplans, includingoverseeing theoperatingresultsona regularbasistoevaluatewhetherthebusinessisbeingproperlymanaged.

•Ensuringthatthecorporationhasinplacesystemstoencourageandenableethicalbehaviourandcompliancewithlawsandregulations,auditing and accounting principles, and the corporation’s owngoverningdocuments.

• Assessing its own effectiveness in fulfilling these and other boardresponsibilities(subjecttominimumstatutoryrequirementssuchasquorumrequirementsformeetingsunderstatecorporationlaw).

•Performingsuchotherfunctionsasareprescribedbylaw,orassignedtotheboardinthecorporation’sgoverningdocuments.

This list shows how integral board members’ involvement is to muchorganisation design work, not least because they are guardians of theirorganisationsandtheirfuture.InthewordsofSteveOdland,CEOofOfficeDepot:18

Strong corporate governance and high ethical standards are notsimply matters of personal and public morality. They are alsoessential for long-term corporate success and world economicleadershipbythisnation.…Acorporationandasocietybasedonstronggovernanceprinciplesandhighethicalstandardsare in thebest position to face unexpected challenges, overcome them, andflourish.Andas longaswecankeep that ideacentral,wecancontinue tolookforwardtogreaterprosperityandhumanprogress.

Organisationshavetohavethecapabilitytokeeppacewithfast-evolvinggovernanceprinciplesandtopredictandrespondtoboard-memberactivity.Stakeholderanalysis(seeChapter6)identifiesthelevelandextentofboard

involvementrequiredforanyparticulardesignproject. It isworthbearinginmindthatalthoughthissectionisconcernedwithcorporategovernance,the principles and frameworks are, of course, applicable to programmegovernance(seeChapter7).

Internalcontext:employeerelationships

Future firms must become both creators of competence andprovidersofpersonality.Once itwasmoney formastery.Now, itmust also be meaning for membership. Talent wants value andvalues. To thrive, organisationsmust learn how to combine skillandsoul.

JonasRidderstraleandKjellNordstrom19

Responsiveness to changes in the employer/employee relationship isanotherarearequiringmorphingcapability.Changesinthelabourmarketinthedevelopedworldmeanthatemployeeswanttogainvaluefromabetterwork–life balance and employers want to gain value in workforceflexibility. These twinwants are resulting in changes to both the implicitpsychological contract (that is, “the perceptions of the two parties,employeeandemployer,ofwhattheirmutualobligationsaretowardseachother”20) and the explicit employment contract between employers andemployees.Thepsychologicalcontractissomethingthatisreadbetweenthelinesof

the employment contract and is then interpreted by the employee assomething that the employerpromises.What individuals readvaries fromperson to person, is highly subjective and, again unlike an employmentcontract, isnot legallybinding. In spiteof this, the impliedpsychologicalcontract can have a strong influence on employee behaviour, well-being,attitudesandperformance:21

For example, an employeecan feel let downabout some issue atworkandtakeadayoff.Notbeinginclinedtogotoworkcanbedue to a number of factors, such as wanting to get back at the

organizationforsomethingithasdoneornotdoneforyou,sothatyou don’t feel so committed to the organization, or you feeldemoralized aboutyour job.Whenan employeebelieves that theorganizationhasfailedtodeliveritspromisesonaregularbasis,heor she will question whether it makes sense to continuecontributing to thatorganizationorwhether itmightbebetter forthemtomoveontoanother.

Employers are offering explicit and binding job contracts in manydifferent forms: short-term contracts, flexible working, home-working,teleworking, casual jobs, job shares, compressed working (working 80hours – two 40-hour weeks – over nine days instead of ten days) andannualised hours, and so on. Bank of America is one company offeringflexibleworking.

Flexibleworkarrangements

Youmaybeable to takeadvantageofaworkarrangement thatgivesyouflexibility in balancing your life and work schedules. Flexible workarrangementsaremutuallyagreeduponbyamanagerandanassociate.

Workarrangementoptions

•FlexTime.Theopportunitytoalterstartingand/ordeparturetimes.•Compressedworkweeks.Condensesafull-timeworkweekintofewer

days.•Telecommuting.Theabilitytoperformallorpartofyourworkfrom

alocationotherthanyournormalworksite.•Selecttime.Reducesyourworkscheduleandjobresponsibilitiesfor

aspecificneed.•Phase-in.Theoption togradually return toa regularwork schedule

afteramedicalleave.

Source:BankofAmerica

Although the relationship between employment and psychologicalcontractsiscomplex,designingasmuchflexibilityintothelegalcontractsas possible and carefully managing the implicit promises of thepsychologicalcontractcontributetoanorganisation’smorphingcapability.TraderJoe’s,aUSfoodretailer,recognisesthevalueofcarefullymanagingthepsychologicalcontract,astheemployeetestimonybelowimplies.

TRADERJOE’S

CrewMember

MeetCharlotte!

With a Bachelors degree in Fitness and a desire to become a PhysicalTherapist,itmightseemoddtofindCharlotteworkingcheckoutatherlocalTraderJoe’s.Butaccording toCharlotte, itallmakessense.“TraderJoe’swill help me reach my goals by allowing me the flexibility of workingdifferentshiftsthataccommodatemyschoolschedule.”

Internalcontext:workforcedemographics

Theage structureof theworld’spopulation is changing.According toUNestimates, thenumberofpeopleaged60oroverwillgrowfrom688min2006 to almost 2 billion by 2050, when older people will outnumberchildren for the first time in history. By 2050 one person in fivewill beaged60orover.Thepercentageofolderpeopleiscurrentlymuchhigherinthemore developed than in the less developed countries, but the pace ofageing in developing countries ismore rapid, and their transition from ayoungtoanoldagestructurewilloccuroverashorterperiod.Averagelifeexpectancy at birth has increased by about 20 years since 1950, to its

current level of 66 years, though there are startling differences betweencountries–30yearsinSwaziland,forexample,comparedwith83yearsinJapan.On average, of those surviving to age 60,men can expect to liveanother17yearsandwomenanadditional21years.22

Thesedemographicshiftshavesignificantimplicationsforthedesignoforganisations, in terms of leadership succession, knowledge transfer andworkforce productivity, and they will continue to do so in the future asemerging talent shortages among younger employees exacerbate theseproblems.23A report commissionedby IBM and theAmericanSociety forTraining and Development (ASTD) comments that human resourcesmanagershaveidentifiedthat:24

Knowledge transfer, removing barriers to learning for matureworkers, and meeting the needs of the next generation ofemployees [are] their greatest challenges related to changingworkforce demographics. Yet, less than half think theirorganisationsaredoingenoughtotacklethesechallenges,andonlyabout40%believetheircompaniesareaddressingtheiroverallskillandcapacityneedsoverthenextthreetofiveyears.Thesefindingssuggest thatmanyorganisations remainunprepared forworkforceshiftsofpotentially“tectonic”magnitude.

Similarly, a 2005 study by the AARP, a US organisation aimed atimproving thequalityof life forpeopleas theyage,andhuman-resourcesconsultants Towers Perrin says that employees aged 50 and over willaccount for 20% of the US workforce by 2012, compared with 13% in2007.Asaresultfirmsareadaptingtheiremploymentpoliciesandpracticestomeetthedesiresofolderworkers.Toacknowledgethecompaniesthatdothiswell,theAARP’sAnnualBestEmployersProgramforWorkersOver50highlights 50 companies and organisations “whose best practices andpolicies for addressing aging workforce issues are roadmaps for theworkplaces of tomorrow”.25 Two companies exemplify the qualities thatAARPislookingfor:

•JohnDeere,amanufacturerof industrialequipmentandcommercialmachinery, offers comprehensive health benefits to any employee

working at least one hour perweek.These include individual andfamily medical coverage, prescription drug coverage, vision anddental insuranceaswellas long-termcarecoverage.Thecompanyalso offers a phased retirement programme and offers retirees thefollowing work arrangements: temporary work assignments,consulting/contract work, telecommuting as well as part-time andfull-timework.

•CentegraHealthSystemhasmadesignificantchangestoitsbenefitsplanandservices topromotework–lifebalanceover thepast threeyears. For example, it offers associates their own complimentarypersonalisedconciergeservicewhichtakescareofdrycleaning,oilchanges, car washes, restaurant reservations, gift wrapping andpurchase, floral delivery, as well as shoe and watch repair. Thehospital also allows employees to phase into retirement throughflexibleschedulingoptionssuchaspart-timework,summersoffandweekendprogrammes.

Buildingthecapabilitytomorph

Leadersneedtoacceptthattheircurrentorganisationdesignwillinevitablygiveway toa futuredesign, andwoulddoevenbetter if theyunderstoodand acted on the necessity to be continuously and consciously thinkingabout thewholeorganisationdesign.They should alsograsp the fact thatdesignsmustbeconstructed torespondtodynamicenvironmentsandthatbuilding adaptive capability into any design is a necessary part of theprocess. Unfortunately, they rarely do. For a number of reasons manyleaders:26

•donotknowenoughabout theprocessesand theories fordesigningeffective organisations and fail to appreciate the range of optionsopentothem;

• choosedesigns that aremorepolitical andmore complex than theyneed be, less than optimal because they exclude importantknowledgecrucialtothesuccessofaneworganisationaldesign,andresistedwhenimplemented;

• work on a design that solves a specific symptom rather than the

underlying cause giving rise to it (identifying the root cause ofissues and responding to these is crucial to the success of anorganisationaldesignproject);

•separateanewdesignfromtheirorganisation’sstrategyandexternalenvironment, when they should realise that a good organisationdesign isameans for implementingstrategyandcanalsoopenupnewstrategicoptions;

• fail to recognise howmuchof their time and active involvement isrequiredinorganisationaldesignworkandcannotdelegatetheirroletoconsultants;

• overlook the fact that organisationaldesign is amulti-stageprocessduringwhichtheorganisationmustcontinuetooperateandchange,so the design process must synchronise with the dynamic of theorganisation.

Thecapacitytoovercomesomeoftheseleadershipobstacles,executeinthepresentandadapttothefuturerequiresleadersanddesignerstoworkonthe shelf-life principle; invest in formal and informal research anddevelopment;andmostimportantlydoeverythingintheirpowertodevelopandenableadaptivecapabilitiesintheworkforce.

Workingontheshelf-lifeprinciple

Thismeansacknowledgingthatanenterprisehasashelflifeinaparticularformandcanlastonlysolongbeforeitbecomesobsolete.InAHistoryofAmericanBusiness,C.JosephPusateriliststhe25largestUScorporationsin1917,1957and1986.27Ofthe25corporationsinthe1917list,13madeit into the 1957 list.Only seven– ifUSSteel andUSX are treated as thesamefirm–madeitintothe1986list.Only12firmsonthe1957listmadeittothe1986list:28

Atthetopofthe1917listisU.S.Steel.Whenformedthroughthemerger of eight large steel firms in 1901,U.S. Steel became theworld’slargestprivatebusiness:ithadatotalcapitalisationof$1.4billion and accounted for 65.7% of all steel sales in the UnitedStates.By1917,U.S.Steelhadassetsvaluedatover$2.4billion,

more than four times the assets of Standard Oil of New Jersey[Exxon],thenextlargestcorporation.ButU.S.Steel’smarketsharewasdownto45%.Fortyyearslater,U.S.Steelwasonlythethirdlargest company and its market share was less than 30%. TodayU.S.SteelisnolongerU.S.SteelbutUSX,andhasamarketsharein steel of less than 10%, receivesmore revenue frompetroleumthan steel, and is number 121 in the list of the largest U.S.corporations, ranked by assets.Themoral of theU.S. Steel storyapplies to all corporations: no firm is impervious to marketcompetition.

Of the original 100 companies in 1917, only 13 still surviveindependentlytoday,andofthesemosthavenotachievedhighperformanceintheirsectorsorrelativetothemarketoverall.29

Onewayofthinkingaboutshelflifeisintermsofanorganisationallifecycle.Typically,ittakestheformofanScurve(seeFigure9.2),sometimescalledthesigmoidcurve.

Thereisatheorythattheorganisationalmaturinganddeclinecyclecan

be interrupted by jumping into another sigmoid curve at an appropriatepoint,thusavoidingtheinevitabilityofdecline.Thejumpisusuallymadeatthemidpointofthematurityphasebeforetheupwardscurvereachesitspeakandstartstoheaddown(seeFigure9.3).

However,thisishardtodofortworeasons:itisdifficulttojudgewhen

anorganisationisatthemidpoint;andwhenthingsappeartobegoingwell,as theytypicallydointhefirsthalfof thematurityphase, thereisusuallylittleincentivetochange.It therefore requires long-term planning – for example, the type of

scenario planning that was developed by companies such as Shell in the1970s.GlenMeakem,founderandCEOofFreeMarkets(acquiredbyAribain 2004), which created business-to-business online auctions, was askedwhathe feltwhenhe realised that his businessmodel hadbecomeout ofdate:30

It was painful, but whether you’re running a start-up or anestablished company, there are turning points where you need toassess critically how you’re positioned and ask, “Is the marketcomingtowardusorrunningawayfromus?”AndthankGodwedidwhatwedid.And it’s hard, becauseyouneed tomove.Yourboard and your investors and everybody in the company need tofaceuptoit.Wemadeabigbetandwejustranwithit.AsCEO,youcan’tbescaredofmakingbolddecisions. It’s tough,butyouhavetobeabletodoit.

Making a decision to review an organisation’s core values is equallytough. One organisation which regularly reviews its core values is IAP2(International Association for Public Participation), a non-profitorganisation that working “through its members, helps organisations andcommunitiesaround theworld improve theirdecisionsby involving thosepeoplewhoareaffectedbythosedecisions”.Ithasasetofcorevaluesthatdefinetheorganisation’spublicparticipationpractice.31

TheIAP2’sboardofdirectorshasadoptedapolicyofformallyreviewingthe association’s core values every five years with the objective ofmaintaining their relevance in changing contexts. To do this it hasestablished a core value working group and invites contributions to thediscussiononcorevaluesfromitsmembersaroundtheworld.During2006,after significant participation and input from members, the decision wasmadetorewordCoreValue1from:

Thepublicshouldhaveasayindecisionsaboutactionsthatcouldaffecttheirlives.

to:

Public participation is based on the belief that those who areaffectedbyadecisionhavearighttobeinvolvedinthedecision-makingprocess.

Thismaynotappeartobeasignificantshift,buttheimpactofthechangeaffectsmany aspects of IAP2’s organisation as it focusesondefending the“right”of thepublic tobe involved in thedecision-makingprocess ratherthansupportingtheir“say”init.Difficultasitistoleaptoanewsigmoidcurveandassesscoreoperating

valuesforcontinuingrelevance, these twoactivitiescontribute to thinkingof an organisation design as having a shelf life. With this thought itbecomeseasiertomorphtowardsnewandimprovedorganisationdesigns.

Investinginformalandinformalresearchanddevelopment

Researchanddevelopment(R&D)activityisalsoimportantiforganisationsare to be capable of adapting.Most large enterprises have their ownR&Dgroups keeping an eye on the future, usually in a combination of threeways: by using a variety of techniques to look ahead, by assessingconsumerbehaviour,andbyanalysingeconomic,financial,andotherdata.Ian Pearson, a member of the foresight and futurology group attelecommunicationscompanyBT,explainshisrole:32

Iwork as a futurologist. I study the future.Myday-to-daywork,currently with BT, involves tracking developments across thewhole fieldof technologyandsociety, figuringoutwhere it isallgoing next, and how that will affect our everyday lives. I takeaccountofasmanytechnologyandsocialfactorsaspossible.Mymain tools are a strong background in science and engineering,trends analysis, common sense, reasonable business acumen,knowing when to listen to other people, and a lot of thinking. Iusuallygetitright,butsincethefutureisnevertotallypredictable,I sometimes get it wrong too, about 15% of the time. But Ispecialiseindoinglongtermstuff.…Although I use the slightly wacky sounding title of futurologist,I’m just an engineer making logical deductions about tomorrowbased on things we can already see happening. For example, ifsomeoneisinvestingheavilyinaparticulardevelopment,andtherearen’tanyobviousbarrierstosuccess, thereisagoodchancethattheywillsucceedinduecourse.Keepingupwithexternalssuchaspolitical,economicandsocialfactorshelpsimprovejudgementastowhetherproductsare likely tosucceed,andhowtheymightbeused.Anyonewithreasonableintelligencecandoit,butittakesalotoftimetointernalisetheverymanyfactorsinvolvedbeforeyoustartgetting it right. I learnedfromexperience thatcomputersareoflimiteduse,becausealthoughtherearemanycomputertoolsonthe market, it usually takes longer to explain all theinterconnectionstoaprogramthanitdoestoanalysethemyourself.I make no claim to be able to predict the future with absoluteaccuracy, but I think of it as like driving a car through fog.Youcan’tseeaveryclearpictureofwhatisahead,andsometimesyou

willmisinterpret anapparent shape in thedistance,but fewofuswoulddrivethroughfogwithoutbotheringtolookoutthewindow.Blurredvisionisalotbetterthannoneatall!Thesameistrueforbusiness,whichiswhyBTemploysme.

Aswell as in-companyR&D activity, a number of profit and non-profitorganisations have been established for those seeking insights into whatmightbeahead.IntheUK,forexample,Demos,theGlobalIdeasBankandthe Centre for Future Studies are three mentioned in an article in theIndependent,aUKnewspaper,listing20oftheUK’stopthink-tanks,onlyoneofwhich(atBT)wasacompanyin-houseunit.33

R&D also occurs through open-source (see Glossary) and similartechniques, whereby consumers or others play an active role in processredesign, product development strategies, new channel development andsolving complex problems. Linux software development is one example(seewww.linux-foundation.org).ResearchbytheForresterGroupindicatesthattherewillbeincreasingexpansionintherolethatconsumersplayinthedevelopment and execution of new products, services and processes (seeFigure9.4).

Iftheyaretocontinuouslyadapt,organisationsmustbefutureaware,and

then use not just their own expertise but the input of others (amateurs,consumers)tohelpthemworkthroughwaysofmeetingthefutureingoodshape.

Enablingadaptivecapabilitiesintheworkforce

Itisnotonlyatanorganisationallevelthatadaptivecapabilityneedstobegeneratedandregenerated.Individualemployeesmustalsobeabletomeetthefuturewithequanimityandimagination.Onewayofencouragingthisisto minimise the number of behavioural rules necessary to keep theenterpriseoperationalyetadaptive.In 1986 Craig Reynolds was looking for a way tomodel the flocking

behaviourofbirds.Hewaslookingforasmallsetofbehaviouralrules toachievethedesiredresultandmanagedtocomeupwithjustthree:34

1Separation:steertoavoidcrowdinglocalflockmates.2Alignment:steertowardstheaverageheadingoflocalflockmates.3Cohesion: steer tomove toward the averagepositionof local flock

mates.

These three rules are sufficient to generate flocking behaviour (seeFigure9.5).Notethat:

• there is no leader who says “follow me” – at any time any flockmembercouldbetheleader;

•eachmemberfollowsthesamerules–thereisnohierarchyofrules;•eachmemberisconcernedonlywithwhatitsneighboursaredoing–

thereisnoattempttotrytocomprehendthebehaviourofthewhole;•therulesarenotdirectlyconcernedwithglobal-levelbehaviour.The

appearanceofflockingisan“emergent”propertyresultingfromallofthemutualinteractionsbetweenmembers.

Such simple ruleswhenapplied toanorganisationmake for flexibility,autonomy and adaptability without losing overall control. They makeorganisationalbehaviourvisible,andoncearticulateditbecomespossibletodiscusswhetherthebehaviourstheygeneratearetheonestheorganisationwants or needs in order to keep adapting orwhether designwork shouldaimtochangethem.

CASESTUDY:howtokeepanorganisationcontinuouslymorphing

MargaretJohns,vicepresidentofaforecastingfirm,facedtheconference.Heraudienceofbusinessadministrationstudentshadinvitedhertopresenther views on how organisations couldmeet the future.Her strongly heldview was that businesses have to have the capacity to be continuouslytransformable.Thisiswhatshesaid.

We’renot livinginafairystorywherethefroggets turnedintoaprince and that’s it.We’re living in a world where what we aretodayisnotwhatwe’regoingtobetomorrowandthat’sdifferentagainfromwhatwe’regoingtobethefollowingday.Thisrequiresa different way of thinking but unless we take that path ourcompanywillbeintrouble.I learned this early in my career when I worked for CumminsEngine Company. Theirs is an interesting story that is stillcontinuing. In the early 1980s, when I joined Cummins, it wasfacedwithdeclining sales, new foreign competition and theneedfor its diesel engines to meet higher environmental standards. Itwas mature in its market, sales were declining and a number ofother thingsweregoingwrong. It seemed tobeentering itsdeaththroesandanalystswerebeginningtosayso.In the late 1980s three options were presented to the board ofdirectors:1Tosellthecompany.2 A “harvest strategy”, that is, consciously running currentproductionouttomaximisecashflow.3Toredesignthecompanywiththegoalofimprovingitsproductmixandmanufacturingprocesses.Optionthreewastheonerecommendedbecauseitwasfeltthatthiswas the only option that balanced the needs of the long-termshareholders with other stakeholders. Also, it focused thediscussion on ways of developing new markets, products and

organisational processes. But it was a risky strategy involvingheavyinvestmentandalongtimelagbeforeitwouldbepossibletoseeanyresults.Tocutalongstoryshort,thefirmwasredesignedtoachievehighproductivityinnewmarkets,includingChinaandIndia,withnewproductsinthosemarkets.Thiswasdonebydeployingtechniquesand processes around three areas: customer-led improvement;internally led improvement; and internal cultural change,benchmarkingthefirmagainstitsmaincompetitors.AlthoughIlefta year or two into the newdesign, I stayed in touchwith peoplethereandkeptuptodatewithprogress,soitdidnotcomeasmuchofasurprisetomewhenIreadinthepress:35

Investinginlocalmanufacturing.Groomingmanagersforthelongterm.Exportingwhenitmakessense,andtappinglocalengineeringbrainpower. Many multinationals are now emulating thesestrategies inChinaandIndia.Cumminsfigured itoutwellbeforethecompetition.During my time at Cummins I learned six things that haveinformedmystyleofoperatingovertheyears:1Astrongandinvolvedboardofdirectorsandgovernanceprocessiscrucial tosuccess.AtCumminswewereable toworkwith thedirectorsandgettheirsupporttotakeariskydecisionwhichtheystuck behind in the long term. It is clear tome that there is realvalueindevelopinggovernancestandardsandapproaches.2Business models must adapt to changing circumstances – youhavetokeepreviewingthedesign.Takingtheprinciple thatformfollows function, as the function of the organisation changes somustitsform.IntheCumminscasethefunctionadaptedtobeingsuccessfulinnewmarketswithnewproducts;thustheformhadtofollowsuit.Toooftencompaniesgetstuckinonedesignandthinkthat’sitforalltime.3 Every single day you have to keep things going and changethings. Thinking in terms of projects and initiatives implies abeginning and an end point and will not breed a successfulorganisation.Wehad tosimultaneouslykeepCumminsgoingand

manage a new design implementation. We could not do that bythinking toomuch in terms of projects and initiatives;we had tothinkofitasacultureandmindsetchangethatimbuedeverythingwedid every day all of the time. I have transferred this thinkingintomydaily life:eachdayI try tochangeeitheroneaspectofaprocess or the environment it exists in. For example, today Ireordered the way I hang clothes in my wardrobe to make thedressingprocessquicker.Tomorrow,I’mgoingtochangethelightbulbinmywardrobesoIcanseethecoloursbetter.Successful organisations learn how to interrupt their rituals andhabits and look for day-to-day improvement possibilities. Tryingout new ways develops adaptability and minimises the fear ofchange.4Enablingpeopletobepartofthenextgenerationofthecompanyrequiresinvolvingtheminwhatisgoingon,listeningtotheirideas,and helping them live their whole lives and not just their worklives. This develops strong employee/employer bonds – thepsychological contract holds firm. Helping staff “run hard anddream big” (in Cummins’s vocabulary) because they arecontributing to their future, the organisation’s future and theplanet’s future is a philosophy I’ve tried to practise in all thesubsequententerprisesthatI’veworkedin.5Peoplewhocanrunhardanddreambigaregenerallycuriousandinnovativeandthesecapabilitiesneedmanagerialnurturing.Thisishard to do in many organisations that formalise innovation inthingslikeR&Dunits.Tomymindthisdoesn’twork.Humansarenaturallycuriousandinventive–lookatthewayachildconstantlyasks“Why?”.Toooftenorganisationssquashthesecapacitieseventhough they are human enterprises. It is hard to genetically codethem into forward thinkingwithout having a regenerative culturethatcomesfromempoweredpeoplefindingexpressioneveryday.6Idiscoveredthatpeopleandorganisationsbenefitfromadiverseworkforcewheredifferences sparkpositive energy. Inmycurrentorganisation, demographic changes are bringing some surprises.Forexample,youngerpeoplearenowmanagingpeoplemucholderthan themselves. Simultaneously, we are consciously recruiting

peoplewithagreatdealofexperienceandtheyareabletomentorand coach the younger ones. No one can claim technologyexpertiseasweareallgettingtogripswithwaveuponwaveofnewtechnologies.

Sowhat am I telling peoplewho come tome for career advice?SteveJobssaiditwell:“You’vegottodowhatyoulove.”Thehighest-performingand best-run organisations help people do that. Look for companies thatintentionallymorph and transform, honour their implicit agreementswithpeopleandworkresponsiblyforthefuturegood.

Reflectionsonthiscase

Johns’sstoryillustrateshowherearlyworkexperiencesintransforminganorganisation helped shape her thinking about how best to guide themorphingprocess inorganisationssheworked insubsequently.Shechosetowork in a forecasting firm as it provided amatch to her interests andskills.Inherpositionshecanmodelthewaysheadvisestheleadersinherclient companies to work. She knows that she must scan her externalcontextfornewbusinessesandmodelsthatmightcatchherunawaresifsheis not careful.With this her business strategy is focused on opening newmarkets even as she operates in existing markets. She is aware of hercompany’s responsibility for the future and through various means isassiduous in helping her staff live whole lives, thus keeping thepsychological contract strong. She is an advocate of strong and involvedgovernance used wisely. The changes in the demographic profile lead torecruitment and retention challenges, but she is astute enough to see thevalue in having a diverseworkforcewhere individuals are encouraged touse their strengths tohelpsolve theirclient’sproblems.For themostpartsheisdoingajobshelovesinanorganisationthatsheishopefulwillshowitsabilitytoleaptheScurveandmorphtomeetasuccessfulfuture.

Toolsforthiscase

Keeping an organisation leaning into the future requires a tolerance (andeven seeking out) of chaos combined with a certain discipline in

intentionallychangingtheorganisation’sdesignonacontinuingbasis.Twotoolshelpwiththis.

GoodtoGreatDiagnosticTool

TheGood to Great diagnostic tool was developed by Jim Collins and isavailableonline(www.jimcollins.com).It isafour-stagetool thatassessestheorganisation’scapabilitymeetthefuturesuccessfully.

GoodtoGreatDiagnosticTool

Ourresearchshowsthatbuildingagreatorganisationproceedsinfourbasicstages;eachstageconsistsoftwofundamentalprinciples:

STAGE1:DISCIPLINEDPEOPLE

Level5Leadership.Level5 leaders are ambitious first and foremost forthecause,theorganisation,thework–notthemselves–andtheyhavethefierce resolve to dowhatever it takes tomake good on that ambition. ALevel 5 leader displays a paradoxical blend of personal humility andprofessionalwill.FirstWho…ThenWhat.Thosewhobuildgreatorganisationsmakesuretheyhavetherightpeopleonthebus,thewrongpeopleoffthebus,andtherightpeopleinthekeyseatsbeforetheyfigureoutwheretodrivethebus.Theyalwaysthinkfirstabout“who”andthenaboutwhat.

STAGE2:DISCIPLINEDTHOUGHT

Confront theBrutal Facts – the Stockdale Paradox. Retain unwaveringfaiththatyoucanandwillprevailintheend,regardlessofthedifficulties,ANDATTHESAMETIMEhavethedisciplinetoconfrontthemostbrutalfactsofyourcurrentreality,whatevertheymightbe.The Hedgehog Concept. Greatness comes about by a series of gooddecisions consistent with a simple, coherent concept – a “Hedgehog

Concept”. The Hedgehog Concept is an operating model that reflectsunderstandingofthreeintersectingcircles:whatyoucanbethebestintheworldat,whatyouaredeeplypassionateabout,andwhatbestdrivesyoureconomicorresourceengine.

STAGE3:DISCIPLINEDACTION

Culture of Discipline. Disciplined people who engage in disciplinedthoughtandwhotakedisciplinedaction–operatingwithfreedomwithinaframework of responsibilities – this is the cornerstone of a culture thatcreatesgreatness.Inacultureofdiscipline,peopledonothave“jobs”;theyhaveresponsibilities.TheFlywheel.Inbuildinggreatness,thereisnosingledefiningaction,nogrand programme, no one killer innovation, no solitary lucky break, nomiraclemoment.Rather,theprocessresemblesrelentlesslypushingagiantheavyflywheelinonedirection,turnuponturn,buildingmomentumuntilapointofbreakthrough,andbeyond.

STAGE4:BUILDINGGREATNESSTOLAST

ClockBuilding,NotTimeTelling. Build an organisation that can adaptthroughmultiple generations of leaders; the exact opposite of being builtaround a single great leader, great idea or specific programme. Buildcatalytic mechanisms to stimulate progress, rather than acting as acharismaticforceofpersonalitytodriveprogress.Preserve the Core and Stimulate Progress. Adherence to core valuescombined with a willingness to challenge and change everything exceptthose corevalues–keepingclear thedistinctionbetween“whatwe standfor” (whichshouldneverchange)and“howwedo things” (whichshouldneverstopchanging).Greatcompanieshaveapurpose–areasonforbeing–thatgoesfarbeyondjustmakingmoney,andtheytranslate thispurposeintoBHAGs(BigHairyAudaciousGoals)tostimulateprogress.

Source:www.jimcollins.com

Thediffusionofinnovationandappropriateeducationmethods

Thistool(Figure9.6)providesasnapshotofthetypeofactivityneededtokeep an organisation’s constituents moving along the adoption andadaptationcurve.

Summary

Thischapterbeginswith thepremise thatnoorganisationdesigncouldorshouldlastforever.Indeed,itisbettertothinkthatanydesignistransitory

andmusthavethebuilt-incapabilitytomorphtoadifferentdesignwithoutcausingdisruptiontotheoperationoftheenterprise.Getting this right in an environment that has multiple challenges both

internally and externally is hard. But certain approaches and techniquesemployed in the development and implementation of the design can helpmovethingsintherightdirection.Since it seems that the forecast formost companies is continued chaos

withachanceofdisaster,learningtohandlethissuccessfullyoraccepttheoutcomesisaprerequisiteforboards,leadersandtheworkforce.

Notes

General

TheURLsforthewebsitesreferredtointhisbookwerecorrectandactiveatthetimeofgoingtopress.However,theauthorandthepublishercannotguaranteethattheywillremainactiveorthatthecontenttheyrelatetowillnotchange.The Economist house style is to use British spelling. In this book,

AmericanspellinghasbeenretainedinquotationsfromAmericansources.Allunattributedchartsarebytheauthor.

1Introducingorganisationdesign

1www.bdo.co.uk/BDOSH/Website/bdouk/websiteContent.nsf/vAll/023F13FFCD2B07E380257243005538F2?OpenDocument2Rheingold,J.,“StillAngryAfterAllTheseYears”,FastCompany,October2003.

3Senge,P.M.,TheFifthDiscipline: theArtandPracticeof theLearningOrganization,Currency,2006.

4 Lawrence, E., Strategic Thinking: A Discussion Paper, PersonnelDevelopment and Resourcing Group, Research and CommunicationsBranch,PublicServiceCommissionofCanada,1999(archivedatepe.lac-bac.gc.ca/100/200/301/psc-cfp/strategic_thinking-e/pdf/strathink_e.pdf).

5www.gore.com

6www.creatingthe21stcentury.org/Larry-IIB-about-work.html

7Kotter,J.,“LeadingChange:WhyTransformationEffortsFail”,HarvardBusinessReview,March–April1995.

8Deutchsman,A., “TheFabric ofCreativity”,FastCompany, December

2004.

9Covey,S.,SevenHabitsofHighlyEffectivePeople,Simon&Schuster,1999.

10Gupta,R.andWendler,J.,“Leadingchange:AninterviewwiththeCEOofP&G”,McKinseyQuarterly,August2005.

11Ibid.

12Ibid.

13Weisbord,M.andJanoff,S.,“Faster,Shorter,CheaperMayBeSimple;It’sNeverEasy”,TheJournalofAppliedBehavioralScience,Vol.XX,No.X,2004(www.futuresearch.net/news/articles/JABS273248.pdf).

14Ibid.

2Models,approachesanddesigns

1Box,G.E.P.,“Robustnessinthestrategyofscientificmodelbuilding”,inLauner,R.L.andWilkinson,G.N.(eds),Robustnessinstatistics,AcademicPress,NewYork,1979,pp.201–36.

2www.ichnet.org/glossary.htm

3Magretta,J.,“WhyBusinessModelsMatter”,HarvardBusinessReview,May2002.

4Friedman,T.,TheWorldisFlat,Farrar,StrausandGiroux,2005,p.180.

5 Goold, M. and Campbell, A., “Do You Have a Well-DesignedOrganization?”,HarvardBusinessReview,March2002.

6Nadler,D.andTushman,M.,“TheOrganisationoftheFuture:StrategicImperativesandCoreCompetenciesforthe21stCentury”,OrganisationalDynamics,Vol.28,Issue1,Summer1999,pp.45–60.

7 Adams,M.G.,Change Your Questions, Change Your Life: 7 Powerful

ToolsforLife&Work,Berrett-KoehlerPublishers,2004.

3Organisationalstructures

1moneycentral.msn.com/content/P136436.asp,postedJanuary12th2005.

2 For a challenge to Mayo’s work see Stewart, M., “The ManagementMyth”,AtlanticMonthly,June2006.

3 Senge, P., Scharmer, C.O., Jaworksi, J. and Flowers, B.S., Presence:Exploring Profound Change in People, Organisations and Society,NicholasBrealeyPublishing,2005.

4Morgan, G., Imaginization: NewMindsets for Seeing, Organizing, andManaging,Berret-KoehlerPublicationsandSagePublications,1997.

5DeGeus,A.,TheLivingCompany,HarvardBusinessSchoolPress,1997.

6Senge,P.etal.,op.cit.

7Senge,P.,Scharmer,C.O.,Jaworski,J.,Flowers,B.S.,“AwakeningFaithinanAlternativeFuture”,Reflections,Vol.5,No.7,2004.

8Ibid.

9www.chevron.com/news/archive/chevron_speech/1998/98-1-28.asp

10 Galbraith, J.R., Designing a Reconfigurable Organisation, undated.Available fromwww.jaygalbraith.com/resources/reconfigurable_org.pdf11Drucker, P., Management: Tasks, Responsibilities, Practices,HarperBusiness,1993.

12“Takeadeepbreath”,TheEconomist,January19th2006.

13Goold,M.andCampbell,A.,op.cit.

14 Copyright 1998 Richard M. DiGeorgio & Associates. All RightsReserved (www.change-management.net/articlespan.htm) 15 Simons, R.,LeversofOrganizationDesign,HarvardBusinessSchoolPress,2005.

16 Simons, R., “Designing High Performance Jobs”, Harvard BusinessReview,July–August2005.

4Planningandsequencingtheorganisationdesign

1Weisbord,M.andJanoff,S.,op.cit.

2 Office of Government Commerce, Successful Delivery Toolkit(www.ogc.gov.uk/sdtoolkit).Thiswebsiteisasourceofexcellentpracticalinformationonrunningsuccessfulprojects.

3Hanessian,B.andSierra,C.,“LeadingaTurnaround:AnInterviewwiththeChairmanofD&B”,McKinseyQuarterly,No.2,2005.

4VanExel,A.andFisher,S.,WinningInternalSupport forUnited’sNewAirline,MelcrumPublishing,2005.

5HanessianandSierra,op.cit.

6Ghislanzoni,G.andShearn,J.,“LeadingChange:AnInterviewwiththeCEOofBancaIntesa”,McKinseyQuarterly,No.3,2005.

7London,S.,“Whythebunkermentalityhasbecomeacorporateliability”,FinancialTimes,September14th2005.

8Davenport, T.H., “Competing onAnalytics”,HarvardBusinessReview,January2006.

9Ibid.

5Measurement

1 For a fascinating discussion on this, see Taleb, N.N., Fooled byRandomness,RandomHouse,2005.

2Wieck,K.,SensemakinginOrganizations,SagePublications,1995.

3 Reichheld, F.F., “The One Number You Need to Grow”, HarvardBusinessReview,December2003.

4 It was similar to the Satmetrix Customer Acid Test(www.loyaltyrules.com/loyaltyrules/acid_test_customer.html).

5Diski,J.,Rainforest,PenguinBooks,1987.

6 Institute of Chartered Accountants in England and Wales, Guide toprofessional ethics, Retrieved on June 2nd 2006 fromwww.icaew.co.uk/viewer/index.cfm?AUB=TB2I_31547, Chapter 2.0SectionA7AA1000StakeholderEngagementStandard.

8 The Stakeholder Engagement Manual, Volume 2: The Practitioner’sHandbook on Stakeholder Engagement, available fromwww.accountability.org.uk9UKNationalAuditOffice,ChoosingtherightFABRIC: A framework for performance information, March 2001(www.nao.gov.uk).

10www.spo.noaa.gov/pdfs/PerfGuidelinesOnly_030805.pdf

6Stakeholderengagement

1www.j-sainsbury.co.uk/cr/index.asp?pageid=112

2Wylie,I.,“TalktoOurCustomers?AreYouCrazy?”,FastCompany,July2006.

3 www.triodos.co.uk/uk/about_triodos/organisation/people_at_triodos/ ?lang=

4Mayer,R.C.,Davis,J.H.andSchoorman,F.D.,“Anintegrativemodeloforganizationaltrust”,AcademyofManagementReview,20,1995,pp.709–34.

5www.vodafone.com(pageon“EarningtheTrustofCustomers”withintheCorporate Responsibility section) 6 “For whom the Dell tolls”, TheEconomist,May11th2006.

7American-Statesman,May15th2006.

8www.businessweek.com/print/technology/content/may2006/tc20060519_475997.htm9www.edelman.com/news/ShowOne.asp?ID=102

10 One of these is Line, R. et al., “The Production of Trust DuringOrganisational Change”, Journal of ChangeManagement, Vol. 5, No. 2,June2005,pp.221–45.

11Ibid.

12AdaptedfromBellman,G.,TheConsultantsCalling,Jossey-Bass,2002.

13www.ibm.com/ibm/values/us/

14Reichheld,F.F.,“TheLoyaltyEffect:TheForcesofLoyaltyvs.Chaos”,BainStrategyBrief,EssayNo.4,April1998(www.bain.com/bainweb/publications/publications_detail.asp?id=21&menu_url=publications_results.asp).

15 Marsden, P., Samson, A. and Upton, N., Advocacy Drives Growth:customer advocacy drives UK business growth, LSE Institute of SocialPsychology,2005.

16www.reliefresources.com

17Ibid.

18Cohen,B. andWarwick,M.,Values-Driven Business, Berrett-Koehler,2006.

19“LifebeyondPay”,TheEconomist,June15th2006.

20Urban,G.L., “TheEmergingEra ofCustomerAdvocacy”,MIT SloanManagementReview,Winter2004.

21www.pampers.com

22mopat405,April4th2005,www.epinions.com

23“BuzzMarketing”,BusinessWeekOnline,July30th2001.

24 “How to Communicate Business Strategy to Employees”,www.melcrum.com/store/products/product.shtml?id=2900,January2006.

25 Power, S., “Top Volkswagen Executive Tries US-Style TurnaroundTactics”,WallStreetJournal,July18th2006.

26 Labovitz, G. and Rosansky, V., The Power of Alignment: HowGreatCompanies Stay Centered and Accomplish Extraordinary Things, Wiley,1997.

7Leadershipandorganisationdesign

1Evans,P.andWolf,B.,“CollaborationRules”,HarvardBusinessReview,July–August2005.

2Adapted fromMorgan, G., Images ofOrganization, Sage Publications,1997.

3 French, J.P.R. Jr and Raven, B., “The bases of social power”, inCartwright D. and Zander A. (eds),Group Dynamics, Harper and Row,1960,pp.607–23.

4Kahn,M.,“UnionsTakeWal-MarttoCourtofPublicOpinion”,Reuters,August30th2005.

5 September 20th 2001, Profile: British Airways,news.bbc.co.uk/2/hi/business/1554140.stm 6 Roach, J., “NASA BudgetDiverts Funds From Science to Spaceships”,NationalGeographic News,February8th2006.

7 Borrus, A. and Arndt, M., “Executive pay: Labor strikes back”,BusinessWeek Online, May 26th 2003(www.businessweek.com/magazine/content/03_21/b3834075.htm).

8 Stanford, N., Fitting in and Getting On: the performance of seniorexecutivesjoiningnewcompanies,unpublishedPhDthesis,2002.

9Schein,E.H.,“Organizationalcultureandleadership”,inShafritz,J.andOtt, J.S. (eds), Classics of Organization Theory, Harcourt CollegePublishers,2001.

10“HowAlDunlapSelfDestructed”,BusinessWeek,June25th1998.

11www.hedricksmith.com/site_bottomline/html/dunlap.html

12Carroll,M.,AwakeatWork,Shambhala,2006.

13 Dickey, B., “NASA’S Next Step”,Government Executive, April 15th2004.

14Blanchard,K.andZigami,P.,LeadershipandtheOneMinuteManager:IncreasingEffectivenessThroughSituationalLeadership,WilliamMorrow,1999.

15Morgan,G.,ImagesofOrganization,op.cit.

16Kotter,J.,op.cit.

17 CNN, “Independence Day Lift-off for Discovery”, July 4th 2006(www.cnn.com/2006/TECH/space/07/04/shuttle.launch/index.html).

18Malik, T., “LandingDay: Space ShuttleDiscoveryReturns to Earth”,July17th2006(www.space.com/missionlaunches/060717_discovery_return.html).

19www.dreamflight.org

20Meyerson, D.E., Tempered Radicals, Harvard Business School Press,2001.

21Meyerson, D.E., “Radical Change the QuietWay”,Harvard BusinessReview,October2001.

22 Weiss, A., “Good enough” isn’t enough: Nine Challenges forCompaniesthatChoosetobeGreat,Amacom,1999.

23 Taylor, S.T., “Whistleblowers End Up Lonesome”, Orlando SentinelOnline,August18th2002.

24Heller,J.,SomethingHappened,Vintage,1995.

25Harvey,J.B.,TheAbileneParadox,Jossey-Bass,1996.

26 Kruger, P. and Mieszkowski, K., “Stop the Fight”, Fast Company,August1998.

27Seewww.belbin.com/foranexplanationofBelbin’sTeamRoles(oneofseveralmethodsofassessingtheprofileofateam).

28 Adapted from Spangler, B., “Best Alternative to a NegotiatedAgreement (BATNA)”, in Burgess, G. and Burgess, H. (eds), BeyondIntractability, Conflict Research Consortium, University of Colorado,postedJune2003(www.beyondintractability.org/essay/batna).

29Fisher,R.andUry,W.L.,GettingtoYes:NegotiatingAgreementWithoutGivingIn,2ndedn,PenguinBooks,1991.

30 Boyce, N., Wayne Hale’s Insider Guide to NASA, June 30th 2006.Retrievedfromwww.npr.org/templates/story/story.php?storyId=5522536

8Cultureandgroupprocesses

1Thisisawidelyquotedadvertisementthatmakesgoodreadingbuttodatenoonehasfounditsoriginalpublication.Theclosest toitappearstobealetterfromErnestShackletonprintedinTheTimesonDecember29th1913,p.6.

2Shackleton,E.,South,TheLyonsPress,1998.

3Watkins,P.,“LostintheSeaofIce”,TheTimes,August26th2006,inareviewofTyler-Lewis,K.,TheLostMen,Bloomsbury,2006.

4Shackleton,op.cit.

5Schein,E.H.,TheCorporateCultureSurvivalGuide,Jossey-Bass,1999.

6Retrievedfromabc.go.com/primetime/supernanny/about.html

7“FaceValue:TheCuttingEdge”,TheEconomist,October7th2006.

8Woodward,B.,“StateofDenial(excerpt)”,Newsweek,October9th2006.

9Hughes,D.,“NABchiefurgesstafftosharethevision”,SydneyMorningHerald,May22nd2004.

10Kean,D.,“Profile:HelenFraser”,TheBookseller,Issue5076,May5th2003.

11Egan,G.,WorkingtheShadowSide,Jossey-Bass,1994,p.4.

12Bevan,J.,TheRiseandFallofMarks&Spencer,ProfileBooks,2007.

13Brechin,A.,Brown,H.andEby,M. (eds),CriticalPractice inHealthandSocialCare,TheOpenUniversity,2000.

14www.impm.org

15Retrievedfromwww.cbc.ca/bigpicture/human.html

16Stewart,T.A.,“DidYouEverHavetoMakeUpYourMind?”,HarvardBusinessReview,January2006.

17Nakashima,E.andNoguchi,Y.,“HPCEOAllowed‘Sting’ofReporter”,WashingtonPost,September21st2006.

18Retrievedfromnews.com.com/pdf/ne/2006/hurd_remarks.pdf

19 Vroom, V.H. and Jago, A.G., The New Leadership: ManagingParticipation in Organisations, Prentice Hall, 1988; Vroom, V.H. andYetton, P.W., Leadership and Decision Making, University of PittsburghPress,1973.

20Klein,G.,SourcesofPower:HowPeopleMakeDecisions,MITPress,1999.

21Ibid.

22Ibid.

23Griscom-Little,A.,“TheWholeFoodsShebang”,Grist,December17th2004.

24Drucker,P.F.,TheEffectiveExecutive:TheDefinitiveGuide toGettingtheRightThingsDone,HarperCollins,2002.

25Peter,L.J.,ThePeterPrinciple,firstpublishedin1969.

26Salter,C.,“Updating theAgenda:MicroStrategyInc.”,FastCompany,May2001.

27www.kilmann.com/conflict.html

28 See www.belbin.com and the Glossary for more information on theteam-roleinventory.

29 Aritzeta, A., Ayestaran, S., Swailes, S., “Team Role Preference andConflict Management Styles”, International Journal of ConflictManagement,Vol.16,Issue2,2005.

30Weiss, J.andHughes, J.,“WantCollaboration?Accept–andActivelyManage–Conflict”,HarvardBusinessReview,March2005.

31 Deutsch, C.G., “Building the global bank: An interview with JamieDimon”,McKinseyQuarterly,Issue4,2006.

32 Lifeskills Publishing, Guidance House, York Road, Thirsk, NorthYorkshire, YO7 3BT; tel: 01845 526699; e-mail:[email protected]; website: www.lifeskillsintl.net 33www.lifeskillspublishing.co.uk/businesspubpages/resources.asp

34Watkins,op.cit.

35Ibid.

9Morphingnotfutureproofing

1www.emacassessments.com/majorapproach.htm(Mackenzie,K.D.).

2Shortformetamorphosing,morphingrefers toa techniqueinwhichonethingisgraduallyturnedintoanother.

3Drucker,P.,ManagementChallengesforthe21stCentury,Collins,1999.

4www.grandcentral.com/

5bokardo.com/archives/on-the-convergence-of-email-and-chat-google-and-apple-get-it/November9th2006.

6Kamenetz,A.,“TheNetworkUnbound”,FastCompany,June2006.

7 Flackery comes from “flack”, an informal word for someone whoallegedlyinventsnews,orgivesoutnewsthatpeoplewanttohear.Inthisinstanceflackeryisasynonymforhype.

8www.clifbar.com/ourstory/document.cfm?location=people

9“Wal-MartpullsoutofSouthKoreaon‘sluggish’business”,TaipeiTimes,May 23rd 2006(www.taipeitimes.com/News/worldbiz/archives/2006/05/23/2003309675).

10 www.motorola.com/mediacenter/news/detail.jsp?globalObjectId=8419_8350_23#

11 Corliss, B., “Not Lost in Translation”, Herald Net, April 20th 2006(www.heraldnet.com/stories/06/04/20/100bus_hubiz001.cfm).

12www.globalpolicy.org/globaliz/cultural/2003/0710starbucks.htm

13www.starbucks.com/aboutus/pressdesc.asp?id=705

14 Claessens, S.,Global Corporate Governance Forum Focus 1, WorldBank,2003(ForewordbySirAdrianCadbury).

15SummarisedfromClaessens,op.cit.,p.7.

16TheNationalAssociationofCorporateDirectors(www.nacdonline.org)providesalistofothers.

17www.nacdonline.org/FAQ/details.asp?faq=1#8

18www.businessroundtable.org/newsroom/document.aspx?qs=5946BF807822B0F1AD1458022FB51711FCF53CE CorporateGovernance Task Force chairman Steve Odland, Speech to the FBICorporateFraudTrainingConferenceon“Ethics,CorporationsandFraud”,Boston,Massachusetts,August25th2005.

19 Nordstrom, K.A. and Ridderstrale, J., commenting on their bookKaraokeCapitalism:ManagingforMankind,PitmanPublishing,2004(seewww.funkybusiness.com/funky).

20Guest,D.E. andConway,N.,Pressure at work and the psychologicalcontract,CIPD,2002.

21Conway,N.andBriner,R.B.,UnderstandingPsychologicalContractsatWork,OxfordUniversityPress,2005.

22www.mercerhr.com/referencecontent.jhtml?idContent=1231640

23www.un.org/esa/population/publications/ageing/ageing2006chart.pdf

24www-03.ibm.com/press/us/en/pressrelease/20387.wss

25 www.aarp.org/states/il/il-news/aarp_honors_best_employers_for_worker_over_50.html 26 Adaptedfrom Major Approaches to Organizational Design,www.emacassessments.com/majorapproach.htm(Mackenzie,K.D.).

27C. Joseph Pusateri, AHistory of American Business, 2nd edn, HarlanDavidson,1988.

28 www.fee.org/publications/the-freeman/article.asp?aid=2917; Matthews,

D., “Does Big Mean Bad? The Economic Power of Corporations”, TheFreeman,Vol.46,No.2,1996.

29 Beinhocker, E.D., “The Adaptable Corporation”, The McKinseyQuarterly,No.2,2006.

30“MarketMakersBid forSuccess”,HarvardBusinessSchool:WorkingKnowledge for Business Leaders, May 30th 2000(hbswk.hbs.edu/item/1540.html).

31www.iap2.org/displaycommon.cfm?an=3

32www.btinternet.com/~ian.pearson/

33news.independent.co.uk/uk/this_britain/article9181.ece

34www.red3d.com/cwr/boids/

35 www.businessweek.com/magazine/content/05_34/b3948463.htm;Engardio, P. and Arndt, M., “How Cummins Does It”, BusinessWeekOnline,August22nd2005.

Appendix1Organisationdesignmodels

Appendix2Usefulsourcesofinformation

Thislistingisagallimaufryofresourcesthattheauthorfrequentlyreturnsto.Thusitrepresentssomepersonalfavourites.Itshouldnotbetakeneitherasanexhaustivelistorasanendorsementofanyoftheproducts,services,orcontentrepresentedonthewebsiteslisted.

Books

Allen, D., Getting Things Done: the Art of Stress Free Productivity,Penguin,reprinted2002.

Arefreshinglookatself-organisationwithenoughhints,ideasandcommonsense to help anyone who has struggled to get more done with less feelslightlylessoverwhelmed.

Block,P.,FlawlessConsulting: AGuide toGetting Your ExpertiseUsed,2ndedn,Jossey-Bass/Pfeiffer,1999.

Anintroductiontobecomingaconsultant,takingthereaderthroughthekeyprinciplesinalively,straightforward,practicalway.

Cameron,J.andBryan,M.,TheArtist’sWayatWork,Quill,1999.

Aseriesofreflectiveexercisesdesignedtoencourageanyoneworkinginanorganisation to learn how to work effectively in it and develop skills inworkingwithothers.

Deal, T.E. and Kennedy, A.A., Corporate Cultures, Perseus Publishing,2000.

Anestablishedbookinthefieldofcorporateculturefirstpublishedin1982.

Deal, T.E. and Kennedy, A.A., The New Corporate Cultures, PerseusPublishing,2000.

Revisits corporate cultures in the light of mergers, downsizing and re-engineering.

Drucker,P.F.,TheEffectiveExecutive:TheDefinitiveGuidetoGettingtheRightThingsDone,HarperCollins,2002edition.

Abook that isasvivid in its recommendations todayaswhen itwas firstpublished in 1967. Some things stay the same, such as not enough time,difficultyinmakingdecisionsandmakingeffectivecontributions.

Gerstner, L.V.,Who Says Elephants Can’t Dance? Inside IBM’s HistoricTurnaround,HarperBusiness,2002.

Awelltoldstoryofleadership,participationandinvolvement.Easytoreadwithlotsoftipsonwhatworkedandwhatdidnotworkwithsomelessonstolearnfrom.

Morgan,G.,ImagesofOrganization,2ndedn,SagePublications,1996.

Amoreacademicbook,thisisafascinatingsurveylookingatorganisationsthrough different lenses: as psychic prisons, as political systems and asmachines,amongothers.

Prochaska,J.O.,Norcross,J.C.andDiclemente,C.C.,ChangingforGood,Quill,2002.

A grounded and practical approach to helping individuals change theirbehaviour. Although aimed at personal change, it has assessments,discussionsandsuggestionsthatworkinorganisationalsettings.

Scott,W.R.,Organizations:Rational,Natural,andOpenSystems,5thedn,PrenticeHall,2003.

An overview of key aspects of organisational theory. This is more atextbook than a “how to” book, giving insights into how and whyorganisationshaveevolvedinthewaytheyhave.

Senge, P.M. et al.,The Dance of Change: The Challenges to SustainingMomentuminLearningOrganizations,Doubleday/Currency,1999.

Areadableandsensible lookatmethodsofhelpingorganisationsdevelopbyprovidingtheconditionsforindividualstodevelop.

Stacey,R.D.,Griffin,D.andShaw,P.,ComplexityandManagement:fadorradicalchallengetosystemsthinking?,Routledge,2002.

A discussion of complexity science and its application to organisationdevelopment.Providesanalternativetotraditionalthinkingoforganisationsassystems.

Journals,magazinesandnewspapers

BusinessWeek

A weekly US print publication covering news, technology, media andnational(US)andglobalbusiness.

Website:www.businessweek.com

E:CO

AquarterlyjournalpublishedinprintandonlinebytheComplexitySociety,the Institute for the Study of Coherence and Emergence, and CognitiveEdge, blending academic and practical insights and moderated withacademicpublishingstandardsandprocesses.

Website:www.emergence.org

TheEconomist

A weekly UK print publication billed as an “authoritative weeklynewspaper focusing on international politics and business news andopinion”.

Website:www.economist.com

FastCompany

Amonthlyprintmagazineaiming tochroniclehowcompaniescreateand

compete, to highlight new business practices, and to showcase the teamsandindividualswhoarereinventingbusiness.

Website:www.fastcompany.com

FinancialTimes

Adailyinternationalbusinessnewspaperprintedondistinctivesalmon-pinkbroadsheet paper covering UK and international business, finance,economicandpoliticalnews,commentandanalysis.

Website:www.ft.com

ForbesMagazine

A bi-weekly US print magazine featuring in-depth coverage of currentbusinessandfinancialeventsfor“theworld’sbusinessleaders”.

Website:www.Forbes.com

FortuneMagazine

A weekly US print magazine, known especially for its annual featuresrankingcompaniesbyrevenue.Website:money.cnn.com/magazine/fortuneHarvardBusinessReview

A monthly general management journal with articles including researchproject findings and their practical application tomanagement issues andopportunities.

Website:harvardbusinessonline.hbsp.harvard.edu/b01/en/hbr/hbr_home.jhtml Inc.magazine

Amonthly print publication covering information and advice on businessand management tasks, including marketing, sales, finding capital andmanagingpeople.

Website:www.inc.com/

IndustryWatch

A quarterly UK publication that investigates recent economic trends andpredicts business failures across a rangeof industry sectors, publishedbyBDOStoyHayward.

Website:www.bdo.co.uk/industrywatch

McKinseyQuarterly

Aquarterly journalofbusinessmanagement strategyarticles, surveysandinterviews,coveringglobalbusinessstrategy,managementandeconomics.

Website:www.mckinseyquarterly.com/home.aspx

Slate

A daily internet magazine, founded in 1996, with analysis of andcommentaryonpolitics,news,culture,businessandtechnology.

Website:www.slate.com

WallStreetJournal

A daily newspaper providing international and national news with abusinessandfinancialperspective.

Website:www.wsj.com

Wired

A monthly print journal focusing on the effects of computing andtechnologyonbusinessculture,theeconomyandpolitics.

Website:www.wired.com

Organisationsandcommunities

TheBusinessInnovationFactory

Acommunityofinnovatorscollaboratingtoexploreandtestbetterwaystodelivervalue.BIFmembersandpartnersexplorebusinessmodelinnovationthroughaseriesofexperiencesdesignedtogetideasoffofthewhiteboardandontothegroundasquicklyandcost-effectivelyaspossible.

Website:www.businessinnovationfactory.com

TheCenterforHumanSystems

A professional and personal development organisation focusing onimprovingorganisationandhumansystems.

Website:chumans.com/index.html

collaboratioNation

Looksathowpeopleworktogetheracrossboundaries.

Website:collaborationation.com

LeadertoLeaderInstitute

Provides innovative and relevant resources, products andexperiences thatenablesocial-sectorleadersofthefuturetoaddressemergingopportunitiesandchallengeswiththegoalofleadingsocial-sectororganisationstowardsexcellenceinperformance.

Website:www.leadertoleader.org

OrganizationDesignForum

Aninternationalprofessionalassociationforthoseinterestedinorganisationdesign,dedicated toadvancing the theoryandpracticeof theorganisationdesignthroughexpertise,educationandresources.

Website:www.organizationdesignforum.org

PlexusInstitute

Anon-profitorganisationprovidinganintroductiontocomplexityscience.

Website:www.plexusinstitute.org

RoyalSocietyofArts

Runs a programme of projects and lectures based on five manifestochallenges: encouraging enterprise,moving towards a zero-waste society,developing a capable population, fostering resilient communities,advancingglobalcitizenship.

Website:www.rsa.org.uk

SanteFeInstitute

An organisation devoted to creating a new kind of scientific researchcommunity, emphasising multidisciplinary collaboration in pursuit ofunderstandingthecommonthemesthatariseinnatural,artificialandsocialsystems.

Website:www.santafe.edu

SpiritinBusiness

An organisation founded on the premise that creating businesses thatrespect life rather thandestroy it requiresashift in themind,achange inconsciousness. Its mission is to explore and further the role ofconsciousness,ethicsandvaluesinbusinessleadership.

Website:www.spiritinbusiness.org/new/content/home.php

StrategyasPractice

Acommunityofscholarsinterestedinthepracticeofstrategyandstrategicchange in organisations, applying a variety of different theoreticalapproaches, such as practice perspectives on organisations, sense-making,discourseanalysisandscripttheory.

Website:www.strategy-as-practice.org

TavistockInstituteofHumanRelations

Offers research, consultancy, evaluation and professional developmentworktosupportchangeandlearning,aswellaspublicationsinthefieldsofinter-organisationalrelations, theemergenceof theknowledgesocietyandproblemsoforganisation,particularlyinthedeliveryofpublicpolicy.

Website:www.tavinstitute.org/index.php

Virtualorganisation

Awebsitefocusingon theoreticalandempirical researchrelated tovirtualorganisations, virtual teams, network organisation and e-commerce. Itissuesregularnewslettersandeventdetails.

Website:www.virtual-organization.net

Resourcesandtools

BeyondIntractability

A free knowledge base on more constructive approaches to destructiveconflict.

Website:www.beyondintractability.org/

BurosInstitute

Provides professional assistance, expertise and information to users ofcommerciallypublishedtests,tools,surveysandinventories,andpromotesappropriate test selection, utilisation and practice. Offers reviews andinformationonnearly4,000tests,tools,surveysandinventories.

Website:www.unl.edu/buros

Businessballs

Providesfreeresources,toolsandinspirationfortheethicaldevelopmentofpeople,businessandorganisations.

Website:www.businessballs.com

CenterforEffectiveOrganizations,MarshallSchoolofBusiness

OffersaCertificateProgrammeinOrganisationDesign.

Website:www.marshall.usc.edu/web/CEO.cfm?doc_id=8297

ChangeManagementLearningCenter (sponsoredbyProsci)TheChangeManagement Toolkit includes detailed planning templates, readinessassessments and guidelines for building executive sponsorship andmanagingresistance.

Website: www.change-management.com/change-management-toolkit.htmChangeReadinessQuestionnaire

SeeBurosInstitute.

EconomistIntelligenceUnit

Providesanalysisandforecastsformorethan200countriesandeightkeyindustries, delivered online, in print, in customised research as well asthroughconferencesandpeerinterchange.

Website:www.eiu.com

Executive Briefing (Economist Intelligence Unit) Provides industryforecasts,countryanalysisandmanagementinsights.

Website:www.viewswire.com/index.asp?layout=homePubTypeEB

GallupOrganisation

Aswellasconductingindependentpolls,theGallupOrganisationpublishesbooksandinventoriesonemployeeandcustomerengagementandarticlesandwhitepapersonarangeofhumanperformancetopics.

Website:www.gallup.com

OrganisationalCultureInventory(OCI)SeeBurosInstitute.

Reuters.com

A source for news including business, financial and investing news, andpersonalfinanceandstocks.

Website:www.reuters.com

TheStrozziInstitute

Providestraining,booksandinformationonleadershipdevelopmentbasedontheprincipleofmindandbodyinteraction.Thetheoryisthatdevelopingleadership skills involves language, action and meaning (here called“somatics”)andmartialarts,principallyAikido,formthevehicleforthis.

Website:www.strozziinstitute.com

TeamEffectivenessInventory

SeeBurosInstitute.

Appendix3Glossary

Abilene Paradox A story ofmismanaged agreement. A course of actionwassuggestedbyonememberofagroupandnooneraisedanyobjectionto it. The group took this course. Subsequently, it transpired that severalpeoplehadnotagreedwiththeoriginalproposalbutwentalongwithitforvarious reasons. (See Harvey, J.B., The Abilene Paradox and otherMeditationsonManagement,Jossey-Bass,1996.)

ActionmanagementAsystematicmethodofmanagingactionsplannedtoachievebusinessgoals.Variousaction-managementsoftwareprogramsareavailabletohelptrack,monitor,controlandrespondtoactions.

ActionplanningDecidebusinessgoalsand thendetermine theactions totaketoachievethese.Fromthisbuildanactionplan,asequencedseriesofsteps that include task assignments, milestones, timelines, resourceallocationsandperformancemeasurement.

Analysis tools Analysis is the systematic approach to problem-solving.Complex organisational problems are made simpler when they areseparatedintosmaller,moreunderstandableelements.Theselectionoftherightanalysistooldependsonthenatureoftheproblem.Anexampleofananalysis tool is a SWOT (strengths, weaknesses, opportunities, threats)analysis.

Appreciative inquiryAnanalysis and assessment approach that seeks tofind what works in an organisation and to build designs from that. Theresults of this positively oriented process are statements that describe thefuturestateoftheorganisationbasedonthehighpointsandgoodaspectsofwhereithasbeen.

Blue-skythinkingSimilartobrainstorminginthatitaskspeopletocreatearange of options and possibilities in an ideal world where there are noconstraints.

BusinessprocessAnend-to-endseriesofactivitiesstartingwithinputstoaproduct or service and ending with the output. There are three types ofbusinessprocess:management,operational,support.

Capability Organisational capability is the collective skills, abilities andexpertise of an organisation vested in its employees. Capability ismaintained and developed through various human resource practicesincluding job design, training, rewards and recognition, and careerdevelopment.Organisationalcapabilityisanintangibleassetthat,managedwell,canbeavaluablecompetitivedifferentiator.

ChangereadinessBeforelaunchinganytypeofprojectinvolvingachangetoworkingconditions,itishelpfultoassessfactorssuchastheperceptionoftheneedforchange,howmuch(orlittle)supportthechangeislikelytoget from stakeholders, what the driving and blocking forces might be toachievingprojectsuccess,andleadershipabilitytomanagethechange.

CompetenceAnindividual’sabilitytocarryouttasksandactivitiestothestandardsrequiredinemploymentusinganappropriatemixofknowledge,skillsandattitudes.Manyorganisationshavecompetenceframeworksthatdefinelevelsofabilityagainstwhichemployees’performanceismeasured.

Complexity theory In the case of organisations and management,complexitytheoryisconcernedwiththeconditionsthataffectpredictabilityandself-organisingbehaviour.Oversimplifying, the theory suggests that acomplex system is inherently unstable and therefore unpredictable(mathematicsdemonstratesthattheunpredictabilityisnotrandom),butthatdirection emerges and self-organisation happens around this. (See Stacey,R.D., Complexity and Management: Fad or Organizational Challenge,Routledge,2000.)

CultureThevalues,traditions,customs,stories,habitsandattitudesthatagroupofpeoplesharethatdefineforthemtheirgeneralbehaviourandwayofworking in an organisation.A common shorthand for the definition is“thewaywedothingsroundhere”.

Dashboard A method of presenting easy-to-read and easy-to-assimilateinformationonthemetricsbeingusedtotrackandmeasureprojectstatus.It

is called a dashboard because the visual display of the informationresemblesthatofacardashboard.

Derailers The character traits that contribute to leadership failure byundermining their effective characteristics. Dysfunctional attributes thattake leaders off track include arrogance, volatility,micromanagement andanabrasiveinterpersonalstyle.(Seewww.hoganassessments.comfortoolstoassessderailers.)

EmotionalintelligenceIn1995DanielGolemanwroteabook,EmotionalIntelligence:WhyItCanMatterMoreThanIQ (Bantam, reprinted1997),describingfivedimensionsofemotionalintelligence:self-monitoring,self-regulation, self-motivation, empathy and social skills. He suggested thatpeoplewhoareclearlymorecapable indemonstrating theseattributesaremoresuccessfulthanthosewhohavelowerlevelsofemotionalintelligence(EI).Thebooksparkedacommercialandresearchindustryintheconceptsof EI. (See the Consortium for Research on Emotional Intelligence inOrganizationsatwww.eiconsortium.org.)

EngagementapproachesThe communication andothermethodsused toinvolvestakeholdersinanorganisationalchange.Theaimistodevelopandmaintainsupportforthechangefromthosewhowillbeinvolvedinitandaffectedbyit.

Facilitated sessions Events or workshops orchestrated by a facilitator.Facilitatorsdonotneedtohaveknowledgeofthecontentoftheworkshopas their skill is using their knowledge of group processes to determineapproachesand techniques thathelpagroupachieve theobjectivesof thesession. (See the International Association of Facilitators at www.iaf-world.org.)

Focusgroups Small groups of stakeholderswho participate in facilitateddiscussionsonquestionsrelatedtoorganisationchange.Thepurposeofthediscussion is to collect views and opinions on the proposed or enactedchangesinordertoinformfutureplanning.

FTEShortforfull-timeequivalent.Inreportingnumbersofemployeesonapayroll,figuresareexpressedasafull-timeequivalentstatisticrepresenting

the number of full-time employees that could have been employed if thereportednumberofhoursworkedbypart-timeemployeeshadbeenworkedbyfull-timeemployees.Thisstatisticiscalculatedbydividingthepart-timehourspaidbythestandardnumberofhoursforfull-timeemployees.

Future Search A conference-style approach involving large numbers ofinternal and external stakeholders jointly working on a design withfacilitator support. Briefly, some initial questions are posed and the“delegates” use a combination of structured activities to agreeanswers/solutions. This method has the benefit of generating feelings ofownershipamongstakeholdersthusgettingspeedilytotheimplementationstage.

GallupQ12 Gallup Consulting has identified 12 questions that measureemployeeengagementand linkpowerfully to relevantbusinessoutcomes,including retention, productivity, profitability, customer engagement andsafety. These questions – the Q12 – measure dimensions that leaders,managersandemployeescaninfluence.

1Iknowwhatisexpectedofmeatwork.

2IhavethematerialsandequipmentIneedtodomyworkright.

3Atwork,IhavetheopportunitytodowhatIdobesteveryday.

4 In the last seven days, I have received recognition or praise for doinggoodwork.

5Mysupervisor,orsomeoneatwork,seemstocareaboutmeasaperson.

6Thereissomeoneatworkwhoencouragesmydevelopment.

7Atwork,myopinionsseemtocount.

8Themission/purposeofmycompanymakesmefeelmyjobisimportant.

9Myassociates(fellowemployees)arecommittedtodoingqualitywork.

10Ihaveabestfriendatwork.

11 In the last six months, someone at work has talked to me about myprogress.

12Thislastyear,Ihavehadopportunitiesatworktolearnandgrow.

(www.gallupconsulting.com/content/?ci=52)

Geeks and techies People with a passionate interest in the detailedtechnical attributes of something. They focus on this to the exclusion ofmany other aspects of life. There is now a magazine, Geek Monthly,targetedatself-identifiedgeeks(www.geekmonthly.com).

GlobalReportingInitiativeThevisionof theGlobalReportingInitiative(GRI)isthatreportingoneconomic,environmentalandsocialperformanceby all organisations becomes as routine and comparable as financialreporting. The GRI accomplishes this vision by developing, continuallyimproving and building capacity around the use of its SustainabilityReportingFramework.(Seewww.globalreporting.org/home)

Governance The way an organisation design programme is directed,controlled, organised,managed and administered through various policiesandprocedures.

HierarchytheoryAtheoryconcernedwithlevelsoforganisation.Itusesasmallnumberofprinciplestomonitorcomplexstructuresandbehavioursofmultiplelevelsystems.Thetheory’sfoundationpaper,“TheArchitectureofComplexity: Hierarchic Systems”, was written by Herbert Simon(Proceedings of theAmericanPhilosophical Society, Vol. 106,December1962).

HolonicsystemsFromtheGreekholosmeaningwhole,aholonicsystemiscomposed of autonomous entities (called holons) that can deliberatelyreducetheirautonomy,whentheneedarises,tocollectivelyachieveagoal.Itisacomplex,co-operativesystem,abletoevolveandself-organiseovertime to optimise survivability, adaptability, flexibility, efficiency andeffectiveness. (See Koestler, A., The Ghost in the Machine, Penguin,reprinted1990.)

Interventions Planned activities designed to change the communicationtrackofaprocess, forexampleaworkshopaimedatdeterminingways tocommunicatedifferentlywithstakeholders.

InterviewA verbal exchange between two ormore people either face toface or via a phone line with the interviewer taking the lead in askingquestions.Theprimarypurposeofinterviewsinorganisationdesignworkistoobtaininformationtofeedintoprojectplanning.

JumpstarteventAnapproachthatquicklymovesparticipantsthroughtheearlyphasesoforganisationdesignwork.Jumpstarteventsprovideasparkthatgetspeoplegoinginthesamewaythatjumpleadsgetacarwithaflatbatterygoing.

Mapping techniques In organisation design work, mapping meansassessing the attributes and relationships between organisational elementstogetasenseoftheorganisationallandscape.Theaimistofindoutwhatthefocusofthevariouselementsis,howtheyareorderedinrelationtooneanother,what theareasof similarityanddifferenceare, andhow theyareorientedwitheachother.

Measurement A formalised activity (assessing, monitoring, gauging,ascertaining,surveying,andsoon)aimedatproducingstructureddatathatare then interpreted and applied in the process of making judgments,decisionsandchoices.

NoiseInorganisationdesignwork,noiseistheinformationgeneratedbyallthe day-to-day organisational communication channels, formal andinformal,includinge-mail,gossip,websitesandnewsbriefs.Organisationaldesignershavetwochallengesrelatedtonoise:siftingoutwhatisrelevant,such as useful feedback on progress, frombackground noise; and gettingtheirmessagesheardclearlyoverothermessages.

Open source Forums, usually web-based, for sharing problems andchallenges andworking togetheron solutions.Commonlyassociatedwithdevelopment of software, for example Linux, the term and concepts arenowbeingappliedtoarangeofotherarenaswherecollaborativeproblem-solving or product development benefits fromwidespread outsider (often

those with expertise tangential to the problem’s field) thinking. Seewww.innocentive.comforexamplesofopensourcechallengesinscience.

OrganisationArelativelydurable,reliableandaccountablesocialstructure“created by individuals to support the collaborative pursuit of specifiedgoals” (Scott,R.W.,Organizations:Rational,Natural,andOpenSystems,PrenticeHall, 2003).Anyorganisation comprises interacting components,eachhavinganimpactononeanother.

OrganisationdesignThesequenceofworkthatresultsinanalignmentofvision/mission,values/operatingprinciples, strategies, objectives, systems,structure, people, processes, culture and performance measures. Theoutcome of intentional activities that align all the components of anorganisationinawaythatkeepsitadaptableinitsoperatingcontext.

PredictivemodellingAprocessofcreatingamodelandwiththisanalysingpastperformancedatatopredictprobablefutureperformance.

Principal/agentproblemsThedifficultiesthatarisewhenoneperson(theprincipal) delegateswork to someone else (the agent)without having themeanstoensurethattheagentwillactintheprincipal’sinterestandnotinself-interest.

ProcessesTheend-to-endworkflowfrominput tooutputofaproductorservice.Forexample,arecruitmentprocesstypicallyincludesthefollowingsteps: develop job specification, determine selection criteria, advertisevacancy, provide information to candidates, shortlist applicants, interviewapplicants,makeoffer,negotiatecontract,signcontract.

ProgrammemanagementTheco-ordinatedmanagementofaportfolioofprojectstoachieveasetofbusinessobjectiveswhichwillberealisedmoreeffectively with a consolidated approach. Managing a programmecommonly involves using a set of tools and methodologies to take theprogrammeinasystematicwayfrominceptiontoclosure(seeChapter4).

ProjectmanagementThe application of specific tools and techniques toinitiate, plan, execute, control and close a time-relatedpieceofwork thathasstatedobjectives.

Quantum theory Formulated in a well-defined mathematical language,quantumtheorymakespredictionsfortheprobabilitiesofvariouspossibleoutcomes, but not for which outcome will occur in any given case.Interpretation of the calculations, in words and images, often leads tostatementsthatseemtodefycommonsense.Becausequantumeventsoccuron an extremely small scale, many aspects of quantum behaviour seemstrange and even paradoxical. (Adapted fromwww2.slac.stanford.edu/vvc/theory/quantum.html.)

ReorganiseShuffleexistingplayersintoanewformationwithoutchangingfundamentals.“Wetrainedhard,but itseemedthateverytimeweweretoform up in teams, we would be reorganized. We tend to meet any newsituationby reorganizing–andawonderfulmethod itcanbe forcreatingthe illusion of progress … while producing confusion, inefficiency, anddemoralization.”(AttributedtoGaiusPetroniusArbiter,RomangovernorofBithynia,AD60.)

Restructure A step up from reorganizing involving deeper changes, forexample in response to amergerwhere, to accommodate the twoparties,aspects of job design, work process, and so on, have changed. Oftenrestructures, like reorganisations, fail to take account of the multipleinterdependenciesthatneedtoformpartoftherestructure.Thismayresultin employee cynicism of the type expressed well by Scott Adams, theoriginatorofDilbertcartoons:“Let’s formproactivesynergy restructuringteams.”

Risk analysis Risks are the various factors that could influence theachievement of business objectives – the upside opportunities (oftenforgotten) and the downside hazards. In organisation design work, it isimportanttoidentify,assessanddetermineappropriatewaysofrespondingto these,andusea risk-control framework tomanage the risksduring theproject’slifecycle.

Sacredcow In organisational terms, an assumption, an idea or a practicethatisfiercelyprotected,oftenwithnoapparentreason,andthusbecomesabarriertochange.(SeeKriegel,R.andBrandt,D.,SacredCowsMaketheBest Burgers: Developing Change Ready People and Organizations,WarnerBooks,reprinted1997.)

Self-organising networks Associated with various scientific fieldsincludingphysics,artificialintelligenceandchemistry,butnowusedmoreloosely to describe the natural (ie, unmanaged) emergence of connectedpeopleintoarecognisedandcoherentcommunity,usuallyaroundaproject,ortopicofinterest.(SeeGoldstein,J.,“EmergenceasaConstruct:Historyand Issues”,Emergence: Complexity andOrganization, Vol. 1, 1999, pp.49–72.)

Silo Organisational silos are divisions and departments that workindependentlyof eachother, resistingco-operationandcollaborationwithother functions in the organisation. Lack of information sharing betweenthem leads to duplication, overlap and slowdown in getting things done.Moredangerously itcanalso lead tomistakesandfailure toactwhen theoccasiondemands.

Silo mentality A compartmentalised view of business operations, oftenencouraged by hierarchical structures and reinforced by reward andrecognition systems. People with a silo mentality are reluctant to shareinformation,make connectionsbetween theirwork and theworkof otherdepartments,orseewherecollaborationcouldbringmutualbenefit.

SixSigmaAmethodofimprovingthequality,efficiencyandeffectivenessofbusinessprocesses throughrigorousandmethodical statisticalanddataanalysis that aims to achieve ± six sigma (standard deviations) or 3.4defectspermillionitems.

StakeholderApersonwithavestedinterestinsomething.Inorganisationaldesign work, stakeholders are people who are affected, directly orindirectly, by the scope of a new design and/or who can influence thesuccessorfailureofthedesign.

StructuresThe arrangements of people in anorganisation that appear, insomeformofhierarchy,onanorganisationchart(seeChapter3).

Systems The infrastructures to carry the processes. So, for example, ahumanresources ITsystemwilltracktheflowofarecruitmentprocess.Inmostcases,systemsaretechnology-based,butpaper-basedsystemsarestillinevidenceinsomeorganisations.

TenFlatteners InhisbookTheWorld isFlat (Farrar,Straus andGiroux,2005),ThomasFriedmanarguesthatthereareanumberofforcesactingtotake globalisation into what he calls “3.0” – globalisation 1.0 being theperiod from1492until around1800 andglobalisation2.0 lasting roughlyfrom 1800 to 2000. Globalisation 3.0 is being triggered by the “TenFlatteners”whichhelistsasfollows:

1 Fall of the BerlinWall. The events of November 9th 1989 tilted theworldwidebalanceofpowertowarddemocraciesandfreemarkets.

2NetscapeIPO.TheAugust9th1995offeringsparkedmassiveinvestmentin fibre-optic cables, creating a worldwide infrastructure for latertechnologicalinnovationanddevelopment.

3Workflowsoftware.Theriseoftheseapplicationsenablesmorepeopleinmoreplacestodesign,display,manageandcollaborateonbusinessdataresulting in work flowing within and between companies and continentsfasterthanever.

4 Uploading or open-sourcing. Self-organising communities of geeksworkingonprogramslikeApachelaunchedacollaborativerevolutionthatresultedincommunitydevelopedsoftware.

5Outsourcing.Initially,migratingbusinessfunctionstoIndiasavedmoneyand fuelled a third-world economy. Outsourcing is now occurring acrosscontinents, including from other continents to the United States andregionally.

6Offshoring. Contract manufacturing is now occurring in a number ofnations.IthasservedtoelevateChinatoeconomicprominence.

7Supply-chaining.Robustnetworksofsuppliers, retailersandcustomersincrease business efficiency. Wal-Mart is the undisputed champion ofsupplychains.

8 Insourcing. Logistics giants took control of customer supply chains,helpingmom-and-popshopsgoglobal.UPSandFedExhavemademillionstransformingthemselvesinthisway.

9 Informing. Power searching allows everyone to use the internet as a“personalsupplychainofknowledge”.ThiswastheemergenceofGoogle.

10Steroids.Newtechnologiespumpupallformsofcollaboration,makingitdigital,mobile,virtualandpersonal.

Source:www.workforceinnovations.org/speaker_docs/world%20is%20flat%20synopsis%20Workforce%20Innovations%20v.2.doc

TransactionaldesignAdesigndevelopedtoachieve“bettersameness”thatmight be needed to carry out the mission and strategy but is not in aresponsetochangesinthem.

TransformationaldesignAdesigndevelopedinresponsetoenvironmentalforceseitherexternalorinternaltotheorganisationthataffectthemission,strategy and culture (such as a major, high-level and potentially life-threateningforce).

Triple bottom line As well as creating economic (financial) value,organisations are increasingly seeking to create social and environmentalvalue(ora least todonoharm).These threeelements–economic,socialand environmental – comprise the triple bottom line for reportingorganisationalperformanceandresults.

Virtual organisation An organisation that encompasses (“organises”) aworkgroup or community that may be within an organisation, may spanmultiple organisations, or may be outside the boundaries of any formalorganisation.Essentialfeaturesofavirtualstructureareidentificationwithshared concerns or issues and temporal and geographic separation ofmembersof thecommunity.Thereareotherfeatures thatmayvaryacrossvarious virtual organisations, such as absence of formal controls, rewardsand incentives, and presence of relationships based on goodwill andreciprocity. (Definition adapted fromwww.brint.com/wwwboard/messages/9894.html.)

Vision/visioningCreatingacompellingstatementofwhattheorganisationaspirestobeordoisoneofthefirststepsindesigninganewstate.Visionisimportantbecauseitisthemostfundamentalimpetusininspiringpeopleto

do their best. Awell-constructed vision also acts as a guide to decision-making, aligning the organisation’s parts so that they work towards adesirablegoal.

WalkthetalkThisphrasehasasimilarintentiontotheinjunction“practisewhat you preach”. Leaders of organisation design programmes are in thespotlight,andiftheyareseriousaboutgettingsupportfortheirprogrammestheymustbeseentobeconsistentlyactingasrolemodelsanddoingwhattheyareencouragingotherpeopletodo.