This is Chapter 3 in the eBook Building A High Performing Team on Purpose.
When I say the term “organisational design”, do you instantly think of boxes with names in them and lines connecting people to their manager?
Might you then picture what the resumes need to look like to fill the boxes that have titles held by the mysterious person named “Vacant”?
At the next level, do you perhaps think of spreadsheets and how bonuses are calculated to reward the financial results from your business objectives?
If this is your picture of organisational design, then you are not alone. This is only the tip of the iceberg and a flattened misconception of what your organisation and job design can be.
In reality, what happens is…
- The boxes merely indicate who has to justify underperformance at management or board meetings
- The resumes create a sense that all of our problems will be solved by a magical person, who has all the solutions to our biggest challenges – we just haven’t met them yet
- The spreadsheets create a sense of excitement about the gaudy numbers that could be achieved, but probably never will.
You might have picked up a theme here that the common actions business leaders take under the banner of organisational design are just schematic activities and we’re kidding ourselves that what we want to happen will actually happen.
Why do we do this? Our comfort zone as business leaders drives us towards these steps. It’s the chemicals that are steering us as human beings. They often fool us into thinking we have accomplished something even when we haven’t.
Our desire to feel good about what we have documented clouds our ability to see the harder work required. The easiest way to get that dopamine fix is to complete something that feels tangible. Changing names in boxes and calculating bonus figures based on projected financial results gives us that fix.
Below, I’ve outlined three steps for business leaders to delve into to consider their organisational design. There might be areas that require you to spend more time on, but remember, if it was easy, everyone would be doing it.
Let’s start by defining what organisational design really means.
1. Organisational design is leveraging the energy flow of your business
What is organisational design? Terminology is confusing if we just keep repeating the same terms without proper explanation or illustration. So I’ll give you my simple explanation of organisational design.
Organisational Design is the energy flow of your business.
Imagine we are at the top of a large dirt hill and you have dug trenches that flow down the slope like tree branches. You pour hot red lava down the pathways, flowing to the bottom. Which way does the lava turn? Where does it stop and bubble up? In which parts does it pick up the pace and start to create new paths?
Simply writing up your organisational chart is not going to change the energy flow of your business. You need to create an in-depth understanding of which way the lava is flowing right now and how to build new trenches in the direction you want. Just typing names in boxes won’t make much of a difference in trajectory.
So where do you need to focus to leverage your organisational design and have a better flow of energy?
- Alignment is key. Organisational design is not simply your organisational chart featuring names in boxes – it goes far deeper than that. Organisational design is aligning the combined individual contexts of each person’s job to support the organisation’s objectives. This means the processes, accountabilities, decision-making, communication flow, capabilities, performance measures, training focus and reward structures needed to support what your business is trying to achieve. As you can perhaps predict, these areas form the trenches you dug for the lava to flow through.
- Sequencing is important. Reward structures are often discussed at the start, but they are merely the exclamation mark at the end of a sentence. Imagine you simply write the ! without knowing what the sentence should be. Imagine what you should have been shouting is “That was a brilliant year!” but instead you said “This is f@#$ed!” It’s important to get the direction right before you add the reward, as otherwise you may emphasise the wrong thing. Lehman Bros got this part wrong and in that case they collapsed and started the global financial crisis in 2008. You need to define the position before the KPIs, which comes before deciding on the reward structure.
- The wrong conflicts will constrain you. Conflict can sometimes be inevitable in business due to different priorities of different people. If you have built into your business conflicts that strongly work against each other and your strategy, you will remain in second gear. A very simple example is that your sales strategy needs to align to the position description, training, KPIs, rewards, processes, systems and disciplines for all of your salespeople and sales managers, right? But actually, you need to also look at the rest of the value chain to ensure that your operations, purchasing, HR etc. are also aligned. Furthermore, whilst this energy conflict can be due to tangible actions, it can also be due to deep seated beliefs and behaviours of the people within your organisation.
Sometimes it is difficult to spot where the energy of your organisation is slipping through the cracks or getting stuck at the bottom of a drain pipe. We’ll go through how to identify these cracks in the third step, but first let’s work through the external factors that can trip you up.
2. Your organisational design will change or cease to exist
Businesses are changing – quickly. Before the COVID-19 crisis, there was a lot of talk about the fourth industrial revolution and the gig economy. Whilst the aspects and principles of organisational design remain consistent, the external environment is rapidly transforming like we have never seen before.
The fourth industrial revolution
The fourth industrial revolution is causing many jobs to be automated or at least having some tasks completed by machines. What is starkly different this time is that previously a lot of blue collar and physically manual jobs had been automated, there are now a lot of white collar jobs also susceptible.
Routine-based and middle skilled roles are at risk of being made redundant due to process automation. This has already begun in many places, such as the increased capability of ATMs and self-serve kiosks. However, even positions that are considered highly skilled and educated, such as lawyers, are starting to see elements of their roles being completed by a machine.
Ultimately, the human element to connect people and processes effectively will be most important. Fitting these new roles into an organisation’s design will be a key part of how a business best creates a competitive advantage.
The gig economy
We’ve witnessed the rise of the freelancer, enabling people to have a side gig and even a full career without having to be an employee. This trend creates a problem for employers looking to retain employees and keep them engaged. We are now not only competing with other businesses, we are competing with ‘entrepreneurs’ who don’t require a permanent, full time role to make a living.
At the same time, it creates a tremendous opportunity to harness this new source of talent. Imagine the convenience of gaining specialist skills or knowledge that you can access as and when you need it. You can outsource routine tasks that are not value-adding for your employees.
This could allow you to hire someone who is great at the competencies that will further your business, without having to be good at the tasks that provide no advantage. For example, someone who has proficient analytical and collaboration competencies might rather use those abilities more often and more effectively than be performing routine and repetitive tasks for half their working hours.
You could take two jobs and combine the fun parts for this type of person then automate or outsource the boring bits. This creates a position that may not exist readily elsewhere for this employee, helping to enhance the enjoyment of their job and ultimate success by capitalising on their signature talents. If these competencies were strategically important to you, then you are also going to get more of this type of work performed by a more engaged, talented and knowledgeable person than the competition.
The risks and opportunities for your organisational design
When external forces are changing rapidly, if roles are not properly defined or updated internally you may have employees seemingly working hard, but not on what is valuable. The business may be left with the wrong type of talent and even worse, continuing to hire on the wrong criteria, adding more of the wrong type of talent into the business.
This type of planning for a new kind of talent for your business may be threatening for others whose identity is built around being able to perform the tasks of yesterday very well. There needs to be a planned approach to transitioning the workforce, which includes both re-training and development, as well as bringing in new talent who have the capabilities required before they are needed.
The changing lens to enable defining roles for high performance
Many businesses are still stuck in the age of viewing roles on required crystallised intelligence, which is defining competence in a role by primarily looking for existing knowledge or skills. For example, the capital of Switzerland is not Zurich like many people think, it is actually Bern.
Whilst the capital cities of countries don’t change very often, the knowledge and skills required in businesses is constantly changing. Think about the changing products, technology, processes and service models that are taking place. Defining positions only on the basis of what set intelligence is required will outdate your roles before your Ubereats delivery arrives. It is still relevant though, as you need knowledge and skills to be effective.
It has always been the case that fluid intelligence is a stronger predictor of performance. The ability to solve new problems, think logically and flexibly. People with stronger fluid intelligence are more likely to seek out new knowledge, reconcile what it means in their context and apply it to add value to your business.
Think of such a person doing this each day versus the person who is still excited by their knowledge of European Geography. Now, add in the context of a rapidly changing environment, where new information and approaches are replacing older knowledge at an exceptional pace. Getting an accurate picture on the requirement for types of intelligence in your business is critical to building a high performing team on purpose, which starts with the right organisational design and role definition.
3. Getting started on reviewing your organisational design for the present and future
Let’s move now to some tangible actions that you can take to get started. Here are 10 questions to ask yourself when thinking about your organisational design:
- What is our business model? What are the high level core functions that our business performs to deliver value to our customers (external and internal)? What are the second level processes that are required to deliver that value? When does each function start and end? Are there functions that don’t exist today that need to exist to deliver to our strategy and purpose?
- What are the broader external trends that are going to have the biggest impact on our business, both as a risk and opportunity?
- (If not completed already) Who is our customer, now and in the future? What do they value? What is our strategic positioning ? What does this mean we have to be exceptionally great at?
- What are the High Value Activities (HVAs) that the business needs to be spending time on that will have the biggest impact on delivering the strategy? How much time is being spent on this today? How much time needs to be spent on it?
- What are the capabilities that our business needs to have strengths in, to deliver our strategy? Do we currently have this? How do I know this? Would I bet the farm on this answer?
- What are the positions that will be most pivotal in delivering on our strategy and most influential on the HVAs? Am I sure I haven’t identified a processing role or a position that I think is strategically important because it is adding value today with a real live person? (If all you have listed are sales people, you need to rethink this one).
- What are the positions that are least pivotal to delivering on our strategy? Can and will they be automated? Will they no longer exist in future?
- Who is the least forward-thinking manager who is most stuck in their ways in my business? What is the position in my business that is strategically important, but doesn’t exist today, that this manager would instantly write off as being a waste of money? (This might be the position you actually need most).
- How do my systems of performance measurement, reward, decision making, process accountability, communication and training focus support all of the above? How are they currently working against it?
- What are the existing beliefs in my business from key people that need to change for me to have an opportunity to move to the type of organisational design we need?
Hopefully at this point you can see that you should avoid approaching organisational design as a quick fix, fooling yourself into thinking you have performed valuable work by creating a new organisational chart, deciding what resume will look best to fill the vacant positions and what bonuses you need to drive performance.
Instead – go deeper. The energy of your business and how this is channelled is valuable to gain a deep understanding of. More important than this is though, is how and where it should be flowing to deliver on your strategy. By opening your eyes to the rapid changes externally and breaking existing assumptions of what’s important to spend time on in your business, you might just be one of the businesses that breaks the mould for others to follow.
Read Chapter 2 of Building A High Performing Team On Purpose — Your Business Strategy here.