Having attended key conferences and visited over 20 organisations around the world last October, it was even more blatantly obvious to me that most organisations are facing the same challenges and falling into the same traps when doing organisation design.
The trap that makes me angriest is in the rush to cut costs – senior leaders revert to simply slashing and burning. They focus on spans and layers without really thinking about the work. They move boxes around the org chart without really thinking what’s inside the box, i.e., the work.
Generic magic numbers are used to right-size the organisation. For example, assuming that ideal span of control is eight, or making a unilateral cut of 20 percent across the board, no matter what, to declare savings. These poor spans & layers benchmark data are used to justify decisions and provide a resemblance of rigour. The result is misleading ‘success’ that’s declared too early. As no change to the work was done, the cost that managers obsessively tried to cut in the first place returns and the organisation ends up at state worse-off than before, bearing a high transactional cost.
You can’t just shoot in the dark!
So why do organisations keep falling into this trap? Most leaders say they feel pressured by speed and cost, and they are forced to react to ‘burning platforms’. Poor earnings; the threat of a take-over; post-merger integration; a new leader arriving. In other words, most leaders treat organisation design with an event driven mindset, filled with stress and as a reaction to a ‘shock’.
This one-off intervention approach needs to change. I believe organisational design is an activity that requires constant attention. It is a core business process just like planning or budgeting – it needs to be done right when the luxury of time is there. Strong organisations are those that are constantly seeking improvement, not just when a dramatic change is forced upon them.
Build an Organisation Effectiveness (OE) function
So how can we shift the mindset around organisation design, from ‘slash & burn’ to ‘on-going transformation’? Start building on your OE function!
The OE function is responsible for driving constant improvements – providing input, direction, and execution with respect to organisation effectiveness. It exists to ensure that corporate strategy is translated into a robust design, strong and clear roles. It includes the role of doing organisational analytics and what is often referred to as ‘Health Checks’.
As a relatively new function, OE is still often under-staff and lacking the right level of competence or authority. But they ought to be done right! It needs to be established at the senior corporate level as a link between HR, Strategy, Transformation, and Finance. It should report to the CHRO (most senior HR executive who reports to the CEO) and reflect the true strategic people agenda. Hence, when shocks occur or great opportunities arrive, the organisation has the right capabilities, data and methods to react in a professional and effective manner.
It’s crucial for us to understand that OE is far more than just a Centre-of-Excellence. It is more than fostering knowledge, capability, and sharing consulting type resources. It is a “driving” function with decision-making authority.
HR needs to embrace and own OE
Historically, HR has been more of an administrative unit rather than a strategic player in the business. The function is on the whole far too tactical and transactional. It spends most of its time dealing with the implementation of the ‘here and now’ – ensuring that people are paid on time, resourcing works well, and L&D is effective. But when a critical moment hits, that is a major organisational change, the function is unprepared, resorting to “Slash and Burn.” This has to stop.
Stay tuned for my next blog where I’ll cover ways for HR to develop its competency in OE in greater depth.
You can find out more about data-driven organisation design by downloading this sample chapter.