A whole-system view
Follow the path from strategy to results as operating models align organisation design, capabilities and people to improve performance.
Summary ideas
See the whole system
The Star Model provides a framework for diagnosing and designing the interconnected elements of an operating model.
Make design choices fit
Each design choice must reinforce the others to create coherence and support the intended behaviours and culture.
Look beyond the technical
The Star Model can make organisation design appear purely technical. Every design choice must also consider social requirements and impacts.
For executive leaders tasked with driving enterprise transformation, the journey into organisation design begins by dispelling a common belief. The organisational chart is not an operating model – it is a management mechanism that can influence managerial focus and control.
The purpose of the organisation chart is an accountability hierarchy to direct work and achieve outcomes. If your intention is to rebalance or reinvigorate accountability for outcomes in a work system that otherwise changes very little, a narrow intervention into the organisation chart may work for you. However, and this is a big cautionary note, if you must align your business to a new strategy, create new capability, fundamentally change the work, integrate technology or modify the culture of your organisation, you will require a much more comprehensive intervention. You are looking at transformational change. You will not accomplish these objectives by focusing on the organisation chart.
This more comprehensive view of your organisation is the operating model. It is a collection of important design categories that must be viewed holistically to achieve a desired outcome. Some will use the term operating model and organisation design interchangeably. There is clarity found in referring to organisation design as a verb whose output is an operating model (noun).
The system view
There are several operating model frameworks available for use. Each intends to specify the basic categories of design choices that must be addressed to produce a comprehensive operating model capable of creating the right type of customer value. There are more similarities than differences among the frameworks. The star model by Jay Galbraith is the most pragmatic and widely adopted for several reasons: it has been repeatedly validated over time; it is the model most likely referenced in formal and informal executive studies; and its simple elegance makes it well suited for practical application.
The Star Model
1. Strategy – Define the organisation’s purpose, markets and plan to win.
2. Capability – Build the work capabilities needed to deliver the strategy.
3. Structure – Organise work into units, roles and responsibilities.
4. Process – Coordinate work and information across organisational boundaries.
5. Rewards – Reinforce the behaviours needed through incentives and role modelling.
6. People processes – Recruit and develop the skills and leaders the organisation needs.
7. Culture – The ways of working shaped by the organisation’s design choices.
DESIGN COHERENCE
The importance of fit
Design coherence is the metaphor of all rowers in the sculling boat pulling together. When one element is misaligned, the whole will be badly suboptimised. All aspects and elements of an organisation’s design must be aligned and congruent with the business strategy, inclusive of desired social attributes/values, if it is to achieve and reinforce desired behaviours and culture.
For example, if an organisation is intended to be team-oriented, then design choices for items such as structure, job design, decision-making, management activity, and compensation and incentive systems must be designed to support teams. Other processes such as recruitment, selection, onboarding and orientation, and training and development can reinforce or contradict the desired team-oriented culture. In a strict sense, everything matters. The design of work and all supporting structures must be consistent with the expressed business strategy and intended culture.
There is a second important perspective of ‘fit’ to appreciate. Organisational life has technical and social dimensions. Both dimensions work together to influence the success of the organisation. This time we’ll apply the iceberg metaphor. The technical system sits above the waterline, is easiest to see, and gets most of the management attention.
The technical system includes the inanimate objects of the organisation – material inputs and informational systems, defined work processes, work technology, governance process, metrics and goals and scorecards, contracts, etc. Organisations highly oriented to STEM fields are very familiar and comfortable with this aspect of organisation.
The social system sits below the waterline. It is more difficult for outsiders to see and understand, and it is difficult to change directly. This is the domain of culture and the hidden bulk of the organisation that shapes success. It is the collective hearts and minds of the people, their relationships to each other, commitment levels, quality of work life and the resulting organisational patterns of sense-making and action-taking. This is the domain of psychology and discretionary effort. Organisations heavily populated with STEM fields often overlook this dimension of organisation, while intellectually understanding it exists.
Design process of a new operating model must seek to optimise both the social and the technical systems as opposed to focusing on one aspect to the exclusion of the other. This is an important issue. The technical system is to be made sustainable in an engaged and dynamic social system. Technical, human and financial requirements should all be considered and reflected in each critical design choice. To ensure accelerated adoption and ROI, these requirements must be designed jointly and concurrently.
CASE EXAMPLE
Building a shared view of the organisation
The organisation was doing fine today. Future growth aspirations would challenge that stability. When discussing future growth, leaders would point to the organisation chart and identify where they thought more jobs were needed to meet the needs of growth. Predictably, the location of those new jobs was within their patch of the organisation. The organisation chart was their dominant view. Increasing the importance of their branch was their defensive concern. Strategy and strategic position were a source of disagreement. Nobody could articulate the basic end-to-end flow of value-creating work. Nobody knew how to revive culture into the high engagement needed to achieve growth aspirations.
A solution was found in creating a common view of an operating model with all its interdependent parts. This common view allowed all members of the organisation to see and understand the end-to-end system of value creation and their role within it. A shared understanding of the challenge and a new appreciation of interdependence brought the organisation together to design a future model that could meet growth aspirations and shift a culture into increasingly collaborative behaviour. The process of design produced the technical aspects of the future operating model while modelling the social interdependence and collaborative culture needed in the future organisation.
SOURCES
- Galbraith, J. R. (2002). Designing organizations: An executive guide to strategy, structure, and process. Jossey-Bass.
- Jaques, E. (1996). Requisite Organization. A Total system for Effective Managerial Organization and Managerial Leadership for the 21st Century. Cason Hall & Co.
- Lawrence, P. R. & Lorsch, J. W. (1967). Organization and Environment, Harvard Business School Press
- Mahler, W. (1975). Structure, Power, and Results. Dow-Jones-Irwin, inc.