Operating model misalignment
Trace silos, conflict and inefficiency back to misaligned structures, processes and people, and learn how addressing those root causes can improve performance.
Summary ideas
Align design with purpose
Operating model choices must fit together to translate strategy into productive behaviour.
Look for root causes
Behaviour and performance problems can stem from multiple, interconnected choices within the operating model.
Reduce fragmentation
Structural fragmentation creates waste and weakens collaboration, making connected work a design priority.
What does it look like and feel like when an operating model is not fit for purpose? Operating units push decisions upwards, responsiveness slows, internal conflict consumes energy and performance falls short of targets. These tangible behaviours and outcomes follow from an operating model that is not creating the right type of behaviour. There is nothing else that converts business strategy into behaviour. You can change leadership, and many leaders are changed to improve performance. However, if you change leaders in an unchanged system, the system will recreate its problems with a new leader at the helm.
Seeing the whole
Your operating model is a complex system of design choices. Because it is a system, various parts can come together to create unwanted behavioural consequences and hide cause-and-effect relationships. It is analogous to the human body. A person might suffer from back pain, but we cannot reliably know the cause until we look at the whole person. Perhaps their hips are out of alignment. It could be degenerative spine disease. It might be a general stress disorder. The point is that the relationship between symptoms and cause is not always easily seen.
A useful exercise to recognise and make sense of behavioural symptoms in the operating model is to use the star model as a diagnostic device. It is intuitive and involves aligning observed behaviours to the points of the star model. The best audience for this exercise is the members of the organisation because they will have the best understanding of the system. They are also the audience that must conclude the unsustainability of the present system in its current form.
An example of this might be a technology development group that provides a sales team with product features it is not expecting and cannot sell to most of the customer base, while the sales team is saying the product is getting too complicated.
There are two important aspects of this exercise to note. The first is the relatively simple expressions of current state. The people participating in this exercise are from the organisation and understand the truth and depth of these statements. There is no need for extensive data collection that is then packaged and presented back to the organisation as a discovered truth. It is data generated by the organisation. It is their data and there is no escape from its meaning.
A second important aspect is the distribution of related factors across each part of the operating model. A constellation of factors is creating dysfunction. Let’s remember that the relevant observation is not the only problem plaguing the organisation. The implication is that a solution is not likely to be a targeted, surgical intervention. A sustainable solution that resolves the problem must be systemic in nature. It must fit into the whole of the operating model. The design choices in the future operating model must cohere together to resolve the presenting problem or the problem will change shape and continue to challenge your success.
Where alignment breaks down
1. Strategy – Unclear competitive positioning and poorly defined customer segments.
2. Capabilities – Market insight fails to identify features customers value.
3. Structure – Technology and sales operate in silos with competing priorities.
4. Processes – Weak coordination of development priorities and work.
5. Rewards – Technology is rewarded for any innovation; sales for revenue from relevant innovation.
6. People processes – Hiring favours technical expertise over business knowledge and cross-functional communication.
operating model dysfunction
The cost of fragmentation
A common driver of operating model dysfunction is fragmentation. It is an outcome of industrial philosophy that organises work into small, highly specialised ‘chunks’, or units, that can be easily measured and managed. This approach to work organisation results in highly functionalised organisations that create boundaries that separate related work and increase coordination requirements.
It is worth a brief comment that fragmentation is not only a feature present in organisational structure, but also a feature of the executive team. While responsible for the whole, the C-suite differentiates areas of responsibility to deal with the nearly limitless complexity of managing an organisation in a dynamic operating environment. Traditional C-suite responsibilities tend to follow functional departmentalisation – Chief People Officer, Chief Legal Counsel, Chief Sales Officer, etc. Without deliberate reintegration, the C-suite can demonstrate many of the same challenges of a fragmented structure. The cautionary message is to maintain awareness that functionalised thinking is deeply embedded in our understanding of organisations and is likely a default choice for organisation structure.
The alternative to fragmentation is to assemble structure into units of whole work. This means placing work boundaries only where necessary so that a group/team is responsible for a whole piece of work outputs, including any rework needed to make it right. Boundaries of whole work must be formed to ensure that any problems can be detected and corrected quickly within group before it moves across a boundary into downstream process.
1. Lost focus
When work is fragmented, people often lose sight of their contribution to the end-to-end value stream that delivers a product or service to the customer. The lack of context and feedback inhibits effective decision-making and exports waste and rework into other parts of the organisation.
2. Errors
Fragmentation and unclear decision rights allow errors to cross boundaries, restrict information flow and increase rework. Decisions escalate and problem-solving slows. Leaders get caught firefighting visible issues, such as delays and quality penalties, instead of addressing root causes.
3. Poor relations
Fragmentation is another way to say siloed behaviour. Commonly, silos promote problems of misaligned incentives, competitiveness or lack of trust among leaders and operating choices wherein leaders attempt to optimise their part of the business in ways that cause unintended negative consequences for the overall whole.
NOTICING PATTERNS
Destructive behavioural dynamics
A misaligned operating model frequently creates destructive behaviour. It is the system’s influence on individual behaviour. These destructive dynamics are reflexive actions and reactions that reduce efficiency and effectiveness (i.e. destroy value). Instead of focusing on stable value-creating work, these patterns draw the organisation into fighting. You can see and hear these behaviours because they show up in your office.
One pattern is the trap of ‘bias towards action’. Here, leaders take it upon themselves to fix problems within their scope of influence. This is understandable because leaders generally rise into their job based upon an action orientation, technical know-how within their practice area and self-authorised behaviour. This bias towards action frequently suboptimises the whole as leaders seek to optimise within their scope. In this pattern, you’ll hear complaints that someone who has taken an action does not understand the consequences of that action. At this point, you know you have an operating model issue to address.
A second pattern is the ‘blame game’. Silos and fragmentation build walls and restrict line of sight, promoting blame directed towards others when something goes wrong. Those participating in the blaming do not look towards the system to find root cause and resolution. They do not see partnership but instead internally competitive adversaries blocking a path towards valued rewards. This pattern is common until people learn to see the whole and develop stronger social relationships that cross organisational boundaries. Until then, this, too, is easily spotted behaviour that almost always indicates operating model misalignment.
CASE EXAMPLE
Spotting fragmentation in your organisation
For this case, we will take a different approach. Let’s make it real by using your organisation and several reflection questions to probe for fragmentation.
- Where do you regularly experience costly rework in your organisation? What do teams tell you as they explain their challenges?
- If you had to name one decision or process in which conflicting priorities frequently create conflict, what is it? How do you explain the clash?
- Have you had a customer telling you that communicating with your organisation is not easy? How did they describe their experience?
- Where do you sense the right hand is not joined up with the left hand in interdependent process?
All organisations have misalignment somewhere in their operating model. In many cases, the managerial middle layer negotiates a resolution. Such interventions can accumulate, sometimes suboptimising the whole organisation and reaching a point of unacceptable operational and interpersonal friction. In such cases, an assessment of current state identifies a collection of problems that simple interventions cannot remedy. When this is so, and many parts of the current operating model are implicated in the problem, a redesign is generally necessary to fundamentally realign all parts of the operating model and return it to a coherent whole.
SOURCES
- Oshry, B. (1995). Seeing Systems – Unlocking the Mysteries of Organizational Life. Berrett-Koehler Publishers, Inc., San Francisco.
- van Dijk, H., & Cloudt, S. (2023). Destructieve dynamieken: 9 problematische patronen in organisaties en hoe die te doorbreken. Uitgeverij Boom.