Designing an organization that is both agile and resilient can be very challenging as leaders grapple with a number of complex considerations including:
- should I set up autonomous functional units versus establishing centers of excellence?
- should I go deep with industry focused units or get broad with geography based units?
- how do I rationalize overlapping roles and responsibilities?
- what’s the best way to create a platform for team work and cross-functional collaboration?
- is it beneficial to nurture a functional identify different from corporate identity?
- how can parent organizations be setup to drive measurable value versus overhead?
- etc. etc.
Any choice you make takes away a degree of flexibility – it is the very nature of choice. When you choose something, you choose to not choose something else 🙂 I hope the following step by step approach will help you design a flexible, boundary-less organization that works:
1. Prioritize the competitive positioning/market advantage
Clearly prioritize the competitive positioning/market advantage that the organization needs to focus on. Examples include: gain market share with existing product, build deep competency and specialization within an industry, steal market share from xxx, rapidly introduce new products or reduce operating costs etc. The organization design should support the most important competitive positioning/market advantage and ensure that it does a few things well rather than a lot of things poorly.
2. Clarify the business plan/goals
Before finalizing the organization design, the business plan should be clearly understood by all stakeholders/leaders. It should include specifics on target markets; industries and customers; revenue goals by customer, industry, region and product; future product development etc. If goals are conflicting, a prioritization of goals will help focus the design on the most important objective. The organization design should be vetted against these goals to ensure it can support them.
3. Identify the functions/tasks/things that the organization needs to do
Identify all the “things” the organization needs to be able to do to meet the strategic intent and the business goals. Don’t constrain yourself – identify all the things you can think off, including people management and vendor management along with client management responsibilities. Cluster the “things” into broad based functions and prioritize based on most important. This helps separate purpose from people and focuses attention on things we must do versus those that are nice to have. It also serves as the start for defining roles and responsibilities that can be fleshed out later.
4. Create a strawman functional organization design – factoring in all the information above
Create a first cut organization functional chart, agnostic of individuals and/or leaders. Factor in trade-offs for strategic focus, autonomy, agility and/or economies of scale. For instance – create a center of excellence if the objective is to build best practices and competencies but if the objective is speed to market, agility and autonomy then create functionally self-sufficient organizations. Additionally, consider creating matrixed cross-functional teams and other rapid-response organizational constructs over and above the standard hierarchical organization charts. During this exercise, also identify “future” organizational considerations/functions and what business conditions would prompt changes to the strawman design and proactively collect the conflicts that will arise from the design choices you are making. Don’t try to figure everything out at this point, there are many ways to address conflicting needs as shown in later steps.
5. Layer in functional leaders into the organization design
This is usually the hardest part – since there are never enough people to do all the functions. Factor in the skills, expectations and experiences of the team and adjust the organization design accordingly, consciously identifying inherent conflicts and dysfunctions that may be created by the “people factor” and will need to be proactively managed. This is also where internal politics comes into play and where there is the greatest anxiety. A way to mitigate this anxiety is to engage leaders impacted in 1-1 sessions and have candid discussions about the possibilities available to them. It is better to gain their buy-in at this point in somewhat formal settings than to have them sabotage the design during the implementation phase.
6. Review with stakeholders and scenario test design
Review the design with “stakeholders” and test against real-life business scenarios. Conduct a “what if”, “how will we” exercise to assesses the robustness of the design and identify all the inherent conflicts and issues. Adjust design where possible without losing sight of strategic intent and goal. Keep the design simple and address outstanding conflicts through governance, cross-functional teams and process.
At this point, the design is complete. The next level of leaders should own their functions and define roles and responsibilities, intersection points with other functions, goals, staffing mix, staff allocation etc. Cross-functional alignment should be proactively addressed and managed at the higher level.
7. Establish rules of engagement to operate across organization boundaries
Most breakdowns occur around the boundaries of functional units when goal’s can be misaligned or politics takes over. To ensure the organization design is resilient, it’s important to establish clear decision rights and rules of engagement to address conflict. These should include considerations on who makes the final decision, who does what task, what is it in it for the leader, and what is in it for the function. If rules of engagement can’t be developed, establish an Organization Conflict Resolution committee where rules of engagement will be constantly evolved.
8. Implement the new organization and manage the change.
If there is stakeholder alignment and engagement in the design phase, implementation may be straight forward with ongoing formal development of practice goals, roles and responsibilities and career-pathing. The emphasis should be to address conflict proactively and not expect things to “work out”. Conflict will come up – and should be resolved by establishing clear rules of engagement and making difficult choices.