Month: February 2021

Project based organisation design

Project phasesJPG

Continuing the alternate week pattern of posting chapter extracts from the forthcoming third edition of my book “Guide to Organisation Design,” this week’s extract is from Chapter 4, “Project-based organisation design.” Next week will be a discussion of this chapter.

Extract from Chapter 4

Designs that effectively deliver desired business results do not just happen.  They are the outcome of deliberate attention involving:

  • Assessing the context, problems and opportunities confronting the organisation and its need for a design change.
  • Being clear about the current and proposed design purpose and desired outcomes.
  • Getting support for any OD work so that the design process runs smoothly (as far as is possible).
  • Tracking the progress of design activity against appropriate measures that enable corrective action to be taken if there are signs of it not achieving the intended outcomes.
  • Staying alert to clues, anecdotes and chat about the organisation’s design and its effectiveness.
  • Bearing in mind the constant organisational flux and change – which is running simultaneously with any planned design change, for example, a merger or an Initial Public Offering (IPO).

Deliberate organisation design (OD) takes two forms, project and continuous, as the information in the John Lewis Partnership (a brand of high-end department stores operating throughout Great Britain) 2018 Annual Report illustrates.  During that year the organisation saw a greater level of internal change than at any time in over a decade contending with what it described as Brexit-fuelled inflation, the extra costs of investing in IT, and having to cut prices because of widespread discounting by competitor retailers.  These market and context conditions led to a profits slump and workforce redundancies.  However, along-side these ongoing challenges requiring a range of OD responses, John Lewis Partnership continued with shop investment plans, completing 127 projects of varying scale in Waitrose shops and 91 projects in John Lewis shops.[1]

Project design is usually undertaken to deliver a specified outcome by a given date.  For example, the 31st December 2020 was a significant date for UK and EU businesses as it marked the end of the transition Brexit period (when the UK left the EU).  From that date UK businesses had to be ready to follow new rules on exports, imports, tariffs, data and hiring.

The Confederation for British Industry (CBI) surveying member organisations in 2018, in the lead up to Brexit, found that the majority of businesses were treating it as a major and significant formal project, with the related governance to oversee their design-for-exit planning and management of preparations.

Project-based OD uses project management approaches, protocols and conventions as provided by, for example, the Project Management Institute.[2]    Continuous OD is less project based and more iterative and emergent.  This chapter discusses project based OD and Chapter 5 discusses continuous OD.

In practice, most large organisations are doing project organisation design and continuous organisation design simultaneously, and as the 2020 pandemic has shown, the need for having the organisational capabilities to do both effectively is critical.

As an example, Just Eat Takeaway.com was formed in February 2020 a merger of Just Eat and Takeaway.com, Just Eat was launched in Copenhagen in 2001. Takeaway.com was founded in Holland in 2000 by Jitse Groen, now chief executive of the new company.

In June 2020 Just Eat Takeaway announced an agreement to acquire Grubhub.  At the time of writing, the close date of the deal (agreed by Just Eat Takeaway shareholders) is not yet known, but expected to be in the first half 2021, pending approval from regulators and Grubhub shareholders.  This acquisition will create the world’s largest online food delivery company outside of China. This acquisition requires rigorous project management capability to ensure the acquisition is finalised effectively on the agreed date.

At the same time as initiating this acquisition, Just Eat Takeaway saw its revenue jump 44 per cent in the first half of 2020 as consumers ordered food at home while restaurants closed during lockdown.[3]

CEO, Jitse Groen talks about the continuous design needed to respond to changes.   in consumer ordering patterns.  For example, during the early summer of 2020 Just Eat Takeaway reported a sharp rise in demand for breakfast and lunch as consumers adjusted to being in lockdown, while the hot weather boosted orders of Greek, Turkish and Thai food as well as ice cream.  Vegetarian and vegan options also increased, requiring delivery changes, signing up new vendors and so on.[4]

Additionally, reacting to ‘winds of change’ about the gig economy the UK part of the organisation announced a move away from a free-lance model of delivery to an employed model. Andrew Kenny, EVP, Managing Director UK, said: “In the UK, the incumbent model is primarily a contractor model. For us this makes couriers an integral part of our offering. It is a big step forward.” [5]

These responses to increased and different consumer ordering patterns, and society’s feelings about the gig economy are examples of the type of ongoing pressures and opportunities that effective organisations respond to by developing and using a well-honed continuous design capability alongside their project based design capability.

Reflective questions: How necessary is it for large organisations to have both project management and continuous design capability?  Why/why not?

Being able to keep an OD project to budget and schedule depends on many factors, including the business purpose and stability of strategy, the operating model, the scope and scale of the design, the number of third parties involved, e.g. platform providers[6], the amount and type of continuous OD going on, and the planning and implementation techniques used.  Thus, a merger with a specific close of deal date may get to the point necessary to close the deal on time, and yet have a further phase of the project (or start a new project) to see through the detailed integration.

Whatever type of end-date project, there is a consistent sequence of activity and a number of identifiable phases to it.  The number of phases may vary.  Figure 4.1, [not shown in this blog] for example, shows three phases for an M & A project, while the waterfall and design thinking methods discussed in Chapter 2 both have five high-level phases, and the agile approach has four.

The phasing suggested for OD projects is a 6 phase one shown in Figure 4.2.  [see accompanying graphic]. This phasing recognises that OD projects often begin with an OD consultant being invited to come and discusses an organisational issue or opportunity that a leader or leadership team feels may need a new design or a redesign.  Hence the first phase is entry and contracting, that is meeting with the person commissioning the project and agreeing the contract for the work.

[1] https://www.theguardian.com/business/2018/sep/09/john-lewis-made-1800-redundancies-in-the-past-year

[2] https://www.pmi.org/

[3] https://www.cityam.com/just-eat-takeaway-sales-soar-during-coronavirus-lockdown/

[4] https://bmmagazine.co.uk/news/surge-in-takeaways-is-the-prefect-recipe-for-just-eat/

[5] https://www.telegraph.co.uk/technology/2020/12/09/just-eat-turns-away-gig-economy-recruits-1000-riders/

[6] When adopting platform business models the operating model and the organisation running it are by definition beyond the boundary of the legal entity running the platform. All the internal/external, inside-out/outside-in, control/influence discussion is being challenged by this development.

Organisational Alignment

alignment

Last week I posted an extract from Chapter 3 Organisational Structures of the third edition of the book I am writing.  At two points in the chapter I use the word ‘alignment’ as follows:

‘They (Medium) found, however that it was difficult to coordinate efforts at scale – any initiatives, which required coordination across functions took time and effort to gain alignment.’

‘With this and the organisation values in mind, they consulted their team members and drafted a design and implementation plan that ensured alignment of all the organisational elements and supported the collaborative principles on which ATD was founded.’

I’ve also used the word ‘alignment’ twice in Chapter 1 and once in Chapter 2.  Chapter 4, which I’ll be sharing an extract from next week, also has two mentions of ‘alignment’.  I’m not sure yet how many times I’ll use the word ‘alignment’ in chapters 5 – 9, but I’m now on high alert to it.

I’m on high alert because Jim Shillady, one of the book group members I’m working with, made the point that:  ‘There are a couple of places in the chapter – more in the book generally- where we ask people either to align this with that or to check that two or more things are aligned.  This always makes me wonder how we would answer those readers who respond by asking ‘how do we align?’ or ‘how can we tell when we are aligned’?

Thus, last Thursday, at our bi-weekly meeting, we discussed these questions and the discussion is still going strong, now via email.

Alignment is a frequently used word in organisation design and Jim asks whether it needs more explanation than the general understanding of it – that things need to be running in sync.  An analogy is wheel alignment on a vehicle: vehicle owners know that hitting a pothole or kerb can put the wheels out of alignment resulting in excessive wear to tyres and problems with the steering or suspension.  They regularly check the alignment of the wheels.

An HBR article, authored by Jonathan Trevor and Barry Varcoe,  How Aligned is your Organization,  notes that ‘Most executives today know their enterprises should be aligned. They know their strategies, organizational capabilities, resources, and management systems should all be arranged to support the enterprise’s purpose.’

The article describes alignment as being a ‘tightly managed enterprise value chain that connects an enterprise’s purpose (what we do and why we do it) to its business strategy (what we are trying to do to fulfil our purpose), organizational capability (what we need to be good at), resource architecture (what makes us good), and, finally, management systems (what delivers the performance we need).’  They cite McDonald’s as being an example of a well aligned organisation.

Organisational alignment is defined and looked at in other ways, apart from through the value chain.  For example, strategic alignment is discussed in a bizzdesign blog describing it as ‘the ability to create a fit or synergy between the position of the organization within the environment and the design of the appropriate business processes, resources and capabilities to support the execution.

Similarly, a research article, Competing Perspectives on the Link Between Strategic Information Technology Alignment and Organizational Agility: Insights from a Mediation Model on the links between IT alignment and organisational agility (using the value chain as a generic outline of the processes in a firm) reports, ‘Our research reveals that alignment is a potent source of value and worthy of the priority status consistently afforded it by top executives.’

Jonathon Trevor co-author of the HBR article mentioned earlier has a long, but worth listening to, webinar ‘How to Lead Strategic Alignment‘, where he points out, “We know that the best aligned enterprises are also the highest performing enterprises—the most change ready, and the most resilient. We must therefore be developing within our corporations, the leadership capabilities required to achieve that strategic alignment, as a matter of urgency.’

So, at this point it seems fair to say that organisational alignment, i.e. having all the elements in sync, is ‘a good thing’?   However, that doesn’t help much with how do we align and how will we know that we are aligned?

On ‘how do we align?’, reading the research article, Competing Perspectives …,  just mentioned, I wondered whether focusing on IT as the ‘spine’ of alignment activity might act to impel other organisational elements towards alignment.  (This article  has a useful  illustrative table on where IT can align to business strategy in 5 business processes).

As started to amble down this path of thinking, I came across another article discussing product aligned v capability aligned organisation design  with the author, Nick Tune, discussing the pros and cons of each in some detail and yet ending up being dissatisfied by the distinction, concluding, ‘how do we actually find the perfect boundaries? I’m still working on that.’

And then I found an interesting ‘how to ‘ suggestion from Chris McDermott  on mapping alignment, including the chain of social practices and the quality of the relationships between them.  This comes closer to the discussion we, the book work group, were having.  This ‘how to design alignment’ is still being pursued by us, but as it currently stands (thanks to Jim Shillady and Giles Slinger for working more on it) we are discussing that alignment is brought about by designing:

  • Alignment in construction: hard design elements such as processes, information flow, metrics, role descriptions, team structures, incentives
  • Alignment in current reality: the shared understanding of the complex reality on the ground – how things are really being done now
  • Alignment in orientation: a common compass point or set of values, purpose, culture
  • Alignment in how construction, reality and orientation will be if we succeed in creating (designing) necessary changes

There is a model and there may be a checklist or other tool(s) to go with these four points.

The final question ‘How will we know we are aligned?’ led to a discussion on two approaches and we advise doing both. First is the technocratic/data driven approach where you focus on the hard design elements and see where there are disconnects, or gaps, or misalignments.  I’ve often used a radar chart as a tool to aid this activity.

As an example of the technocratic, an alignment disconnect that I frequently come across is a performance management and reward system designed to foster individual competitive performance with a value around ‘one-team’ and ‘collaboration’.  Another is a desire for a ‘seamless customer journey’, but one where you find the customer journeys through multiple handover points that require them to repeat information just given.

The second approach to finding out if an organisation is aligned is the human signal detection approach where you ask the question ‘What about the alignment of the design do you feel uneasy about?’  Or ‘What do we need to discuss further about this’.  This plays to more to instinct, intuition and experience and is a helpful complement to the more technocratic/data driven approach – in essence you are getting a quantitative and a qualitative view of alignment.

In discussing alignment I began to wonder whether constantly aiming for it – which is necessary as things change so rapidly – is really continuous design.   I’ll be developing this idea (or not!) in Chapter 5 which is on continuous design.

What’s your view of what alignment is, how to design an aligned organisation and how you know when you have one?

Questions to ask about structures

Continuing my plan to give an extract from a chapter of the to-be-published third edition of the Guide to Organisation design, this week’s extract is from chapter 3 Organisational Structures. Next week I’ll pick up on the discussions the group I’m working with have had on organisational structures.  NOTE that in the book I’ve equated structures with organisation charts as this is what people seem to do.  But there are other views on what organisational structures are.  See my blog on this.  

———

Starting with the structure is not the best way to do OD but asking a range of questions about structures helps in making sensible structural decisions when the time comes in the design process.   Useful questions include:

Speed

  • How often and how much restructuring is necessary to keep ahead of competitors?
  • What structures make for fast decisions and delivery of product or service?
  • What structures will enable keeping up to speed or ahead of the curve with changes in customer and market requirements?
  • What structures minimise bottlenecks without incurring risk?

Integration (size and shape)

  • What structure will maximise the flow of knowledge and information through the organisation?
  • What effect do particular structures have on the relationships among business units, divisions, headquarters, customers, suppliers?
  • Does the way a department, business unit or organisation is structured get in the way of efficient and effective workflow?
  • What is the best balance between centralisation and decentralisation?
  • Does the structure allow everyone’s voice to be heard (high participation)?

Flexibility (role clarity)

  • How will jobs and pay levels be described and classified to maximise workforce flexibility?
  • What levels of autonomy, accountability and participation go with each of the potential structures?
  • What are the job designs that go with each type of structure?
  • How well do the relationships between individual departments and between departments and headquarters work?

Innovation (specialisation/organisation identity)

  • What structure will best support the desired culture?
  • What structure will best support organisational values?
  • Does the organisational structure attract the best and the brightest staff (and help retain them)?
  • Will structuring differently help develop the organisation’s market position and competitiveness?
  • What structure would maximise the flow of knowledge and information through the organisation?

Control

  • How will the balance between local and central control be attained?
  • How many layers of management make for effective and efficient control?
  • What is the optimum span (ie, number of people any one person can supervise) of control in a given set of circumstances?
  • How can structures be used to drive the desired/required behaviours?
  • What should be the chain of command/decision-making?
  • Who will report to whom and why?

Because the structure of an organisation is only one design element, there are no straightforward answers to these questions as each has to be answered in relation to the other organisational elements. However, comparing the structures starts to give some useful information on the relative capabilities of each. (In the book there is a table comparing capabilities of the structures).

Combining this information with the advantages and limitations of each structure (in the book there is a table showing this info) gives a reasonable start-point on which to base discussions about current structures and structural alternatives. Repeating a point made earlier, the thing to bear in mind is that even within one organisation there may be a need for several structures. For example, an internal audit function may require a different structure from a research and development group, which may in turn need a different structure from a marketing network.

Layers and spans

People in self-managing organisations do not have the same concerns with layers and spans that people in traditional hierarchical organisations have and it may be that discussions on them gradually fade away as traditional organisations evolve.  However, for the moment it is still a live topic.

Layers in a traditional hierarchical organisation refer to the number of levels of staff there are from the most junior to the most senior – typically varying from 7 to 12.  The trend is to reduce the numbers of layers by merging or removing them in order to place accountability at the lowest possible layer. A span is the number of employees that a single manager is responsible for, usually in terms of allocating work and monitoring performance. The relationship between spans and layers is not straightforward either, although wide spans of management are typical of organisations that have few layers.

There are two frequently asked questions related to structure to which people are anxious to get a ‘right’ answer:

  • How many layers of management should there be?
  • What is the right span of control?

Unfortunately, neither of these questions has one right answer. Layers and spans are structured to help managers get work done, so the first part of an organisational decision on the number of management layers and the span of a manager’s control requires discussions and agreement on what managers are there to do in what context.

In general, managers plan, allocate, co-ordinate and control to achieve what the late Peter Drucker described as their three tasks:

  • To contribute to the specific purpose and mission of the enterprise.
  • To make work productive and the worker achieving.
  • To manage the social impacts and social responsibilities of the organisation.

Clearly, determining what configuration of layers and spans is likely to work in a given organisation depends on the situation, organisational purpose and a host of other factors related to the interpretation of what the three tasks entail and the weighting given to each of them.  In general layers should:

  • be flexible and adaptable enough to enable managers to forward plan in a context of constantly changing operating environments;
  • facilitate co-ordination between business units including leveraging know-how; sharing tangible resources; delivering economies of scale; aligning strategies; facilitating the flow of products or services or information; creating new business;
  • have appropriate control and accountability mechanisms (note that any task, activity, or process should have only one person accountable for it and accountability and decision-making should be at the lowest possible level in the organisation; overlap and duplication, fuzzy decision-making and conflict resolution processes are all symptoms of lack of adequate controls);
  • enable its managers to allocate effectively the range of resources (human, time, equipment, money, and so on) they need to deliver their business objectives.

If these four attributes are working well, it is likely that the layer is adding value to the organisation, in that it is facilitating speed of operation, innovation, integration, flexibility and control. If it is not evident that the layer is doing this, it may be redundant and the reason for its existence should be questioned.

Determining a sensible span of control is possible (though infrequently done) both for an individual manager and for the type of work carried out in a business unit or organisation. The method involves considering, the diversity and complexity of the work, the experience and quality level of the workforce, the extent to which co-ordination or interdependence is important between employees and groups, the amount of change taking place in the work environment, the extent to which co-ordinating mechanisms exist and are effective, the geographic locations of the workgroups, the extent to which job design and tools allow direct performance feedback to the employee, administrative burdens on each level of management, and expectations of employees regarding development and career counselling.

Reflective questions: What is the design impact of de-layering an organisation? How do span considerations relate to size of a self-managing team?  (Note: The reflective questions are a new addition to the book. I am how useful people will find them?)

Image:  https://bridges.eng.monash.edu/analysis/

Designing with systems: design is attitude

At the start of the year I mentioned that some of blogs in the coming months would be written by members of the group working with me on the third edtion of the book I’m writing. This is the first of these, written by Milan Guenther, a co-founder of Intersection Group, a not for profit association dedicated to helping people create better enterprises.

This blog post relates to Chapter 2 of the upcoming 3rd edition of The Economist Guide to Organisation Design, find an excerpt here. I, Milan Guenther, am part of the team of reviewers.

“Enterprise Architecture is the issue of the century”, were the words of John Zachman, the “founding father” of the field. What did he mean?

In his seminal 1998 paper, he described how any enterprise, any ambitious human endeavour, is in need of architecture and engineering to accommodate today’s extreme complexity and rate of change. And this is obviously the case today: all around us, we see humanity’s need to establish well organised agency at scale. 

Just think of the pandemic and who we count on handling it: government institutions, healthcare providers, insurance and pharma companies. To tackle such an immense challenge, they need to be architected, designed, engineered, or better: co-created so that they are fit for purpose and actually deliver treatment, vaccines or financial support. There is no short supply of similar big challenges to look into.

Some time back, my design school PBSA Düsseldorf published a book about their famous alumni and typographer Helmut Schmid, titled Gestaltung ist Haltung, or design is attitude. The point he made when coining this quote: design always represents an idealised future, and it is up to us to take a stance and define what future we would like to see.

Designers of all types set out to do just that. Create better products, services, businesses, strategies and organisations: the field evolved from crafting useful things to designing better outcomes. This inevitably challenges us to redesign the enterprise itself, its organisation and operations to actually deliver on such a promise. We need to design from the experiences we wish to reshape back to the necessary changes in the systems that make them happen.

In chapter two of her upcoming book edition, Naomi suggests that one way of dealing with enterprises, their organisation and their interplay, is thinking in systems. Both a rich and diverse tradition and a loaded term, the abstraction of all those moving parts to a set of systems expressed as boundaries, relations and interactions can help us understand the emerging behaviour. To do so we need to apply this thinking to a representation of the reality we want to change, or in other words create a model of this reality.

I first encountered Naomi’s thinking about this when my friend Sally Bean pointed me to her blog post on metaphors we use for Organisation Design. When dealing with companies, institutions or similar organisations, we apply an analogy that makes it easier to grasp. Naomi included an example that pictures the enterprise as a human body we can treat and heal. Other common models try to describe it as a machine to be engineered and optimised for performance, or even a sort of swamp supporting many competing lifeforms (referred to as an ecosystem). 

More than simply a way to explain or describe what’s going on inside or around an enterprise, these models shape the way we think about the enterprise, how it is organised and goes about its business. Even when consciously applying systems thinking principles, such a model provides us with a way to understand and talk about this non-tangible, dynamic thing we are supposed to design.

The models we use determine to a large degree if we will be successful in our attempt to design better organisations. It makes a huge difference if you see the enterprise as a set of numbers in a spreadsheet, as a portfolio of projects and initiatives, as a group of people trying to achieve something together, as a collection of machines and processes to be automated, or as a set of products and services delivered to customers.

In my experience, these models correspond to the views of typical functions and their teams – think Marketing, HR, IT or Innovation. They originate from different traditions, and correspond to prevalent metaphors present in these teams. They also stem from the simple fact that different actors are concerned with different things, so it seems natural to focus on those and ignore others. These filters are what enable us to design in the first place:

“(…) it is not possible or feasible to represent everything about an entity (in our case a product, system, or sub-system) in a single encapsulated description. When you are designing a takeaway coffee cup for example, you are interested in how well it holds liquid—it is unlikely that you are concerned about the permittivity of the material to light.” From A Function-Behaviour-Structure design methodology for adaptive production systems

In Organisation Design however, this is known to create some big challenges. The infamous silos, inflexible and rigid bureaucracy, dysfunctional customer relationships or a lack of team engagement are not cause but symptom. They can be linked to the limits of the underlying model people applied when designing and managing the organisation. Consequently, Naomi presents a wide choice of potential models to choose from, from management classics to new approaches of self-organisation. What models to use depends on the context, and not least personal preferences, experiences and appeal to the designer.

This brings us back to the original challenge: designing enterprises and their organisation in a way that they are fit for purpose and deliver value. What perspective, what model, or their combination, will help you get to this – together with your co-creators, in the given context? That is the designer’s greatest challenge and biggest opportunity. A quote by George Box in the beginning of this chapter says: “All models are wrong but some are useful”. Instead of presenting another attempt at the ultimate model, it is up to the designer to choose and apply them in their environment. True for something as intangible and abstract as an organisation, it applies to any design practice.

Just as product, service or fashion design, Organisation Design is a deliberate creative act. Systems thinking and models might give us the elements to consider or useful perspectives to apply, but won’t solve that task for us. What’s more: design is always incomplete, never captures or describes the entire system we want to change. This requires multiple models to guide the change required, and interaction with the system to be changed. Naomi explains this using the story of a merger between two councils in the UK, effectively blending and hacking several models and viewpoints.

To do so, we need to 

  • be comfortable with many incomplete models, 
  • acknowledge the fact that organisations are co-created by teams organising themselves to achieve something, 
  • seek external inspiration, experiment and validate, and 
  • treat this as an open inquiry into the future. 

More important than a neutral or correct model is one that helps you get through this process, develop your personal attitude, and chart a way forward together. What is a well designed organisation? This needs to be figured out by those who can imagine the future.

References

John Zachman: The Issue is the Enterprise

Helmut Schmid: Gestaltung ist Haltung

Len Fehskens: Designing Ambitious Endeavours 

Naomi Stanford on metaphors

David Sanderson, Jack C. Chaplin & Svetan Ratchev: FBS Ontology

Enterprise Design Patterns