1. What is the Current State of Organizational Excellence around the World?

    June 28, 2015 by ahmed

    OEF

     

    What is the Current State of Organizational Excellence around the World? The ‘Organizational Excellence Technical Committee’ (OETC) aims to answer this question with a global assessment of organizations across industry sectors and geographical regions.

    The global assessment is based on the Organizational Excellence Framework (OEF). The OEF integrates excellence models around the world and provides a ‘how to guide’ for implementation that can be used by the quality professional. Authored by Dawn Ringrose, representative for Canada on the OETC and Global Benchmarking Network, the publication is intended to provide support for the implementation of any excellence model and to encourage organizations to apply for recognition at national excellence award programs and international best practice and benchmarking competitions. It is available at ‘no charge’ and can be downloaded at http://organizationalexcellencespecialists.ca

    The assessment requires the responding organization to self-assess against the principles and best management practices of the OEF using a leading edge technological platform. The platform will collect the data, assist with analysis, and provide a snapshot of the current state of organizational excellence around the world at any given point in time. While individual organization results will remain confidential, aggregate data will be reported on the open OETC LinkedIn site, published in research articles, and used by quality professionals on improvement initiatives.

    Please take time to complete the assessment and forward the invitation to your contacts so that data can be collected and aggregated on a good cross-section of organizations by industry sector and geographical region. Depending on organization size, the assessment should take between 15 and 30 minutes to complete.

    To begin the assessment, please click on the following link http://www.qlbs.com/QimonoVBA/Assessment/OrgExFramework

    Thank you in advance for your participation ! The OETC looks forward to ‘bringing the continents together through excellence’ and reporting the aggregate results on a regular basis !

    To join the OETC Linked-in Group click here


  2. Leadership Performance

    by ahmed

    Originally posted on Linkedin by Jim Gilchrist

    We all have experienced ineffective ‘leaders’ at some point in our careers. Many people are mistakenly referred to as leaders simply because of their title or the position that they hold in their organization. But just because a person occupies a ‘leadership positon’ does not mean that they actually perform as an effective leader. Just like any other business activity, the measure of leadership effectiveness must be based on actual performance. Effective leaders experience performance success because they have willing followers, they possess attractive leadership characteristics, and they actually use their leadership skills.

    Leaders have willing followers

    A leader without followers is simply not a leader – after all, without followers, who are they really leading? And since leaders and their followers need each other, their objectives and interactions must be mutually supportive. They both want something, and they rely on the other party(s) to help them to acquire it. On the one hand, the leader wants to achieve an outcome, and after they determine an appropriate direction, they will need their followers to complete activities that will bring forth their desired result. (This is why leaders try to surround themselves with the right people). And followers will support a leader who will satisfy a common collective need or desire, therefore they will be attracted, and their support will be retained, based on their confidence in the leader’s ability to accomplish this.

    But the most effective leaders don’t just have followers; they have willing followers. The commitment given is totally different between a follower who is required to support a leader and one from whom the leader has earned their willing support. Leaders who have followers simply because of their title, or position, will never have the same effectiveness as those who attract and retain truly loyal followers based on their actual leadership performance.

    Since people are by their nature different, their expectations of what a leader can do for them, and therefore their willingness to follow, can be different as well. Despite the fact that many leaders may obtain initial support from core ‘groups’ of similar people with similar desires, their real success will depend on their ability to make a connection with as many followers as necessary despite any differences that exist among them. And while it may be easier to lead a group of homogenous followers, who have some common characteristic, a greater challenge exists for the leader who is required to bring together very diverse followers in order to achieve some higher goal that is beyond their initial commonality.

    You cannot lead if you don’t have the leadership characteristics that are necessary to attract followers

    How would you answer this question; the main characteristic of an effective leader is…….?

    I can assure you that we would see a great variety of responses based on what is most important to individuals when they are deciding whom they should or should not follow. In many instances people will default to a person’s high technical competency as a key leadership characteristic, but relying only on technical competency is a too frequent recipe for ineffective leadership performance. Many of us have experienced the frustration that occurs when a highly technical person takes on a leadership role, yet still fails to achieve effective performance results.

    And while various levels of technical capability are important (depending on the situation), for effective leadership performance to be experienced, significant personality based non-technical skills need to be present as well. In contrast to the previous example, I am sure that we can find many cases where performance success was realized when non-technical people have lead technically superior followers. I have experienced this with many of my clients, so I am comfortable in saying that effective leadership is not rooted in technical competency, but really requires the presence of some combination of suitable non-technical personality-related skills.

    So what are the essential skills for effective leadership and what is their right combination? It depends on the situation. Despite what many people want to hear, there is no one desirable leadership model. The great variances in people, as well as their changing needs within dynamic environments, creates a level of complexity that no one form of leadership can consistently respond to. Failure to recognize, and respond to, this fluid complexity is why so many people perform poorly in a leadership role. And as a result, truly effective leadership is quite rare. Similarly, leadership development programs that fail to recognize the dynamic and individualistic nature of leadership are really only sharing information about possible ‘desired’ leadership traits, a process that later results in poor leadership performance when there is a mismatch between the education and the application. In other words, since one leadership ‘shoe’ does not fit all, unless development programs are adaptive to individual needs they will generally be informative but ineffective.

    Come on, there must be some common performance characteristics of effective leaders

    Effective leadership involves adapting any number of appropriate non-technical performance characteristics to a given situation. However, beyond an individualistic approach to effective leadership, we can say that there are some broad categories of performance-related characteristics that most effective leaders will have covered.

    -Invariably, effective leaders have a vision of what they want to accomplish. Whether on a societal, organizational, departmental, team or individual level, the most effective leaders can visualize a realistic and obtainable goal, or solution, that they want their followers to satisfy at a specific point in time in the future. This ability to visualize is based in their individual cognitive capability which enables them to organize and evaluate complex information in order to develop solutions to problems that will be effective within a given time horizon. The farther into the future that a leader has to contemplate, and plan for, the greater will be the complexity of the information involved, the strategies to be developed, the solutions to be formulated and the contingencies to be considered. Higher levels of cognitive capability help to shape the strategic focus that leaders use to guide their followers.

    If a person does not have the cognitive capability necessary

    for their specific leadership requirement

    they will fail to lead effectively.

    For example, leaders of countries or societies will require significantly higher levels of cognitive capability due to the far more complex and inter-related issues that they need to understand, and contend with, and the farther into the future that they will have to plan. Because of the larger number of potential followers, and thus a greater degree of diversity, the complexity of issues they face becomes substantial.

    Beyond the influence of organizational size, at any leadership level, anyone who does not have the required cognitive capability to perform in their respective leadership role will spend more time protecting their position than they will spend leading. Without cognitive capability there will be no vision, and without vision there will be no direction and no progress.

    • High performing leaders can effectively communicate their vision to their current and future followers in a way that is understandable, relevant and motivating. Again, recognizing diversity, they adapt their communication to the communication needs of their followers in order to get their message across most effectively. By doing so they are much more capable of influencing, attracting and retaining current and new followers.
    • They create rapport with their followers through their strong interpersonal skills and emotional intelligence. By establishing rapport, effective leaders gain trust, credibility and loyalty among their followers who, as a result, are more willing to follow, to listen to the leader’s vision, to commit to the vision, and to actively perform in ways that will fulfill it.
    • While leaders want to be personally successful, they understand that this requires their follower’s help (no one is an island). Having a true team perspective, they are motivated to help their followers to be successful as well, knowing that when they do everyone’s needs will be satisfied. It is not surprising that true leaders are not afraid to surround themselves with talented people, and that they devote time and energy to the development of future internal leaders.
    • They embrace and facilitate change. A leadership vision is never about maintaining the ‘status quo’, as it always involves some degree of change. Effective leaders consistently have a growth-oriented mindset and the ability to encourage similar change-oriented thinking in their followers. By personally embracing change they act as a role model for change in the people around them, and they use their interpersonal and communication skills (building rapport) to influence their follower’s comfort and trust in change as well. Similarly, like all top performers, the growth-orientation of effective leaders translates in their commitment to life-long learning and they likewise encourage career-satisfying ongoing learning and development in their followers.
    • Effective leaders are self-aware. They are aware of their general performance capabilities and their leadership-related strengths and weaknesses (accurate third-party assessment is valuable here). This self-awareness helps them to understand their leadership ‘comfort zone’, their natural reactive tendencies, and when their preferences will be effective in given situations. More importantly, self-awareness enables them to determine when their preferences will not be effective in a given situation. Doing so will help them to adapt, and thus perform better, when situational leadership demands, and the diversity of their followers, are outside of their specific comfort zone. Finally, individualized self-awareness enables them to identify specific performance-related gaps, to then develop specific performance enhancement activities and thus to develop a broader, more all-encompassing leadership capability which in turn makes situational response and adaptation easier.
      You won’t keep your followers if you don’t use your leadership skills effectively

    Leaders actually perform. It’s really that simple.

    Effective leaders don’t promise to perform, they don’t claim to have performed when they have not – they simply do what they say they will do. And, as humans will, should they make a performance mistake, they admit it, they learn from it and they correct it. We can say that, in addition to their actual performance, effective leaders gain credibility with their followers due to their honesty and integrity and their willingness to accept responsibility for their actions.

    Leadership is essentially an action, not a title, or a promise. It is one thing to know about leadership, but it’s totally another to actually be an effective leader. There are numerous books and leadership development programs that will tell people how to be a leader, but they are relatively useless unless the education is translated into practical individualized application (this is where performance coaching can help). We all have various degrees of leadership characteristics and the potential to enhance our leadership skills. The key is to consistently grow and expand our leadership capabilities by using the skills that we have, and being aware of, and developing, the skills that we are missing. Doing so will expand our ability to perform and to engage larger numbers of diverse followers by adapting to all of their needs. The benefit is that people will be attracted to a leader who they believe will help them, and they will stay with a leader whose performance proves it.


  3. The One Interview Question Most People Are Not Prepared For!

    June 24, 2015 by ahmed

     

    Originally posted on Linkedin by Bernard Marr

    Any job hunter would be wise to seek out common interview questions and think about his answers beforehand, but what about the questions that haven’t made it onto the lists yet?

    One question I’ve heard asked is some variation of, “Tell me something I wouldn’t know from looking at your CV,” or “Tell me something no one else knows about you.”

    This question seems to be becoming increasingly common, but it’s still not one that job applicants are routinely preparing for. That means it’s a good place for you to shine.

    What is the recruiter looking for?

    Of course, I can’t say exactly what any specific recruiter is looking for when she asks a question like this, but I can give you some possible ideas. She might be looking to see:

    1. How do you organize your thoughts? If you’re telling an anecdote or story, is it well thought out and well told? Do you connect topics and events linearly, or jump all around?
    2. Can you think on your feet? Because this is a less common question, the interviewer may be trying to get you away from canned, rehearsed answers and see if they can get a glimpse of the real you.
    3. What do you consider most important for the interviewer to know? What comes out as an answer to this question could say a lot about you. Do you tell a story about your philanthropy and charity work, or about your many awards and accolades, or about family and hobbies?
    4. Are you able to relate the story back to the job? It’s a nice indication of higher-level thinking if you can tell a personal story but relate the points about you back to why you would be a good candidate for the job.
    5. Are you saying anything you shouldn’t? This isn’t to say that interviewers are trying to trip you up, but they will always be listening for things you shouldn’t reveal about current or former employers, or anything personal that might make them question your qualifications for the job.

    Remember, their job is to find the best candidate, so it makes sense that they want to move you away from more rehearsed speeches into more authentic territory – even if that authentic territory doesn’t put you in the best light.

    How to prepare for this question.

    As with all interview questions, it’s important to think about how you might answer, but don’t compose your answer and memorize it word for word – any savvy interviewer will be able to tell.

    Since this is an open-ended question, your answer is an opportunity for you to highlight aspects of your qualifications, history, or skills that might not be immediately noticeable in your resume.

      • Keep your core strengths in mind. Go into every interview with a good idea of the core strengths you would bring to the job, and then take the chance to highlight those skills with your answer. For example, if you want to emphasize your organizational skills in a particular interview, you might tell a story of how you organized an elaborate fundraiser at your child’s school, or how you were the president of a particular club at university.
      • Think about intangible strengths and soft skills. Your resume should highlight achievements and metrics, but this is your opportunity to highlight your best soft skills. If, for example, your resume says you exceeded your sales goals by a certain percent, you could elaborate by explaining that you were able to do that because of your excellent people skills or your dedication to following up with your leads.
      • Share something personal. If the question comes towards the end of the interview, and you feel you’ve already been able to make your case for your job skills, you might choose to highlight something from your personal life that reflects well on your character. Consider sharing only personal things that are universally accepted as positive, like being an avid chess player or enjoying mountain climbing, rather than anything that could be considered controversial, like volunteering with a political cause or being involved in a counterculture.
      • Explain why you want the job. This is a great place in the interview to explain why you are particularly passionate about the job. If something in the job description excited you or any personal connection for the field. For example, I knew a young woman who was practically falling out of her chair to apply for a marketing position with a Parkinson’s charity because of the work they had done to help her father. This kind of personal connection can demonstrate that you would bring extra passion and energy to the position.

    Figuring out how to answer these more open-ended and personal questions is like solving a riddle; the answer should show how you fit into this new job opportunity. As important as it is to think about these questions before you go into the interview, it’s equally important that your answers sound friendly and conversational, not memorized and rehearsed.

    In the end, you should feel glad if you get one of these questions in an interview, because they afford you the opportunity to be your real self and highlight any of your best qualities that don’t fit into the resume template.

    Have you had this question put to you in an interview? How did you respond? I’d love to hear your stories in the comments below.


  4. How to Design Your Organization: Part 3 – How to Design

    June 21, 2015 by ahmed

    Originally posted on Organizational Physics by Lex Sisney

    The first step in designing the new structure is to identify the core functions that must be performed in support of the business strategy, what each function will have authority and be accountable for, and how each function will be measured (Key Performance Indicators or KPIs). Then, avoiding the 5 classic mistakes of structure above, place those functions in the right locations within the organizational structure. Once this is completed, the structure acts as a blueprint for an organizational chart that calls out individual roles and (hats). A role is the primary task that an individual performs. A (hat) is a secondary role that an individual performs. Every individual in the organization should have one primary role and — depending on the size, complexity, and resources of the business — may wear multiple (hats). For example, a startup founder plays the CEO role and also wears the hats of (Business Development) and (Finance). As the company grows and acquires more resources, she will give up hats to new hires in order to better focus on her core role.

    Getting an individual to gracefully let go of a role or a hat that has outgrown them can be challenging. They may think and feel, “I’m not giving up my job! I’ve worked here for five years and now I have to report to this Johnny-Come-Lately?” That’s a refrain that every growth-oriented company must deal with at some point. One thing that can help this transition is to focus not on the job titles but on the PSIU requirements of each function. Then help the individual to identify the characteristics of the job that they’re really good at and that they really enjoy and seek alignment with a job that has those requirements. For example, the title VP of Sales is impressive. But if you break it down into its core PSIU requirements, you’ll see that it’s really about cold calling, managing a team, and hitting a quota (PSiU). With such a change in perspective, the current Director of Sales who is being asked to make a change may realize, “Hmm… I actually HATE cold calling and managing a team of reps. I’d much rather manage accounts that we’ve already closed and treat them great. I’m happy to give this up.” Again, navigating these complex emotional issues is hard and can cost the company a lot of energy. This is one of the many reasons that using a sound organizational restructuring process is essential.

    A structural diagram may look similar to an org chart but there are some important differences. An org chart shows the reporting functions between people. What we’re concerned with here, first and foremost, are the functions that need to be performed by the business and where authority will reside in the structure. The goal is to first design the structure to support the strategy (without including individual names) and then to align the right people within that structure. Consequently, an org chart should follow the structure, not the other way around. This will help everyone avoid the trap of past precedents that I discussed earlier. This means – literally – taking any individual name off the paper until the structure is designed correctly. Once this is accomplished, individual names are added into roles and (hats) within the structure.

    After restructuring, the CEO works with each new functional head to roll out budgets, targets, and rewards for their departments. The most important aspect of bringing a structure to life, however, isn’t the structure itself, but rather the process of decision making and implementation that goes along with it. The goal is not to create islands or fiefdoms but an integrated organization where all of the parts work well together. If structure is the bones or shape of an organization, then the process of decision making and implementation is the heart of it. I’m going to discuss this process in greater detail in the next article in this series. It can take a few weeks to a few months to get the structure humming and people comfortable in their new roles. You’ll know you’ve done it right when the structure fades to the background again and becomes almost invisible. It’s ironic that you do the hard work of restructuring so you can forget about structure. Post integration, people should be once again clear on their roles, hats, and accountabilities. The organization starts to really hum in its performance and execution speed picks up noticeably. Roaring down the tracks towards a common objective is one of the best feelings in business. A good structure makes it possible.

    Structure Done Wrong: An Example to Avoid

    Below is a picture of a typical business structure done wrong. The company is a software as a service (Saas) provider that has developed a new virtual trade show platform. They have about ten staff and $2M in annual revenues. I received this proposed structure just as the company was raising capital and hiring staff to scale its business and attack multiple industry verticals at once. In addition to securing growth capital, the company’s greatest challenge is shifting from a startup where the two co-founders do most everything to a scalable company where the co-founders can focus on what they do best.

    structuredonewrong

    So what’s wrong with this structure? Several things. First, this proposed structure was created based on the past precedents within the company, not the core functions that need to be performed in order to execute the new strategy. This will make for fuzzy accountability, an inability to scale easily, new hires struggling to make a difference and navigate the organization, and the existing team having a hard time growing out of their former hats into dedicated roles. It’s difficult to tell what are the key staff the company should hire and in what sequence. It’s more likely that current staff will inherit functions that they’ve always done, or that no one else has been trained to do. If this structure is adopted, the company will plod along, entropy and internal friction will rise, and the company will fail to scale.

    The second issue with the proposed structure is that efficiency functions (Tech Ops and Community Operations) are given authority over effectiveness functions (R&D and Account Management). What will happen in this case? The company’s operations will become very efficient but will lose effectiveness. Imagine being in charge of R&D, which requires exploration and risk taking, but having to report every day to Tech Ops, which requires great control and risk mitigation. R&D will never flourish in this environment. Or imagine being in charge of the company’s key accounts as the Account Manager. To be effective, you must give these key accounts extra care and attention. But within this structure there’s an increasing demand to standardize towards greater efficiency because that’s what Community Operations requires. Efficiency always trumps effectiveness over time and therefore, the company will lose its effectiveness within this structure.

    Third, short-run functions are given authority over long-run needs. For example, Sales & Marketing are both focused on effectiveness but should rarely, if ever, be the same function. Sales has a short-run focus, marketing a long-run focus. If Marketing reports to Sales, then Marketing will begin to look like a sales support function, instead of a long-run positioning, strategy, and differentiation function. As market needs shift, the company’s marketing effectiveness will lose step and focus. It won’t be able to meet the long-run needs for the company.

    Fourth, it’s impossible to distinguish where the authority to meet customer needs resides and how the company is controlling for systemic risk. As you look again at the proposed structure, how does the company scale? Where is new staff added and why? What’s the right sequence to add them? Who is ultimately responsible for profit and loss? Certainly it’s the CEO but if the CEO is running the day-to-day P&L across multiple verticals, then he is not going to be able to focus on the big picture and overall execution. At the same time, who is responsible for mitigating systemic risk? Within this current structure, it’s very likely that the CEO never extracts himself from those activities he’s always done and shouldn’t still be doing if the business is to scale. If he does attempt to extract himself, he’ll delegate without the requisite controls in place and the company will make a major mistake that threatens its life.

    Structure Done Right

    Below is a picture of how I realigned the company’s structure to match its desired strategy. Here are some of the key things to recognize about this new structure and why it’s superior to the old one. Each box represents a key function that must be performed by the business in its chosen strategy. Again, this is not an org chart. One function may have multiple people such as three customer service reps within it and certain staff may be wearing multiple different hats. So when creating the structure, ignore the people involved and just identify the core business functions that must be performed. Again, first we want to create the right structure to support the chosen strategy. Then we can add roles and hats.

    structuredoneright1

    How to Read this Structure

    At the bottom of the structure you’ll see an arrow with “decentralized autonomy” on the left and “centralized control” on the right. That is, your goal is to push decision-making and autonomy out as far as possible to the left of the structure for those functions closest to the customer. At the same time you need to control for systemic risk on the right of the structure for those functions closest to the enterprise. There is a natural conflict that exists between decentralized autonomy and centralized control. This structure recognizes that conflict, plans for it, and creates a design that will harness and make it constructive. Here’s how.

    Within each function, you’ll see a label that describes what it does, such as CEO, Sales, or Engineering. These descriptions are not work titles for people but basic definitions of what each function does. Next to each description is its primary set of PSIU forces. PSIU is like a management shorthand that describes the forces of each function. For example, the CEO function needs to produce results, innovate for changing demands, and keep the team unified: PsIU.

    Identifying the PSIU code for each function is helpful for two reasons. One, it allows a shared understanding of what’s really required to perform a function. Two, when it’s time to place people into hats and roles within those functions, it enables you to find a match between an individual’s management style and the requirements for the role that needs to be performed. For example, the Account Management function needs to follow a process and display a great aptitude towards interaction with people (pSiU). Intuitively you already know that you’d want to fill that role with a person who naturally expresses a pSiU style. As I mentioned earlier, it would be a mistake to take a pSiU Account Manager and place them into a Sales role that requires PSiu, give them a commission plan, and expect them to be successful. It’s against their very nature to be high-driving and high-charging and no commission plan is going to change that. It’s always superior to match an individual’s style to a role rather than the other way around. Now that you understand the basics of this structure, let’s dive into the major functions so you can see why I designed it the way I did.

    The General Manager (GM) Function

    The first and most important thing to recognize is that, with this new structure, it’s now clear how to scale the business. The green boxes “GM Vertical #1 and #2” on the far left of the structure are called business units. The business units represent where revenues will flow to the organization. They’re colored green because that’s where the money flows. The GM role is created either as a dedicated role or in the interim as a (hat) worn by the CEO until a dedicated role can be hired. Each business unit recognizes revenue from the clients within their respective vertical. How the verticals are segmented will be determined by business and market needs and the strategy. For example, one GM may have authority for North America and the other Asia/Pacific. Or one might have authority for the entertainment industry and the other the finance industry. Whatever verticals are chosen, the structure identifies authority and responsibility for them. Notice that the code for the GM/PsIU is identical to the CEO/PsIU. This is because the GMs are effectively CEOs of their own business units or can be thought of as future CEOs in training for the entire organization.

    Underneath each green business unit is a Sales role, responsible for selling new accounts and an Account Management role, responsible for satisfying the needs of key clients. Essentially, by pushing the revenue driving functions to the far left of the structure, we are able to decentralize autonomy by giving each GM the authority and responsibility to drive revenue, acquire new customers, meet the needs of those customers. Each GM will have targets for revenue, number of customers, and client satisfaction. They also have a budget and bonus structure.

    The Product Manager (PM) Function

    To the immediate right of the green business units is a black box called “PM” or Product Manager. The function of the Product Manager is to manage the competing demands of the different verticals (the green boxes to its left) as well as the competing demands of the other business functions (the grey boxes to its right) while ensuring high product quality and market fit and driving a profit. The grey boxes to the right of the Product Manager — CEO, Finance, Operations, Engineering, Marketing Strategy, and Admin — represent the rest of the core organizational functions. Effectively, these functions provide services to the green business units so that those units have products to sell to their markets. The revenue that the business generates pays for those internal services. Profits are derived by subtracting the cost of those services from the revenues generated by the business units. A Launch Manager who helps to coordinate new product releases between the business units supports the Product Manager.

    The code for the Product Manager is pSiU. That is, we need the Product Manager to be able to stabilize and unify all of the competing demands from the organization. What kind of competing demands? The list is almost endless. First, there will be competing demands from the verticals. One vertical will want widget X because it meets the needs of their customers; the other will want widget Z for the same reasons (and remember that this particular company’s strategy is to run multiple verticals off a single horizontal platform). Operations will want a stable product that doesn’t crash and integrates well within the existing infrastructure. Engineering will want a cutting-edge product that displays the latest functions. Marketing Strategy will want a product that matches the company’s long-range plans. Administration will want a product that doesn’t cause the company to get sued. The CEO will want a product that tells a great story to the marketplace. Finance will want a product that generates significant ROI or one that doesn’t require a lot of investment, depending on its lifecycle stage. So the list of inherent conflicts runs deep.

    The reason we don’t want a psIu in the Product Manager is that at this stage of the company’s lifecycle, the innovative force is very strong within the founding team, which will continue to provide that vision and innovation in another role, new Vertical Development and R&D under Marketing Strategy (more on this later). Nor do we want a Psiu in the Product Manager function because a big producer will focus on driving forward quickly and relentlessly (essential in the earlier stages of the product lifecycle) but will miss many of the details and planning involved with a professional product release (essential at this stage of the product lifecycle).

    It’s worth discussing why we want the product P&L to accrue to the Product Manager function and not the CEO or GMs. By using this structure, the CEO delegates autonomy to the GMs to drive revenue for their respective verticals and for the Product Manager to drive profits across all verticals. Why not give P&L responsibility to the CEO? Of course the ultimate P&L will roll up to the CEO but it’s first recognized and allocated to the Product Manager. This allows the CEO to delegate responsibility for product execution in the short run while also balancing the long-range needs of the product and strategy.

    We don’t give the Product Manager function to the GMs at this stage for a different reason. If we did, the product would have an extreme short-run focus and wouldn’t account for long-run needs. The business couldn’t adapt for change and it would miss new market opportunities. However, the GMs will need to have significant input into the product features and functions. That’s why the Product Manager is placed next to the GMs and given quite a lot of autonomy – if the product isn’t producing results in the short run for the GMs, it’s not going to be around in the long run. At the same time, the product must also balance and prioritize long-range needs and strategy and that’s why it doesn’t report to the GMs directly.

    If the business continues to grow, then one of the GMs will become the head of an entire division. Think of a division as a grouping of multiple similar verticals. In this case, the Product Manager function may in fact be placed under the newly formed division head because it is now its own unique business with enough stability and growth to warrant that level of autonomy. Remember that structures aren’t stagnant and they must change at each new stage of the lifecycle or each change in strategy. For this current stage of the lifecycle, creating a dynamic tension between the GMs, the Product Manager, and the rest of the organization is highly desired because it will help to ensure a sound product/market/execution fit. I’ll explain more of how this tension plays out and how to harness it for good decision making in the next article.

    The Operations Function

    To the immediate right of the Product Manager is Operations. This is the common services architecture that all GMs use to run their business. It is designed for scalable efficiency and includes such functions as Customer Service and Technology Infrastructure. Notice how all of these functions are geared towards short-run efficiency, while the business still wants to encourage short-term effectiveness (getting new clients quickly, adapting to changing requests from the GMs, etc.) within these roles and so it gives more autonomy to this unit than to those to the right of it. The code for Operations is PSiU because we need it to produce results for clients every day (P); it must be highly stable and secure (S); and it must maintain a client-centric perspective (U). It’s important to recognize that every function in the business has a client that it serves. In the case of Operations, the clients are both internal (the other business functions) as well as external (the customers).

    The Engineering Function

    Going from left to right, the next core function is Engineering. Here the core functions of the business include producing effective and efficient architectures and designs that Operations will use to run their operations. This includes SW Design, SW Development, and QA. Notice, however, that the ultimate deployment of new software is controlled by the Product Manager (Launch Manager) and that provides an additional QA check on software from a business (not just a technology) perspective. Similar to Operations, Engineering is also short-run oriented and needs to be both effective and efficient. It is given less relative autonomy in what it produces and how it produces it due to the fact that Engineering must meet the needs of all other business functions, short- and long-run. The code for Engineering is PSIu because we need it to produce results now (P) and to have quality code, architecture, and designs (S), and to be able to help create new innovations (I) in the product.

    The Marketing Strategy Function

    The next core function is Marketing Strategy. Marketing Strategy is the process of aligning core capabilities with growing opportunities. It creates long-run effectiveness. It’s code is psIu because it’s all about long-term innovation and nurturing and defending the vision. Sub-functions include new Vertical Development (early stage business development for future new verticals that will ultimately be spun out into a GM group), R&D (research and development), Marketing Execution (driving marketing tactics to support the strategy), PR, and People Development. A few of these sub-functions warrant a deeper explanation.

    The reason new Vertical or Business Development is placed here is that the act of seeding a new potential vertical requires a tremendous amount of drive, patience, creativity, and innovation. If this function were placed under a GM, then it would be under too much pressure to hit short-run financial targets and the company would sacrifice what could be great long-term potential. Once the development has started and the vertical has early revenue and looks promising, it can be given to a new or existing GM to scale.

    The purpose of placing R&D under Marketing Strategy is to allow for the long-run planning and innovative feature development that can be applied across all business units. The short-run product management function is performed by the Product Manager. The Product Manager’s job is to manage the product for the short run while the visionary entrepreneur can still perform R&D for the long run. By keeping the Product Manager function outside of the GM role, New Product Development can more easily influence the product roadmap. Similarly, by keeping the Product Manager function outside of Marketing Strategy, the company doesn’t lose sight of what’s really required in the product today as needed by the GMs. Similarly, if the R&D function was placed under Engineering, it would succumb to the short range time pressure of Engineering and simply become a new feature development program — not true innovative R&D.

    The reason Marketing Execution is not placed under the GM is that it would quickly become a sales support function. Clearly, the GM will want to own their own marketing execution and he or she may even fight to get it. It’s the CEO’s role, however, to ensure that Marketing Execution supports the long-range strategy and thus, Marketing Execution should remain under Marketing Strategy.

    The basis for placing People Development under Marketing Strategy rather than under HR is that People Development is a long-range effectiveness function. If it’s placed under HR, then it will quickly devolve into a short-range tactical training function. For a similar reason, recruitment is kept here because a good recruiter will thrive under the long-range personal development function and will better reflect the organization’s real culture.

    The Finance & Admin Functions

    To the far right of the organization are the Administrative functions. Here reside all of the short-run efficiency or Stabilizing functions that, if performed incorrectly, will quickly cause the organization to fail. These functions include collecting cash Controller (AR/AP), Legal, and the HR function of hiring and firing. Notice, however, that the Finance function is not grouped with Admin. There are two types of Finance. One, cash collections and payments, is an Admin function. The other, how to deploy the cash and perform strategic financial operations, is a long-run effectiveness function. If Finance is placed over Admin, or under Admin, the company will either suffer from lack of effectiveness or a lack of efficiency, respectively. It also creates a tremendous liability risk to allow one function to control cash collections and cash deployments. It’s better to separate these functions for better performance and better control.

    The CEO Function

    The top function is the CEO. Here resides the ultimate authority and the responsibility to keep the organization efficient and effective in the short and long run. The code for the CEO is PsIU because this role requires driving results, innovating for market changes, and keeping the team unified. By using this structure, the CEO delegates autonomy to the GMs to produce results for their respective verticals. The GMs are empowered to produce results and also to face the consequences of not achieving them by “owning” the revenue streams. The CEO has delegated short-run Product Management to produce a profit according to the plan and simultaneously balances short- and long-run product development needs. At the same time, the CEO protects the organization from systemic harm by centralizing and controlling those things that pose a significant liability. So while the GMs can sell, they can’t authorize contracts, hire or fire, or collect cash or make payments without the authorization of the far right of the structure. Nor can they set the strategy, destroy the brand, or cause a disruption in operations without the authority of the CEO and other business units.

    The goal of structure is to create clarity of authority and responsibility for the core organizational functions that must be performed and to create a design that harness the natural conflict that exists between efficiency and effectiveness, short-run and long-run, decentralization and control. A good CEO will encourage the natural conflict to arise within the structure and then deal with it in a constructive way. More on how to do this in the next section.

    Remember that within any structure, individuals will play a role and, especially in a start-up environment, wear multiple hats. How you fill roles and hats is to first identify and align the core functions to support the organization’s strategy. Then, assign individuals to those functions as either a role or a hat. In this particular structure, the role of CEO was played by one founder who also wore the temporary hats of GM Vertical #1 and #2 until a new GM could be hired. The other founder played the role of Product Manager, as well as Engineer until that role could be hired. Clearly delineating these functions allowed them both to recognize which roles they needed to hire for first so that they could give up the extra hats and focus on their dedicated roles to grow the business. Going forward, both founders will share a hat in Marketing Strategy with one focused on new Business Development and the other on R&D. These Marketing Strategy hats play to the strength of each founder and allow them to maintain the more creative, agile aspects of entrepreneurship while the business structure is in place to execute on the day-to-day strategy.

    Summary of Organizational Structure & Design

    To recap, design controls behavior. When an organization’s structure is misaligned, its resistance to change will be great and its execution will be slow. Organizational structures get misaligned over time for many reasons. The most basic of these is inertia, through which companies get stuck in old ways of doing things. When restructuring your organization, there are some classic mistakes to avoid. First, always redesign the structure whenever you change the strategy or shift to a new lifecycle stage (do this even if there are no personnel changes). Second, avoid placing efficiency-based functions such as operations or quality control over effectiveness-based functions such as R&D, strategy, and training. Third, avoid giving short-range functions like Sales, Operations, and Engineering power over long-range functions like Marketing, R&D, and People Development. Fourth, distinguish between the need to decentralize autonomy and centralize control and structure the organization accordingly. Finally, avoid placing the wrong style of manager within the new structural role simply because that’s the past precedent. Changing structures can be really hard because there’s so much past precedent. If the organization is going to thrive, however, the new structure must support the new strategy. In the next article, I’m going to discuss the most important process of any business: the decision making and implementation that brings the structure alive.


  5. How to Design Your Organization: Part 2 – The 5 Classic Mistakes

    by ahmed

     

    Originally posted on Organizational Physics by Lex Sisney

    Here are five telltale signs of structure done wrong. As you read them, see if your organization has made any of these mistakes. If so, it’s a sure sign that your current structure is having a negative impact on performance.

    Mistake #1: The strategy changes but the structure does not

    Every time the strategy changes — including when there’s a shift to a new stage of the execution lifecycle — you’ll need to re-evaluate and change to the structure. The classic mistake made in restructuring is that the new form of the organization follows the old one to a large degree. That is, a new strategy is created but the oldhierarchy remains embedded in the so-called “new” structure. Instead, you need to make a clean break with the past and design the new structure with a fresh eye. Does that sound difficult? It generally does. The fact is that changing structure in a business can seem really daunting because of all the past precedents that exist – interpersonal relationships, expectations, roles, career trajectories, and functions. And in general, people will fight any change that results in a real or perceived loss of power. All of these things can make it difficult to make a clean break from the past and take a fresh look at what the business should be now. There’s an old adage that you can’t see the picture when you’re standing in it. It’s true. When it comes to restructuring, you need to make a clean break from the status quo and help your staff look at things with fresh eyes. For this reason, restructuring done wrong will exacerbate attachment to the status quo and natural resistance to change. Restructuring done right, on the other hand, will address and release resistance to structural change, helping those affected to see the full picture, as well as to understand and appreciate their new roles in it.

    Mistake #2: Functions focused on effectiveness report to functions focused on efficiency

    Efficiency will always tend to overpower effectiveness. Because of this, you’ll never want to have functions focused on effectiveness (sales, marketing, people development, account management, and strategy) reporting to functions focused on efficiency (operations, quality control, administration, and customer service). For example, imagine a company predominantly focused on achieving Six Sigma efficiency (which is doing things “right”). Over time, the processes and systems become so efficient and tightly controlled, that there is very little flexibility or margin for error. By its nature, effectiveness (which is doing the right thing), which includes innovation and adapting to change, requires flexibility and margin for error. Keep in mind, therefore, that things can become so efficient that they lose their effectiveness. The takeaway here is: always avoid having functions focused on effectiveness reporting to functions focused on efficiency. If you do, your company will lose its effectiveness over time and it will fail.

    Mistake #3: Functions focused on long-range development report to functions focused on short-range results

    Just as efficiency overpowers effectiveness, the demands of today always overpower the needs of tomorrow. That’s why the pressure you feel to do the daily work keeps you from spending as much time with your family as you want to. It’s why the pressure to hit this quarter’s numbers makes it so hard to maintain your exercise regime. And it’s why you never want to have functions that are focused on long-range development (branding, strategy, R&D, people development, etc.) reporting to functions focused on driving daily results (sales, running current marketing campaigns, administration, operations, etc.). For example, what happens if the marketing strategy function (a long-range orientation focused on branding, positioning, strategy, etc.) reports into the sales function (a short-range orientation focused on executing results now)? It’s easy to see that the marketing strategy function will quickly succumb to the pressure of sales and become a sales support function. Sales may get what it thinks it needs in the short run but the company will totally lose its ability to develop its products, brands, and strategy over the long range as a result.

    Mistake #4: Not balancing the need for autonomy vs. the need for control

    The autonomy to sell and meet customer needs should always take precedence in the structure — for without sales and repeat sales the organization will quickly cease to exist. At the same time, the organization must exercise certain controls to protect itself from systemic harm (the kind of harm that can destroy the entire organization). Notice that there is an inherent and natural conflict between autonomy and control. One needs freedom to produce results, the other needs to regulate for greater efficiencies. The design principle here is that as much autonomy as possible should be given to those closest to the customer (functions like sales and account management) while the ability to control for systemic risk (functions like accounting, legal, and HR) should be as centralized as possible. Basically, rather than trying to make these functions play nice together, this design principle recognizes that inherent conflict, plans for it, and creates a structure that attempts to harness it for the overall good of the organization. For example, if Sales is forced to follow a bunch of bureaucratic accounting and legal procedures to win a new account, sales will suffer. However, if the sales team sells a bunch of underqualified leads that can’t pay, the whole company suffers. Therefore, Sales should be able to sell without restriction but also bear the burden of underperforming accounts. At the same time, Accounting and Legal should be centralized because if there’s a loss of cash or a legal liability, the whole business is at risk. So the structure must call this inherent conflict out and make it constructive for the entire business.

    Mistake #5: Having the wrong people in the right functions

    I’m going to talk about how to avoid this mistake in greater detail in a coming article in this series but the basics are simple to grasp. Your structure is only as good as the people operating within it and how well they’re matched to their jobs. Every function has a group of activities it must perform. At their core, these activities can be understood as expressing PSIU requirements. Every person has a natural style. It’s self-evident that when there’s close alignment between job requirements and an individual’s style and experience, and assuming they’re a #1 Team Leader in the Vision and Values matrix, then they’ll perform at a high level. In the race for market share, however, companies make the mistake of mis-fitting styles to functions because of perceived time and resource constraints. For example, imagine a company that just lost its VP of Sales who is a PsIu (Producer/Innovator) style. They also have an existing top-notch account manager who has a pSiU (Stabilizer/Unifier) style. Because management believes they can’t afford to take the time and risk of hiring a new VP of Sales, they move the Account Manager into the VP of Sales role and give him a commission-based sales plan in the hope that this will incentivize him to perform as a sales person. Will the Account Manager be successful? No. It’s not in his nature to hunt new sales. It’s his nature to harvest accounts, follow a process, and help customers feel happy with their experience. As a result, sales will suffer and the Account Manager, once happy in his job, is now suffering too. While we all have to play the hand we’re dealt with, placing people in misaligned roles is always a recipe for failure. If you have to play this card, make it clear to everyone that it’s only for the short run and the top priority is to find a candidate who is the right fit as soon as possible.