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

    June 21, 2015 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.


  2. How to Design Your Organization: Part 1 – Parachute or a Rocket?

    June 20, 2015 by ahmed

     

    Originally posted on Organizational Physics by Lex Sisney

    If I were to ask you a random and seemingly strange question, “Why does a rocket behave the way it does and how is it different from a parachute that behaves the way it does?” You’d probably say something like, “Well, duh, they’re designed differently. One is designed to go fast and far and the other is designed to cause drag and slow an objection in motion. Because they’re designed differently, they behave differently.” And you’d be correct. How something is designed controls how it behaves. (If you doubt this, just try attaching an engine directly to a parachute and see what happens). But if I were to ask you a similar question about your business, “Why does your business behave the way it does and how can you make it behave differently?” would you answer “design?” Very few people – even management experts – would. But the fact is that how your organization is designed determines how it performs. If you want to improve organizational performance, you’ll need to change the organizational design. And the heart of organizational design is its structure.

    Form Follows Function — The 3 Elements of Organizational Structure & Design

    There’s a saying in architecture and design that “form follows function.” Put another way, the design of something should support its purpose. For example, take a minute and observe the environment you’re sitting in (the room, building, vehicle, etc.) as well as the objects in it (the computer, phone, chair, books, coffee mug, and so on). Notice how everything serves a particular purpose. The purpose of a chair is to support a sitting human being, which is why it’s designed the way it is. Great design means that something is structured in such a way that it allows it to serve its purpose very well. All of its parts are of the right type and placed exactly where they should be for their intended purpose. Poor design is just the opposite. Like a chair with an uncomfortable seat or an oddly measured leg, a poorly designed object just doesn’t perform like you want it to.

    Even though your organization is a complex adaptive system and not static object, the same principles hold true. If the organization has a flawed design, it simply won’t perform well. It must be structured (or restructured) to create an design that supports its function or business strategy. Just like a chair, all of its parts or functions must be of the right type and placed in the right location so that the entire system works well together. What actually gives an organization its “shape” and controls how it performs are three things:

      1. The functions it performs.
      2. The location of each function.
      3. The authority of each function within its domain.

    The functions an organization performs are the core areas or activities it must engage in to accomplish its strategy (e.g. sales, customer service, marketing, accounting, finance, operations, CEO, admin, HR, legal, PR, R&D, engineering, etc.). The location of each function is where it is placed in the organizational structure and how it interacts with other functions. The authority of a function refers to its ability to make decisions within its domain and to perform its activities without unnecessary encumbrance. A sound organizational structure will make it unarguably clear what each function (and ultimately each person) is accountable for. In addition, the design must both support the current business strategy and allow the organization to adapt to changing market conditions and customer needs over time.

    What Happens When an Organization’s Structure Gets Misaligned?

    When you know what to look for, it’s pretty easy to identify when an organization’s structure is out of whack. Imagine a company with an existing cash cow business that is coming under severe pricing pressure. Its margins are deteriorating quickly and the market is changing rapidly. Everyone in the company knows that it must adapt or die. Its chosen strategy is to continue to milk the cash cow (while it can) and use those proceeds to invest in new verticals. On paper, it realigns some reporting functions and allocates more budget to new business development units. It holds an all-hands meeting to talk about the new strategy and the future of the business. Confidence is high. The team is a good one. Everyone is genuinely committed to the new strategy. They launch with gusto.
    But here’s the catch. Beneath the surface-level changes, the old power structures remain. This is a common problem with companies at this stage. The “new” structure is really just added to the old one, like a house with an addition – and things get confusing. Who’s responsible for which part of the house? While employees genuinely want the new business units to thrive, there’s often a lack of clarity, authority, and accountability around them. In addition, the new business units, which need freedom to operate in startup mode, have to deal with an existing bureaucracy and old ways of doing things. The CEO is generally oblivious to these problems until late in the game. Everyone continues to pay lip service to the strategy and the importance of the new business units but doubt, frustration, and a feeling of ineptitude have already crept in. How this happens will become clearer as you read on.

    Edwards Demming astutely recognized that “a bad system will defeat a good person every time.” The same is true of organizational structure. Structure dictates the relationship of authority and accountability in an organization and, therefore, also how people function. For this reason, a good team can only be as effective as the structure supporting it. For even the best of us, it can be very challenging to operate within an outdated or dysfunctional structure. It’s like trying to sail a ship with a misaligned tiller. The wind is in your sails, you know the direction you want to take, but the boat keeps fighting against itself.

    An organization’s structure gets misaligned for many reasons. But the most common one is simply inertia. The company gets stuck in an old way of doing things and has trouble breaking free of the past. How did it get this way to begin with? When an organization is in startup to early growth mode, the founder(s) control most of the core functions. The founding engineer is also the head of sales, finance, and customer service. As the business grows, the founder(s) become a bottleneck to growth — they simply can’t do it all at a larger scale. So they make key hires to replace themselves in selected functions – for example, a technical founder hires a head of sales and delegates authority to find, sell, and close new accounts. At the same time, the founder(s) usually find it challenging to determine how much authority to give up (too much and the business could get ruined; too little and they’ll get burned out trying to manage it all).

    As the business and surrounding context develop over time, people settle into their roles and ways of operating. The structure seems to happen organically. From an outsider’s perspective, it may be hard to figure out how and why the company looks and acts the way it does. And yet, from the inside, we grow used to things over time and question them less: “It’s just how we do things around here.” Organizations continue to operate, business as usual, until a new opportunity or a market crisis strikes and they realize they can’t succeed with their current structures.

    What are the signs that a current structure isn’t working? You’ll know its time to change the structure when inertia seems to dominate — in other words, the strategy and opportunity seem clear, people have bought in, and yet the company can’t achieve escape velocity. Perhaps it’s repeating the same execution mistakes or making new hires that repeatedly fail (often a sign of structural imbalance rather than bad hiring decisions). There may be confusion among functions and roles, decision-making bottlenecks within the power centers, or simply slow execution all around. If any of these things are happening, it’s time to do the hard but rewarding work of creating a new structure.


  3. Do You Have a Blah, Blah Vision or a DRIVING Vision?

    June 19, 2015 by ahmed

     

    Originally posted on Quality Digest by Jesse Lyn Stoner

    Does your vision sound something like this? “Our vision is to provide aggressive strategic marketing with quality products and services at competitive prices to provide the best value for consumers.”

    Bad news. You have a blah, blah, blah vision. Do yourself and everyone on your team a favor: Take it down.

    You have two choices. You can decide you don’t need a vision and get on with your work. Or, you can engage with your team in creating a driving vision—one that lives in the hearts and minds of everyone and naturally drives behavior and decisions.

    A driving vision is a clearly articulated, results-oriented picture of a future you intend to create. It’s a dream with direction.

    When it is shared, it generates a tremendous amount of energy that drives you where you want to go. If you are in doubt, here are eight ways vision creates a powerful, driving force.

    The seven characteristics of a DRIVING vision

    When your vision meets these seven criteria, you will be DRIVING in the right direction.

    D-Demanding purpose

    The invitation and opportunity to achieve greatness excites and enlivens us. A noble purpose that challenges us to rise to our potential is inspiring and appeals to our natural human instincts. It helps us understand the importance of our work and gives meaning to our daily activities.

    R-Results-oriented

    A vision describes a clear picture of what the future will look like—something you can actually see in your imagination. It is a picture of the end result—what it looks like when you are fulfilling your purpose. It does not include the process to get there. The vision is the target. The effectiveness of the strategies and goals you set will be tested by how well they move you toward your vision, and often they require adjustment.

    I-Illuminates values

    It is easier to stay focused and motivated when the vision connects with what we care deeply about—our values. And when the vision has been taken into the minds and hearts of the people, it endures beyond the tenure of the leader who articulated it. Values are implicit in driving visions. (e.g., the values in Martin Luther King’s “Dream” are clearly implied: brotherhood, freedom, and dignity.) The values must be fundamentally connected with the organization’s purpose. A vision for a financial services organization might include values like accuracy, reliability and dependability while the vision for an amusement park might include fun and safety.

    V-Vibrant

    Creating a vision about what you want—a proactive vision—is what makes it vibrant and energizing. A reactive vision based on negativity and what you want to get rid of is short-lived because it doesn’t take you anywhere. A vision that excludes or does harm to its environment isn’t sustainable because the organization is part of its environment and ultimately is doing harm to itself.

    I-Identifiable

    It should explain in plain language what the company is about—what is unique about it that differentiates it from others. A generic blah, blah, blah statement means nothing, makes people lose confidence in the leadership of their company, and turns off customers. Too many vision statements are wordsmithed to death.

    N-Never-ending

    A vision should not be about beating the competition. Where do you go after the race is over? It’s about being the best you can be. An enduring vision continues to provide guidance. The farther you proceed, the clearer your vision becomes and the more the magnitude enlarges. There is no such thing as a five-year vision, only a five-year goal. The vision answers, “What’s next?” after that goal is achieved.

    G-Guiding

    When the organization is guided by a shared vision, the role of leadership naturally shifts from controlling and managing to supporting and enabling. Empowerment only makes sense in the context of a shared vision. When everyone understands the vision, is committed to it, and sees where they fit and how their actions contribute, they can be trusted to make decisions.


  4. Instill a culture of happiness and quality will follow

    April 4, 2015 by ahmed

     

    Originally posted on Biztorming by Luciana Paulise

    Google, Zappos and Virgin are convinced that happiness can change the world by improving profitability and employee performance at the same time. Do you want to know how?

    The quality culture of happiness

    In the 80’s Edwards Deming used to say that to achieve continuous improvement: “Management obligations include the following ingredient, I believe: Create a climate in which everyone may take pride and joy in his work”. When he was working for Ford, a cultural model of 14 principles based on three main goals was designed at the company. One of those goals was “Provide Employees an environment that encourages full use of their potential”, which would include 8 of the 14 principles.
    Nowadays, Companies like Google, Zappos or Virgin showcase that whether you are an entrepreneur managing a startup, or a corporate executive with thousands of employees, if you keep your team members happy at work, they are better collaborators, work to common goals, and are more innovative. A Harvard Business Review research shows an average of 31% higher productivity, 37% higher sales, with creativity three times higher, which confirms Google, Zappos, Virgin and Deming are right.

    On the other hand, according to the Forbes insights on Culture of Quality, instilling a culture of quality is “essential to the success of any quality program.”

    The challenge is to find the best way to keep everyone on your team happy, productive and quality oriented.
    Even though each company already have their own culture set up, no matter the size or industry, a new culture can be instilled in the long term if the day to day behaviors are changed accordingly. Tony Hsieh, Zappo’s CEO states that “Culture will happen regardless of whether you want it to or not, you just need to formalize and organize it. You just have to analyze what makes you unique, what you want to be known for, and what your ideal employee looks like.”
    I found there are five basic decisions that can guide company owners in the right direction towards a “happiness culture”. It’s up to the owners to decide which way to go!
    The five decisions are:

    1. Intrinsic vs. extrinsic motivation: Extrinsic motivators are usually money incentives based on performance. They lead an individual to act mainly for an external reward (pay). On the other hand, intrinsic motivation drives an individual to act (such as work or study) because it generates joy, self-satisfaction and happiness. Edwards Deming would say that extrinsic motivators like money rewards and carrot and stick incentives were not enough to motivate employees to work at their best. He insisted that intrinsic motivation was the key, and that people should be given a purpose to satisfy their psychological needs based on Abraham Maslow theory. Richard Branson at Virgin said in his blog What employees wellbeing means to me that “Flexible working encourages our staff to find a better balance between their work and private lives, and through this balance they become happier and more productive. At Pluralsight, a training company that applied Deming philosophies, they used to have only 10 days off on holidays. Now employees can take as many days off a year as they need, as vacation time is not tracked. There are only two rules: “be respectful” and “always act in Pluralsight’s best interest”. They eliminated extrinsic motivators like incentive pay for managers and commissions for salespeople, to focus on creating an environment where everybody wins.
    2. Long term vs. short term profit thinking: Companies that want to transform their culture undoubtedly need to have a long term view because cultural changes are slow. Management commitment is crucial to allocate resources through a sustained period of time even when changes will become evident later on. Thinking long term help employees prioritize quality, when fore example in the case of small business, employees tend to be always thinking in what needs to be done now, no matter how.
    3. Win-win mindset vs. win-lose: A Win – win scheme is perfect for a culture of happiness. Competence and rivalry brings sub optimization and frustration. In an “I win you lose” scheme everybody is losing, like in a divorce. Companies don’t have to focus on keeping happy only a few excellent employees, but making sure all the employees are happy because they can excel in what they do. In a win-win approach you don’t beat out a rival. He is doing his best, you’re doing yours, and you can all work together.
    4. We vs. Me organization: WE organizations promote more cooperation, less individualism and remove barriers to teamwork (like individual incentives). Everybody work as a unit to accomplish objectives rather than everybody off doing the very best they can do at whatever they do and not paying much attention to what the objectives are. Rewards will be greater for everyone, not just in money but in self-esteem and intrinsic motivation.For example, If I cut a piece of wood and it is too short or too long, others have to do more work. I may save a dollar to make it easier for me but it would be costing you 10 dollars. In a ME organization I should work to minimize loss for the system, I should spend 1 hour to make you save three hours. Toyota for example focus on team working and the evaluation is based on the group performance, so people want to share everything they know, they want to make sure everything they do is great to increase the total shared.
    5. Small continuous improvements from bottom up vs. breakthrough changes from top down: Psychologist Ron Friedman in his book “The best place to work” states that “smaller frequent positive feedback and rewards will keep people happy longer than a single large infrequent happy event. The small continuous improvement approach is not also good for employee’s motivation but also for dealing with a changing environment. For a small business, conducting small experiments without making massive investments is much more flexible and allows to deal with uncertainty and lack of resources, minimizing the expenditure of time, money and effort. It also generates an environment of experimentation without fear. At Toyota for example, the responsibility of the daily kaizen is led by those who are responsible for operations, instead of being the responsibility of a “quality department”. This is what I call “improvements from bottom up”, because employees are the ones proposing the changes.

    Believe it or not, it is possible for employees in business, as well as entrepreneurs, to be both happy and productive. It is difficult to change a big organization but you can start small, in small continuous batches. Managers and directors are the first ones to change their minds. If they do, they will change their habits, and the rest of the employees will us follow their examples. Start up and entrepreneurial organizations can pick-up these new ideas naturally.
    Happy employees lead to success, more than success leads to happiness. If you want to emulate Google’s success as a great place to work, and as a successful company, maybe it’s time to adopt a culture of happiness.

    A quick piece of advice to start delivering a culture of happiness? Replace the “Employee of the month” award with a “Thank you” note.


  5. What Executives Value in Their CEOs

    March 20, 2015 by ahmed

    Originally posted on HBR by Leslie Gaines-Ross

    A CEO’s reputation is a key part of a company’s success.

    Few would disagree with that. But how about specifics? Weber Shandwick conducted new research with KRC Research, The CEO Reputation Premium: Gaining Advantage in the Engagement Era, among more than 1,750 executives in 19 markets worldwide. We sought out the perspectives of those closest to the CEO, those in the best position to judge.

    We found that nearly one half of a company’s corporate reputation (45%) is attributable to its CEO’s reputation. Similarly, 44% of a company’s market value is attributable to its CEO’s reputation. Tellingly, one-half (50%) of the global executives we surveyed report that they expect CEO reputation to matter even more over the next few years.  Global executives also say that a positive CEO reputation attracts new employees (77%) and helps to retain them (70%).

    We found that executives value a few key attributes more than others. Among them:

    1. Humility. Only one out of four CEOs in our study were described by their executives as being humble. Yet we found that highly regarded CEOs are nearly six times as likely as less highly regarded CEOs to be described as humble (34% vs. 6%, respectively). While there are still some well-known celebrity CEOs out there, today’s CEOs have to demonstrate their humility, not their celebrity, and make it clear that the company, not themselves, is their focus.

    Humble CEOs motivate and empower those around them, share employees’ values, and listen well. They use their reputations on behalf of all.  They rely on their senior teams to validate strategy.  They build cultures that are about the collective whole, not individual rising stars.

    This is a nascent trend that will undoubtedly continue to grow. Global media coverage of humble CEOs has spiked 200% in the past year and mentions have risen 70% in a Google search.

    2. Visibility. While it’s important to be humble, a successful CEO can’t be a wallflower. A hefty 81% of global executives believe that for a company to be highly regarded it is important for CEOs to have a visible public profile.  In addition, admired CEOs are four times more likely to be skilled at engaging the public than those with less admired status (50% vs. 13%, respectively).  When engaging the public, CEOs are the purveyors of the company’s narrative. It is this narrative that must stand out amidst the informational deluge that besets the public. The CEO therefore must attend to the clarion call, standing up and standing out so as to tell the company’s story.  Given the glut of competing information bombarding society, however, standing up and standing out is no easy task.  It is immensely difficult to get the story of one’s company not only heard, but also recalled and shared.  All of which leads to our next finding.

    3. Persuasiveness. The CEO must convey the company narrative and satisfy the marketplace’s demand for content and transparency through both traditional methods of storytelling (such as media interviews) and newly developed digital channels.  Which of the many communications channels are most important?  The majority of global executives (82%) believe speaking engagements to be most beneficial when engaging external stakeholders.  Industry-specific speaking engagements are more important than non-industry ones. Other important external CEO activities are building relationships with the media, using the company website strategically, and identifying compelling thought leadership platforms. Social media participation is also viewed favorably.  A full 43% of respondents deem using social media a worthwhile CEO activity to demonstrate the company’s forward-looking ideas and clear vision for the future and, of course, to elucidate the company story.

    Along with public visibility and engagement, however, comes some risk.  When asked whether CEO visibility positively or negatively impacts company reputation overall, an equal number said it improves reputation (41%) as said it can either improve or harm reputation (41%).   Just 10% said visibility serves only to harm a company’s reputation. So the smart CEO takes advantage of the positives but is wary of the negatives.

    Global executives today are luckier than ever — a rich ecosystem of channels exists to promote the company’s business strategy, greater purpose, and company story. Customers are ready to engage with the CEO, and conferences with receptive audiences are exploding.

    CEOs now generally accept what has long been apparent:  like it or not, they are public figures.  By virtue of digital communications we all have in some sense or another gone public.  It is just that some of us, CEOs in particular, are more public than others. There is no turning back. It’s time to embrace engagement — but in a most humble way.