Developing a High Performance Organization™ (HPO)
Today I will be focusing on the second pillar in The Organizational Dynamic Model™, Organizational Design.
The design of an organization takes into account many elements. These include:
1. Basic Structure: Criteria and evolution
2. Core Competence: Identifying core competencies
Leveraging core competencies
3. Information Systems & Technology: Organization communication
4. Organization Efficiency: Balanced oversight & direction
Roles & responsibilities
Outsourced & strategic alliances
Organization Design is not simply creating an organizational chart. It is about designing how your organization will function in order to achieve its strategic objectives. To quote my colleague Dr. Roger Allen, “although there is not a single way nor "right" way to make the transition to a HPO, there has evolved over the past several years a methodology that can be applied to most organizations. This method of design is a high involvement process. It is not upper management or a consultant that analyzes the organization and comes up with a design to then impose it on the organization. Consistent with the philosophy of trusting and empowering people, those who do the core work of the organization are intimately involved in the design process”.
The Design Process
(Adapted from The Centre for Organizational Design)
What follows is a detailed descriptive of that methodology to give you an idea of how the design process is accomplished. There are 3 phases and 12 steps in the design process.
Phase I: Direction Setting
Step 1. Leadership Awareness and Commitment. Before embarking on a redesign effort it is necessary that the sponsor(s) of the project and senior leadership understand and be committed to the process. This step involves educating senior leadership about high performance work systems, the transformation model, the change process and needs driving organizational change. It is imperative that this group understand and be willing to commit fully the time and resources to the change effort.
Step 2. Assessment of the Business Situation. This step involves the senior leadership doing an overview of their current results and the business environment. They gather data about key business results, customer expectations, technology, vendor relationships and other social, legal or political demands on the business. This overview provides a common view of the business environment and much needed context for the next steps in the redesign process.
Step 3. Strategy Clarification. In this step, the senior leadership group examines both the business and organizational strategies. On the business side they will review or, if necessary, develop: a mission statement; strategic intent; long range objectives; and critical success factors. On the organizational side, they will review and/or develop their vision of the future, shared organizational values and guiding and operating principles. Senior leadership also establishes a general framework for the redesign process that includes allocation of resources, time deadlines and other parameters they want to guide the project.
Step 4. Steering Committee Orientation. A steering committee is selected and chartered to oversee the redesign process. They are a multidisciplinary group of key people critical to the success of the project. Their role is to oversee the entire change effort, establish measures of effectiveness, choose and empower a design team and give final approval to all recommended changes. They also act as a buffer and communications link to the rest of the organization. They must be oriented to high performance work systems, the change process, the transformation model, the business situation and business and organizational strategy. This is generally accomplished in a 2-3 day orientation session. Site visits to other companies or locations who have gone through similar redesign efforts often take place during this step.
Phase II: Involvement and Redesign.
Step 5. Organization Awareness and Commitment. After the steering committee formation, the rest of the organization needs to be made aware of the coming change process. The intent is to help all employees understand that there is an organization redesign effort underway that will seriously change the way the business operates and will significantly involve them over time. Communication sessions, department staff meetings, informal stand-up meetings, brown-bag lunch discussions and in-depth two-day orientation seminar are the means of communication. Education brings awareness, and everyone’s inclusion brings the beginning of commitment.
Step 6. Design Team Charter and Orientation. The design team is a group of employees selected and commissioned by the steering committee to do most of the work of the redesign. During three days of orientation, they learn about the vision, values and guiding principles that have been developed by senior leadership. They also learn about high performance work systems, the transformation model and steps in the redesign process. Their job is to do an analysis of the organization and then develop redesign recommendations regarding each of the elements of the transformation model. During their orientation they learn the steps and are given specific tools to carry out their responsibilities.
Step 7. Organization Analysis. Analysis is a period of intense data gathering and discussion to discover who the organization is connected to, how its core business process(es) work (or don't work) and how people coordinate efforts to get work done. The design team leads the data gathering, holding one-on-one or small group interviews with different levels of employees, customers and other key stakeholders. They share results and conclusions with the steering committee and the rest of the organization. A thorough analysis is usually conducted of each of the seven elements of the transformation model including environment, strategy, core processes, structure, systems, culture and results. During analysis design team members, steering team members and others will often go to other sites and talk with people who have gone through redesign.
Step 8. Redesign Proposals. After the analysis of the present state of the organization is completed, results and key learnings are communicated and discussed with the steering committee. Now the redesign proposals can begin in earnest. During this time the design team, and usually subject matter experts, will look towards the future and develop a complete set of design recommendations for their "Ideal Future Organization". They will first redesign the core business processes followed by the roles and responsibilities of people, including management and staff support functions, around those processes. Often, the design team’s recommendations will point to cross-functional, self sufficient business units or teams. The design team will also make recommendations regarding ways the various systems of the organization can be better aligned with the new philosophy, core processes and structure. The recommendations of the team will include not only a snapshot of the ideal, also key milestones in a transition plan for how to get to that new organization.
Phase III. Implementation and Evaluation.
Step 9. Approval and Implementation Planning. Approval is the process of discussion, adjustment, acceptance and buy-in to redesign proposals. After the design team and steering committee meet and come to agreement on the design proposals they will make presentations to the rest of the organization or business unit in which the redesign is taking place. Transition plans and rough time frames have been developed and are presented as part of the redesign package. Implementation planning begins at this point and involves a cross section of employees who decide how they will make the new design happen.
Step 10. Implementation. Once implementation plans are completed the task is to make the design live and work. During this phase, people are organized into natural work groups which receive training in the new design, team skills and start-up team building. New work roles are learned and new relationships within and without the unit are established. Reward systems, performance systems, information sharing, decision-making and management systems are changed and adjusted. Some of this can be accomplished quickly. But some of it, such as reward system restructuring, may be further detailed and implemented over a longer period of time. Aggressive goals and objectives should be set and carefully tracked during this time period to ensure continued progress toward implementation of the new design.
Step 11. Evaluation. A healthy organization is one that can measure its own performance, diagnose deficiencies, make plans for improvement and implement those plans to achieve desired results. Evaluation is the process of monitoring and maintaining organizational health by measuring performance against clearly established standards and goals. During implementation, when goals are met new ones are set. Similar to target analysis after target practice, evaluation of organization performance provides needed feedback to continue learning and improvement. Practically speaking, if targets are not posted before shooting takes place, it is impossible to measure accuracy. It is the same with organization evaluation; if goals and expected results are not identified ahead of time, it is difficult to accurately measure performance progress against them! If you begin with the end in mind, evaluation becomes a manageable and ongoing process.
Step 12. Renewal. Renewal can begin some time around two years after the beginning of implementation. It is the careful comparison of the two-year-old organization against the ideal organization identified in the original redesign proposal. It can be viewed as a sort of a mini-analysis to check organization design element by element to know how much progress has been made. This is often accomplished through interviews and discussion at several levels in the organization. Renewal is distinct from evaluation in that it occurs at a specific point in time and attempts to look at the whole organization and the integrity of the total design. It is not uncommon to see significant course adjustments or design changes come out of the renewal process.
This redesign process can be used by any organization including manufacturing, service, retail, government, health care or professional staffs. The steps may need to be modified or streamlined depending on the nature and size of the organization. Yet the same principles and general sequence of steps apply. Likewise, the same process can be used to redesign a large and complex organization, sub-units of a large organization, or a small office or business. I have seen and worked with companies or business units as small as 10 members utilizing the principles of redesign to improve their performance.
The length of time required to complete a redesign also varies depending on the nature, size and resources of the organization. Large and complex redesign projects can be completed within about six to nine months from Step 1 through Step 10 (the start of implementation). Doing so requires that design team members dedicate and commit time to the project. Smaller organizations require much less time and fewer resources to complete a project.
Although this methodology has been around for more than 40 years few companies have utilized it. Why? A big part of the answer is that throughout the 60s, 70s and into the 80s and 90s, it was unnecessary. American businesses grew even when managed poorly. However, moving into the 21st century, rapidly changing technologies, international competition and more educated workers have made that impossible in today’s world. A second reason is lack of knowledge of a better way of doing business or the tools of organizational change. A final reason is fear and self protection. In high performance organizations, departmental boundaries are changed, jobs descriptions are broadened, people have full authority to make decisions and solve problems related to their work and the role of management changes. This represents a radically different way of doing business that may be threatening to many managers and leaders. In spite of the potential for great improvements, many prefer the security of the familiar.
To illustrate this point let me refer to a previous client of mine where I was asked to conduct and lead an Organizational Design process. The client was a health care provider (HCP) focused on providing services along the continuum of “retirement to long term palliative care”. While in the past the HCP was to a degree successful, the CEO recognized they must create a new organizational design to ensure sustainability in a market where the government was providing an additional 20,000 beds to service the aging population. The redesign project was not simply led by management but included key individuals at every level in the organization. The outcome was an innovative design that otherwise would never have been considered in how they should look at doing business in the future.
Please refer to Attachment B. [link to http://members.cma-ontario.org/MHillierHPC-IDEAL-HPO.pdf]
I will not explain each functional item of the new HCP’s Organizational Design as shown in Attachment B, but refer to it only to emphasize the creative approach used to define the HCP’s strategic focus, its key relationships, interdependencies and critical success factors. The team was amazed at the design that evolved, the fact they did it (not the consultant), and that they owned it. Using this design they then dealt with all the elements in this category described in the Organizational Dynamic Model™ to ensure best in class performance practices. The new design was used to move their organization to a HPO, a status they achieved within 2 years with operating results well above the industry norm, making it one of the most sought after places for retirees, the ageing and the sick resulting in a two year waiting list.
Given the current economic challenges, most organizations realize that to survive and grow, they must find a new way to do business. As a CMA, you are provided with the resources and tools to be a leader in the design process and help your organization realize its full potential. Here is a summary you can use to talk to your company about what it might need to do to face the economic challenge we are in.
Transforming the Nature of Your Organization
Twentieth century structures and processes will no longer serve the needs of twenty-first century organizations. The growing challenge of Organization Design is learning how to adjust strategies and internal operations to the rapidly changing business environment which surrounds us.
Through a proposed Organizational Design Intervention™ program, we as CMAs can help businesses change the very nature of how they operate by aligning internal structures, processes, and systems to strategy, while adjusting to the demands of the external environment.
What We With You Will Do:
- Verify the organization's strategy.
- Identify key business unit groupings.
- Map ideal core business processes.
- Design core work teams.
- Identify and allocate unit support resources.
- Design the management structure of the organization.
- Design coordination and development systems.
- Plan the transition and implementation of the new design.
This approach to redesign results in dramatic improvements in quality, customer service, decreased cycle times, lower turnover and absenteeism, productivity gains from 25 to at least 50%, etc.