The Characteristics of a Reengineered Corporation

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Reengineering initiatives typically lead to a business organization with these characteristics:

1. Business processes are simplified rather than being made more complex.

2. Job descriptions expand and become multi-dimensional.

3. People within the organization become empowered as opposed to being controlled.

4. The emphasis within the organization moves away from the individual and towards the team’s achievements.

5. The organizational structure is transformed from a hierarchy to a flatter arrangement.

6. Professionals become the key focus points for the organization, not the managers.

7. The organization becomes aligned with the end-to-end process rather than being focused on departments.

8. The basis for measurement of performance and compensation moves away from activity towards results.

9. The role and purpose of the manager changes from supervisor to coach.

10. People in the organization no longer worry about pleasing the boss–they focus instead on pleasing the customer.

11.The organization’s value system transforms from being protective to being productive.

Reengineering is not solely about creating new business processes–it focuses on creating a new company.

Taking each of these points in turn, in a reengineered company:

1. Business processes are simplified rather than being made more complex.

Companies that reengineer invariably end up dismantling departments and instead put together process teams that handle work logically rather than within the artificial department constraints. Inevitably, the process team approach will be more logical and make more sense than any other approach.

Process teams within a reengineered organization can be of any shape or size. The work to be done dictates the optimum size and structure of the process team–not any artificial constraints, preferences of the managers or external factors.

2. Job descriptions expand and become multi-dimensional.

Before reengineering, a worker may perform one task repetitively all day every day, without ever giving thought to the big picture perspective of what is being created.

After reengineering, the worker is part of a process team that has full responsibiliy for the entire process. In that situation, every team member has an appreciation and familiarity with each step in the process, and will more than likely be required to perform several of those steps at different times. Thus, work becomes multi-dimensional, more rewarding and more closely linked with the end result. There’s ownership in the process output.

3. People within the organization become empowered as opposed to being controlled.

Reengineered companies don’t want people who follow the rules–they value employees who can set their own rules to achieve results. Therefore, reengineered companies look for employees who are self-starters, self-disciplined and who are motivated to achieve.

Another way of looking at empowerment is to consider what happens when a supervisor visits an employee. In a traditional company, the real work screeches to a halt while the employee focuses on satisfying the supervisor. By contrast, in a reengineered company, the employee is thinking, interacting, using judgment and making decisions on the basis of what will create a satisfied customer. The supervisor becomes a resource towards that objective.

4. The emphasis within the organization moves away from the individual and towards the team’s achievements.

Reengineering effectively removes the artificial boundaries put there by department structures. Instead of being focused on a single aspect of the delivery of value, a process team is formed that assumes total and complete ownership of the process.

Teams may be structured in many different ways:

As case teams which handle recurring tasks

As process or virtual teams–for as long as required

As one-person teams

5. The organizational structure is transformed from a hierarchy to a flatter arrangement.

In the team environment made possible by reengineering decisions are made on a consensus basis rather than by a manager. That has the indirect effect of reducing a manager’s role–and their need to be part of the loop.

Invariably, organizational structure is less of an issue at reengineered companies than industrial-age organization. Equally, that leads to a flattening of the traditional management structure. With work being organized around processes and teams, the organizational structure becomes a secondary issue.

6. Professionals become the key focus points for the organization, not the managers.

Reengineering will always change the boundaries between different kinds of work. In the past, the past, the roles filled by the manager–checking, reconciling, monitoring and tracking–would most likely have been at the center of operations.

After reengineering, the creation of value becomes the main focus point. As such, the people who do that most effectively will become the center of focus. Teams will do whatever is required to maximize the efficiency of professionals with the skills applied.

Overall, it’s a more positive approach to business. Invariably, mush of what managers did in the past was unproductive but considered necessary to maintain order. Reengineered teams have a totally different approach people are working because they’re motivated to achieve.

7. The organization becomes aligned with the end-to-end process rather than being focused on departments.

When a process team assumes responsibility for performing a job, the organization as a whole becomes focused on results rather than activity. There’s also a greater sense of completion and achievement for the workers because they can identify directly with a result they care about. That also encourages growth and learning for the team members.

8. The basis for measurement of performance and compensation moves away from activity towards results.

Instead of being paid for their time, workers in a reengineered company are paid for their results achieved. Most often, this tends to be structured as a base salary and a performance-based bonus–which can grow to a substantial level if outstanding results are achieved.

In reengineered organizations, performance is measured solely on the basis of the added value created. The compensation system recognizes and rewards that value creation process.

In the reengineered business environment, advancement from one position within the company to another is not given as a reward for previous results. Instead, it’s entirely ability driven.

9. The role and purpose of the manager changes from supervisor to coach.

Process teams don’t need bosses–they need coaches. A boss allocates work. A coach helps the team solve problems, and facilitates achievement by providing the requisite resources and other inputs. In short, managers in reengineered companies take pride in the accomplishments of the teams they are responsible for assisting.

10. People in the organization no longer worry about pleasing the boss–they focus instead on pleasing the customer.

In the industrial-age companies, the average employee’s attitude was: “My boss pays my salary and determines whether or not I get promoted. Therefore, I’ll concentrate on keeping him happy.”

In a reengineered company’s process team, the attitude becomes: “Customers pay my salary. I’m not paid just to turn up. I get paid according to the amount of added value I create. Therefore, to make more, I’ve got to create more satisfied customers.”

11. The organization’s value system transforms from being protective to being productive.

In a protective organization, every manager wars with every other manager over issues like blame for problems, jurisdiction, fault and allocation of resources.

In a productive, reengineered company, everything in the value system is centered around the creation of customer value. Everything is aligned with and judged by that criteria alone:

The way people are paid

The way performance is evaluated

The way promotions are made

The way people actually spend their time

Changing corporate value systems is always going to be a big part of any reengineering program.

Most companies that have successfully navigated reengineering programs find there are five key roles that need to be filled:

Leader
↓
Process owner
Reengineering Team
↑ ↑
Steering Committee Reengineering Czar

Ideally, the Leader will appoint the Process Owner, who will convene a Reengineering Team to reengineer the process, with assistance from the Czar and under the auspices of the Steering Committee.

The Leader–must be a senior executive of the organization who has enough clout to cause the whole organization to turn itself upside down and inside out while reengineering occurs. The leader must also be a consensus builder–persuading people to accept the disruptions reengineering will bring.

The Process Owner–will usually be a senior manager (often with line responsibility) who has prestige and credibility. The process owner will make reengineering happen at the individual process level. Most often, process owners are already intimately familiar with one of the functions involved in the process that will undergo reengineering.

The Reengineering Team–carries out the heavy lifting. These people actually get their hands dirty figuring out the nuts and bolts of the nuts and bolts of the reengineered process. The best teams have between five and ten members–a mix of outsiders (people who don’t currently work in any of the functions being reengineered) and insiders (people who do work in those areas).

The Steering Committee–is a broadly based collection of senior managers of the organization who:

Set priorities for the Reengineering Team

Decide the allocation of resources

Resolve any conflicts that arise

Monitor the results achieved

The Reengineering Czar–is responsible for management and coordination of all the reengineering teams working within the organization. In effect, the Czar keeps hands-on tabs on the state of play in each reengineering initiative, and provides that perspective to the leader. The Czar acts both as a resource to each reengineering team and as a custodian of the bigger picture issues.

The key points to keep in mind about this structure are:

Processes, not organizations, are the object of reengineering. Therefore, companies don’t reengineer their sales or manufacturing departments–they reengineer the work these departments do.

Information technology is the main enabler of reengineering processes. That will deliver marginal improvements at best. Instead, reengineering is focused on breakthroughs–quantum leaps forward.

Reengineering is never focused on fixing old processes. That will deliver marginal improvements at best. Instead, reengineering is focused on breakthroughs–quantum leaps forward.

The Reengineering Concept

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Reengineering is defined as the fundamental rethink and radical redesign of business processes to generate dramatic improvements in critical performance measures–such as cost, quality, service and speed.

Reengineering

Fundamental rethink of business processes→
Dramatic& sustainable improvements in performance
Radical redesign of business processes →

In practice, reengineering means to start over with a clean sheet of paper and rebuild the business better.

To succeed in today’s global economy, corporations must have organizational structures and business processes that:

1. Are fast
2. Deliver high quality consistently
3. Are flexible
4. Are low cost

Traditional businesses are unlikely to be able to deliver on these requirements because of the way business management has evolved. The four key stages in the evolution of business management have been:

Stage 1–1776

Adam Smith published The Wealth of Nations. In this, he suggested the specialization of labor as a way for workers to achieve greater productivity. Smith’s ideas suggested efficiency could best be achieved by breaking large jobs down into small tasks that could be performed repetitively.

Stage 2–1820s

The railroad companies introduced bureaucracies to avoid collisions on single-track lines–formal operating procedures, centralized management and a rule for every contingency. This was the forerunner of the command-and-control system still in use today–where there are workers supervisors to keep things organized.

Stage 3–Early 1990s

Henry Ford introduced the assembly line–workers performed one tiny step in a complex process where the work is brought to the worker rather than the other way around–while Alfred Sloan created small, decentralized management teams for GM so that huge, sprawling operations could be managed efficiently.

Stage 4–The 1945-1960 Era

The hierarchical or pyramid organizational structure became popular as the best way to match production capacity and demand for mass-produced consumer goods. Functional middle managers were added to provide control and management.

These principles were all appropriate for their times, but in today’s environment, they inevitably result in:

1. Delay and errors
2. Rigidity
3. High overhead costs

The reality is that corporations cannot move into new competitive environment by adapting the old management methods–a complete and sweeping redesign is called for. Reengineering delivers those changes.

The key rhetorical question of reengineering is:

“If I were re-creating this company today, given what I know and the current level of technology, what would it look like?”

Inevitable, the answer to that question will have four key elements:

1. A focus on fundamentals
Addressing the issue of precisely what it is the corporation does, why is it done the present way and what are the tacit rules and assumptions embedded in present practices. Reengineering ignores “what is” and concentrates on “what should be.”

2. A radical redesign element
Reengineering is about reinventing the business–not making superficial changes or marginal enhancements to the old ways of doing things.

3. The potential for dramatic results
Reengineering leads to quantum leaps in performance–not incremental improvements.

4. A business process orientation
Reengineering evolves around business processes–not tasks, job descriptions, people or structures. A business process takes an input or inputs and generates an output that is of value to the customer. A business process only works if it generates added value, not internal activity.

Generally speaking, three types of companies undertake intensive reengineering programs:

Companies that find themselves in deep competitive trouble–and who often require an order of magnitude improvement somewhere in their operations to be able to compete with others in their field.

Companies with managers who can see problems arising a little further down the road they are traveling on–and who want to begin reengineering before all competitive advantages they possess evaporate.

Companies with managers who are ambitious and aggressive–who see reengineering as a way to position the company to extend their lead over their competitors.

The reengineering concept:

Should not be confused with automation–since doing the wrong things more efficiently will make few, if any, improvements to a business.

Is not restructuring or downsizing–since reengineering seeks to achieve more with less rather than scaling back what’s being done.

Is different from an attempt to “flatten” an organization–since the problems facing companies are deeper, process based rather than superficial, organizational problems.

Allows fragmented processes to be brought together–thereby eliminating the need for a business bureaucracy.

Differs fundamentally from total quality management (TQM) or similar programs–since TQM seeks to enhance and improve the existing processes through ongoing, incremental improvements whereas reengineering seeks to discard existing processes entirely and replace them with break-through processes delivering leaps in performance.

There are no hard and fast rules about what a reengineered business process will look like–simply because each will be individual and process-specific. There are, in practice, some recurring general themes most reengineered processes tend to align with:

Several jobs are combined into one.
Reengineering tends to reverse the assembly line approach. Instead of having many people involved, none of whom can be held accountable, many reengineering programs combine process steps and make a team directly responsible for creating a satisfied customer. That eliminates the errors, delays and inefficiencies of hand-offs.

Decision making falls to the workers, not the managers. When a business process is reengineered, the responsibility for making decisions often becomes an integral part of the process itself rather than being separated. The advantages of this are:

1. Fewer delays
2. Lowering of overheads and fixed costs
3. Better response to customers
4. Workers are empowered to create value

Process steps are performed logically and naturally.
In many older industrial-age business processes, an artificial amount of linearity was introduced as part of the control function. Inevitably, arranging tasks that way slows work down and creates a drag on efficiency. Most reengineered processes allow multiple jobs to be completed simultaneously, and for the sequence of activities to be organized logically. The benefits:

More gets done by fewer people

The chances of obsolescence or reworking are reduced

The end of standardization–processes can have multiple versions of the same product fine-tuned for niche markets. The paradigm of the industrial age was to achieve economies of scale through mass production. In today’s business environment, those manufacturing efficiencies can still be achieved while delivering a product or service that is fine tuned to the requirements of specific markets. Most reengineered processes deliver impressive production planning flexibility and capabilities. The benefits:

Simplification of processes usually occurs

Greater added value can be delivered

The work is performed where it makes most sense.
In industrial-age organizations, the work usually had to physically travel to where each specialist was located–creating loads of overheads keeping track of things and fitting all the pieces together. When a business reengineers its processes, these functions can be shifted around the organizational boundaries to become more efficient. Inevitably, doing so simplifies management procedures and reduces drag on the company.

Checks and controls are reduced or eliminated.
When processes are reengineered, checks and controls are put in only where they make economic sense. In fact, the majority of reengineered processes tend to have controls that aggregate patterns rather than seek permission for individual circumstances. That way, problems that are developing can be identified and dealt with early.

Hand-offs and reconciliations are minimized.
A reconciliation is required whenever the data generated by one part of a business process fails to match up with the data from another part of the same process. In other words, it’s work that doesn’t add any value. Most reengineered processes end up reducing dramatically the number of points of contact between the company and its customers–eliminating the need for hand-offs from one department to another and reducing the possibility of irregularities arising for any reason whatsoever.

Single points of contact–case managers–assume responsibility for the results.
In many industrial-age companies, the customer had to interact with a number of people to deal with the company. That caused confusion and frustration–simply because bringing each new person “up to speed” on the specifics of a situation was a major exercise in and of itself. Most reengineering programs eliminate that problem altogether by creating a one-person contact point-frequently designated as the case manager–to act on behalf of the customer and follow the entire transaction from start to finish. The case manager integrates processes and simplify things for customers.

Companies enjoy the benefits of centralized purchasing power and decentralized operations.
Many companies that have reengineered their processes end up combining the benefits of both decentralization and centralization. In other words, business units tend to operate as if autonomous (giving them greater flexibility and market responsiveness) while at the same time enjoying the economies of scale (purchasing power and pooling of key information) centralization delivers.

Every reengineered business program is unique, and will require insight, creativity and sound judgment to develop. However, the general themes and patterns others have previously followed may be of value in the development of reengineered processes.

Fundamentally, reengineering is about reversing the industrial revolution. Reengineering rejects the assumptions inherent in Adam Smith’s industrial paradigm–the division of labor, economies of scale, hierarchical control and all the other appurtenances of an early-stage developing economy. Reengineering is the search for new models of organizing work. Tradition counts for nothing. Reengineering is a new beginning.

–Michael Hammer & James Champy

The Four Key Elements

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The context within which executive decisions and actions take place will have a profound influence on making strategy work. The four contextual factors–change, culture, power and leadership–all need to be in sync before any strategy will work. To be able to make the right strategy work, you need to have:

1. The ability as an organization to manage change
2. A culture that values execution highly.
3. A power structure that supports execution of the strategy
4. Leadership that is committed to creating and following through on the strategy.

1 The ability to manage change

By definition, making strategy work requires that you manage the changes that occur in the marketplace and within your organization. This is often the single biggest obstacle to effectively executing a preferred strategy.

To manage change effectively:

1. Assess the size and content of any impending changes. Decide where the focus of any change efforts should rightfully be.

2. Estimate how much time you have available to execute your planned changes.

3. Decide whether the necessary changes should be made swiftly in one step, or if a sequential process of progressive steps wouldn’t be better.

4. Make someone responsible and accountable for the various elements of the change process. Be very definitive about this so there is no ambiguity.

5. Find practical ways to offset and neutralize any overt or covert resistance which might arise to the change initiative.

6. Monitor the changes as they’re implemented. If they’re not working as planned, make some tweaks and enhancements. Pay close attention to what’s going on.

Obviously the more complex the change that’s required or the shorter the time available, harder the change process becomes. When you have to actually do a number of change related tasks simultaneously, the potential for problems increases appreciably as:

Coordination and control become harder to track

People have insufficient time to do cause-and-effect analysis

Organizational learning may be restricted

There may be an inability to adjust performance targets

If at all possible sequential change is the preferred option. If you can find a way to break large changes down into smaller, more manageable pieces or elements that can then be changed one at a time, some of the problems previously mentioned will be eased or even avoided entirely. The only downside to this approach is sequential change takes time, and the longer you take to make a change, the more potential there is for additional, unanticipated factors to crop up. Furthermore, slow sequential change is fairly unexciting. It won’t be possible to make a big deal about launching a major change initiative when it’s done in a series of small steps. That may or may not be a factor worth considering.

2 A culture that values execution

Corporate culture makes a big difference in any organization’s ability to make strategy work. Culture is pervasive–it colors and influences everything that happens. If there is a culture of concealment in place, employees will be discouraged from doing what’s required. Equally, if the prevailing culture is one of discipline and getting things done, you can be more confident about executing the nominated strategy.

In simple terms, culture dictates the way things get done or the way people behave. Culture embodies the organization’s shared values and vision. Changing an organization’s culture is difficult, but it can be done. There are five rules or guidelines to keep in mind when it comes to changing a culture:

1. Make the reasons for change clear, compelling and agreeable to the key players. Explain why prior performance was poor, and use a cause-effect style analysis to generate consensus for making a change.

2. Focus more on trying to change behavior and less directly on trying to change the culture per se. As you change people’s behaviors for the better, you’ll find the culture changes correspondingly. Introduce new incentives that will reward the desired behavior. Put in place controls and organizational structures aligned with the new culture. This works better than appealing to individuals to make changes.

3. Remember effective communication is vital. Let people know where the organization is at in its evolution. Talk to people directly, face-to-face and in groups. Let everyone know what’s going on, and what remains to be done.

4. Do everything you can to reduce resistance to change. Within reason, focus on the positives and leave the negatives to die a natural death. Improving participation and involvement is an excellent way to offset any potential negativity.

5. Make cultural at a reasonable pace. If you try and change too many aspects of the culture simultaneously, you not only confuse people but also generate coordination and communication challenges that aren’t desirable. Trying to move too fast hurts the learning process and dilutes the impact of the changes made.

3 A power structure which supports execution

Power can be defined as the opposite of dependency. In any organization, the people who have the most power are those who monopolize something another person needs. The source of power might be information, resources, authority to act or whatever, but the basic principle is the person with power has access to the things other people want and need.

Power affects both strategy formulation and strategy execution directly. The people with the most power can make the choice of strategy they prefer, and the consequent execution needs will then flow directly from the choices made. It’s important to keep this in mind during strategy formulation. Any organization that does not take into account its own internal power structure when considering strategy will face difficulties and likely failure.

So what can you do to enhance your effective power to formulate and then execute your effective power to formulate and then execute your preferred strategy? Some ideas:

See if it’s feasible to form a coalition with those in power: where they will support your ideas in exchange for something they want. Often, if you sell another internal group on the merits of what you’re suggesting, you can form a larger power base that cannot be ignored.

Focus on the value-added, measurable results that will be delivered: that is, the positives of the cost-benefit calculations. It will always be easier to marshall support when the upcoming benefits are real and substantial. It also helps if there is a clear cause-and-effect relationship involved, and if the benefits are measurable rather than being soft or hard to quantify.

Make a direct approach to your organization’s senior leadership: those who have the power to change the prevailing internal power structure. If the CEO and the board of directors learn about clear and compelling benefits that could flow from a change of strategy, they will be obliged to look at the matter in more detail. If you have your facts right and can make a genuine case, they may even be able to help modify the prevailing internal power structure to facilitate your strategy. This is the ideal scenario, as the senior leadership will be anxious to change anything which dulls your organization’s competitive advantage.

4 Leadership committed to following through

Poor organizational leadership can stop or at the very least seriously impede strategy execution efforts. Effective business leaders generally bring the ability to meld together both hard and soft issues that will be critical to execution success. The more an organization has at stake, the greater the degree to that success will depend on the quality of the leadership provided.

The practical things you can do as a leader to enhance your organization’s ability to make strategy work are:

Have the ability to analyze, understand and then sell execution needs and decisions: throughout the organization as a whole. Leaders need to be advocates for the right decision that is not always going to be the most popular decision. When needed, leaders need to take steps to ensure the right things happen.

Develop incentives that are simultaneously alluring and aligned with strategy execution: since more than any other single factor, rewards send an unmistakable signal what is valued and what is not when it comes to executing a strategy.

Think strategically and long-term: to encourage the learning which will be required to underpin future performance.

Understand the internal power structure: and know how to encourage the learning which will be required to underpin future performance.

Be able to dictate the ideal pace of change: whether the situation calls for rapid and complex interactions or whether a sequenced, paced intervention would yield better results.

Be open-minded and have a high tolerance for situations of ambiguity and uncertainty.

Even out internal biases: so strategy formulation and execution is not totally dominated by just one unit or division.

People are vital to execution success. Clearly, their motivations, capabilities, commitments, and ability to create and follow through on plans of action will affect the success of execution efforts. It is important to focus on the climate leaders create.

–Lawrence Hrebiniak

Power is social influence, and that influence can materialize in different ways.

–Lawrence Hrebiniak

Incentives and Controls

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Execution will suffer if people are rewarded for doing the wrong things. Accordingly, an incentive program that provides individual and group rewards when the short-term objectives are achieved is essential. Of equal importance, these rewards must also reflect the desired business structure. A balance must be struck between group and individual rewards that makes sense. Rewards tell people what’s important in no uncertain terms, and what to emphasize. Controls are the feedback loop, providing information to the organization’s leaders on how well the strategy is being implemented.

Incentives motivate behavior and actions that are consistent with the desired outcomes. Controls provide feedback about performance so corrective actions can be taken and the organization can learn.

Good incentives motivate people to do more of what works rather than seeking to punish them for doing the wrong things. Incentives come in two general varieties:

1. Extrinsic: an increase in salary, a bonus, a promotion or something else that’s tangible.

2. Intrinsic: an award, greater autonomy, the opportunity to become involved in more interesting projects in the future and so forth.

It’s absolutely essential that the incentives available in your organization reward the right things–id eally performance against your agreed objectives. If you say one thing but reward something entirely different, people will discount your words and do whatever earns the incentive, even if this is detrimental for the organization. It’s important to avoid unintended consequences in the incentives offered. You always get what you “pay for.”

Once incentives are in place agreed upon, controls then become important. In effect, controls are the flip side of incentives. Controls provide feedback on performance, reinforce the correct execution methods, provide a corrective mechanism to get back on track and facilitate organizational learning.

Controls operate in this way:

Specify the short-term strategic objectives
↓
Compare actual and desired performance → Analyze and study significant deviations
↓
Analyze cause-effect Learn more → Correct the situation as needed
↓
Issue incentives Take corrective action Take corrective action Make any changes that are required

Note that the effectiveness of this control flowchart will depend on the use of good objectives. Poor objectives will doom the process. If it isn’t possible to measure results systematically, or if the objectives don’t relate logically to the strategy, the entire process breaks down and becomes pointless. Good objectives are centered around doing the right things whereas with poor objectives, the wrong things are reinforced.

Some other key points to keep in mind are:

Always make sure you reward the doers and recognize the performers rather than those who mean well but never quite get around to doing what’s required.

Celebrate success. When your organization achieves a milestone, do something memorable.

Make certain you face the brutal honestly and openly. Don’t try and fudge the facts. Ignoring the real facts of the situation can only detract from your ability to make your organization’s strategy work.

Recognize and reward cooperative efforts. If the achievement required the activities of a large group, be certain everyone gets recognized and rewarded appropriately. If just the group leader gets the accolades, there will be willingness to get involved next time around.

Be very clear about who is responsible and who is accountable for results. The control process won’t work if accountability is muddled.

Provide everyone with timely and valid information so they can take corrective actions sooner rather than later. For controls to work, everyone’s information must be accurate and timely. Out-of-date information is a genuine problem. And check to ensure the information you provide is actually being used and not getting lost in the background noise.

Have leaders in place who will lead by example. The last thing you want is a “Do as I say, not as I do” culture.

Incentives are central to any plan of execution. They tell people what’s important and what to emphasize. Behavior that is reinforced tends to be repeated. Successful execution requires that incentives reward the right things.

–Lawrence Hrebiniak

Controls represent a feedback loop. They provide information about the achievement of objectives that derive from strategy and other aspects of our model of execution. This feedback is important because strategy execution is an adaptive process. Managers rarely get everything right; fine-tuning of plans, objectives, and implementation methods is more often the rule than the exception.

–Lawrence Hrebiniak

Business Structure

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Business-level strategy, short-term objectives and the preferred corporate structure all impact on the choice of business structure. Different businesses within the same company can and do face very different marketplaces and therefore have a need for different structures rather than complying with a decreed model. A good business structure will reflect and be driven by busines strategy rather than management preferences.

Regardless of what structure a business ultimately takes, it’s vital that information gets shared and knowledge gets transferred right across the organization. Without this kind of ongoing communication, it is highly doubtful any commercial strategy will work.

Information sharing can be enhanced by the availability of both formal and informal tools. Some of the more common tools are:

Create and maintain company-wide databases and IT systems where knowledge can be first captured and then shared with others who need it.

Create formal teams or committees with responsibility for enhancing the flow of information.

Create opportunities for employees to meet informally and chat. This is particularly important in the sharing of tacit knowledge that cannot effectively be written down.

Publish a directory that lists key personnel, their geographical locations, their responsibilities and specific areas of expertise.

Allow everyone to approach anyone else in the organization for help without needing to get their boss’s approval.

Create a common language that everyone uses, regardless of their area of specialization, language skills or technical capabilities.

Create a culture of trustworthiness so people feel confident about acting on what others are telling them.

Encourage everyone to take note of new information and assimilate it into what they do.

Regardless of which specific tools are used, its important that you clarify who is responsible and accountable for information sharing within the organization. If this is left up in the air without anyone being made specifically responsible, everyone will assume someone else is already doing this.

To make this happen:

1. Develop a chart that lists all the major tasks, activities or decisions which must be made in order to achieve a strategic goal.

2. List the key decision-makers for each of these tasks or activities. Designate each person’s degree of responsibility in this way:

R–full responsibility to make a decision.

C–must be consulted prior to a decision.

A–the person who is ultimately accountable for result.

I–those who must be informed after a decision is made.

?–When you don’t really know the degree of involvement.

3. Circulate the chart to all managers and have them designate what they feel their most appropriate responsibility code should be for each task. This may highlight some problems.

4. Combine all the participants’ responses on one chart and get together a management group to discuss the responses. It’s likely there will be all sorts of disagreements about who is responsible for which decisions within the organization. This is to be expected, but the group should work together to come up with a single chart everyone can live with. Expect some heated debate before any kind of consensus is reached.

5. If no single chart of responsibilities comes together, split the larger group into two or three small groups and have each group prepare their own idealized version of the chart. Then let each group present their version, arguing its merits. A facilitator or senior business leader can then create one chart openly by reaching agreement with the people who will be responsible. It’s important that this be done with the input and agreement of everyone involved.

6. It’s a good idea to then put together and circulate a manual or handbook that sets out what will be done, by whom, when and who is responsible to check the work is done.

This process clarifies roles and responsibilities as they lead to the desired outcomes of the strategy. In the absence of this kind of detailed clarification, strategy execution won’t happen. Everyone will assume it’s the other person’s responsibility, and major problems will arise.

Business structure should reflect, and be driven primarily by, the nature of business strategy. Structure does make a difference to business performance. It does affect costs and other outcomes.

–Lawrence Hrebiniak

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