making sure your organizationmaking sure your … sure your organizationmaking sure your...

Making sure your organizationMaking sure your organization structures stack up

Tom McMullenOctober 21 2009October 21, 2009

Building effective organizations

Trends in organization designTrends in organization design

OptimizingOptimizing Focusing resources and reducing headcountsRemoving layers of managementWork simplification initiatives

Focus on clarityLeaders focuses on developing better clarity on business prioritiesHR/Line managers using this opportunity to crisp the edges on role profilesHR/Line managers using this opportunity to crisp the edges on role profilesManagers seeking people to focus on activities that drive value

Avoiding pitfallsLimiting gaps and overlaps in accountability Not spreading the organization too thin.Overloading and disengaging high performers Eliminating headcount, but not the workCreating roles which are not doable

3© 2009 Hay Group. All rights reserved

Creating roles which are not doable“Incrementalism” in job evaluation activity

So how do we do that?So how do we do that?

Alternative 1: Alternative 2:Alternative 1:The situational approach

Alternative 2:The strategic approach

Look at the people who work for you and figure out what accountabilities they could take on based on their

Understand how your organization creates value for stakeholders.

strengths and weaknesses. Be clear about your required operating model and design roles around that.

Then identify who the best people are for those roles.


Benefits of the strategic approachBenefits of the strategic approach

A sound organization structure that is aligned with where yourA sound organization structure that is aligned with where your business/organization needs to go

d i lWork is focused on activities that drive value

Mitigates the risk of disengaging employees with unrealisticMitigates the risk of disengaging employees with unrealistic accountabilities and dysfunctional reporting structures

O i ti d i ill ti t t succession planningOrganization design will continue to support succession planning, career pathing and internal equity


Building an effective organizationBuilding an effective organization

OperatingModel

StrategicContext

OrganizationDesign Implementation

What is the objective?What is the vision?What is the strategy to get there?What is getting in the

How to operate?What are the guiding principles?How to manage the organization?

How to organize?What are the roles and reporting relationships?How to manage key processes?

How to execute?What is needed to build the organization?How to manage implementation?

Engagement

way? What level of centralization is needed?

What people and capability are required?

What are the key accountabilities?

g g

How to build commitment?How to build shared understanding and momentum for change?What is the communication and change


gmanagement strategy?What culture is needed to realize the strategy?

Strategic Context What is the objective?What is the objective?

Organizational structure needs to reflect your business strategyOrganizational structure needs to reflect your business strategy and align with the operating model

It i i fl d bIt is influenced by:Mission and vision for the futureBusiness model – how do you create results (whether money or other

f l ) t i d th imeasures of value) to survive and thriveStage in the business life cycleCompetitive differentiators for your businessKey stakeholders such as customers, business partners, regulatorsAlignment and core messages you want to send employees


Strategic ContextStrategic Context

Articulate how you will succeed as an organizationArticulate how you will succeed as an organization− Can think in terms of value disciplines - operational excellence,

product leadership, customer intimacy*O tli h d t l t t t k h ldOutline how you need to relate to stakeholders.− “We are here to…”− “We will accomplish that by…”− “And to do that we need to…”Use that strategic context summary as your “sanity check” as you progress through the design processprogress through the design process

*Treacy and Wiersema, after Porter


Operating ModelOperating Model

Define operating principlesDefine operating principles based on your strategic context

Core operating units

Four key questions:1. What is your engine for value

creation and growth?Core operating unitsMajor business processesGovernance structure

creation and growth?

2. How should you segmentyour markets and channels?

3. How can you design business and management processes to achieve synergies across the portfolio?

4. What corporate governancemodel needs to be in place to


psteer the organization?

Operating model - exampleOperating model example

End Consumers

Customers

Distribution Channels Enabling Processes

Core Business

Transactional Processes

Processes

MeetingDemand

Business Processes

Advisory Services

Planning Supply and

Demand

Portfolio of Business UnitsProduct or service groupings

Governance and Policy

HRFi

Creating Demand

MarketingM f t i


Geographies or regionsCustomer segments

FinanceEtc.

ManufacturingEtc.

Organization Design

Aligning organization design with operating modelAligning organization design with operating model

Design organization structure based on your business strategy andDesign organization structure based on your business strategy and your operating model

C t t ll d i bCommon structures are generally driven by:FunctionGeographyProductCustomerProcess …or a combination: Matrix or Hybrid


Procter and Gamble Organization Design: Global and Local at the Same TimeGlobal and Local at the Same Time

Market Development Organizations

Get initiatives to local markets faster

“Globalization and consolidation in our industry have combined to create a dynamic global Get initiatives to local markets faster

and at lower cost

Global Business

CorporateFunctions

create a dynamic global marketplace. To lead in such an environment, you have to be big and small at the same time. You need to be a global company that Business

UnitsFlow product Innovations acrossCategories and

hi k t

FunctionsProvide technical excellence within business discipline

need to be a global company that can operate like a small local business in every part of the world. Our new structure helps us do that ” geographic markets

Global Business Services

do that.

A.G. Lafley, Chairman, Procter and Gamble


Global Business ServicesLeverages size to deliver better quality services

internally at a lower cost

Organization design measuresOrganization design measures

How will I know if there are flaws in the organization design?How will I know if there are flaws in the organization design?Span of controlRelationships in job sizeManagerial added valueManagerial added value

Flags or indicators:Size of support groups relative to the organizationNoise, complexity and confusionaround job definitions andaccountabilitiesaccountabilitiesClarity feedback measures forleaders


Where to start?Where to start?

1 Determine key roles and reporting relationships1. Determine key roles and reporting relationshipsSpan of controlManagerial added valueRelationships in job sizep jJob shape

2. Define job accountabilities for key rolesW t h f l d i t d d i b t lWatch for gaps, overlaps and interdependencies between roles

3. Determine people requirements for rolesTechnical skillsBehavioural competencies

4. Design management and leadership team structuresM b hi d t f f


Membership and terms of reference

How do we optimize span of control?How do we optimize span of control?

Recognize that span of control can be a key driver of cost andRecognize that span of control can be a key driver of cost and efficiency

A i t f t l d dAppropriate span of control depends onComplexity and diversity of the work being managedThe nature of the leadership role, its challenges and expectationsCareer pathing channels and succession planning arrangementsWork culture of the organization


Span of control alternativesSpan of control alternatives

CommonCommon3-5 direct reportsBalance among direct reportsManagement delegationSuccession usually possible

Broad6-10 direct reportsImbalance among direct report g ppositionsManagement decision making tends to be centralizedSuccession possible but would be a


Succession possible but would be a real stretch

Span of control alternativesSpan of control alternatives

Very LargeVery Large10+ direct reportsLarge differentials among direct report positionsManagement decision making highly centralizedSuccession virtually impossible

One on OneOne direct reportSupervisor and direct report f ti tfunction as a teamUsually a temporary grooming position for direct reportTypical if strong focus on upward or


external stakeholder management

Relationships in job size matterRelationships in job size matter

When a job is significantly larger than those that report to itWhen a job is significantly larger than those that report to itCommunication gaps often ariseLeaders either lose their strategic focus or don’t coach effectively Succession is problematicSuccession is problematic

When a job is marginally larger than those that report to itLeaders and direct reports often stepping on each other’s toesLeaders and direct reports often stepping on each other s toesTends to be overlaps in accountability


Managerial added valueManagerial added value

IntegratorIntegratorIntegrates functions to achieve collective objectivesExpect a greater difference in job size between the Director and direct reports

Manufacturing Director

between the Director and direct reportsFunctional diversity generally means smaller span of controlEngineering

ManagerPlant

ManagerPlanning Manager

Purchasing Manager

Span Breaker

RegionalSales

Manager

Span BreakerFunctional similarity places emphasis on monitoring, coaching and controlPerformance is the sum of its partsArea Sales

ManagerArea Sales

ManagerArea SalesManager

Area Sales Manager


Should be able to manage a wide span of control

Manager Manager Manager Manager

Managerial added value ContinuedManagerial added value …Continued

PortfolioPortfolioNo requirement to integrate the work of direct reports for collective performanceDirect reports are often reasonably autonomous specialists

Head of Corporate

Affairs

autonomous specialistsLeader often owns one of the areas of accountability or is a seasoned manager

HumanResources

Manager

General Counsel

Public Relations Manager

Facilities Manager

Extra Pair of Hands

CEO

Extra Pair of Hands Can indicate an unnecessary layer of managementMay be necessary where CEO is retiring or

COO

G l G l Fi HR


focused on M&A activityGeneralManager A

GeneralManager B

Finance Director

HR Director

Defining role accountabilitiesDefining role accountabilities

Role accountabilities should beRole accountabilities should be designed in view of the overall organization structure including:

The core purpose of this job – what value does it offer the organization?Intended relationships between this job, its manager, peers and other jobs with which it interfaces Potential overlaps, gaps and interdependencies in role accountabilitiesinterdependencies in role accountabilitiesAlignment of accountabilities to overall role type


Organization and role clarity is kingOrganization and role clarity is king

Most Admired Companies do a better job of implementing their strategiesp j p g g

7292Strategy well communicated to

management in the company.

Peer GroupMost Admired

50

72

67

g p y

Strategy well communicated to employees.

5879Managers understand their

roles in implementing strategy.

3251Employees understand their

roles in implementing strategy.


0 10 20 30 40 50 60 70 80 90 100% “Very Great Extent” / “Great Extent”

Accountability MatrixAccountability Matrix

Corp. Field BusinessFunction Support Mgmt

Strategy/PolicyDevelops forecasts of HR requirements P C CEnsures organizational structure and culture are aligned with business strategy P C CDesign of Programs/ServicesDevelops systems to identify the human resources available to the organization. PDevelops succession plans for key personnel. P C CDesigns advanced management development programs. PEnsures awareness of available management development programs. P C CDevelops programs to align organization culture with strategy PDevelops programs to align organization culture with strategy. PRestructures organization where appropriate. S C SReviews and evaluates the effectiveness of OEMD programs. P CImplementation of Programs/ServicesDiscusses succession plans and determines suitable candidates for promotion. S Sp pDelivers advanced management development programs. PImplements culture support programs. S S SImplements changes to organization structure. C C P

Primary: Direct and controlling accountability


Primary: Direct and controlling accountability

Shared: Explicit joint or shared control

Contributory: Consultative, advisory or supporting impact

Job shape mattersJob shape matters

Advisory RolesAdvisory RolesGuidance and advice to support achievement of results by developing functional capability

Collaborative rolesCoordination of internal resources relationships with external partners to deliver measurable results

Operational RolesDirectly accountable for achieving results/outputs through direct control of significant resources

Each role type requires different behavioural competencies to beEach role type requires different behavioural competencies to be successful in the role

When shuffling accountabilities, be aware of what you are doing to


When shuffling accountabilities, be aware of what you are doing to job shape

The Role Profile MatrixRole typeRole type

Global

Collaborative Roles Operational RolesAdvisory Roles

Enterprise

GlobalEnterpriseLeadership

Coordination of internal resources relationships with

external partners to deliver measurable

Directly accountable for achieving results/

outputs through direct control of

significant resources

Guidance and advice to support achievement of

results by d l i

StrategyFormation

Leadership deliver measurable results

significant resourcesdeveloping functional capability

c

of W

ork

StrategicAlignmentSt

rate

gic

Leve

ls

StrategicImplemen-tation

TacticalImplemenO

pera

tiona

l


Implemen-tation

O

The Role Profile MatrixRoles and levels of complexityRoles and levels of complexity

Advisory Roles Collaborative Roles Operational RolesGlobal

Enterprise

GlobalEnterpriseLeadership

Responsible for organization's overall policies, strategies. Goals broadly defined (e g enhance international operations) Often

StrategyFormation

Leadership broadly defined (e.g. enhance international operations). Often confronting unknown.Setting broad strategy for organization/ function, integral to organization’s purpose.

c

StrategicAlignment

Positioning an organization/ function within broadly defined organizational strategy. Scanning environment to anticipate impact of external events

s of

Wor

k

Stra

tegi

c

StrategicImplemen-tation

TacticalImplemen

Leve

ls

Ope

ratio

nal


Implemen-tation

O

Implementation

Implementing organization changeImplementing organization change

Hay Group seven lever modelHay Group seven lever model

Reward and Individualand team

ResultsStrategicobjectives Leadership

Managementprocesses and

recognitionand team

competence

Values and objectives Leadership processes andsystems

Organization,team and job

Work processesd b i

culture

team and jobdesign

and businesssystems

Integrated


alignment process

Don’t forget employee engagementDon t forget employee engagement

Organization restructuring represents significant changeOrganization restructuring represents significant change

Be prepared toArticulate the vision for your new organization and make it real for employeesKnow the work culture you are seeking to developBuild the capability and commitment of leaders at all levels to drive through change in their areaDevelop a communication and change management strategy


Tools to support engagementTools to support engagement

Employee surveysEmployee surveysTo understand the key drivers of engagement in your workforceTo track the success of organizational changeTo reinforce leadership accountability for leading changep y g g

Culture modelingTo understand what culture is needed to realize the strategygyTo identify the gap between current and desired organizational culture

Organization climate surveyg yTo measure how it feels to work in a team against key climate dimensions− Clarity, Rewards, Standards, Responsibility, Flexibility, and Team Commitment


Tips for effective organization designTips for effective organization design

Organization and role design must always focus on work that delivers valueOrganization and role design must always focus on work that delivers value

Empowerment and accountability is about leadership, but it is also about designing the right organization structure and roles

Gaps and compression in job size relationships are often “red flags” for gaps or overlaps in accountability

An organization chart does not depict functional interdependencies and matrixAn organization chart does not depict functional interdependencies and matrix leadership

If you reshape a role, the current incumbent may no longer have the behavioural competencies to be successful in the newly defined role

Ensure other human capital processes are aligned with organization structure changes


g

How Hay Group helps clientsHow Hay Group helps clients

Audit or review your current organization design or support an organization change project

Model the behavioural competencies that will drive successModel the behavioural competencies that will drive success

Assess candidates for new leadership positions in your organization design

Design rewards strategies, executive and employee programs for the new organization

Support job evaluation to implement changes to organization design

Model compensation costs due to proposed changes to organization design


design

Organization benchmarking and span of control spot surveycontrol spot survey

Background for spot survey:Background for spot survey:− A new data source can help answer questions relative to how your

executive staffing levels and span of control compares to other large organizations?

D h th i ht b f ti l ti t th− Do we have the right number of executives relative to other organizations?

− What is the functional mix of executive jobs?Are the number of direct and dotted line reports too large or too few?− Are the number of direct and dotted line reports too large or too few?

− What are the principles behind determining how narrow or wide a span of control should be?

Participating in the study is free of charge.g y g− All participants will receive a complimentary report of aggregated findings− More detailed sub-cuts of findings will be available at additional charge.− All data will be handled by Hay Group with the utmost confidentiality.


Only aggregated results are presented to study participants.

Organization benchmarking and span of control spot survey (cont )control spot survey (cont.)

BenefitsBenefits− Availability of organizational executive benchmarking data and span of

control data not available through other source.− Job size data normalized via Hay job evaluation criteria. This allows you toJob size data normalized via Hay job evaluation criteria. This allows you to

make consistent comparisons to other companies using a comparable job sizing approach.

− Note: one does not need to be a Hay job evaluation user to participate in this study.

Process− Data submission kit to be distributed by end Oct.− Data due by end November− Results available by early January.


Questions? Comments?

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