At the Crossroads: The Politics of Real Business Transformation

Dynamic markets and changes in today’s corporate environment create fresh challenges and opportunities for companies and government organizations. Pixabay

When Rex Tillerson was appointed U.S. Secretary of State, one of his early initiatives was to develop a strategy for overhauling the State Department. From proposed cuts to the workforce to bans on lateral reassignments, Tillerson’s plan is rendered problematic by his closed-door strategizing, which puts his overhaul at a great risk for failure. In the context of redesign, business leaders can learn a lot from Tillerson’s lack of collaboration and myopic thinking when in fact the only real difference between the government and businesses is that the former is much more insulated from external market forces.

Dynamic markets and changes in today’s corporate environment — from technological advances to globalization — create fresh challenges and opportunities for companies and government organizations. Often, though, businesses will utilize relatively benign solutions that leave it far from meeting these challenges head-on and embracing the opportunities, significantly neutralizing any semblance of progress. According to a survey from The Boston Consulting Group, of the 80 percent of polled companies that attempted some form of reorganization to adapt to these competitive landscapes, only half implemented enterprisewide initiatives.

It is well-known that organization redesign is an effective management solution to modernize an operating model intended to eliminate self-inflicted complication and obstacles while unleashing the collective potential of a business to meet changing demands. It’s not a Band-Aid solution. Companies that arrive at a crossroads, then, must ask themselves three questions: Are we truly fit-for-purpose? If not, should we consider an organization redesign? And, even more critically, how do we go about it?

Why Redesign Scares Businesses

I’ve seen company leaders balk at redesign for several reasons. First, they try restructuring, which is akin to moving chairs around the kitchen table: same room, same chairs, same view. Second, following the lead of the large consulting houses, they focus on shape and levels, which results in not much real change, either. Third, they think a redesign can be accomplished in three months or they don’t want to invest in the time or effort required to truly change their operating models. Last, leaders want to limit the disruption to their operations, so they inadvertently hamper the redesign’s efficacy by utilizing a “pay later” approach or compliance-based model — i.e., operating top-down and explaining the process over time. In the end, these efforts lead to little change in an operating model yet provide the illusion of action.

In Tillerson’s case, redesigning a business behind closed doors and then rolling it out like a set of salt tablets coming down from the mountaintop may allow leaders to move very quickly up front, but massive struggles and conflicts arise when it comes time for implementation. This compliance-based approach leads to a highly compromised design that won’t stand the test of time. Moreover, leaders must spend time and effort monitoring and tracking employees to ensure compliance. The business and its workforce are forced to deal with confusion, employee pushback, and incomplete solutions that attempt to confront long-term problems — all of which is much more disruptive to the organization. What ultimately happens is the legacy business wins by death-by-delay and workarounds.

Leaders also assume that a new operational model can be unleashed in a single meeting, when in reality implementing it properly takes more commitment. The process just to lay the foundation can last a week. Either by taking small and finite amounts of time away from high-level people every month or a large chunk at the back end, companies need to achieve value co-creation with employees, which includes devoting the minutes and hours necessary for creating the new and more effective operations.

Redesign Versus Other Solutions

Organization redesigns are vastly different from technology changes and cosmetic managerial solutions. While a redesign deliberately modernizes an operating model, those other practices reinforce the operating model upon which they’re built.

Zappos CEO Tony Hsieh’s elimination of managerial roles is a good example of such a solution. Restructures like Zappos’ consist of moving people around an org chart or changing a structure’s definition, but they do little to alter the overall direction of the company.

Likewise, reductions in force cut costs but do not automatically make substantive improvements, and “technology transformations” simply incorporate new tools within the same operating models. The same goes for lean/Six Sigma methodologies and restructurings: None of these alters the operating model.

When a business considers a transformation, it must evaluate three factors: whether the company as it exists today fulfills its purpose (fit-for-purpose), whether the work being done is truly providing value to its customers and achieving that purpose, and how work and resources that are bound and grouped facilitates or obstructs that work.

When ‘How’ Is More Important Than ‘What’

Leaders have three important choices about how they go about modernizing their operating models: top-down, bottom-up, or best of both. Leaders often default to taking a compliance-based approach relying on the insulated work of a few a la Tillerson. This has huge risks, including the lack of veracity and robustness in a solution that won’t stand up to the real world.

Alternatively, a leader can take a “commitment approach” — engaging the entire business to solve the challenge within prescribed parameters and constraints. We’ve learned from neuroscience and research that the more diverse perspectives involved with solving a complicated and complex problem, the more robust and enduring the solution. This is exactly why the GOP has failed at healthcare reform.

The next choice for a leader is whether to do it in-house or use an external resource. While both options can work and perhaps benefit from being part of a more comprehensive operating model that’s revamped on multiple fronts, it is difficult for an internal person to effectively lead and drive an organization redesign. This is due to the push and pull of politics and norms, the impacts on leaders and people, and the need to ask and get answers to difficult questions. An internal resource rarely has the power, authority, or license to be a free radical and the courage to do what must be done. On the other hand, an external partner can more easily navigate change and is less beholden to the internal winds of resistance. Think of it this way: When faced with the need for real, lasting change, would you lead family therapy on your own family? I think not.

When To Undergo A Redesign

As businesses mature, they always become more complicated. In our experience, this usually drives increased fragmentation and bureaucracy, costing a business 15 to 25 percent of its operating costs.

To identify those situations when it would be useful to consider a redesign, we developed an assessment tool which identifies the “constellation of indicators.” It begins by identifying all of the market and environmental forces impinging on the business, including changing customer demand, followed by whether the business strategy needs to change or has changed. If a business recognizes that its competitive differentiators and strategic intents have shifted, then it’s a pretty sure bet that it isn’t “fit-for-purpose.” Now it’s decision time. A redesign helps leaders reassess which products and services drive the business’s value and which are irrelevant.

Implementing An Effective Redesign

To lead a redesign effectively, leaders must think laterally across the entire end-to-end value stream rather than about who runs which departments. It’s not about any one leader, who reports to whom, or the people — it’s about the value for customers and the work that needs to get done in order to create that value. Consider an enterprisewide redesign: In traditional terms, this redesign typically starts with the corporate center and works its way out. But the corporate center isn’t where value gets created, and for maximum effectiveness, redesigns should always start where value gets created. Now consider a supply chain redesign: Thinking laterally, a supply chain impacts manufacturing and distribution on one end and affects sales and marketing on the other end.

This is what makes an organization redesign solution so difficult: It’s a process of deconstructing then reconstructing every aspect of a business with collective success trumping self-interest.

The challenges associated with organization redesign are the same across businesses of all sizes, industries, geographies, and markets — even one as big as the federal government. While Tillerson may or may not have ulterior motives for his State Department overhaul, there’s a better way to balance a leader’s desire to put things in place while taking into account the sustainability of the solution and maintaining a high level of workforce engagement. These three goals are not mutually exclusive, and leaders who undertake the most effective organization redesigns understand that.

Mark LaScola is founder and managing principal of ON THE MARK. In business for 27 years, OTM is a global leader in collaborative organization design having completed over 400 redesigns in over 35 countries on five continents for every type of business function. Mark’s passion for collaborative business transformation sits at the heart of OTM, supported by pragmatism, systems thinking, and belief in people.