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Designing Strategic Organizations: the New Work of Executives and HR by Gregory Kesler and Amy Kates, Kates Kesler Organization Consulting*

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Designing Strategic Organizations: the New Work of Executives and HR by Gregory Kesler and Amy Kates, Kates Kesler Organization Consulting* Designing Strategic Organizations: The New Work of Executives and HR By Gregory Kesler and Amy Kates, Kates Kesler Organization Consulting* * Parts of this article are excerpted from the book Leading Organization Design: How to Make Organization Design Decisions to Drive the Results You Want by Gregory Kesler and Amy Kates (Jossey-Bass, 2010), with permission. We long have been fascinated by the overlap between leadership and organization development. One of the most difficult challenges for new general managers, who have been promoted after leading functional teams in marketing, sales or operations, is to make their leadership impact scalable across a multi-dimensional organization. oday’s general managers understand is able to keep many balls in the air at once facilitation support. If your HR staff wants the importance of organizational through a web of structure, business process to be positioned closer to strategy develop- Tcapabilities to compete, but many are and human relationships. It is a very difficult ment, rather than wait to be handed less clear how to create them. They grapple design for competitors to copy. implementation work, they need to be ready with the question of how to align the compo- to provide business leaders with all the ele- nents of the organization to execute strategy ments to enable them to make better, faster and remove barriers so that members of the HR’s Role In Guiding and easier-to-implement organization organization can make the right decisions Organization Design design decisions. and do their best work. Guiding a leader through a significant orga- Elements of an Effective The New, Complex nization design project with the goal of building new capabilities may be some of the Design Decision Work of Leaders most important and complex work that a human resource professional can undertake. Human resources can support leaders in the As business strategies become more com- It requires a deep, trusting relationship with organization design process in the following plex, leaders have to do more than be able the client, knowledge of the business, and an five ways: to inspire individuals and guide the work of ability to bring broad HR domain expertise 1. Define the Right Problem teams. Leaders also have to understand — talent, organization, change, learning, 2. Use Effective Design Frameworks organization. To make good organization compensation and project management — to decisions, leaders need to have a robust the effort. 3. Involve the Right People in the Process diagnosis of the issues and opportunities, an 4. Tie Talent and Organization Together involvement strategy to ensure they con- The internal HR or OD professional also 5. Implement the Change sider a wide range of views and engage key needs to bring an organization design toolkit stakeholders, conceptual frameworks to and well-developed consulting skills if he or guide trade-offs, and a disciplined project she wants to influence, and not just support, 1. Define the Right Problem management approach to turn decisions the design process. We often hear some varia- The first step to effective organization design into action. tion on the following from internal HR and is to build a business case for change. The OD staff: “I’m brought in too late on decisions business case is made up of the key elements Business strategies and organizational forms or my client doesn’t believe that using a pro- of the strategy, an analysis of the current state are more complex than ever for a number cess and involving anyone beyond the current of organization, and a clearly defined set of of reasons: executive team is even worthwhile. How can design criteria. • Global expansion and the reality of competing with ever more sophisticated local players A working knowledge of organization design has • Changing business models and the need to manage a portfolio of varied business become an essential personal competency for models successful senior leaders. • Innovation in process as well as product • Efficiency pressures to increase volume, reach and capability without adding overhead expense I add value earlier in the decision-making pro- Clarify the Strategic Priorities. Sound orga- cess and give my business leaders confidence nization design decisions depend upon a clear Organizations will be as complex as the strat- in my ability to manage this work?” strategy, as organization design is a first step egies they are designed to execute. The ability in turning strategic thought into action. Any- to manage a multi-dimensional organization Organization design decisions support strat- one involved in the design process must that is capable of executing a multi-faceted egy execution. We often see the strategy understand the strategy and its implications, strategy actually provides competitive advan- function asked to lead and guide the project, and agree that achievement of the strategy tage over firms whose management can only with HR used only as an adjunct team mem- will lead to superior results for the company. do one thing well. For example, today’s IBM ber or engaged narrowly for staffing or If the strategy is vague, full of conflicting ➤ V OLUME 33/ISSUE 3 — 2010 15 Ex HIBIT 1: THE STAR MODEL FOR ORGANIZATION DESIGN process around both organization and cul- ture issues. In the fast changing financial services landscape, good assessment data helps ground decision makers in the current realities of the organization undergoing change, link decisions to strategy, and align executives around the highest impact capa- bilities to pursue. 2. Use Effective Design Frameworks Organization design has evolved as a field with a body of knowledge. Human resources leaders should be students in the field and need to be equipped with a small but high- powered set of design frameworks. Let’s look at a few that we believe are the most useful. The Star Model. Jay Galbraith’s Star Model, shown in Figure 1, has been the gold standard for conceptualizing organization design since © Jay Galbraith the early 1970s (Galbraith, 1995). The Star Model has proven to be a simple, yet objectives, or so broad that it does not set out and employees in the organization. HR adds powerful, way to guide leaders as they align clear choices, it will not lead to a workable value by objectively gathering the data and structures, processes, measures and talent to organization. If the strategy has not been providing an integrated and actionable anal- support a strategy. The big idea behind the Star explained and understood fully, stakeholders ysis of the issues and opportunities. Model is that there is no one right configura- coming into the design process will bring dif- tion of resources. Different strategies require ferent assumptions that will lead to conflict Set the Design Criteria. To gain the most different organizational forms. Even within rather than creativity. Finally, if those who benefit from a change in organization, go the same industry, companies with similar must execute the strategy do not believe it will beyond fixing today’s problems to think products and customer sets will need different lead to a better future, then there will be little about capabilities needed 12-36 months into organizations, because each has a formula for commitment to undertaking the hard work the future that will differentiate the business success that requires different capabilities. of organizational change. The work of HR from its competitors. The capabilities become often starts with facilitating a strategy clari- the “design criteria” that all options are The elements organizations need to align — fication session. tested against. This practical and positive structure, process, rewards, and talent — are focus on creating strength is motivating and factors that a leader can both control and Define the Case for Change. Once the high- engaging for the design team and employees, make decisions about. Behavior, performance lights of the strategy are called out clearly, and encourages expansive thinking, often and culture are all outputs of how these four you can assess the current state and under- resulting in more creative ideas than a prob- elements are aligned. That numerous aca- stand the problem you are trying to solve. The lem-fixing approach allows. demics and consultants have created task is to assess the current structure’s ability variations on the Star Model over the past 30 to deliver the key elements of the strategy. Getting the design criteria right helps deliver years only attests to its status as the most This often means identifying gaps, but the better outcomes throughout the entire design influential model used in organization design. organization problem is not always a gap. We and implementation process. Correct design work with many successful companies where criteria determine what basic units of organi- Five Milestone Design Process. Design work the leadership of the organization defines a zation will be most effective and what business needs a road map to organize and sequence future change in the environment created by processes, cross-functional teams and forms the tasks. Without a progression of steps, new technology, geographic expansion or of power allocation will be required. They design logic is lost and shortcuts are taken too competitor moves, and initiates a proactive also provide the means of measuring the easily. The Five Milestone Process, shown in shift in strategy while the current business results of the new design. HR can play a role Figure 2, works in a variety of settings (cor- remains strong. The problem in this case is here by challenging the leadership team to porate, government, non-profit) and is quite that the current structure is now misaligned make the trade-offs necessary to create a con- scalable to be effective at the enterprise level to execute its new task. cise, yet robust, set of design criteria.
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