BusinessDay

4 organizational design issues that most leaders misdiagnose

During our first conversation, Henry, the chief executive at a technology company, expressed frustration over his organization’s inability to stay focused on and execute priorities. “We agree upon priorities at the beginning of each quarter,” he said, “but when it comes time to review them, I’m told that urgent crises have prevented us from making progress. We never get anything done.”

After spending some time at the company, I realized that Henry’s problems were actually driven by poor governance. The “urgent crises” preventing his team from making progress were attributable to a lack of effective coordination between two key parts of his business. As a result, there was no forum in which leaders could productively resolve difficult tradeoffs

Henry had misdiagnosed the problem. But he is not the first competent leader to make this mistake. After 35 years of consulting, I’ve learned just how easy it is to do, largely because recurring performance challenges run deeper than they initially appear. More often, they are symptoms of a larger problem rooted in organizational design.

Four of the most common irritants I’ve seen arise from ineffective organizational design are; competing priorities, unwanted turnover, inaccessible bosses and cross-functional rivalry. If you find yourself struggling with one or more of these issues, ask yourself if the design challenges I discuss below may be the deeper cause.

SYMPTOM: COMPETING PRIORITIES

COMMON DESIGN CHALLENGE: POOR GOVERNANCE

Henry’s company was designed as a matrix organization, meaning that most people had two bosses. In this case, they were organized around functions, such as marketing, sales and engineering. They were also organized around three customer segments: enterprise platform users, small businesses and individual software users. Each team was led by a functional head, as well as a division vice president who led their assigned customer segment.

The problem was that the division VPS reported to the chief operating officer and the functional heads reported to Henry. When Henry’s team met to set priorities within each function, the division

VPS was not present to weigh in on how their priorities fit into the company’s larger plan.

In short, Henry’s company wasn’t designed to govern a matrix. His company was designed to govern a vertically structured functional organization. In a complex organization design like a matrix, decision-making systems must be set up to address common conflicts about priorities and resources.

Read also: Kantar Nigeria drives teamwork with office consolidation

SYMPTOM: TURNOVER

UNWANTED

COMMON DESIGN CHALLENGE: BAD ROLE DESIGN

Leaders often label unwanted defections as a retention problem. Stock options and bonuses are given, or new titles are fabricated to give the appearance of promotions. This may work temporarily if the defections are driven by overworked departments or

toxic managers. But if they’re widespread, chances are the culprit is organizational.

One organization I worked with struggled with increased turnover following several years of botched reorganizations. The executives dismissed it as people’s frustrations with too many failed changes at once. But that wasn’t the problem. The real issue was that, in an attempt to reduce costs, leadership had used some of the reorganizations to consolidate specific jobs — such as finance, accounting and purchasing — into overly broad roles with a vast range of responsibilities. Other reorganizations were used to shrink specific jobs so narrowly that many employees had to work closely with others to do their jobs. These poor role designs had some people stretched way beyond their bandwidth while others were stuck with mundane tasks that demanded too much coordination. For many, quitting was the best option.

The organization needed to realize that quality roles are designed around desired outcomes, and not around people. When companies build roles around people, they are unintentionally defining their value by the sum total of whatever the person in that role is capable of doing. As a result, a role is seen as important only when a superstar is in it — regardless of how vital it is to the company’s performance. Similarly, a role is seen as inconsequential when occupied by a poor performer.

SYMPTOM: BOSSES

INACCESSIBLE

COMMON DESIGN CHALLENGE: EXCESSIVE SPANS OF CONTROL

Too often, when employee surveys return low scores for metrics like “my manager is available when I need them,” people assume it’s because of a time management issue or leader isolation. When this happens, managers are given canned tools that tell them how to hold more effective one-on-one meetings or better prioritize their tasks. Empathy training may get added to the leadership curriculum. Coaches may even be hired. But this issue tends to reach far beyond individual leadership practices.

For teams to run effectively, the number of layers within a hierarchy and the number of direct reports on a leader’s team must be carefully determined based on two factors: the type of work people are doing and the amount of coordination the work requires. Highly complex or high-risk work — scientists running clinical drug trials, analysts interpreting sensitive data — often requires extensive coordination. Therefore, it makes sense to keep a manager’s span narrow to ensure high-quality performance. More repetitive work — engineers writing technical code, teams working on manufacturing lines — typically enables employees to be more autonomous, which allows a manager’s span to be wider. When these nuances are overlooked, a manager’s accessibility can become severely constrained.

SYMPTOM: TIONAL RIVALRY

CROSS-FUNC

COMMON DESIGN LENGE: MISALIGNED TIVES OR METRICS

CHALINCEN

Metrics and incentives are vital to aligning work across teams. They shape people’s behaviour by defining what’s important to the organization and synchronize tasks by ensuring that everyone is working toward a shared result. Misaligned metrics and incentives can act like grinding gears, pulling people in opposite directions and pushing them toward conflicting goals.

In one organization I consulted, two divisions of marketing met this fate. One was intended to drive online traffic to the company’s website while the other was supposed to convert that traffic to sales. This led to conflicting messages on landing pages, missed targets and an aversion to sharing vital analytics.

When two functions meet at a critical seam to produce shared results, they must be able to closely examine their individual incentives and metrics to ensure they reinforce needed collaboration. The two divisions spent a day together constructing a plan to ensure that traffic and conversion were not treated as mutually exclusive, and created joint access to one another’s analytics so that they could collaborate before making plans for driving traffic and conversions.

Chronic problems have deeper roots than we naturally see, but they aren’t random. As I tell my clients, “Your organization is perfectly designed to get the results you’re getting, even if they’re not the results you want.”

Ron Carucci is co-founder and managing partner at Navalent.

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