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Presented by Jaimie Mudd of ON THE MARK
MCCCD HR Professional Development Series on Organizational Design
March 29, 2016
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Objectives
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Solving Real Business Challenges Applying Organization Design Solutions
a) Solve both strategic and operational business challenges.
b) Gain answers and solutions to real organization design and/or transformation issues you are facing.
c) Gain tools and a disciplined, step-by-step approach leading to realtransformation.
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Outline
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Solving Real Business Challenges Applying Organization Design Solutions
Welcome and OverviewWho are we and what is One Maricopa, One
HR?What is Org Design (1 Hour)
I. ‘Fit for Purpose’II. Integration vs Separation
Customer FocusOur Challenges ?
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1. Welcome, Intros, Overview
Name, Role, CollegeWhat does One Maricopa, One HR mean for you?What do you want to learn during our session today?
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About OTM
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Solving Real Business Challenges Applying Organization Design Solutions
OTM is a leader in collaborative organization design and business transformation. Now in our 25th year of operation, with offices located on both sides of the Atlantic (Phoenix and London, UK), OTM is recognized by many as their preferred vendor in providing substantive yet practical organization design and lasting change. Our passion is for collaborative business transformation and our work is guided by research, evidenced-based and established best practice and emerging methodology.
Organisation Design and Business Transformation – Concept through Implementation
Change Readiness – Planning through Implementation
Capability Building – Assessment, delivery and support
Business Integration – Due diligence “fit predictor” through implementation
Decision Making, Planning and Problem Solving – Issue identification through implementation, resolution and follow-up support
Our Solutions:
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About OTM
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Solving Real Business Challenges Applying Organization Design Solutions
Sectors Functions GeographyAerospaceDefenceLogistics & DistributionFinancial ServicesTelecommunicationsFMCGIT Software & ServicesManufacturingRetail
Human ResourcesSupply ChainManufacturingOperationsFinance, ITRegulatorySales, MarketingEngineeringOutsourcing – BPOSkunk works
North AmericaWestern EuropeScandinaviaEastern EuropeLatin AmericaMiddle EastSouth East AsiaSouth Pacific
Other OTM Offerings:
OTM offers services supporting organization design and business transformation solutions including a) in-house executive development, b) internal or external multi-day, hands-on skill building workshops using real projects, c) support and guidance, d) conference presentations and TED Talks.
Our Experience:
With our experience of delivering close to 400 organization design and transformation projects, across 30 countries and countless industry sectors, OTM offers the most disciplined, integrated and comprehensive Organization Design and transformation solutions.
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Practical Challenges
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Solving Real Business Challenges Applying Organization Design Solutions
1. Organizational challenges.
2. Current operating model isn’t fit for purpose.
3. Moving from site-based/local to global operating model.
4. Moving from product to solutions focus.
5. Real business integration rather than bolt-on.
6. Putting the customer at the center of a business.
7. Large technology changes. CRM, ERP
8. Implementation challenges.
9. Organization boundaries/integrate v. separate.
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2. Organization Design Defined
What is it and Why does it make a difference?
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OTM’s Applied STAR Model
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Rules of the OTM Enhanced STAR
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Solving Real Business Challenges Applying Organization Design Solutions
Rule 1: Form follows function ALWAYS. (Strategy drives all design choices)Rule 2: Value stream is core work only (value-producing activities). Comes before structure.Rule 3: Structure is organizing people around core work. Structure choice must best align with strategy. (Value stream + structure = definition of work).Rule 4: Management is neither core work nor structure yet necessary.Rule 5: Rewards/remuneration/compensation and benefits plus people processes are reinforces and enablers, not drivers.’Rule 6: Organizational and social renewal can be achieved through a redesign and transformation.Rule 7: Culture change is the result of an entire design and operating model, not a separate process or activity.
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1. Business Direction
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Solving Real Business Challenges Applying Organization Design Solutions
The most important element of the OTM STAR as it is where the business strategy is formulated and competitive difference is decided. This determines distribution of power in a business model. We call this “gravitational pull.” In addition, this element includes the customer experience, products and services offering, customer demand, company values/social attributes and ways of working are examined and defined in future terms.
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Examples of Companies by Competitive Advantage
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Solving Real Business Challenges Applying Organization Design Solutions
Customer IntimacyCustomer intimate => Segmentation, Strong Brands
ProductInnovation & Leadership
⇒ Deep specialism, functional structure, Pricing higher,
“PUSH”
Operational Excellence
=> Service delivery is common, flatter/ horizontal
E2E structure, Strong Brands
Ultimately: Only one can be King/Queen
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2. Value Stream
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Solving Real Business Challenges Applying Organization Design Solutions
Consists of all tasks and activities that transform raw materials and information into an output, product or service. Value-creating work! It is the end-2-end process without being concerned about where it is done and who does it. This element also identifies big decisions, inputs, outputs and inter-dependencies and linkages internal and external to the unit of service.
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Step 1.0
Level 1 Process Step (7-9 Steps)
Activity Output
Decisions(Big 3-5)
Metrics
What
From who
What
To who
Inputs Output
Step 2.0
Step 3.0
Step 4.0
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Value Stream Overview
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Solving Real Business Challenges Applying Organization Design Solutions
Talent Acquisition Value StreamMCCCD HR
1.0Identify Need
2.0Develop Solutions (Explore, Analyze)
3.0Develop Plan
4.0Implement Plan
5.0Evaluate
6.0Celebrate
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3. Structure
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Solving Real Business Challenges Applying Organization Design Solutions
Structure is organizing people around core work and must best align with strategy.
Thinking beyond roles and jobs, structure consists of 6 different features: 1. Boundary location2. Departmentalisation, 3. Specialisation, 4. Shape, 5. Distribution of Power6. Vertical/Horizontal Coordinating and
Integrating Mechanisms or what is commonly called “glue.”
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3. Structure
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Solving Real Business Challenges Applying Organization Design Solutions
Departmentalisation is the way we organise people within boundaries. There are 6 ways to organize people around work. Organisations typically default into functional structures due to not knowing the options and trade-offs. Each option has a very real business advantage and disadvantage:1 Functional - Expertise. 2 Product - Product knowledge, focus, resources. 3 Segment - Channel, customer, demographics.4 Geography - Location, region, division. 5 Horizontal – Process or end-2-end value stream. 6 Hybrid - A combination of 2 or more of above.
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3. Structure
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Solving Real Business Challenges Applying Organization Design Solutions
Front-Back Hybrid Dimension• Market structure front-end • Product structure back-end• Where are you in relationship to your
competition?• Where do you need to be in the next
12 to 24 months?• Does your current structure match
your strategy?
Cost
Process/Horizontal
• Potential for new processes and radical change to processes• Reduced working capital• Need for reducing process cycle times• Maximum efficient scale across P/Ls through leverage
Product Dimension• Product focus• Multiple products for separate customers • Short product development and life cycles• Minimum efficient scale for functions or
outsourcing
Geographic • Low value-to-transport ratio• Service delivery on-site• Closeness to customer for delivery or support• Perception of the organization as local• Geographical market segments needed
Functionality ServiceFunctional • Small-size, single P/L• Undifferentiated market• Scale or expertise within the function• Long product development and life cycles • Common standards
Market • Important market segments• Product or service unique to segment• Buyer strength• Customer knowledge advantage• Rapid customer service and product cycles• Minimum efficient scale in functions or outsourcing
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3. Structure
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Solving Real Business Challenges Applying Organization Design Solutions
Vertical/horizontal coordinating and integrating mechanisms or glue is used to align and connect work, people, structures and levels within and across the boundaries of a business. Vertical glue: cascading of goals and objectives. Horizontal glue: matrix roles, meetings and councils, shared objectives across units/departments, etc.
OTM Wisdom: Glue mechanisms are commonly used to offset the inherent disadvantage of boundary locations and departmentalisation choices.
OTM Wisdom: The more boundaries in an organisation, the more fragmented an organisation becomes, increasing the risk of over-specialising; Keep in mind that the more you fragment and specialise the more co-ordination/glue is required; the more glue required, the more people expend the vital resource of time and effort co-ordinating and integrating.
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4. Management Mechanisms and Systems
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Solving Real Business Challenges Applying Organization Design Solutions
Management mechanisms consists of: • Management Roles• Information flow, • Governance,• Risk and Compliance,• Metrics/scorecards and reporting• Decision Making,• Reporting structures and org charts,• Technology.
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5. Reward and Recognition
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Solving Real Business Challenges Applying Organization Design Solutions
Rewards include reward, compensation/benefits or remuneration, recognition and as well as the leadership style that is desired in the business. Sometimes referred to as a “Total Rewards Policy.”
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6. People Processes
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Solving Real Business Challenges Applying Organization Design Solutions
People processes consists of all aspects of the employee lifecycle including:• Recruiting,• Onboarding,• Performance management/development,• Most engagement activities. • All processes and mechanisms geared towards
developing, growing and engaging employees can be considered.
OTM Wisdom: It is quite a common to insert more robust people processes and engagement tactics to compensate for unaligned, disconnected and/or unfit organisation designs or change cultures.
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7. Organisational Renewal
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Solving Real Business Challenges Applying Organization Design Solutions
Organisational renewal is the last part of the OTM enhanced STAR and is a direct consequence of HOW the Organisation Design is completed.
OTM Wisdom: The greater amount of people [management and employees] involved in the design process itself, the greater opportunity for positive organisational renewal occurring simultaneously. This is known as “Design Compatibility.
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Definition of Organisation Design – Fit for Purpose
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Solving Real Business Challenges Applying Organization Design Solutions
The aligning of all parts of a business to succeed in the marketplace.
It is the deliberate process of configuring the informal and formal… including value stream, structure, technologies,
management mechanisms & systems, rewards, and people processes and social systems to create an organization
capable of achieving its business strategy.
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Complexity: Complexity is the natural consequence that occurs at the intersection of a business’ product and service offering, plus its customer mix and their varied demands, magnified by the speed of response required.
VS
Complication: Business complication is the self-made processes, boundaries and structures, practices, mechanisms, protocols and norms embedded in an operating model and organization design that makes up HOW a business manages and copes with its complexity. It is OTM’s experience that nine times out of ten a business over-complicates its organization design and operating model.
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Disciplined phases.
Each phase has a set of concrete outputs and key decisions that must be made BEFORE proceeding to the next Phase of work.
Decisions made in each phase become the basis for the next phase of work.
Completed work associated with each Phase must pass through an approval gate by the sponsor team and key stakeholders before advancing to the next one.
Each Phase allows for significant participation and involvement from key stakeholder groups.
APPROACH & METHODOLOGY OTM’S DESIGN CYCLE
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Customer Focus vs Customer intimacy
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Solving Real Business Challenges Applying Organization Design Solutions
Traditional – “Customer Focus” Customer Intimacy
Customer ExperienceFocus on customer satisfaction; being nice Focus on customer engagement; deepening
relationship
Takes customer feedback and acts on complaints rapidly solving problems
Designs business to minimise complexity for customer.
Customer Feedback Uses research to understand customer preferences
Uses total feedback to drive customer insight and drive product/service and process innovation
Customer Communications
‘Push’ traditional communications Multiple communication channels – using every point of customer interaction to systematically gather, analyse and generate customer insight
New channels for communication, create choice and options
In-source complexity from customer experience
Innovation Use customer research and focus groups to drive product/service development
Create solutions to needs that customers don’t even know they have
Customer Service Transactional – build good customer service at ‘moments of truth’
Good Customer Service is a given – focus on end to end customer experience
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Customer Ecosystem – Case for Change
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Solving Real Business Challenges Applying Organization Design Solutions
Drivers So What?Why Important? What was our response?
Financial
• Transparency into business line P&L’s• To drive growth (lack of current growth)• Need for clearer Portfolio management
• Wasted investment• Spend on wrong items• Missed opportunities
• Increased executive capacity focused on growth
• Created self-contained business groups
Customer
• Expansion of customer base• Reduced influence of standards• Ecosystem / customer interaction / work
flows more complex and varied• Markets we serve are more distinctive and
independent
• Lose relevance andinfluence
• Keep selling existingproducts
• Dilute long-term opportunity
• Increase affinity to the customer/market
• Moved engineering and product marketing closer to the ecosystem / customer
Growth
• Existing growth drivers + sources of growth flattened out
• Needed to focus on growth • Needed to create multiple sources of growth• Need for faster process for growth
• No growth• Missed opportunities• Fewer bets
• Created 6 Ecosystem segments reporting to CEO, each with a growth charter
• Each group has a different growth responsibility
• Created a laboratory for incubation projects
Cultural
• Lack of focus / visibility / control in businesses
• Lack of speed• Lack of sufficient cross functional
communication & alignment• Lack of clarity for employees between what
they do on a daily basis and driving growth
• Poor execution • Flattened leadership structureo Fewer Approvals
• Improved quality of decision making
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Implementation Challenges
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Change Impact Analysis
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Solving Real Business Challenges Applying Organization Design Solutions
Star Aspect Change Impact Rationale
Strategy 3 MWB remain the same, but the way of presenting them are different.
Products and Services 3 Products won’t change. Services and way of presenting them will be modified.
Core Business Processes 4.5 The entire interdependencies will be modified / new responsibilities.
Structure 4.5 The whole reporting line will be impacted.
FTE of Work 3.5 4% additional FTE (without support).
Management Mechanisms 4 New objectives / roles / system / process / alignment needed.
People 3.75 Specific functions will be more impacted (Sale & care).
Leadership 4 Strong leadership skills needed for this modification (new reporting lines).
Culture 3No modifications of values/Socialattributes. Culture/mind-set might be altered.
Customers 4 Big positive impact on our consumers.
Customers and Suppliers 3 Positive impact on Customers and Suppliers.
Average 3.66
0
1
2
3
4
5Strategy
Products andServices
Core BusinessProcesses
Structure
FTE of Work
ManagementMechanismsPeople
Leadership
Culture
Customers
Customers andSuppliers
Change Impact: Avg. 3.66
The Change Impact is on a rating is rated on a scale of 1 = low impact to 5 = high impact. While this rating does not correlate with negative or positive impact, it does highlight the level of change to be considered while planning the transition to the new design and operating model
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Internal and External Drivers Causing Change
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Some external drivers causing change
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Solving Real Business Challenges Applying Organization Design Solutions
External Pressures Examples
CustomersLoss of customers, changing expectations, evolving needs, customer experience
Demand Changing, evolving, trends
Products & Services Lifecycle (New, harvest, etc.), cannibalization
Pricing Commoditization, pressures
CompetitorsNew entrants chipping away at market share; offering of cheaper services
Legal/regulatory Changing requirements
Time Pressure, Time window to “catch wave”
Social/Political Turbulence, stability, predictability, maturity, war, poverty
Talent Available labor pool, skillset demand, wages
Climate/Environment Climate change, drought, famine, etc.
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Some internal drivers causing change
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Solving Real Business Challenges Applying Organization Design Solutions
Internal Pressures Examples
Internal Improvement efforts Lean, customer experience, efficiency, restructure, compensation
Engagement & Retention Low scores, difficulty attracting and/or retaining talent
Complications & Quality Fragmentation, response time, over-matrixed, silos, errors, timeliness, speed
Growth M&A, new products/services
Innovation R&D, setting up, managing, process/product/business model
Costs Declining margins, large overhead, efficiency
Value proposition & competitive differential
Moving from Product to market or solutions, low price vs. customer excellence, etc.
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Gravitational Pull
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Characteristics of Customer Intimate Organisations
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Solving Real Business Challenges Applying Organization Design Solutions
Goal/Focus: Share of customer’s businessValue Proposition • Personalized solutions
Customer Experience• Complexity ‘insourced’ from customer • Easy to do business with• ‘Premium’
Core Capabilities• Segmentation• Customer insight – ability to systemically gather, analyze and
generate insight for solutions
Organization Features • Customer/Market focus• Multi-disciplinary customer teams
Risks • Duplication of resources (inefficiencies)• Sharing information across teams
Examples
• Pampers• Ocado• First Direct Bank• Nordstrom
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Characteristics of Product Innovative Organisations
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Solving Real Business Challenges Applying Organization Design Solutions
Goal/Focus: Market share/market penetrationValue Proposition • Product features
Customer Experience• Customer has choice• Higher cost• May have good customer service as ‘product surround’
Core Capabilities • Innovation • Market knowledge (customer preference/competition)
Organization Features• Product/Category or functional organization• Specialists• ‘Internal’ competition (different generation teams)
Risks • Product ‘silos’ • Duplication and hoarding resources
Examples
• Apple/Samsung• BMW• Starbucks• Bose• Lego• ARM
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DIRECTIONS: Three restaurants…
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Solving Real Business Challenges Applying Organization Design Solutions
a. Customer Intimate
b. Product Innovative
c. Operational Excellence
Time: 50 mins
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DIRECTIONS: Using the OTM Applied STAR Model as your guide…
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Solving Real Business Challenges Applying Organization Design Solutions
a. Describe your menu offering/food and service [product/services]
b. Describe the E2E customer experience [from the outside-in]
c. Simply illustrate the E2E value stream
d. How will you organise people around work? Key Roles needed?
e. What skill levels will you need?
f. What would be key management mechanisms including: metrics, decision making,
governance/compliance, information flow…
g. What would be your key R/R and People recruitment processes
h. Name of the restaurant/location/hours
Time: 50 mins
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Definition of Work
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Solving Real Business Challenges Applying Organization Design Solutions
Business Environment
ORGANISATION
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Definition of Work
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Solving Real Business Challenges Applying Organization Design Solutions
InputsRaw materials & information
OutputsProducts and/or Services
ORGANISATION
IN OUT
The value creating process
Business Environment
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Definition of Work
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Solving Real Business Challenges Applying Organization Design Solutions
People
People
OutputsProducts and/or Services
ORGANISATION
IN OUT
Business Environment
InputsRaw materials & information