Structure Continually Lags Strategy…

When Will Structure Advance Strategy?

As with many consulting interventions, we find that competitive landscape assessments can be an important tool when formulating insights for client initiatives. Sometimes, the assessments raise more questions than initially in scope for a client engagement; and sometimes, they downright point to a nagging issue that is systemic within a sector, industry or geographic / cultural market. One of these nagging issues centers on the notion that a change in organizational design or structure and related platforms and systems clearly follows a change strategy in order to align with and better advance the new strategy.

Sounds as simple as a What if this, Then that logic flow. Our assessment findings should reflect the salient changes that create alignment and advance strategy; but that’s not usually the case. Simplistic logic flow is a weak substitute for higher level cognitive approaches that probe within the layers of complexity and multiple systems in which assessments navigate. For example, in a number of landscape assessments, it’s clear that the strategy gauntlet has been thrown and at first glance it appears to be embraced by the organization’s leaders. However, year-over-year and peer comparison of various key leading and lagging indicators and in-depth dialectical-inquiry based interviews often reveals that little has changed except the re-naming and re-packaging of projects and investments that were all ready in the approval pipeline, and the reshuffling of internal top talent to a renamed and yet to be defined role.

In addition, we often see through the landscape assessment filter relevant industry actors herding toward the same growth or emerging market strategies; often as a result of the same expensive advisory guidance of industry consultants that for higher profits margins have repackaged a strategy from one client for their next client. For example, the years of 2008 through 2010 seemed to be the period of Mass Affluent becoming the repackaged targeted growth segment / strategy for greater than seventy percent of the financial services companies in a competitive landscape assessment we provided to a leading multinational corporation.

Industry group think can blind leaders just as stealthily as leaders who create blind acceptance of strategy. One of our CEO clients was interested in gaining insight into the progress of his organization’s journey from a product-centric organization to a customer-centric organization. At this time, the market had already become volatile and regulatory intrusion was at an all time high siphoning off profits and increasing operating and risk-related expense. After several leadership town halls, visioning sessions, a marketing campaign aimed at creating associate awareness, and time for maturation, traction was minimal. Although a high level scan would conclude that the show for customer centricity was alive and well, after all presentation decks and leadership speeches complied with the new templates, slogans, and key messaging quips, actual buy-in was questionable. Our multi-level diagnostics using an appreciative inquiry approach pointed to a number of hypotheses and insights, a few of which were glaring and easily remedied – the proverbial low hanging fruit or quick fixes.

When structure alignment severely lags strategy, like a deteriorated cornerstone it destabilizes the foundation and provides resistance to any momentum forward. As in the case of this organization, creating one or two new direct report roles and a disruptive reshuffling of top talent and business support resources does not a new structural alignment make. Senior executives will genuinely acknowledge this notion, yet many avoid recognition of this practice in their own decisions and organizations. Highly effective talent, those with strong conceptual capability and fluidity of thinking, see this as a shallow venture with low probability of success and high probability of followership destruction.

Repeating the organizational shell game loop is frequently a reaction to a stalled transformation. We call this the ARCane LoopÔ (Assess, Rank, Concerns Acknowledged, Hobble On, and Repeat) – a disproportionate emphasis and investment in assessments and rankings, coupled with an underinvestment and insufficient attention to the more complex work of translating insights into sustainable actions and interventions. Seeking the right balance given context, interdependencies, and transformative potential is essential. Assessments and rankings have an invaluable place; its overuse serves as a crutch and sweet deterrent from the hard work of strategy execution.

Beyond organizational construct and role clarity, structure and framework change may include elements such as governance, decision rights and performance systems. All these are important aspects to the dance of strategy execution. In the case of our client CEO and leadership team, conflicting messages about the transition to a customer-centric organization were also conveyed weekly during Executive Committee. Despite a customer-centric agenda, participants attested and meeting records indicated that ninety-percent of the discussion meandered to a myopic focus on the performance of one metric, PBT (Profit before Tax). Customer measures examined were of an operational and lower-level nature, albeit important, e.g. customer satisfaction, number of customer complaints.

Variations of this dialog cascaded throughout the organization as it was well understood (informally) that reward and recognition systems reinforced same. For leaders, this is an exceptionally seductive trap. The overwhelming emphasis on short-term results from various stakeholder interest groups, including investors and oversight agencies, is a powerful lure for even the most accomplished and enlightened leaders; and contributes to the industry conundrum of organizational structures that detract, or at best are neutral, in terms of advancing strategy.

As Michael Porter said, “The essence of strategy is choosing what not to do.” While providing insight into opportunities and areas for innovation, a landscape assessment also identifies the nagging industry red flags and trendy herd’s plan of attack. One key leadership challenge is to create a bespoke structure and platform that advances your company or group’s unique and best opportunities for sustainable growth and innovation; and to say No to the superficial comfort of repackaging what appears to be informed strategies of peer competitors.

Too often, these informed strategies lead to nothing more than organizational talent and structure stuck in creating value in the present; and, insufficiently focused, designed and positioned for future value creation. Chasing PBT, as in the earlier example, constrains a leader’s line of sight and points to a current economic-profit contextual framing for decisions and strategic planning. We codify the descriptive strategic in the case of planning for current value outcomes as tactical or tactical planning. Metrics used for benchmarking should reflect both current operational (operations and logistic value chain) excellence measures and infrastructure utilization (e.g., productivity measures – NOPAT/FTE), as well as future value indicators such as the increase of shareholder return in relationship to structural portfolio changes (return on net assets), return on capital investments to create new and disruptive innovations, and human capital measures such as Future Value/FTE.

A second leadership challenge is to recognize in the landscape assessment the vulnerabilities created in the ubiquitous use of layers and spans of control as the primary considerations for organizational structure and effectiveness. The number of management layers should be based on the strategy for growth and the level of innovation and complexity required for strategy execution and future value creation.

Structure will advance strategy when the layering of the organization is NOT based on simple mathematical rules for spans of management control and the number of roles reporting to the manager. This line of reasoning provides no insight into the complexity, emerging change, and level of unique value-add of a managerial role (Chart 1). Structure will advance strategy when the design of work at CEO and senior management levels is based on future value builders.

A competitive landscape assessment can expose at which level of complexity your most sophisticated competitor is organized and operates. If your firm’s strategy aims towards a vantage industry position, then conceptualize senior management roles and performance logic at a one higher level of complexity (compared with your top tier competitors’ senior management roles and performance logic design) – this is a powerful approach even without having your strategy clear at that moment. In doing so, structure will even advance the strategy creation processes!

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