Industryweek 14189 Organizing

Organizing for Success

Sept. 29, 2015
How to perform an organizational redesign with a lean mindset.

In the lean community, there is generally a preference to solve problems through process design and not through reorganization. There are a couple of reasons for this. First, most efforts for new organizational designs are poorly informed and even worse in execution. Second, the lean tool set is primarily meant for process improvement and so when your tools lead you down a path, you tend to follow that path.

But considering you need some organizational design changes, it is foolish to ignore this factor in organizational performance. Organizational design does matter. How can we perform organizational design with a lean mindset?

1. Solve a problem. I remember a conversation with a vice president of HR for a multibillion dollar organization. He said the operations team had asked him to lead an organizational redesign. I asked him what problem he was trying to solve in doing so. He stated that he wasn’t sure, but it’s what the organization asked for, so he was going to do it. While that surely sounds like the wrong decision, it is not rare. Most organization redesigns do not have a clearly defined objective or problem statement. They are done because it feels like progress. When you don’t know what to do, reorganize.

2. System first or people first? As a soccer coach, I always look for where lessons cross over. There is often a debate whether a coach starts with his formation and tactics, and makes the players fit his system, or whether they should build a system that best suits the players they have. The same is true in business, and it’s just not a topic for the pundits. It is a decision that should be made before you go too far. There is no single right answer. In general, however, I believe that larger organizations should primarily design the system and smaller organizations design the system around the people. Why?

 In a larger organization, you have much more turnover. If you design your organization around the people, the people are going to change and your system will no longer be optimal. In a smaller organization, you often already have people wearing multiple hats. You may have some specialized skills that you want to get the most out of, because those skills become part of your company strategy. You can also more easily spot any problem areas and make adjustments as needed.

Connections are the invisible glue that holds the organization together and should not play second fiddle as design criteria.

 3. Activities and connections. Most people believe that organizational design is centered on the activities you require someone to perform. I believe it has much more to do with the connections, or the relationships and interactions that you want the person to perform. Many people believe that a lean organization is a flat organization. Toyota however, has many layers with very small relationship ratios. Neither is particularly right or wrong, but Toyota has designed their ratios, often as low as 5 to 1, to enable a critical connection of coaching. If you have a flat organization with 40 or more direct reports, you will not be able to focus your connection on coaching.

 A flat organization, when properly designed, focuses the organization’s connections horizontally, meaning that collaboration between peers is the heartbeat of the organization. Once you understand how the connections are supposed to work, then you can design an organizational structure optimized around your most important connections. Connections are the invisible glue that holds the organization together and should not play second fiddle as design criteria to the activities performed by individuals.

4. Experiment. People are afraid to experiment with organizational design because they think it is disruptive to people’s lives and their work. The flaw in that logic is that it is not more disruptive than getting the design wrong. Experimentation, when it leads to a better answer, is only temporarily more disruptive. Determine how you will measure the organization’s success, define several design options and then perform your experiments. As there is no single right answer, we must learn our way toward the optimal organizational design.

Organizational design is a useful mechanism for change, as long as performed with a lean mind. 

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