Often companies can fail to deliver, not because of a lack of strategy, but more because they don’t complete these critical actions.
The step by step nature of this process is what makes it so simple to understand and at the same time, easy to implement – it can be completed in just one day! Despite Costco's large store volume, it has been known to sell a fraction of the number of toothpaste brands as Wal-Mart, according toA The New York Times. ReutersWal-Mart and Target have blamed current woes on the cash-strapped American consumer. Huge Wal-Mart and Target stores lack the convenience of smaller dollar chains and drugstores. These fundamental guidelines, drawn from experience, can help you reshape your organization to fit your business strategy.by Gary L. Although every company is different, and there is no set formula for determining the appropriate design for your organization, we have identified 10 guiding principles that apply to every company.
We’ve seen a fair number of organization design initiatives fail to make a difference because senior executives got caught up in discussing the pros and cons of the old organization. The blocks naturally fall into four complementary pairs, each made up of one tangible (or formal) and one intangible (or informal) element. In an org redesign, you’re not setting up a new form for the organization all at once. You must ensure that there is a connection between the capabilities you need and the leadership talent you have.
A global electronics manufacturer was struggling with slow execution and lack of accountability.
Second, even if you share the same strategy as a competitor, who’s to say that its organization is a good fit with its strategy? If you feel you must benchmark, focus on a few select elements, rather than trying to be best in class in everything related to your industry. In particular, think through your purpose when designing the spans of control and layers in your org chart. You can often hasten the flow of information and create greater accountability by reducing layers. In a call center, 15 or 20 people might report to a single manager because the work is routine and heavily automated. Perhaps your company has well-defined decision rights, wherein each person has a good idea of the decisions and actions for which he or she is responsible. Remaking your organization to align with your strategy is a project that only the top executive of a company, division, or enterprise can lead. These 10 fundamental principles can serve as your guideposts for any reorganization, large or small. Articles published in strategy+business do not necessarily represent the views of the member firms of the PwC network.
Most investors in the stock market know that it's best to be patient and focus on the long-term. But there can be a big difference between having the strategy in place and having the key actions identified to deliver it.
Its a great way to take a significant challenge, break it down into key actions and to involve your whole organisation in delivering your strategy.
This is an especially important point following comments from Apple CEO Tim Cook that the iPad Pro could replace a laptop for many customers. Is it taking an ad out in a newspaper, sending a direct mail piece to potential customers, setting up a booth at a local trade show or establishing a solid promotion?
Introducing a new line of communication devices for the Asian market required reorienting its sales, marketing, and support functions.
Because of the new technologies that had entered its category, and a sea change in customer expectations, the CEO decided to shift from a product-based business model to a customer-centric one.
In the 18th annual PwC survey of chief executive officers, conducted in 2014, many CEOs anticipated significant disruptions to their businesses during the next five years as a result of global trends.
Therefore, a major re-organization is likely to happen only once during that leader’s term.
These have been developed through years of research and practice at PwC and Strategy&, using changes in organization design to improve performance in more than 400 companies across industries and geographies. You have to set a bold direction, marshal the organization toward that goal, and prioritize everything you do accordingly. Decisions are paired with norms (governing how people act), motivators with commitments (governing factors that affect people’s feelings about their work), information with mind-sets (governing how they process knowledge and meaning), and structure with networks (governing how they connect). But too many interventions at once could interact in unexpected ways, leading to unfortunate side effects. It also carries emotional weight, because it defines reporting relationships that people might love or hate.
You’re laying out a sequence of interventions that will lead the company from the past to the future. In the past, it had undertaken reorganizations that focused almost solely on structure, without ever achieving the execution improvement its leaders expected. For example, if you’re organizing the business on the basis of innovation and the ability to respond quickly to changes in the market, the person chosen as chief marketing officer will need a diverse background. A Harvard Business School study conducted by associate professor Julie Wulf found that CEOs have doubled their span of control over the past two decades. How would that talent shortage affect your product launch capability, especially if it involved identifying and acting on customer insights?
To address these issues, it created a matrix that could identify those who had made important decisions in the past few years. Gradually, people get in the habit of following through on commitments without experiencing formal enforcement. If your competitor has a different value proposition or capabilities system than you do, using it as a comparison for your own performance will be a mistake.


Your choice of companies to follow, and of the indicators to track and analyze, should line up exactly with the capabilities you prioritized in setting your future course. But if the structure gets too flat, your leaders have to supervise an overwhelming number of people. An enterprise software implementation team, made up of specialized knowledge workers, would require a narrower span of control, such as six to eight employees. Now, as part of the redesign, the leaders of the company embraced its informal nature, adopting new decision rights and norms that allowed the company to move more fluidly, and abandoning official channels as much as possible.
If that’s a familiar problem in your company, the principles in this article can help you develop an organization design that supports your most distinctive capabilities and supports your strategy more effectively. Although it’s not practical for a CEO to manage the day-to-day details, the top leader of a company must be consistently present to work through the major issues and alternatives, focus the design team on the future, and be accountable for the transition to the new organization. He focuses on consumer strategic transformation and organization for the healthcare industry. Based in New York, he leads the PwC network’s financial-services people and change practice. Reviews and mentions of publications, products, or services do not constitute endorsement or recommendation for purchase. If you have a year or two of of big stock market gains but weak bond returns, then your allocations will have shifted towards stocks. In this case, you should sell stocks and buy bonds and get back to your target allocations.
Of course, this can prove invaluable in difficult turnaround situations, but it is equally powerful in any situation where there is a need to significantly improve business performance, or to make a substantial change.
These fundamental principles point the way for leaders whose strategies require a different kind of organization than the one they have today. Organization design should start with corporate self-reflection: What is your sense of purpose?
We have identified eight universal building blocks that are relevant to any company, regardless of industry, geography, or business model. By using these elements and considering changes needed across each complementary pair, you can create a design that will integrate your whole enterprise, instead of pulling it apart. But a company hierarchy, particularly when changes in the org chart are made in isolation from other changes, tends to revert to its earlier equilibrium. Structure should be the last thing you change: the capstone, not the cornerstone, of that sequence. Then the stakes grew higher: Fast-growing competitors emerged from Asia, technological advances compressed product cycles, and new business models appeared that bypassed distributors.
Someone with a conventional marketing background whose core skills center on low-cost pricing and extensive distribution might not be comfortable in that role. Although many executives have seven direct reports, there’s no universal magic number.
Make a list of the things that hold your organization back: the scarcities (things you consistently find in short supply) and constraints (things that consistently slow you down). For example, if your company is a global consumer packaged goods manufacturer, you might first favor a single structure with clear decision rights on branding, policies, and usage guidelines because it is more efficient in global branding. Design your organization so that it’s easy for people to be accountable for their part of the work without being micromanaged. It then used the matrix to establish clear decision rights and motivators more in tune with the company’s desired goals. Even after it becomes part of the company’s culture, this new accountability must be continually nurtured and promoted. For example, two banks might look similar on the surface; they might have branches next door to each other in several locales. For example, if you are expanding into emerging markets, you might benchmark the extent to which leading companies in that region give local offices decision rights on sourcing or distribution. For every company, there is an optimal pattern of hierarchical relationship — a golden mean.
You can free up management time by adding staff, but if the pyramid becomes too steep, it will be hard to get clear messages from the bottom to the top. Formal elements like structure and information are attractive to companies because they’re tangible. Overhauling the organization is one of the hardest things for a chief executive or division leader to do, especially if he or she is charged with turning around a poorly performing company. You can use this strong accountability and redirect people to the right decisions to support the new strategy. The chief executive will also set the tone for future updates: Changes in technology, customer preferences, and other disruptors will continually test your business model.
So what is the best way to implement your strategy, how can it be done and how does it help? And once built, the plan will form a powerful management tool with which to manage the business.
The same proportion of respondents foresaw changes in customer behavior creating disruption.
This type of pronouncement may sound simple, but it’s surprisingly effective for keeping the focus on the new strategy. These building blocks will be the elements you put together for your design (see Exhibit 1). You can significantly remove management layers and temporarily reduce costs, but all too soon, the layers creep back in and the short-term gains disappear. This time, instead of redrawing the lines and boxes, the company sought to understand the organizational factors that had slowed down its responses in the past.
You might assume that the personalities and capabilities of existing executive team members won’t affect the design much. Taking stock of real-world limitations helps ensure that you can execute and sustain the new organization design.


But if consumer tastes for your product are different around the world, you might be better off with a structure that delegates decision rights to the local business leader.
Make sure that decision rights are clear and that information flows rapidly and clearly from the executive committee to business units, functions, and departments.
Sales directors were made accountable for dealers in their region and were evaluated in terms of the sales performance of those dealers.
In theory, it can be helpful to track what competitors are doing, if only to help you optimize your own design or uncover issues requiring attention.
But the first could be a national bank catering to millennials, who are drawn to low costs and innovative online banking features.
When these intangibles are not in sync with one another or the more tangible building blocks, the organization falters. A big picture definition of marketing is letting your community know who you are, what you do and enticing them to check out your services.
There were problems in the way decisions were made and carried out, and in how information flowed. But in reality, you need to design positions to make the most of the strengths of the people who will occupy them. If the chief financial officer is an excellent technician but has little leadership charisma, you may balance him or her with a chief operating officer who excels at the public-facing aspects of the role, such as speaking with analysts. For example, you may build a product launch center of excellence to address the typical scarcity of never having enough of the people who know how to execute effective launches. Our research underscores the importance of this factor: We analyzed dozens of companies with strong execution and found that among the formal building blocks, information and decision rights had the strongest effect on improving the execution of strategy.
This encouraged ownership and high performance on both sides, and drew in critically important but previously isolated groups, like the manufacturer’s warranty function. The other could be regionally oriented, serving an older customer base and emphasizing community ties and personalized customer service. That means that the right structure for one company will not be the same as the right structure for another, even if they’re in the same industry.
It includes all the typical marketing and advertising options but is so much more than that. As CEOs look to stay ahead of these trends, they recognize the need to change their organization’s design.
What differentiating capabilities will allow you to deliver your value proposition over the next two to five years? People in sales might be more heavily influenced by monetary rewards, whereas R&D staffers might favor a career model with opportunities for self-directed projects and external collaboration and education. Therefore, the first changes in the sequence concerned these building blocks: eliminating non-productive meetings (information), clarifying accountabilities in the matrix structure (decisions and norms), and changing how people were rewarded (motivators).
In other words, consider the technical skills and managerial acumen of key people, and make sure those leaders are equipped to foster the collaboration and empowerment needed from people below them.
They are about twice as powerful as an organization’s structure or its motivators (see Exhibit 2). The company operationalized these new decision rights by establishing the necessary budget authorities, decision-making forums, and communications. Those different value propositions would require different capabilities and translate into different organization designs. It is everything that represents you, everything you do, how you act, how you talk, what you wear, how your customers are treated, the results your clients achieve and the vibe or energy of your business.
But for that redesign to succeed, a company must make its changes as effectively and painlessly as possible, in a way that aligns with its strategy, invigorates employees, builds distinctive capabilities, and makes it easier to attract customers. By the time the company was ready to adjust the org chart, most of the problem factors had been addressed. The national bank might be organized primarily by customer segment, making it easy to invest in a single leading-edge technology that covers all regions and all markets. They deliver work out of scope or ahead of schedule, often because they empathize with the problems customers face.
Marketing encompasses all these things, and the bottom line is that your marketing message needs to be consistent. The regional bank might be organized primarily by geography, setting up managers to build better relationships with local leaders and enterprises.
You can draw attention to that behavior by setting up groups to talk about it, and reinforce the behavior by rewarding it with more formal incentives.
If you benchmark the wrong example, the copied organizational model will only set you back.
Either they don’t have a plan at all and are winging it or they have a plan but by the time they start to initiate the process, it’s too late to do any real good. If you don’t take the time to do this, you will most likely spend the year in urgency mode. Internal marketing initiatives: It’s typically more cost effective to spend your energy and marketing dollars in this area first. External marketing initiatives: At some point, you must branch outside of your current clientele base and facility into your community. Team development: If you’re going to spend a lot of time and money marketing your programs and services, be sure to spend a great deal of time developing your team so they can provide the experience that is consistent with your marketing message. Her million-dollar training studios in Portland, OR, and Vancouver, WA, have received Better Business Bureau Business of the Year recognition.



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