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When companies are struggling to execute a strategy, they often lay the blame on skill gaps when the real culprit is rather different: a shortage of cooperation. The solution is to make adjustments to the context, in such a way that a committed fulfillment of the responsibility becomes a rational and personally beneficial behavior for the role holder. Any new organization design should not only deploy and leverage existing talent to the full but also aim to attract, retain, and develop future talent.

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One strategy in this regard is to create and foster roles that offer great learning experiences or enhanced career paths. Once again, make sure to create a conducive context for such roles—one that gives an ambitious and talented individual the right amount of exposure, for example, and provides him or her with the right opportunities to move on after a while. Organizational Enablers. Finally, organizational enablers provide further help in creating the coherent organizational context that encourages the desirable behaviors. The main enablers are enterprise-level decision processes and their support systems, performance management, and talent management.

Among the enterprise-level decision processes are strategic planning, product and portfolio planning, budget allocation, and major capital investments. Decision making within organizations often becomes slow and contentious, and when a company tries to improve the situation by imposing formal guidelines and new processes, it often just complicates things and makes matters worse.

As an additional resource for sharpening their decision-making abilities, the stakeholders have access to a support system, including IT platforms and data analytics. This system needs to be well designed, however, and the analytics need to be relevant as well as practical. Failing that, the system could actually prove counterproductive, and weaken rather than strengthen the quality of decisions made within the organization. Performance management is conducted through staff evaluations. The evaluations would ideally involve a combination of KPIs and judgment-based assessments. The company should ensure that those conducting the performance management are properly equipped to do so.

They need to acquire the requisite skills, by means of training, if necessary—how to recognize cooperative and uncooperative behaviors, for instance, or how to provide feedback candidly but constructively. If executed well, performance management can help to enhance workplace behavior—but it is liable to misuse.

All too often, companies deploy performance assessment criteria to link operational failures to specific roles or individuals. The clearer the link, the more strongly the company believes it has the right assessment system—only to find that these direct attributions have the effect of making matters even worse and prompting suboptimal or even counterproductive behavior. A smart organization understands that performance requirements can be highly complex and often conflicting and accepts that problems of execution arise for many reasons. It also understands that frequently the best way to solve these problems is to increase cooperation, and that means reducing the payoff for those people or units engaging in uncooperative behavior, even if the problem does not take place directly in their own domain, and to increase the payoff for everyone when everyone cooperates in a beneficial way.

As for talent management through appointments, promotions, or a new career path, for example , it too can have a powerful effect on the way that people behave. One technique is to carefully assign people the role—perhaps as a temporary transfer—of someone affected by their behavior. This technique is particularly effective when the outcomes of their behavior lie very far in the future.

By reminding people that what happens tomorrow is a consequence of what they do today and making them accountable for it, you give them an incentive to optimize their current behavior. Both performance management and talent management need careful designing to create the right context for behavior.

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It is all too easy to misalign them with target behaviors and thereby actually encourage the counterproductive behaviors that you are setting out to eradicate. Reorganization is undertaken not for its own sake but in order to successfully execute strategy and boost performance in each case, by modifying the behavior of the workforce. So the implementation phase is crucial. It has two main aspects: establishing the right context throughout and enhancing the capabilities of leaders and top talent.

And it can be accomplished most efficiently through a process with three features: cascaded design, rigorous program management with multilayered communication, and capability building.

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This cascading process helps to refine and publicize each role—clarifying the interdependencies and the way they affect one another—as well as speeding up decision making and reinforcing strategic goals throughout the organization. Rigorous program management involves creating, tracking, and course correcting a portfolio of change initiatives. If conducted properly, it maximizes the visibility of the change program and ensures that members of the workforce understand and feel the consequences of their actions.

Through feedback loops, it indicates, encourages, and reinforces the desired behaviors. One of its major components is multilayered communication—at all levels of the hierarchy, senior managers hold one-on-one conversations with their subordinates and conduct pulse checks or surveys to monitor how their subordinates are progressing and how they feel. In that way, they can gain insights into the effects of the new context and make adjustments to it as needed. Capability building, or enablement, drives performance and hence value.


  • Competing by design : the power of organizational architecture;
  • Tainted Wombs;
  • Competing by Design: The Power of Organizational Architecture.
  • Getting the Fit Right.
  • Introduction!

To ensure sustainable outcomes in each of these requisites, companies often benefit from a tailor-made leadership- and talent-development program. Some reorganization initiatives clearly need all three components of the enhanced organization-design program; for others, just one or two of the components might be enough. A multibillion-dollar financial institution in the US was underperforming, and a serious reorganization was indicated.

A redesign initiative duly got under way, with the aim of transitioning the organization from a predominantly line-of-business LoB structure to a matrix of LoBs and hub centers. The upshot was exacerbation of the drivers of underperformance:. When BCG was invited to help resolve these issues, our Smart Design team began by analyzing exactly what was happening and why.

The team studied the key actors, identified the undesirable behaviors, and established why those behaviors were rational in the given context. The team then developed a suite of solutions that would make a new set of behaviors rational—that is, more cooperative and productive. Finally, the team developed a change program for implementation. The company was then able to resume its redesign initiative, but on a proper footing this time. It redefined roles and revised the rewards system in such a way as to reinforce the hubs and attract the right talent to the right positions.

Further effects included reduced waste, increased cooperation, clearer accountability, higher levels of employee engagement—and overall improved performance. In a major strategic initiative, a global chemical company embarked on a radical reorganization: the old structure, which was based on business units, was to be replaced by a new matrix structure, with centers of excellence CoEs for key shared functions such as analytics, customer insights, marketing excellence, and sales operations.

The goal was twofold: to improve efficiencies by building scale in these areas and to boost capabilities to the point of excellence. The twin goals seemed further away than ever. The broad problem was that in creating the CoEs, the company had pressed the structural levers but neglected all the other levers. Roles and responsibilities remained unclear. The talent assigned to the CoEs was ill considered—generalists rather than appropriate specialists. Subsequent assessments have shown that the organization is now much more scalable, and performance is markedly higher than before.

As mentioned earlier, BCG conducted a survey on reorganization, polling corporate executives in a wide range of industries. The survey identified six factors as the strongest contributors to the success of reorganization efforts: aligning design with strategy, clarifying roles and responsibilities, deploying the right leaders and the right capabilities, designing layer by layer not just from the top down , executing optimally by minimizing risk factors, and reorganizing during a period of strength rather than crisis.

The findings of the survey were illuminating, to say the least: companies that embraced all six success factors within their reorganization effort enjoyed vastly greater success than companies that did not. With each additional factor, the success gained further impetus. See Exhibit 3. Subsequent case experience has confirmed the importance of these factors.

These findings are consistent with our expectations. In Smart Design, the emphasis is less on perfecting each element and more on creating the context in which the elements can work most effectively together to drive the target behaviors and enhance performance. So, when business leaders commit to an organization redesign, they should take a holistic approach rather than treat each factor individually. Smart Design is premised on the recognition that company performance is a function of employee behavior. So to improve performance, the trick is to modify behaviors appropriately.

And to do that, you must first study the existing behaviors—the good, the bad, and the absent—and then comply with the other success factors listed in the middle column of Exhibit 3. As the final column shows, a conscientious approach to reorganization can make a striking difference to its chances of success.


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Successful reorganization is often the most promising route for companies to regain their former sparkle, consolidate their strengths, or gain a competitive advantage. But taking that route requires steady nerves and bold measures. Many corporate executives are sufficiently bold to authorize a thoroughgoing organization redesign, but not to break with the conventional approaches to it.

The trouble is, the conventional approach has produced uninspiring results in recent years, and in many cases has actually made matters worse. The Principles of Design -- 4. The Crucial Design Issues -- 5. Choosing a Basic Structure - Strategic Groups -- 6. Coordinating Work - Strategic Linking -- 7. Designing at the Enterprise Level -- 8. Designing the Operational Level -- 9. A Process for Design -- Implementing New Designs -- Knowing When to Redesign -- The Lessons of Design.

If the defining goal of modern-day business can be isolated to just one item, it would be the search for competitive advantage. And, as everyone in business knows, it's a lot harder than it used to be. As David A. Nadler and Michael L. Tushman show, the last remaining source of truly sustainable competitive advantage lies in "organizational capabilities": the unique ways each organization structures its work, builds its cultures, and motivates its people to achieve clearly articulated aspirations and strategic objectives.

In this landmark book, the authors draw upon their experience with firms worldwide to illustrate how strong executive leadership has produced effective organizational architecture in practice. This book offers managers a systematic means of analyzing their organizations and, in turn, building integrated organizations to achieve sustainable competitive advantage.

It leads managers through the process of designing new and more flexible organizations that will provide a firm's competitive edge into the next millennium.


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New York : Oxford University Press. ISBN : alk.

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MMS ID. Get It. Virtual Browse. Explore Syndetics Unbound. Summary If the defining goal of modern-day business can be isolated to just one item, it would be the search for competitive advantage. On the one hand, competition is more intense than ever--technological innovation, consumerexpectations, government deregulation, all combine to create more opportunities for new competitors to change the basic rules of the game. On the other hand, most of the old reliable sources of competitive advantage are drying up: the hallowed strategies employed by GM, IBM, and ATandT to maintaintheir seemingly unassailable positions of dominance in the s and 70s are as obsolete as the calvary charge.

On the one hand, competition is more intense than ever--technological innovation, consumer expectations, government deregulation, all combine to create more opportunities for new competitors to change the basic rules of the game. So in this volatile, unstable environment, where can competitive advantage be found?

As David Nadler and Michael Tushman show, the last remaining source of truly sustainable competitive advantage lies in "organizational capabilities": the unique ways each organization structures its work and motivates its people to achieve clearly articulated strategic objectives.

For too long, too many managers have thought about "organization" merely in terms of rearranging the boxes and lines on an organizational chart--but as Competing by Design clearly illustrates, organizational strength is found far beyond one-dimensional diagrams.

Organizational Design and Structure

Managers must, argue Nadler and Tushman, understand the concepts and learn the skills involved in designing their organization to exploit their inherent strengths. All the reengineering, restructuring, and downsizing in the world will merely destabilize a company if the change doesn't address the fundamental patterns of performance--and if the change doesn't recognize the unique core competencies of that company.