ISSN - 0974 - 1739

NHRD Network Journal

April 2012 Volume 5 Issue 2

Bijay Sahoo & Prashant Deshpande Brijendu Gupta Dr. Chandrashekhar S & Shiben Moitra

Shapes and Structures of Organizations Today and Tomorrow

Ester Martinez Dr. Keith C D Souza & Anjan Bhowmick Krish Shankar Kumar Krishnaswamy & Cyriac Joy Madan Nagaldinne & Shweta Shukla Dr. Pallab Bandyopadhyay Raj Raghavan S Ramnarayan B Ravi Shankar Sreekanth K Arimanithaya B Sudhakar Sudheesh Venkatesh Vikram Bector

A Quarterly Publication by The National HRD Network

www.nationalhrd.org

CONTENTS
S.No. 1 Title of Article Author Bijay Sahoo and Prashant Deshpande Brijendu Gupta Page No. 1 Organization structure as a vehicle for Strategy Execution Strategy ahead: Future Organizational Structures Organizational structures of the future

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Dr. Chandrashekhar S and Shiben Moitra Ester Martinez Dr. Keith C D Souza and Anjan Bhowmick Krish Shankar

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4 5

Structure and the virtuous Spiral Organization structure and innovation

21 25

Organization structures challenges in dynamic times

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Organization structure in Hospitals-Enigma Kumar Krishnaswamy and of Clinician Engagement Cyriac Joy Organization structures in New Age Organization and organizations of the future Designing High Performance Work Organizations Madan Nagaldinne and Shweta Shukla Dr. Pallab Bandyopadhyay

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46

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10 Evolution of Organization Structures in New Age Technology & Research Organizations 11 Redesigning to go across borders 12 Keep aside the ladderLadder vs. Lattice 13 Structures in multi-location organization and its impact

Raj Raghavan

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Dr. Ram Narayan B. Ravi Shankar Sreekanth K Arimanithaya

64 70 74

ORGANIZATION STRUCTURES CHALLENGES IN DYNAMIC TIMES

KRISH SHANKAR
Abstract
In this article, the author explains in brief about how the organizational structures become the obvious tool for implementing changes and gives an analysis on the formal organizational arrangements and their failure. The author also provides tips and lessons on creating the right organization design and furthermore explains how to manage the transition. About the Author He has been leading the HR function in Bharti airtel since April 2007. Prior to joining Airtel, he has worked with Unilever for over 20 years, lastly as Vice President, Human Resources- Asia- Africa Region. He started his career with Eicher Tractors in 1984 and thereafter has held various roles in Hindustan Lever Ltd and Unilever, spanning the diverse areas of HR and business operations. He has a Post Graduate Diploma in Personnel Management and Industrial Relations from XLRI, Jamshedpur. Introduction very now and then, businesses change their structures, usually following a string of bad performances, or after a new CEO takes over. Some businesses do so proactively to drive new priorities or focus on markets more effectively. It has become one of the most powerful levers for CEOs to generate breakthrough improvement in organizational performance. Why do structures (or to look at it holistically, 'formal organizational arrangements') become the obvious tool for implementing changes? First, they are perceived to be substantially easier to modify than either individual or collective behavior. Second, the formal organization has a much faster and direct result on behaviour, activities and performance. It is
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also directly linked to strategy and gives clear visibility to the changes in priorities flowing from new strategic directions. Lastly, it serves as a good expression and communication of intent - sends a clear message right through the organization and helps align priorities. However, not all changes in the formal organizational arrangements are successful. An analysis would show that there are two broad reasons for failures: 1. Not looking at organization design in a holistic way. A good framework for looking at organization design is the 'Congruence Model' that was outlined by Tushman & Nadler, in their book 'Competing by design - the Power of Organizational Architecture' . For effective organization design, the

Congruence Model advocates a fit between the four key elements:

l

The Work to be done, derived from the strategic direction The People - their skills, capabilities, interests The Formal organization - structures, processes and systems The Informal organization - the culture

Therefore, changes in structures alone cannot bring about the desired result. First, they need to be complemented by appropriate changes in processes (a specifically defined sequence of steps, activities or operational methods) and systems (application of physical or social technologies that enable the performance of work i.e., HR systems, which outline specific sets of policies and practices that influence how work gets done and by whom). These are integral part of the set of 'Formal Organization', and a misalignment here is sure case for failure. Further, the congruence or fit amongst the other core elements, namely Work, People and Culture need to be ensured. 2. The other main reason for failure of structure changes is what I would call as 'estimation defect 'or 'trade-off biases. Most of our strategic decisions are about trade-offs between alternate priorities or courses of actions. These decisions call for an ability to forecast, estimate or predict, and we go sometimes wrong in those. Such issues are more common among businesses which compete in highly dynamic environments with rapid and discontinuous technology change. In this article, we will focus on how we can understand and reduce such estimation/trade-off bias in our design of organizations.

Let's take the example of a company in the hi-tech industry. Normally, a high degree of technological change exists in this industry, with an average of one big, discontinuous change every decade or so, and numerous other changes. Tushman & O'Reilly, in their book 'Winning through innovation', talk about four distinct periods in an innovation/product lifecycle. First, there is a period of technological discontinuity - when a completely new technology breaks through. Take the example of Mobile Phones or Digital Photography or Quartz watches - these create new paradigms. This discontinuity is followed by a 'period of ferment' when competing platform/technologies establish themselves. Continuing with the example of mobile phone systems, it took a few years before the GSM technology got accepted as the standard. Similarly, Blu-ray of Sony is an example of a platform establishing itself in a 'period of ferment' over the rival platform. This period is followed by a one of continuous improvement - where the focus is on incremental change and architectural innovation, where the focus shifts to efficiency, scale, continuous improvement and stability. Soon, this stability is disturbed by another discontinuity, another breakthrough innovation and the whole cycle starts again! Based on this insight, Tushman & O'Reilly have articulated three broad types of product lifecycle/innovation stages- the Incremental/Process innovation usually with small extensions of existing technology, the Architectural innovation which is reconfiguration of the technology or platform, and the Discontinuous innovation with completely new operating principles. Each of these addresses both existing market/customers and new markets, as shown in Table 2 with an example from the watch industry.
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Table 1 - Product Lifecycle/Innovation Stages

Incremental/Process (Small extensions existing technology) Architectural (Reconfigures existing technology) Discontinuous (New operating principles/ Discontinuous innovation) First Watch

New Markets

Inexpensive mechanical watch (TIMEX) Thinner, smaller mechanical watches

'SWATCH'

Existing Markets

Quartz watches co-exist in a particular company. Table 2 outlines the features of the organization and culture for each stage of the innovation cycle.

Now each of these different stages needs a different 'eco-system' to thrive - a unique set of People, Formal Organization and Informal Organization. That then is the challenge, more so when all three stages

Table 2- Product Lifecycle Stages and Organization/Culture Required Incremental Relatively formalised roles & responsibilities l Centralised procedures l Functional structures l Focus on efficiency & continuous improvement
l

Architectural
l

Discontinuous Entrepreneurial Decentralised product structures l Relatively young and heterogeneous people l Focus on experimentation, multiple but small failures, learning by doing.
l l

Adding & linking Sub systems

Focus on integration & linkages

We are now entering an era where such technological discontinuities are far more regular - and this is putting incredible challenges to our leaders, and our organizations. To add to this complexity, at times we need to keep driving the business across all the above three stages of product lifecycles - becoming 'ambidextrous'! Given this level of heightened uncertainty or complexity, no wonder our 'estimation defects' are increasing. Further challenges in our quest for 'best fit' organization are to do with questions of specialisation vs. integration, reduced layers vs. managing complexity, and centralisation vs. decentralisation, etc. :
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1. How do we manage our organizations for such dynamic changes? 2. How do we identify which technological changes or opportunities do we place our bets on? How do we resource these? How do we manage the distractions to our existing core? 3. With each form of innovation needing different capabilities & culture, how do we manage these seemingly different 'organizations' within one? 4. How do we build synergies across these different streams or product groups? How best can we leverage scale, without losing focus?

5. To what extent do we split functions into further specialised verticals? 6. What needs to be decentralised to business/product units or geographies, and what should be centralised? What principles help us get the right mix of focus vs. synergies? 7. How do we get the matrix of a product line-function-geography to come together effectively? We will explore some of these issues with a couple of examples, and then conclude with some 'learning's' that we can use as practitioners. Let's take an example of Bharti Airtel, a leading Telecom company. It started as a Mobile services provider in late 90's and added a Landline business, and then an Enterprise business. It went into providing DTH broadcast services in 2009. While the launch of 3G, Data services has become a specialised, differentiated product line. Airtel Money, a completely new ecosystem for mobile payments and money transfers, has now been created. Mobile Entertainment (called Value added services in telecom jargon); Mobile Health and the other new business opportunities are emerging, using the mobile network platforms. The challenge was to design an organization that focused on efficiency, scale and synergies in the traditional voice business, but have different set-ups for the emerging businesses. The company chose to create an integrated Network Services Group to drive the technology backbone synergies, and an integrated sales and 'goto-market' organization, while each business unit had its independent CEO to create and manage the products and its relevant ecosystem, in some ways building on the traditional 'category organization' in FMCG. The other challenge in organization nowadays is the trade-off between specialisation and integration. Let's take an

example: In FMCG companies, the Sales & Marketing function of yore that was integrated is now broken up into 3-4 different verticals, as follows: 1. Brand Development 2. Brand Activation /Market Development 3. Consumer Insights 4. Customer Marketing Marketing or Trade

5. Sales or Customer Management While Brand Development, Brand Activation and Consumer Insights are normally grouped by 'categories' (a division by product group), Sales is normally integrated across the product groups, but grouped geographically. Brand Development, for instance, is usually managed globally. On one hand, the split of the traditional marketing function helps build deep expertise and provides focus. While Brand development is on a regional or global scale to build on synergies, the Brand activation or Market Development has a strong country P&L focus, thus ensuring a local country perspective. However, there is a danger of too much 'salami-slicing' of jobs, requiring lot of interfaces between each of the above verticals - and that's a trade-off we need to make as leaders. The other perpetual challenge is on balancing the number of layers with increased span of control, and thus the ability to manage scale & complexity. An additional layer may be a 'span-breaker' (managing a set of similar roles, e.g. National Sales Head, with regional sales heads reporting) or an 'integrator' (managing and integrating disparate functions, e.g. a CEO). As organizations' drive to be more agile and cut out layers, the span-breaking roles are coming under the microscope- and thus there is a need to find different ways to manage the
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complexity. We see the emergence of 'interface' management roles, and simultaneously a more empowering and liberating governance framework, and an increasing reliance of the matrix relationship. Perfecting the matrix relationship is the 'holy grail' for all effective organization design in these complex times. It is now increasingly clear that more than structures, it is our behaviour and the ways of working, i.e. the Informal organization, that enable the success of the matrix. Therefore, here are some lessons for us as we look at the right organization design. The following are tips for practitioners. Follow the SCRIPT: 1. Begin with a deep discussion on Strategy, identifying the key priorities and imperatives, in the context of the environment and the future. A key learning is to ensure that this is sharply prioritized - the team must be able to 'stack-rank' the different priorities, so that when it comes to certain trade-offs, we are sure what is really critical. 2. Look at each business or product group, and identify the Critical factors as follows: a. What is critical for success of that business? b. What is unique about that business, and our USP? c. What kind of people needed to make a difference in that business or product group? d. What should be the unique culture there to make it win in the market? e. What activities have to be specific to the business? f. What areas can benefit from synergies or scale? 3. Assuming you cannot make any structural changes; look at how you
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could meet the objectives by changing people. Research shows that most issues in a business can be addressed by a change of leadership - having the Right Person will make all the difference. A good way to identify this is to first list out what is ailing the business - in terms of specific shortcomings. Then, identify the key leader and ask this question "what can this person do better (or stop doing) that will make the organization more effective". If the two lists are similar, it points to the issue of the individual. On a more generic level, the organization of the future will call for people to be able to work across silos and boundaries, and depend less on hierarchical orders but more on influencing - and having such types of leaders is imperative for every company. 4. Many companies are looking at various Innovative ways of managing the mix of People and Structures. For example, new business project teams are kept as separate 'start-ups' with a group of young, entrepreneurial people, but led by an esteemed senior person from the mother company to ensure that they do their work unhindered but still get support from the mother company. Innovative linkage of reward systems to ensure that relevant people have the skill in the game also helps in managing the different priorities. Use of project/ programme management offices also helps drive a new focus area. 5. The next step, before you jump into structures, is to see if the issues can be addressed by any of the following: a. Changing any systems or Processeseither a business process or any supporting HR processes, especially rewards and performance management. b. Prioritising new set of measures relevant to the strategy.

c. Changing or aligning KRAs/targets of key people. d. Adding additional role or headcount to look after certain focus areasthere are many examples where big issues have been sorted out by adding a coordinating/interface or a project management role. 6. Only after all the above have looked at, should you look at changes in structures, with strong buy-in for the Transformation. While doing so, it would be good to use a rigourous structured process. The methodology followed by the Haygroup is given below. Be sure to test the Congruence or fit of the four elements- the Work to be done, the People with their skills & interests, the Informal organization, i.e. the Culture, and the Formal organization, including structures, processes and systems. Following the above SCRIPTunderstanding Strategy, identify Critical factors, putting the Right People, seeking

Innovative ways to sort issues unique to your organization, aligning Processes and finally creating a strong buy-in for the Transformation will help us avoid the 'estimation defects' we spoke of. In conclusion, as businesses go through increasingly dynamic environments, they need to be more flexible and multifaceted in how they organize themselves. They would gain from a lot more holistic approach to managing their organization design, with a greater focus on People, Culture, Systems and processes, rather than just structures, and need to come up with winning mix of these elements. In the Indian context, we should be prepared for more frequent changes and tweaks as organizations' search for this winning mix. The perfect organization design is a myth! No sooner than you think you have found the 'perfect solution', you will find that there is a new problem coming up somewhere. We should be open to continuous renewal and change, and be constantly looking at ways in which to get the most effective organization working for us.

Bibliography:
1. 2. Competing By Design: the Power of Organizational Architecture, by David A Nadler and Michael L Tushman, Oxford University Press. Winning through Innovation: A practical guide for leading organizational change and renewal, by Michael L Tushman and Charles A O'Reilly III, Harvard Business Review Press

3. James M. Utterback Harvard, Mastering the Dynamics of Innovation. Business School Press; 2Rev Ed edition. September 1996

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