This page provides you with more information on all the 12 Organisation Design Excellence pillar criteria of our 100-criteria Operational Excellence model. Please note that the goal here was never to cover each item on this list in comprehensive detail. Instead, we simply want to give you more information about what each one means and what it represents. That way, you can use them to better evaluate your own company's Operational Excellence level in the future.
The Organisation Design Excellence pillar of our Operational Excellence model may not seem like the most important on the surface. However, it is certainly the most visible and, as a result, is the most structuring out of all of them.
Each employee belongs to a structure of the organisation, with a role and responsibilities; similarly, each employee is impacted by someone else's responsibility. In addition, everyone frequently receives information related to the organisation and dependent on its structure (where it comes from, to whom it is communicated, with what type of content...)
There are three core components that are complementary, all of which are required to make the organisation work:
Organisational structure is not only about structuring your business. Because it has profound impacts on the people in a way that touches their competencies, managerial responsibilities, leadership capabilities and culture, it represents so much more than that. It has a particular impact on most central or support functions, such as finance, human resources or IT, because they are naturally transversal to all or part of the organisational structure
This is why ultimately it must be carefully defined to support the strategy, also making sure that it doesn’t change too often.
As stated in the highly regarded McKinsey’s 7S models, several interdependent factors influence the organisational design. One of the most important required to design the right structure is an alignment with your overall strategy.
Some organisational structures - or the hierarchical importance of certain roles - promote some performance levers more than others. For example, a centralised organization tends to promote cost reduction. A quality manager reporting to the CEO will promote quality.
For this reason, the structure must be aligned as much as possible with the main performance levers, which depend on the strategy itself. The design must also clearly take into account other influencing factors such as skills, systems, values, and personnel.
The organisation must be flat...but not too flat, and according to the level of overall Operational Excellence. For the reasons detailed below.
Flat organisations have the key advantage of not only achieving cost savings, but also being more adaptable and innovative.
However, they also tend to create informal, even dysfunctional hierarchies with more confused responsibilities. A flatter organisation or more complex induced managerial skills can also demotivate people due to a lack of vertical promotion. This is why, to function properly, flat organisations must meet many other criteria of operational excellence to function properly (clarity of roles and responsibilities, effective management systems, appropriate culture and leadership, etc.).
When they are satisfied, they then function better than hierarchical organisations.
The Span of Control is a term used to describe how many people are managed by a single person. It has a direct impact on a number of different layers within the business. Though it is true that we recommend a flat structure, there is also a limit to the maximum span of control. That limit depends on several criteria, which we use in the Wevalgo methodology and that include things like:
The importance of having clear roles and responsibilities is often well understood, as lack of clarity is often a source of not only personal conflicts but also a lost sense of responsibility and low morale. It can even contribute to up to 1/3rd of the inefficiencies you’re dealing with, according to our experience.
However, their definition is often not at the appropriate level of detail and does not have the practicality necessary for effective operation. For example, we have observed organisations spending millions in Euros to precisely define all processes, with detailed RACI, before changing completely (and hopefully) to a more pragmatic approach.
The right approach will always involve focusing on the key processes and responsibilities. Likewise, a PDCA (Plan DO check Act) cycle should be used to align the definition and the “real life” together.
At the strategic, area or single team level, roles and responsibilities are generally clear. However, at process or activity levels, they often lack that clarity or are less “commonly understood.” This means that different people have varying understandings of who should be doing what, potentially creating inefficiencies, delays or even personal conflicts.
Therefore, it is absolutely essential that roles and responsibilities are defined as clearly as possible in a documented way. The standard methodology to define them is RACI, or “Responsible, Accountable, Consulted, Informed.”
All processes should have at least a clear responsible (meaning someone who is doing something) and a clear accountable. There must only be ONE accountable for each process step of activity, though there may be several if the process has several variants (like those for different products). However, there must be ONE per variant and the list of variants must be clear. Key processes should have other roles defined as well, both in consulted and informed capacities.
The roles and responsibilities definition, itself a form of a RACI, should be consulted when issues concerning accountabilities and responsibilities arise. This enables to not only solve potential conflicts with an impartial document, but also see a discrepancy in the definition (and to update the RACI accordingly).
Documented roles and responsibilities seated idle in a repository aren't useful. With time, as the organisation evolves, they tend to be outdated and create more confusion than they solve. They must be updated when roles or processes change, or even improved thanks to learning loops and continuous improvement. When agreed, they must be regularly reinforced and demonstrated (as role models) by the management and "built" into the actual operating practices.
Job descriptions are too often viewed as documents for external hiring and because of that they remain stored in the HR department repository. As a result, they are not updated until the next recruitment. Rather, they must be a document that is actually used with current employees as a basis to define their objectives and evaluate them. They should also be updated as the role evolves.
Every position should have a job description. This will not only ensure higher understanding of everyone's own role and avoid a duplication of misaligned documents (the "HR" job description and the manager's objective setting document, for example), but it will also facilitate the update of the job description when recruitment is needed.
Service Level Agreements (SLA) are normally made for relationships with external parties. However, internal SLAs can be made between internal departments that have frequent supplier/user relationships.
We advocate that if the performance management system is well-designed, used and communicated, then SLAs would be redundant. This is because all key processes, including internal ones, would be identified with a performance indicator measuring their performance.
However, if some relationships between supplier/user departments aren't where they need to be because of service delivery issues, then the SLA framework is useful to define the relevant processes, roles, responsibilities and performance indicators.
The SLA may also help to improve the internal service (or to change misperceptions by factually showing the actual level of performance), but ultimately it should be integrated in the normal performance management system and process definitions.
Communication fits into this pillar because it is a key element in breaking down the boundaries of the organizational structure. It affects the entire organisation and its individuals; and a little like the Performance Management pillar, it connects all the pillars of Operational Excellence. Even if it is in a less structuring way than this one, its importance is not smaller since it directly affects individuals.
For every geographical or business area, there should be a communication plan clearly defining what type of information is communicated to whom, from who, how often and what media channel is to be used.
Management at all levels should regularly inform the employees reporting directly to them, along with those reporting indirectly, about the strategy, the improvement plans, the operational results, the client news and the key decisions taken. They must proactively cascade information coming from their management into their organisation, in compliance with the area communication plan guidelines.
Any and all bottom up communication must be properly organised using different means, including but not limited to things like surveys, paper or electronic suggestion boxes, web forums and more.
The performance management system itself should be organised to collect that information and communicate it upwards. For example, different management meetings can be organised to start with the lower hierarchical ones followed by the higher ones to transmit information in the upper direction. A well-defined and cascaded reporting system (like dashboards and KPIs) also help to enable this level of bottom up information.
Cross functional communication is key, here, to break any silos that exist. The basic communication would be to use something like a newsletter, but other means can and should be used as well. This includes but is not limited to things like physical or webcast presentations of the work of some teams, visiting each other when multiple offices exist, holding "standard" meetings or events alternately in the rooms or buildings of other teams, and more.
Collaborative communication must become a cornerstone in your business’ wall of high performance. It should be promoted, but not over-promoted, and NOT without specific objectives. A recent study conducted by the Harvard Business Review showed that time spent on collaborative activities actually increased by more than 50% in the last 20 years. However, that can easily contribute to a sense of management overload and reduce the amount of time available to actually “work.” It was estimated that 35% of value-added collaborations come from just 3% to 5% of your employees.
We typically advocate for implementing collaborative communication only under rigourous objectives and a regular follow up of the results.
Assess your level of Operational Excellence (or your client's if you are a consultant) with Wevalgo's expert assessment tools which cover Organisational topics
You may also have a look at the 17 criteria of the Employee Engagement Excellence pillar.