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Published: August 27, 2013
 / Autumn 2013 / Issue 72

 
 

How to Design a Winning Company

The purpose of this exercise is to lay a foundation that should guide the rest of the detailed design. As you move through the organization to specify the elements of particular functions and departments, some variation is inevitable. For example, an overall blueprint for a premium auto manufacturer like BMW, Audi, or Mercedes-Benz may not identify frugality as a central tenet. But even luxury carmakers keep a watchful eye on the efficiency of their operations. The organizational design for such a company might specify incentives related to efficiency and norms of frugality for its operations group, but not for marketing and sales.

The New Organizational Design

One month after the initial meeting at Seabright, Jill and Sanjay presented their findings to Joanna and an expanded executive team, including chief functional officers for finance, operations, marketing, and R&D. Sanjay began. “We’ve made a lot of progress,” he said. “We started with our way to play as an innovative value provider—using digital technology to cut prices while being more relevant than ever. This requires an organization that can continually improve print while making the transition to digital. We focused on the areas we need to improve most: the formal controls of decision rights and motivators, and the informal leverage of commitments and networks.”

“What about the other elements?” Joanna asked. She already knew the answer, but this was a small test.

“Well, we can’t tackle all eight at once,” said Jill. “We need some clear priorities. We already have a strong commitment to excellence, and although our organizational restructuring was painful, the resulting structure could actually serve us well—if we bring the other elements up to par.”

“That sounds right,” Joanna said. “So what’s first?” Sanjay explained how they would strengthen the CDO’s role and expand that leader’s jurisdiction; Jill then talked about motivators. “Right now,” she said, “business unit evaluations are based on individual performance. So everyone’s working hard, but they’re not working together. We want to adjust the bonuses, linking them to the new behaviors we want in addition to margin performance.

“Next,” she said, “we need to build our information capabilities. We have access to a lot of customer data—the salespeople are fantastic in maintaining those relationships—but we don’t have the capability yet to synthesize that data from multiple places, make sense of it, and translate it into the products and apps that we need.”

“I thought we were already building this,” said the senior vice president of production.

“We are,” replied Sanjay. “That’s the problem. We have five different groups working on aspects of it, but they don’t know what the others are doing. We need to be innovative in a more systematic way, but without more structural constraints. Eventually, we will have to upgrade our information infrastructure, but the first step is to get people collaborating across boundaries. So we’re setting up long weekly lunches among the five groups. We’re also asking everyone to make a common commitment to customers—to raise our game further, giving them the information they need faster than anyone else does. To help pull that off, we’re setting up some dialogues between our content generation staff and our leading customers.”

Joanna sat back in her chair. Jill and Sanjay had said the right things so far. “I know I pushed you hard to turn this around quickly,” she said. “Are you convinced it will get us aligned?”

Sanjay and Jill both nodded. “It’ll at least point the ship in the right direction,” Jill said.

“And,” Joanna asked, “how will these recommendations help us strengthen the critical capabilities that we need?”

Jill and Sanjay both smiled. Jill reached into a folder in front of her. “Already done,” she said, passing out a sheet of paper to the people in the room (see Exhibit 3).

 
 
 
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Resources

  1. Deniz Caglar, Jaya Pandrangi, and John Plansky, “Is Your Company Fit for Growth?s+b, Summer 2012: Organizational design can be an integral part of a more strategic approach to costs, helping companies prepare for the next round of expansion.
  2. Gary L. Neilson, Karla L. Martin, and Elizabeth Powers, “The Secrets to Successful Strategy Execution,” Harvard Business Review, June 2008: Why decision rights and information flow are better starting points for organizational leverage than fixing the lines and boxes on the org chart.
  3. Booz & Company Org DNA Profiler Survey: A short diagnostic tool that explores the formal and informal elements of your organization’s design.
  4. For more thought leadership on this topic, see the s+b website at: strategy-business.com/organizations_and_people.
 
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