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Published: May 15, 2007

 
 

Culture Change: Calling on Philosophers and Engineers

2. Aligning Organizational DNA
Having chosen and articulated discovery, excellence, altruism, or heroism as your purpose, it is still necessary to make the changes that will recast peoples’ behavior. That is the work of the engineer.

Values and behaviors can change over time because they are guided by at least four elements of an organization’s design. Like the basic proteins of our own DNA, these four elements serve as the “building blocks” of an organization’s DNA; in different combinations, these elements can produce very different organizational cultures:

  • Structure. The hierarchical chains that determine lines of reporting authority and answer the question, Who is your boss?
  • Decision rights. The formal rules about who is allowed to make and execute particular choices.
  • Information flow. The patterns of connection among people who communicate regularly.
  • Motivators. The incentives, rewards, and risks that people associate with behavior.

If you examine the symptoms of a dysfunctional culture (for example, second-guessed decisions, hoarded information, or frustrated employees), you’ll discover that the root causes of this dysfunction can all be traced back to misalignments among these four organizational elements. These collectively determine how the organization looks and acts each day as the individuals within it make countless trade-offs and judgment calls.

As you might guess, companies have different purposes and each works best with an organizational DNA design that is aligned with that purpose. For example, discovery, excellence, altruism, and heroism are each strong motivators of people; but in misaligned companies, the formal incentives undermine those motivations. A company predisposed to excellence will lose essential people when it tries to give everyone similar compensation, regardless of performance.

Although we have not yet conducted extensive research in this field or made a full analysis of such complementary factors as organizational size, some patterns are already clear. The following table describes organizational designs that seem to be most effective for each of the four purposes.

Structure

Discovery Excellence Altruism Heroism
These companies are most effective when organized by launch; each new product or service develops its own organizational domain. IBM, Hewlett-Packard, and Merck have all been structured this way. These are often small-scale, atelier-style organizations, like Berkshire Hathaway, or are set up around project teams like many professional services companies. Even when they grow larger, they retain the characteristics of small organizations, such as attention to detail. These companies benefit from sophisticated structures for operationalizing customer knowledge; they may replicate a small company model in branches (hotels, shops). They may also have departments focused on customer segments, as in divisions of a hotel chain with several price points. A strong, centralized, and disciplined formal structure is required. This framework may be balanced by strong individuals within the organization. The structure should be functional or product-focused to reap economies of scale.

Decision Rights

Discovery Excellence Altruism Heroism
Decisions about where to invest and what innovation targets to aim for are more effective when centralized. Decisions about how to achieve these goals are delegated. The Sony Walkman was developed in this manner. Decisions are delegated to the professionals who share the conception of excellence. One extreme case is Toyota, where any shop-floor employee can stop the assembly line if a significant problem with quality is observed. Decision rights should be decentralized to customer-facing staff (albeit with clear guidance about their limits). At Nordstrom, every salesperson is empowered to take any action necessary to satisfy customers. At Tesco, a stock clerk can discard food that he or she would not personally buy. Decision rights should be granted primarily to key individuals who have the power to make the system work. There will often be decision rights embedded in strong processes (such as a financial review).
 
 
 
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Resources

  1. Nikos Mourkogiannis, Purpose: The Starting Point of Great Companies (Palgrave Macmillan, 2006): The book on which this article is partly based explores the notion of purpose in business. Click here.
  2. Gary L. Neilson and Bruce A. Pasternack, Results: Keep What’s Good, Fix What’s Wrong, and Unlock Great Performance (Crown Business, 2005): In addition to the “building blocks” of this article, this book describes seven principal organization types and their characteristics. Click here.
  3. Gary L. Neilson, Bruce A. Pasternack, and Karen Van Nuys, “The Passive-Aggressive Organization,” Harvard Business Review, October 2005: This article examines one of the more dysfunctional examples of the seven organization types: the passive-aggressive organization. Click here.
  4. The Organizational DNA Web site: Booz Allen Hamilton has developed an online assessment tool, the OrgDNA Profiler®, that allows individuals to diagnose their organization’s execution culture. Click here.