The Outgrown Organization. This firm has outgrown its organizational model; it is bursting at the seams. Too large and complex to be effectively controlled anymore by a small team of top executives, it has yet to “democratize” decision-making authority. Consequently, much of the organization’s potential remains untapped. By keeping power centralized, the organization tends to move slowly and often finds it cannot get out of its own way. Such firms routinely miss opportunities and consistently fail to execute effectively.
The Overmanaged Organization. Burdened with multiple layers of management, this organization tends to suffer from “analysis paralysis.” When it does move, it moves slowly and reactively, often pursuing opportunities later or less vigorously than its competitors. More consumed with the trees than the forest, managers spend their time checking one another’s work rather than scanning the horizon for new opportunities or threats. These organizations, which are frequently bureaucratic and highly political in nature, tend to frustrate self-starters and results-oriented individuals.
Booz Allen launched the Org DNA Profiler™ assessment tool (www.orgdna.com) on December 9, 2003, and collected 4,007 completed profiles in the first two weeks. Respondents came from companies of all sizes across a wide range of industries from financial services and automakers to consumer packaged goods (see Exhibit 1). Moreover, respondents represented every level in the corporate hierarchy and every division (see Exhibit 2). This report marks the first summary look at the results to date; key findings are featured below.
1. Most Organizations Are Unhealthy
Of the seven organizational profiles, only three—Resilient, Just-in-Time, and Military—can be described as relatively free from dysfunction, or “healthy.” As Exhibit 3 shows, only 27% of the survey responses resulted in one of those three healthy profiles, and more than 60% of respondents indicated that the traits and behaviors of their organizations were “unhealthy” in some way. Their responses described firms unable to act decisively or effectively.
Passive-Aggressive was the most prevalent organizational type, with 31% of respondents reporting organizational behaviors consistent with that profile. Overmanaged was the second largest category, at 18%. Only 15% of respondents gave answers resulting in very healthy, or Resilient, profiles.
2. Organizational DNA Changes as Companies Grow
The 4,000-plus completed surveys collectively suggest a four-step company growth story (see Exhibit 4). As companies grow, they may migrate through certain profile types as they evolve, hitting rough patches when their DNA lags behind. Note that DNA clearly does evolve in organizations as they adapt to changes in culture and the competitive environment. Astute managers appreciate these subtle shifts and can help their organizations successfully transition to new models as the company expands.
Step 1: $0–$500 Million. Responses from small companies are most likely to result in Resilient or Just-in-Time profiles. These profiles describe organizations that are effective at executing and adapting to change in their environment.
This finding is intuitive because small companies tend to be younger and therefore may be more attuned to and aligned behind the vision and strategy of the founder. Moreover, their small size allows them to adapt more quickly and nimbly to external market shifts.
Step 2: $500 Million–$1 Billion. As firms cross the $500-million threshold, many seem to address their growing coordination challenges by centralizing authority in a strong senior team that drives the business. Not surprisingly, the Military profile peaks in this revenue segment. In addition, we see a sharp increase in Overmanaged profiles, suggesting that many firms in this size range become bureaucratic, slow, and overly politicized as growing middle management starts to second-guess and interfere in lower-level decisionmaking.
Step 3: $1 Billion–$10 Billion. Once past the $1-billion threshold, organizations become too large and complex to be run effectively by a small, senior team via command-and-control mechanisms. Companies are thus forced to decentralize.