There are ideal design principles that guide the structure and operation of any business, but very few leaders are able to maintain a continuing focus on them. Great businesses are only made by leaders who keep coming back to these principles and reinforcing them, time and time again.
Yes, great businesses are high performing businesses but what design elements enable them to be high performing?
In my earlier article ‘Structure Before Strategy, Always’, I argued that no matter how great a strategy you craft, its only value lies in the ability of your business to deliver on it. Structure bounds strategy and the ceiling you must break through is the capability limit of your business. Great businesses keep lifting this ceiling.
Organisational Charts Are Not Structure
So when I refer to ‘the structure of your business’, here’s what I actually mean. For me, one of the landmark articles that unpacks the concept of structure well is ‘Structure Is Not Organisation’. Written by R. Waterman and Tom Peters in 1980, it is now commonly known as McKinsey’s 7-S Framework. Their thesis is simple: structure is not reflected in the organisational chart of a business but rather the interplay between seven elements. These elements are superordinate goals, skills, staff, style, systems, strategy and structure. Many of you will be familiar with this work and language.
The starting point on thinking of organisational design is to recognise that structure goes well beyond a diagram of the positions and roles people hold within a business. It encompasses the way that the entire business functions, and all the things that influence its performance.
If your business is not performing well, then you must step back and look at the entire eco-system that makes up how your business works.
To help you consider the design of your business, we will look at design from three key perspectives:
- The traits of highly successful businesses.
- Alignment for high performance.
- Drawing how your business works.
The Traits Of Highly Successful Businesses
The first perspective to consider is, what actually makes a business successful? Are there certain attributes that are common to all businesses that are highly successful? And if so, what are they?
What do you think makes a business highly successful? Go ahead, before you read any further, list out in order of importance, the key traits or elements that you believe make a business successful. Is it location, brand, or great products? What is it that you must get right?
Okay, so hopefully you took a moment and listed the elements out, at least in your mind. Now take a step away and look at your list, are these the catalysts of success or the outputs? In design, we are interested in identifying the catalysts, as these are the elements that underpin and drive success. Our organisational design must include these catalysts. The seven key traits that underpin and drive success are:
- Strong leadership proving direction and focus.
- Focusing on the customer.
- Vision in setting the future course.
- Creating the correct culture.
- Being proactive.
- Identifying core competencies.
- Recognising the importance of employees.
These traits form key elements of what I describe as the Competitive Engine of a business, and which any design must incorporate to lift these traits to the surface.
Alignment For High Performance
The second perspective is that of alignment. A well-tuned engine runs at peak performance, everything is working together to deliver maximum output. In a business context, what would that well-tuned engine look like?
In a business designed to achieve high performance, alignment must be achieved through the following elements:
- The business has crafted its competitive posture, that is how it intends to compete to win.
- A goal achievement plan (GAP) has been developed to ensure delivery of all the actions required to achieve the competitive posture.
- The way in which the business operates (its structure) has been attuned to focus on the key aspects of the competitive posture.
- All decisions are made with reference to the GAP and the actions detailed therein.
- The culture within the business is aligned with the personality traits required to underpin the attributes inherent in the competitive posture.
- Performance measures are focused on the key metrics, which reflect delivery of the GAP and achievement of the competitive posture.
- Finally, rewards are adjusted to only encourage aligned behaviour and outcomes. Again, these are focused on the delivery of the GAP and achievement of the competitive posture.
I’ve discussed the principle of competitive posture in previous articles, but in short, it is how you intend to compete to lift your business’s strengths to the surface so that you can deliver greater customer value than anyone else in the market. It is how you will out-compete everyone else.
Drawing How Your Business Works
The third, and final, perspective of the design review is reworking the way in which your business functions so as to bring the most focus and weight possible to achieving your competitive posture.
Grab a blank sheet of A3 paper and draw how your business will work. Delivering greater customer value than anyone else is the goal, what would achieving that look like for your business?
Where would the focus need to be? And how would each department need to act to ensure its delivery?
Try sketching the interactions that will need to occur. For examples and more detail see ‘Organigraphs: Drawing How Companies Really Work’.
Being able to draw how your business needs to function is critical. If you can’t see it in your mind, it is unlikely you that you will be able to deliver it on the ground.
The Perfect Design
In crafting the perfect design for your business there are a number of elements that you must bring together.
Firstly, you must recognise and understand what drives the competitiveness of any business, that is, the traits of success. And you must ingrain these traits into your business. This will be a daily task to ensure your leadership team upholds these values.
Secondly, you will need to review all the elements of alignment and ensure that every process, action, measurement, reward and decision is focused on the right outcome. That outcome is the achievement of your competitive posture and the delivery of your goal achievement plan (GAP). More often than not, businesses do not reward the right behaviour or amend processes and metrics to be correctly focused.
Thirdly, you must create a clear articulated image of how your business needs to function to out-compete everyone in its chosen market. This image must be so welded in everyone’s mind that they know exactly where their activities fit into and support delivery of value and achievement of the competitive posture. Again, more often than not, everyone is left to their own devices and everyone assumes they all know what to do. Usually, they don’t.
There are elements to the design of your perfect business that are common to all great businesses. These are what you must continually strive to achieve. But there are also elements that will be unique to your business and the customer value you intend to deliver. These elements you must carefully craft and continually review to ensure they are still relevant as your competitive posture evolves to stay effective in your marketplace.
Active Knowledge Questions:
- Draw how all the areas of your business work together to focus on delivering the value you promise to your customers.
- Look at your diagram, are key areas correctly resourced? Are some areas over resourced? Is the sequencing of activities correct? Does information flow where it is needed? And is decision-making residing in the right hands?
- Is your competitive engine well-tuned? What needs to change?
Act Now:
How undefeatable is your business strategy? Consider Strategy Play – Crafting Undefeatable Business Strategies.
Need to lift the leadership performance in your business? Learn how in C88 – Leadership Performance Guide and Journal.
Want to become part of the Entrepreneurs+ community? Sign up for my eNewsletter, and join the conversation by sending me a question via Ask Richard.
All the best in the success of your business,
Richard Shrapnel
References:
The diagrams included above are drawn from Strategy Play – Crafting Undefeatable Business Strategies.
