An enterprise’s organization is one of the primary Areas of Action to consider in a business transformation scenario. It describes the formal structures, processes, and interfaces that a company implements to define a standard way of working. The core aim of a company’s organization is to facilitate efficient value generation by minimizing the total effort required to turn input into marketable output. However, it is often large and elaborate corporate organizations that have turned into perfect breeding grounds for inefficiencies and “waste.”

Organizations can be described using various dimensions. On a structural level, companies can follow functional or divisional schemas when defining reporting lines. They can utilize line management structures, implement matrix systems, use network mechanisms, or leverage project organizations. On a process level, companies can define workflow and corresponding rules in a formal and detailed manner, or they can focus on providing guidance and recommendations. With regard to management and leadership, companies can be hierarchical, with a strict command and control approach, or they can rely on self-organization and dynamic, cross-functional collaboration.

The structures that ultimately work best for businesses are related to the type of work the company plans to perform. However, the manner in which structures develop over time is also a result of the race for power across the various management levels.

When Transforming, Question Your Organizational Principles

In most transformation scenarios, companies pursue a comprehensive change that is triggered by an increasing awareness on the management level that the current business model and corresponding organization will not be “future-proof.” Such fundamental change is risky and challenging; besides the fact that business transformations in general combine significant investments with a higher degree of uncertainty, transforming an organization has the potential to cause chaos. Employees, and perhaps other stakeholders, will feel uneasy, if not plainly frightened, if known structures and rules are no longer valid. This is especially true if their position might be at stake. Disorientation and resistance can subsequently occur.

Therefore, organizational transformation is always a balancing act—an attempt to change something for the better, while at the same time knowing that the change itself might make things worse—at least for a while.

Modern organizational schemas increasingly focus on collaboration approaches that emphasize cross-functional, self-organized teams, instead of strictly separate, hierarchically structured organizational entities. In doing so, they increase employee involvement in the design, development, and implementation activities, and place greater responsibility and accountability into the hands of “their people.” This may be challenging for teams during the transition phase, but it successfully increases the effectiveness of strategic change.

Evaluate Your Organizational Transformation on Five Levels

When planning to transform their organization, companies should follow five steps to change and improve their structures and processes:

Assess current strengths and weaknesses – Management must assume a candid perspective regarding the performance of the current organization. Does the large number of detailed process guidelines really support efficient value generation, or is it just a means of management self-protection, installed to blame someone else should something go wrong? Most rules and processes that have been implemented as a result of a previous problem can be assigned to the latter category. There are thousands of relevant examples.

You may counter that an organization is only as good as the degree to which its employees adhere to basic rules. Such rules are indeed necessary to prevent costly mistakes. However, in reality, the more detailed rules you have, the more overhead you create, and the more inefficient your organization becomes. In the end, it is often the shortcuts people take that make the organization as a whole appear better than it truly is. Be honest with yourself!

Analyze future work activities – Next, managers and employees who know how future work should be performed must identify and describe the required activities and define the company’s new value generation process. Of course, this is not yet in detailed terms regarding structures or processes, but instead, in the form of ordered jobs to be completed.

Define the change – Only then should top-level management evaluate which organizational changes will ensure an effective, lean performance structure. Management must also decide on fundamental collaboration principles. For example, this might entail whether it makes sense to implement lean or agile delivery models and/or sociocratic collaboration structures.

Design the new way of working – Afterwards, management must shape the future way of working by describing structures, processes, and interfaces, beginning with purpose, principles, and practices. Details should be elaborated only up to the minimum level required to prevent worst-case scenarios such as harmful negative publicity or even significant financial losses.

Engage in transformation – Finally, plan the change, perform the change, and participate in the change. Only a visible, transparent, and comprehensible change will minimize friction and organizational waste. As transformation leaders, top executives should exert their influence by displaying their own commitment to the change, to ensure that nothing comes in the way.

Balance Your Organizational Transformation and Act Holistically

Moreover, the trouble of defining an efficient organizational setup is to strike the right balance between dogmatic and pragmatic structures and processes. The challenge of organizational transformation is to act holistically, integrate new technologies, focus on the efficient delivery of solutions towards clients, and consider people’s mindsets and behaviors.

The Trexcelerator Transformation Board provides Entrepreneurs and Senior Executives as well as Business and Project Managers with a comprehensive structure to develop, elaborate, assess, and improve their transformation strategy. When using it to evaluate the Area of Action Organization, consider asking the following questions:

• Which capabilities available in the current economic environment enable the organization to perform activities that are more efficient than markets and competitors are able to? Which opportunities exist to adjust and improve the organization and transaction costs?
• Which organizational structures and processes can provide a competitive advantage?
• Which social trends have a significant influence on the mindsets and behaviors of the human workforce?

To learn more about the other building blocks of the Transformation Board, check out our blog on our website or participate in one of our trainings.

‍