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Executive Prof. Entrepreneurial MBA at Flanders Business School / Catholic University Leuven Managing Director Connect & Transform |
Organization design is taught at various levels of management and in several settings. There is common agreement that education in organization design most often yields fruit when taught at the most senior general management levels and when senior peers attend together. Major barriers to this most effective approach are lack of awareness of the power of organization design in transforming organizations, scarcity of executive time, scheduling, and concern that the educational experience will not be of sufficient quality to justify the investment.
I’m writing about the development of our unique offering at Flanders Business School at the Catholic University Leuven, so that others in executive centres around the world may examine our concepts and processes to test them for possible value in their own setting.
The ‘Innovation in Human Capital Program’ is in fact a spin-off of my Entrepreneurial MBA Human Capital classes. In these classes I focus on the role design and matching people and roles. Most of my MBA students are senior executives, with an average age of 40, and very sceptical about the value-add HR provides in their organizations. Most of them experience HRM as floating on a lifeboat of immigrants bobbing in turbulent sea, looking for a safe harbor. They experience a disconnect between HR practices and value creation. The work levels model is the only model I know that enables me to make this link. There is a clear correlation between human capital themes and growth of companies on two sets of performance indicators: current value creation (such as EBIT/FTE, NOPAT/FTE) and future value creation (P/E multiple, EV/EBITDA next 12 months). This approach, inspired by Mark Van Clieaf, links the issue of overlaps/gaps and fit-to-role with sustainable value creation. I use work levels and levels of capability approach as a foundation to rethink key Human Capital Processes, such as talent management, performance management and remuneration processes. I invited my students to select a Human Capital issue in their respective companies and to think through what new solutions could be imagined using the work levels approach. They had to share their analysis with at least two colleagues, preferably the CEO and the CHRO, and explore what needed to be added to implement these solutions. Through the case studies, the organizations became familiar with work level concepts. Students, colleague senior managers, and C-suite members or their direct reports, became work level enthusiasts.
Getting CEO's attention
CEO’s know that they depend on their company’s human resources to achieve success. Businesses don’t create value, people do. It is a natural reflex to attribute success or failure to individuals in an organization. The frameworks currently used in Human Resources reflect this focus on the individual. Talent and performance management practices are characterized by helping individual collaborators to exceed expectations. CEO’s search solutions for excessive or growing of cost structures, slowing growth and innovation, business strategy execution problems, slow decision making and speed of customer response and disengagement and disengaged employees in frameworks that connect people and cascade excellence.
But both CEO’s and CHRO’s overlook the impact of strategy and management misalignment. The root cause for the dysfunction of individuals can often be found in role duplication and confusion, too many layers of management, work designed at the wrong hierarchical level, missing work and accountability to drive breakthrough innovation, and mis-alignment of role accountabilities, performance metrics and authorities.
Although work design is traditionally considered as one of the major HR functions, HR has been little involved in the dialogue on the organizational system that defines the relationships amongst roles and how organizational design can create real tangible value for all stakeholders. CEO’s, although conscious that they need to get the system right, prefer to focus on improving processes and communication, and have accumulated disappointment with the solutions HR provides. Research by McKinsey and the Conference Board consistently finds that CEOs worldwide see human capital as a top challenge, and they rank HR as only the eighth or ninth most important function in a company.
My students showed, through the dialogue they had to engage in to work out their papers, how the focus on the individual could be balanced with a focus on the organization. Some CEO’s started to ask how they could get familiar with the concepts used by their senior management colleague/students.
An Entrepreneurial Effort - First Marketed To The Executive Ed Program Managers
Since no post master’s program was available that introduced levels of work complexity and levels of human capability I asked myself what format could be developed to change the dialogue between CEO’s and their CHRO’s. It was very clear for me that both needed to be invited in an action learning program to engage in a critical inquiry on how the organizational design of their company could be transformed to accelerate value creation opportunities and growth, reduce investment and capital intensity and reduce risks and operating costs. The levels of work complexity and levels of human capability served as the guiding framework for this co-creational approach.
The enthusiasm was built through case studies of MBA students. Students were asked if their colleagues would be interested in such a program. Since the link between organizational performance (by benchmarking on current and future value creation indicators), organizational problems and organizational design issues is not part of the mindset, it did not seem very effective to set up a marketing communication inviting future participants to think differently about their framing of HR issues. Even when the opportunities for breaking out of their mindset, which focused on the individual (being disengaged, lacking competencies, not collaborating, …), could be communicated in a very clear way, it always involved a critique on the current approach. Critiquing did not seem the most appropriate way to attract participants.
Since the pre-work by the students created a first awareness, it seemed more effective to build upon this. The Business School also had a limited budget. As a member of the entrepreneurial faculty I took the financial risk myself and margins were shared with the business school. The program was announced by two mails sent to ex-students which they forwarded into their organizations. One of them was an invitation to a breakfast dialogue where either one (CEO or CHRO) or both participated and where an open discussion was initiated about the role of structure in sustainable growth of companies. Financial analysis was the point of departure to discuss the human capital practices that could make a difference. The program was also mentioned in Alumni meetings, and other initiatives of the university. It was mainly a mouth-to-mouth communication.
Program Design
The program is a four-day program, spread over a period of three months. The objectives of the program are twofold:
- Establishing a new contract between CEO and CHRO, where organizational design principles serve as a step-up to unpack meaning through sharing specific challenges, to diagnose problems in a different way and to prescribe which actions are meaningful in each specific organizational context. The outcome is that CEO’s start to consider Organizational Design as one of their key accountabilities and consider their CHRO as the natural partner to optimize organizational design and to match people and roles differently. The program works with four to seven CEO-CHRO pairs which allows peer questioning to unlock the mental models that made them blind for managerial structure issues in the past, to identify assumptions that underlie current ways of framing challenges, and reframe a common understanding of the situation.
- Build engagement platforms in their respective companies to create a common ground to action. This means that in the time between the workshop days the participants are stimulated to have a number of dialogues with internal and external stakeholders to improve the organisation’s ecosystem of capabilities. The major triggers here were business model challenges: the need to organize things differently in light of digitalization, big data, changing manufacturing (robotica) and logistic processes. The basic insight is that organizational design ideas will be successfully implemented if there is an immediate understanding and trust in how the changed environment of interactions will create new value creation possibilities. In order to make this possible participants select experience domains that are strategically important for them, such as shifting from a product-centric to a customer centric company, scaling up excellence (achieving more without settling for less), or improving the innovation capabilities. The levels of work and levels of capability approach are used to bring to the surface the context, the nature of relationships and the emerging changes participants see or do not see. The outcome is that participating individuals start becoming aware on what level they contribute and what is necessary to develop further (if desired). This helps to manage the uncertainty linked with organizational design discussions.
Three key steps: Framing, Co-creating, Implementing
The general educational approach includes conversational building blocks organized into three phases to create transformational change.
Phase one: Framing and engaging. In the first step every participant shares his/her organizational challenge in the form of a question, after which the groups picks a duo with whom to begin work. The facilitator uses the identified challenges to introduce the work levels lens by asking questions to clarify the ecosystem facilitated and or made difficult by the current work organization. Through asking questions participants build an awareness for the dynamics of overlapping and missing roles and insights in how issues might be framed from another level of thinking. Participants experience the power of questioning the organizational system differently and build awareness of how the different questions might help them to have different dialogues with individuals inside or external to the company.
Phase two: Co-creating. The co-creation phase is basically a phase in which participants let go of their fixed ideas about roles, treating the activities in which people engage as value creating systems. In order to do this it is important to recognize other’s perspectives on interactions and outcomes and where value may not necessarily coincide with one’s own. Building awareness on how framings of situations fit in a hierarchy of complexity and how they can naturally reinforce each other is a giant step into exploring ‘win more – win more’ opportunities.
Phase three: Implementation. The essence of the implementation phase is coming to mutually beneficial decisions that unlock new sources of value and agreeing on the feedback cycles that guide the realization of these decisions. In practice changing the organizational design doesn’t happen overnight. It happens through incremental steps, linked to changing the expected value add of some positions, agreeing on different performance objectives, replacing (or not replacing) individuals and or changing the mental frameworks of key individuals. A continuous reflection on the outcomes and creating transparency in what has changed is crucial in this phase.
During the four days, the relative importance of the three steps shifts. Where in the first day the framing gets 60% of the attention, co-creation 30% and implementation 10%, in the last day framing receives 10%, co-creation 60% and implementation 30% of the attention. In between the participants engage to have conversations and to jointly prepare for the next day.
Program Results to Date
The results of the program are promising: 6 out of 10 duo’s engage in optimizing their organization design within six months after following the program.
Although the mutual trust between CEO and CHRO has not been measured before they subscribed for the program, there are clear signs of better collaboration and strategic partnership. CHRO’s contribute to increase the flexibility of their human capital, start to recommend actions that unlocks value creation. Putting people and design before strategy and reassignment of people with respect to organization design and human development principles is what really boosts the participating companies.
Weaving the Program into an In-House Approach
The program has been tailored to in-house processes. In-house design builds on specific issues and challenges of the company. Points of departure are always strategic shifts, such as the evolution towards client centricity, development of new business models, or alliances with other companies.
A big difference with an open program is the preparatory work that can be done. A company specific analysis on the value-add of critical reporting relationships gives insight in company specific examples and dynamics. These company specific examples create practical focus in the discussions that follow. It also gives a first idea on the spread in human capability of the team(s) that could participate in rethinking the organizational design and supporting organizational practices. In reality capability levels in groups are always diverse and create specific dynamics. I encourage that teams involved in the reorganization process are upwardly divided, which means that the diversity in capability is centered towards the highest possible holistic thinking (which starts to appear from the level of creating breakthrough). This means that the highest capability level present in the group will dominate the discussions and ensure the top roles are really designed at the appropriate level. This increases the power of the steering team to implement changes and to make a real difference.
Reference
Jan De Visch (2010). The Vertical Dimension: Blueprint to Align Business and Talent Development. Connect & Transform Press.
