Research in the broader context

Speaker A Okay, so a few words of context. This module is focusing on measuring or researching what we do. Now in the field of change management, of any kind of change management, I would say the number of companies or consultants who actually make deliberate methods to collect before and after data and try to attribute something to the change is very small. Some people would say less than 10%, less than 5%, less than 2%. So most of the data and in the field of organization development, golambuski was a researcher and he kept trying to encourage people to measure and use instruments. Now they're online and some companies are using survey instruments of Climate or Aggregating. Certain kinds know how we're doing, employee satisfaction. And there is some so that they are tracking that. And there may be some other online instruments that they are using to track. And it may be that the new information systems will have indices that you can use to track change in conditions. So we have some people in the room who are starting to use these new systems, or Mickey who puts them in. And there is the potential for being able to track various important indicators related to HR and other things that may be very interesting. So we know things are changing as we're getting our systems more integrated. But in our field of requisite organization, we have talked well. In our first conference in 2005, we had a session on measuring and researching what we do. And Ron Cappell spoke then. He had already started doing it and said for me, as I understand it, and not putting words in Ron's mouth, he can correct them later. Maybe I am putting words in. Ron did this because he thought it was important to clients to know the possible benefits, what was happening, what are the correlations, what is correlated with doing this work, and can we trace it? And so I think of all of us worldwide, he is one who has tried to do a systematic approach. And that's why I invite him now, this is seven years later, to talk about what has been your experience, how has it affected your ability to plan and do your work, your relation with your clients, anything in insights and things you have. So I think it's really important for us to be able to hear this. I don't know what the uptake will be. At our last Buenos Aires conference, we had an arrangement with Simlog, a culture instrument, and they would provide things to us free. We had a session, we offered this to people. We had one potential uptaker who was still thinking about it. But in spite of it being online, inexpensive, fairly easy to do, our consultants companies are not yet hitting on it, not yet picking it up. So we need to look at this because as we develop the field, we would be in a much stronger position if we could say things about this. So with that introduction, ron Good, thank.

Speaker B You very much, Ken. What I'd like to do is put the research in a broader context. So the primary focus will be on the research. But the broader context is that I've recently written a book on organization design, and writing the book kind of forced me to pull together and consolidate stuff over 25 years. So it's kind of interesting because on the one hand, the book was written in four months, on the other hand, the book was written in 25 years. And so in that process, we pulled together research and did some other things. What I'd like to do is start with a couple of observations, which people may or may not agree with in terms of the current literature and some of the issues we see and some of the things that I've tried to do in terms of this writing, and then get more specifically into the research. Because writing the book has really pulled together these different pieces. We've been doing this over 25 years now. We've used it for clients. We've not published it other than one study up to this point in time. So it's pushed us to consolidate things and also expand what we've been doing. So a couple of comments first before we get into the research. More specifically, the first comment would be that in terms of our practice and in terms of our research, the two core pieces are the measurement of the complexity of work in terms of time span or information processing requirement, and on the individual side, information processing capability and or time horizon. So those measurements for us are central. And our view is that in terms of the work that's been done, those are two of the most important pieces. So both our consulting and our research use that. Our view is, and it was interesting in terms of doing the book and going back over 25 years, our view would be that if you're going to demonstrate and claim that something's effective, it seems to me that there are two useful things to have. One is that you can demonstrate that executives have actually successfully applied this. So does it work in the field? The second is that there's research that substantiates that this happens. A lot of the material in the field currently is either correlational in terms of this variable is related to that variable, and or anecdotal it worked in this case, it worked in that case, and so on. But in terms of anything that's more substantive or systematic, there's really not much, if any, available in terms of our read of the literature. So there are two pieces to this then. One is we've gone back over 100 large scale projects that we've done in terms of executive comment and so on and so forth. What's worked? What's happened? And that's been an interesting process in itself. We would say from an anecdotal point of view, in terms of the client pieces, that of the data that we've got, we've got data on over 50% of these projects that anecdotally in terms of executive comment has been positive. And this is over a 20 year period that we have these comments, there's about 25% that we really don't know. And quite frankly, these are largely government projects and we found that with government projects that they really like the assessment, they really say they're going to do stuff and then they tend not to. So we don't get involved with the implementation and we really don't know. We found that going back over, there are two projects that we consider to be failures. One, the expectation of the client and what we delivered was not consistent. And in the other, in the implementation process, the client deviated from the agreement we had and we chose not to continue that implementation. So we've had two failures. But when you read the literature in terms of success rates, this is pretty good stuff in terms of what you know, most of it being successful and a couple of clear failures. So acknowledging that piece as well, the other is research. So what does the research say? So over the last 20 years we've taken opportunities that we've had to do research. Sometimes it's been one off pieces of research. So we did a piece of research on the global pension fund industry, which actually is a published piece. It's the only published piece that we have to this point in time showing that better organization design as we define it is related to better pension fund performance in the global pension fund industry. We've done a couple of reviews of the top thousand Canadian companies on a survey basis with CEOs and heads of human resources. We've had a couple of clients where we've had an opportunity to do pre post work where we've measured before, we've measured after, and sometimes with actual benchmarks relative to other kinds of situations. One of the main things we've done is that in the work we do, we've developed a database. So we've developed when we go into an organization and do an assessment, we'll go through interviews and do time spans and so on and so forth. And from doing that, we've collected a database over the years. So we've got a database now of over 59,000 manager direct report relationships from over 76 organizations. We've got over 13,000 employee responses in terms of employee satisfaction over that period of time. That gives us an ongoing framework that we can assess either directly in terms of that particular client, but more importantly, over a period of time in terms of the total database. So what are the relationships in this total database? So what I'd like to do is I'd like to just make a couple of other comments first related to kind of our sense of the field. And then I'd like to get into the specifics of the research outcomes and what we found. So in terms of the field and in terms of kind of thinking about writing and what are some pieces that maybe are missing and or aren't as developed as they might be. So I'm going to go through several. So I'm basically saying that there might be some holes or flaws, so people might disagree with me on this. So we might have some interesting discussion. So the first one is, there's not a lot on what I would call the consulting process. So the consulting process in terms of for those of you who have gone through a management consulting program or whatever, the consulting process in terms of initiation, contracting, doing an assessment, doing a report, a meeting, implementation, sustainment that kind of flow. One piece of the book is, well, how do you do this engagement? And the engagement doesn't have to be an external consultant. If you think about doing this internally, it's the same process. Kind of like if you do project management, it's good to know what the whole project management piece is. If you've got a little project, you don't go through the whole implement the whole project management calendar. But knowing what the pieces are is critical. In terms of just even if you check things off in two minutes, if you understand what that is, you're better able to do it. In terms of our work, there are two pieces that we think are important. One is how do organizations function? And most of the Ro literature has to do with how they function. That was what Elliot was really interested in, and he was a genius in the second piece, which isn't focused on very much, in our opinion, is how do organizations change? Part of this process in terms of doing the writing, was to go through the literature. So I've been reading a lot of the books, not only the Ro books, but also the other organization design books, galbraith, whatever, to try to get a sense of what's out there and what isn't out there. So in terms of looking at Ro, in some of the pieces that I think are weaker and or missing that this book tries to address, the first one is understanding strategy. So if you look at the Ro methodology, it really tends to focus on the organization. This is the organization. These are the parts. This is how the parts work together. The strategy piece, in terms of really understanding strategy, isn't as strong. In fact, in most cases, I would say it's totally missing. So in our practice, we don't claim to do strategy work, but we do claim to understand strategy and be able to relate to strategy and work with it. In terms of design, let me backtrack slightly then. What I want to do is talk about Ro more generally. And in terms of writing the book and going back over things and thinking about things, some of the pieces that we think are either missing or weaker, that we've tried to incorporate into our thinking, first of all, and methodology, but also into the writing of the book. So the first one is strategy. So Ro tends to be about this is the organization, these are the parts, this is how the parts work, and so on and so forth. The strategy piece tends to be either weakened or ignored or absent. Our view is that it's important to understand what the strategy is. We don't claim to be a strategy consulting firm. I think to a large extent that's a different expertise, but we do understand it. The other thing which is kind of interesting is that there's a myth about strategy and structure. The myth is that you create a strategy and then you develop a structure. Form follows function. The reality is that strategy and structure are iterative. You don't start with a blank sheet of paper. We had an interesting experience working with the International Red Cross in Geneva on designing their operations in 60 countries. The Secretary General wanted to do strategy and organization design at the same time. It was a very interesting process. It was an Iterative process and organization design informed strategy as much as strategy informed organization design. So there's a real Iterative relationship between those two. The second piece that we built in, and it's interesting because it used to be there, but it's not anymore and it's a systems framework. I wrote a book many years ago called Changing Human Systems which looks at different levels of human systems, how they function, how they change the role of a third party in the change process. And I like the concept of stratified systems theory. I think that organizations are human systems and I think they're stratified. And I think that part of the unique value and added value of Ro is the stratification piece of It. We've introduced systems thinking in terms of this is the system, this is the environment, this is how they connect, so on and so forth. Which provides a framework that better supports the organization in connecting to the environment, understanding what those connections are, understanding what the strategy is, understanding what the linkages are, and so on and so forth. So that would be a second piece. In terms of the other pieces, the core for us is position alignment. How do you align positions vertically and how do you align positions functionally? For us, that becomes the spine of the organization. Everything else gets overlaid on the spine. To the extent that the spine is misaligned, our view is that everything else will be suboptimal. I'm going to come back to the research in a few minutes which really supports how important that position alignment is. I'm sorry. The next piece would be accountabilities and authorities. So this is fairly traditional. How do you set up accountabilities and authorities for employees, managers. Managers once removed get into cross functional accountabilities and authorities. One comment that I would make here and it ties in with accountabilities and authorities, but it also gets back to functional alignment. I think that Ro is particularly strong in terms of the vertical alignment and is particularly weak in terms of the functional alignment. I think that if you look at other practitioners and I'd cite Galbraith as one, I think there's far more effort and work and good work in terms of how you do functional alignment. So I think there are some pieces there that we can learn from some of those other practitioners. If you look at Galbraith and some of those others, the obvious missing piece is they don't know how to do vertical alignment. So if you don't know how to do vertical alignment and it's such a core part of organization design, I think you're substantially weakened in terms of the work that you can do. So I think those folks suffer a significant disadvantage. I think there are things we can learn from them in terms of doing better work. Next piece would be matching people to positions both current and future. We don't do a lot of nontraditional things there in terms of the Ro pieces. We tend to follow those. We've made a shift on the next two variables. What are called tasks we call deliverables. We use the term task for some micro pieces of work and I'll define that in just a minute. But for us, one of the problems we've seen in organizations is that they're unconnected systems. So you've got a strategic planning system up here, you got a business planning system here, you've got a performance management system. None of them are connected. So you got these three unconnected systems that are supposed to be doing these things. Our approach here would be as much as possible to create one integrated, what we would call organization planning and review system. And that system would be a Cascading system. It would be Stratified and it would have six components. The first would be mission. Before I get into those six, let me say that the idea would be that each manager in the organization would have an organization plan within the context of his or her manager in a Cascading and iterative process. So the first is mission. What's your business? So for a CEO, what's your business? For someone who's running a training unit at a stratum three level, what's your business? Next would be vision. What's your vision of where you want to be, whether you're a CEO or you're running that training unit? What are the values in terms of the behaviors? Now these do tend to be more consistent throughout an organization. There's not the same differentiation. There the fourth one, and I'm going to come back to this in a minute. We call it strategic positioning and I'm going to come back to it. The fifth one is the operational plan. So what are you going to accomplish this could be Qqtr, whatever. And the final one is the resource plan. What resources do you have and how are you going to use them? Money, people, so on and so forth. For us, strategic positioning, one of the problems I've talked about the absence of strategy. One of the issues with strategy, in my view, is that strategy is ill defined. It's used in all kinds of different ways. It's amorphous. Everyone wants to have strategy in their title. So the term we use is strategic positioning. And for us, strategic positioning is for this unit, whether it be a total company or, excuse me, running this training unit. Strategic positioning is how do you position your unit to provide better value to stakeholders than alternatives? How do you position your unit to provide better value to stakeholders than alternatives? So stakeholders could be the market customers. You think about your suppliers, think about your shareholders who need to make money. Alternatives could be competitors, could be new, entrants, could be doing nothing. One of the alternatives to consulting services is doing nothing. So providing better value than alternatives. I say this half tongue in cheek, but this is something that we would see each manager doing within the context and the prescribed limits of his or her manager. And our view is that strategy is too important to leave to senior executives. What you want to do is you want to integrate this stuff through the organization. Okay? And then the final piece is tasks. Tasks for us would be smaller pieces of work. So something where I receive something, I do something and I have an output. To give you an idea in terms of sizing of tasks because that's always a question in a position. When we do this kind of work, we find that the criteria we use is that a task should account for 5% or more of someone's work. So someone could have up to 20 tasks. The average we find is ten or twelve. Some people have fewer than that in this methodology, what we do is we look at the tasks that people do. So this is micro analysis. Everything I've been talking about so far is macro. You go through the whole organization on this macro basis. Where task alignment is important is in situations where there's lack of clarity between stratum one and stratum two work. Okay? So if you think about a hospital, what's a nurse in terms of Stratum, in terms of capability, in terms of the tasks they do. So do you have the stratum right? Do you have the capability right? And are people doing the tasks that are appropriate tasks for that level? We had a situation where we got called in by a pharmaceutical company. They had a quality assurance unit that was doing poorly. People were leaving, the work wasn't so good, so on and so forth. We looked at what they were doing. What they were doing was they were hiring quote, unquote, the best people. So they were bringing in PhDs. Well, if you understand quality assurance, it's really bench chemistry. It's really stratum one processing. So you're bringing in these PhDs and the work is stratum one processing. These people are creative people. They came up with all kinds of new processes all the time. So needless to say, the work wasn't very good and they weren't very satisfied. So it'd be an example of where there's kind of a misfit. We've done 15 studies now, and what we find is that professionals spend about 50% of their time doing lower level tasks that someone could do just as well for less money, maybe better. The potential annual cost savings works out to about $10,000 per professional, not to mention the employee satisfaction hit that you get if you give people the right level work, which we all know about. So we've defined task in this way, and part of it is we've developed an approach to look at the difference between stratum one tasks and stratum two tasks. We can't get beyond stratum two. Don't know how to do that, but we can differentiate between stratum one and stratum two tasks. And that's where most of the work is and that's where most of the conflict is in terms of getting it right or not. Those would be the major pieces in terms of the book and thinking and so on. There are some other pieces as well. We've got stuff on boards and project management and process management and compensation and so on. But those are some of the major pieces. How about if I shift then and talk more specifically about the research and then maybe open it up for questions and comments? So we've got 23 research projects that are going into the book. These have been done over about a 15 to 20 year period. A number of them, quite frankly, are new because as we got into writing and looking at stuff, we said, geez, we've got some data here and this is an interesting question, so why don't we do some analysis of it? So there's a fair bit of new stuff as well as a result of going through this process. So the most fundamental piece, we've got 23 pieces of research. They're done in different ways, different times, different methodologies, and have a similar framework. In terms of the things that we're looking at, the first thing is we're looking at organization design as we define it. So we'll go into an organization and we'll quote, unquote, do organization design. So do an assessment, make recommendations, work on implementation, do the sorts of things in terms of aligning positions and accountabilities and so on and so forth. One of the variables then is organization design. The measures that we look at in terms of that relationship, we look at employee satisfaction. We've got our own questionnaire. But what's interesting is in most of the cases, our clients actually were measuring employee satisfaction on their own with independent measures. So we simply used their stuff pre post. The second is customer satisfaction. It's a little harder to get. We've got some direct measures of customer satisfaction, we've got some secondary measures. The third one is financial performance. So again, we've got some direct measures, we've got some secondary measures, and I'll talk about that in a minute. In terms of different aspects to the financial performance, there are two other variables that come into play. One is relationship with manager. So for us, relationship with manager is a significant intermediate factor. If you look at the book first, Break All the Rules by Buckingham and I forget the other chap's name. Anyway, they wrote this book on how important the relationship with the manager is. Did some research on that. In my opinion, they don't have much in the way of a solution, how to improve it, but they certainly indicated that it's important related to employee satisfaction and outcome measures and so on and so forth. So that's a factor. Here's the other factor, and this has been a surprise for us, quite frankly, because I wouldn't have expected that any single factor within organization design would be robust enough that it in itself would lead to those outcome measures. And that one factor is the manager direct report alignment. Having a manager exactly one stratum above a direct report, that one factor by itself is related to those outcome measures. And when you kind of think about it, if you do employee opinion surveys, the most important factor is virtually always the relationship with the manager. When people talk about turnover, they say you don't leave an organization, you leave a manager. So that relationship is critical. And what we found is that so you got the manager direct report alignment when we go into an organization and do our assessment. So we have a method for doing this. We find that the manager direct report alignment is correct about 50% of the time. 59,000 manager direct report relationships correct about 50% of the time. About 40% of the time it's compressed. They're actually working at the same level. You don't know that on an organization chart because that's just boxes on a piece of paper, isn't it? Till you actually understand what the complexity of work is, you don't know that in about 10% of the time there's a gap. So I'm saying that the single most important factor in organization design is the manager direct report relationship. It's only right 50% of the time. So just a huge potential for improvement in organizations. What we find is when we go in, our approach tends to be that we'll go and do an assessment of a whole system. So a whole system could be a total organization or it could be a part of the organization. We would tend not to work with something smaller than a stratum. Four subpart from our point of view, if you want to sustain something you got to have enough critical mass. Our tendency is to work at that level and above. When we go in and do an assessment we find that the potential annual cost savings for an organization and this is a conservative number, works out to about $2,500 per position times the number of positions in an organization. So if we go in and do a review of 1000 person organization that's two and a half million dollars. Our clients would say, and we would agree that that cost saving is a nice bonus on the way to better performance for us and our clients. It's clearly not the purpose of doing the work. The financial hit comes later in terms of the improved performance. That's the big win. This is a nice pickup on the way to that performance. In fact, our work really one of the things we like about doing this is that the research clearly shows in our experience that better organization design is related to better employee satisfaction, customer satisfaction, financial performance. It's not a win lose situation. So we really like that. It's nice if you can do work that you feel good about. If we have a situation we've had several of these over the last number of years, a few of them that you've read about in the newspapers where we've been approached by a company that clearly just wants to do downsizing and isn't interested in improving their organization. We turn down that work. We're not interested in doing just downsizing work. That's not our business. There's significant upside and obviously that comes if you think about 40% of the positions being compressed. That leads to a number of opportunities and when you do a comprehensive assessment you can really pinpoint where those situations are eh, so it's not like you lop off a level or something. You can really identify where the positions are that are dysfunctional are redundant from a managerial perspective. Dealing with those and getting rid of positions that are dysfunctional from that perspective and giving the people and the organizations opportunities to do real work and be in positions that really add to the work because people know if they're not in situations where they're adding value, we think that's important. Now obviously sometimes you can't find another position for someone so there is some downside to that. But often that downside in terms of results in people getting real jobs that are meaningful to them as well. So that's not necessarily a bad thing. A couple of other pieces. One is when we go into organizations we also look at compensation. Our research is that the time span correlates very highly with other job evaluation systems. So when we go in and look in an organization, we look at their current job evaluation system, there's a high correlation. Obviously the advantage of time span is that you've got clear boundaries which other job evaluation systems don't provide. So even if you don't want. To use time span, you can get some clarity at those boundaries. The other advantage is that in terms of individual contributor positions, it's a better way of assessing. So the other job evaluation systems, they tried to compensate for this in some ways, but they tend to put a high premium on having big budgets and having lots of direct reports, and those aren't necessarily synonymous with doing complex work. So this method is better. From that perspective, I'd say that the bulk of our clients, some have but I'd say the bulk of our clients have not sort of taken time span as their new job evaluation system. Some have, but the bulk of them have used it as an adjunct to help them clarify issues and understand issues that they previously had and get better alignment. So if you look at a job grade system in an organization, some are clearly within a stratum and some are at the stratum boundaries and go run both sides. So it gives organizations opportunities to understand some of the issues that they have. Two of the studies actually have to do with information processing capability. One was pretty much a total replication of the Jackson Kason work in human capability. Our correlations were all significant, weren't as good as theirs. I don't know what they did that we didn't do, but they were all statistically significant. We also did another review where we assessed several hundred people in an organization and there was a significant correlation between those assessments and the job grades that they had. So again, another piece of support for this, and the final piece that I want to share with you was we did a number of pieces at the end. So we're looking at this and we're saying, well, it would be interesting to see if we could find this and figure this out. So we look for opportunities to do other stuff. By the way, I want to say this, I think it's really important is especially the way journals operate in terms of the research we've got, we have not hidden any research, so all of the research we got is clean. Like, if you look at journals, they often turn stuff down. That's not positive, eh? So you never get a good handle on what works and what doesn't. So in terms of our reporting and the research, it's all know, I'm a little embarrassed we don't have the same results that Elliot and Catherine got, but what the heck, that's what it is. And similarly, in terms of the executive comments and the case studies we've got, it's a full set in terms of what's been good, what's been gray and unclear, and what we think is actually failures. So on both sides, we've tried to be transparent. So final comment would be the last thing we did was a piece of mischief. And the piece of mischief was there are a number of consulting firms around who go into organizations and say what you need to do to fix your problems is to have a span of control of seven. If you have a span of control of seven, we'll work with you to do that because, you know, in the literature it says six to eight. And, boy, that's been in the literature for a long time. So that's really sound research. It's not, by the way, there is no research on that. And so seven so what we did is we went back and we looked at three major organizations. We correlated the span of control with employee satisfaction, as we've done with a number of other variables that we've tested. Absolutely no relationship between span of control and employee satisfaction. So not surprising. That's what we would have predicted. But we hadn't seen any literature or research on span of control. I mean, everyone talks about it and going back to Erwick or whoever, but so now there's a piece of research showing that there is not a relationship between span of control and employee satisfaction.

Speaker C So you mentioned the importance of leader member exchange, employee supervisor relationships. Yes. Have you done any work looking at not only CIP and levels, appropriately placing levels, but also there's a lot of work on the continuum of situational factors with intrinsic and extrinsic motivation and self determination theory. And some of the factors there I don't know if you're familiar with that area and the impact that internalization of autonomy and goals might have.

Speaker B Yeah, no, we haven't gotten into that. I mean, that would obviously be interesting to do. What we've done is we've kind of focused on the area where we think our depth and expertise is. What we've done, which is sort of interesting is that in terms of the total field, we can't do research on the total field. We've got this piece that we think we're good at and we've got good data on, but we can use other people's research. So, for example, we can demonstrate, not surprisingly, that better manager direct report alignment leads to a better relationship with manager. There's a very high correlation between those two. Buckingham and Kaufman. That was Buckingham and Kaufman. Their research shows that the relationship with the manager is related to customer satisfaction, financial performance. So we can say, look, we can get this far in the continuum. We do have some data on the other stuff, but not a lot. But these folks have done this. The other one that we use is the service profit chain, or profit service chain. I think profit is the first word. But there has been significant work done in that area. Going back to Gosh, it goes back to about 95. What they've done is they've talked about employee satisfaction and how it's related to customer satisfaction and how it's related to financial performance. So they've actually developed a service profit chain showing the relationships among these variables. So we would say, look, we can get this far and we do have some stuff showing these outcomes in terms of customer and financial performance. We don't have as much as we do on some of these other variables, but these folks have done more extensive work there. We can show you how we can get this far and then they've done some great work in terms of taking that further. Yes.

Speaker D There's a book called The Coming Jobs War written by James Clifton as head of Gallup Poll. And they poll companies all over the world continuously and see if I have these numbers should be reasonably correct. He said 28% of employees are engaged, 53% are in neutral, kind of bumping along. And then he said 19% are actively disengaged and are actually out to destroy the company. And listening to your manager relationship, they probably have a bad I'm just thinking they probably have a bad relationship with their manager and their only out is to hurt the company.

Speaker B Yeah, it's a very good point. We were somewhat clear about this before, but as we got into doing the writing and some additional pieces of research, it got more clear how important that manager direct report relationship is and also how important the Manager direct report vertical alignment is. We would say that the manager direct report alignment is a necessary but not sufficient condition for a good manager direct report relationship. To the extent that this is misaligned, by definition, this will be suboptimal. This isn't the whole story. There's a whole lot of other stuff, including some of the managerial leadership stuff that's part of this system. But it's a significant piece. So one of the interesting things in terms of first, break all the rules was very interesting in terms of the relationships and so on and so forth. I think that in this there are some very specific things that are doable to make those situations different and better. Thank you for that piece of information.

Speaker A Ron, on the same theme, this problem between one and two basically is the issue job design or is the issue lack of skill in managerial practices or is the issue the wrong level of person at two?

Speaker B Yes and yes. So when we look at those situations, when we look at those situations, there are three main variables and all three of them have issues. The first is do you get the positions aligned properly? Is this a stratum one or stratum two or stratum three position? So that's step one. The second piece is not necessarily in this order, but the second piece is do you have someone who's got the capability to do that work in terms of information processing capability, skilled knowledge, valuing the work? So that's the second piece. The third is are the tasks, the right tasks in that particular piece of work, in that particular role? And we find that all three of those interact in either positive or negative ways.

Speaker A Do you have any research or opinion on how this plays out at three and four, for example.

Speaker B Not from that perspective. In terms of the task alignment work, we've really only done it at one and two, so I can't comment on three or above for that in terms of three and four. And we find that at different strata there are issues, so it's not limited. But one of the most difficult strata in terms of getting the alignment right is stratum three. And one of the reasons I think is because of this annual planning system, organizations have everything's one year. So if you're a stratum three and it's a one to two year time span, most organizations don't think in those terms you've got the one. So one year time span is perfect. If you're at the top of two or bottom of three for everyone else, it's useless. Yeah, that's right. I think that that annual plan, and I understand why you have it, you're not going to do away with it. But I think that annual plan is just a tremendous impediment in terms of getting work aligned properly. We often find people in stratum three roles are not doing each role has unique added value. Eh, people in stratum three roles are not doing the unique added value that they're being paid to do.

Speaker C Okay, so I want to comment on the annual goal piece and then I'm going back over to what Art said. We have found several occasions where the annual goal phenomenon has gotten low to managers in trouble because, for example, we have several clients who have set standards for every employee will have 40 hours of training in a year. And yet the level two managers are their role is at low two. So you're talking four month, six month time span of discretion, and yet they're accountable to see that all their level one employees get 40 hours of training over the course of a year. So by definition, if you believe time span of discretion, those level two managers should not be held accountable for a one year deliverable. And we actually had an instance where the CEO was bonus on this particular factor and they were sleeping at the wheel and it came up, the year ended and the employees at level one who were reporting to these low two managers did not meet the requirement. And we went back to them and said you couldn't see this coming. You gave a one year accountability to people who are at low two. They didn't manage it correctly.

Speaker B Okay, good.

Speaker C So point one on that and then back to your comment. Around 19% of employees self report engagement. Glenn Meltreder of People Fit, who I work quite frequently with, collects data on similar data to you and he's spoken on this before looking at person to manager alignment. His number is 52% mismatch 48% aligned. So very similar. Then he looks at person to role and we've got about 48% mismatch 52% alignment and then role to role design. Do we have reporting relationships from one level to the next? Mismatch about 34% of the time. And of course, various people in the organization have more than one of those out of alignment. And after doing the calculations, Glenn came up with and I can't remember the exact number, but the number of people who actually have a requisite situation in those three areas would be right at about 21%. So it aligns very nicely with that number around self reported engagement. I find that very interesting. I wanted to add that.

Speaker B Thank you.

Speaker C I do have a question.

Speaker B Yes.

Speaker C So you mentioned that requisite that focus a lot on how to understand how organizations function.

Speaker B Yes.

Speaker C But not really on how organizations change.

Speaker B Yes. So my reading, when you go through the books and so on, I would conclude that.

Speaker C So one of the comments I hear quite often from management that I not only at Novos but in other organizations is that requisites sometimes can be very rigid. How do you relate those two things and how can we bridge the gap?

Speaker B Well, first of all, we don't use the term requisite organization. I personally don't like the term. And I think that requisite organization does have a tendency to be a closed system. It wasn't intended that way, but I liked Stratified systems theory better. Actually. To me, requisite organization in terms of this is requisite and this is what you should do in my practice. Well, let me make a general comment. I don't think anywhere there's a 100% perfect requisite organization. My role as a consultant is to help organizations improve performance. I believe that this methodology and time spans a critical piece and information processing capabilities a critical piece. This methodology, I believe, works to help managers improve their performance so that's my business and I will work with an organization to do that. We have certain ways of working. This is more prescriptive than some other systems. We had a situation where a potential client talked to us and they had a major consulting firm in the major consulting firm was quote unquote, doing organization design. Well, what they had is they had a generic change management process that you could apply to absolutely anything. It could have been organization design, it could have been process improvement. I mean, all you have to do is change 73 words and you can change what it's supposed to do. They had absolutely no concept around organization design. What they did is they had all these groups. So what we'll do is we'll set up these groups and we'll talk about it and we'll come to a consensus as to what it should be and no framework, no research. So I'm much more comfortable going in saying, look, this is what we do. These are the executive comments and organization experience supporting it. This is the research supporting it. You as a manager need to deal with probabilities. So this is not 100%, but there is a track record here in terms of assessment and implementation of being successful. So as you consider this, I would argue that this probably has a higher probability of success for you than a lot of other things do. And that would be the way I would approach it. But it's always in terms of using this. The tentative title of the book is Improving Organization Performance by Optimizing organization Design. So organization design is a methodology, but it's in the service of improving organization performance. If it doesn't improve organization performance, we're wasting everyone's time.

Speaker A We ran into one consultant who did that. I've intentionally attended the professional association meetings of people interested in organization design. Let me tell you, it is not one consultant that does that. Yes, among the various organizations design groups, the Organization Design Forum largely emphasizes process. They have a training program like ours. It's entirely process oriented. I don't know of any substantive theoretical background other than organization development change process. There is a new group in Europe. The organization Design Forum Europe. And we have talked to them and looked and they might talk about holocracy or sociocracy or some organic process. But basically most of them are participated processes where there is consensus. So I would question these groups privately and in plenary. What is the basis of your theory? What do you use? And some said, well, we use a little sociotechnical, we use a little Gullbraith, some of us use some Jax. But in the presentations that was almost entirely absent. So in the culture they do not talk about their theory base. At the professional association level, there are two who do. One is the Sociotechnical systems roundtable. They have about 40 senior practitioners and they do have a theoretical approach for designing organizations largely at levels one, two and three. But they're trying to move higher levels and do that work. The other organization design group that we've looked at is the Theory of Constraints after Gold Rat. And they do have processes for designing processes largely at the factory or level four. And they're struggling to go up. They would love to connect with us. So I just wanted to take your comment about one other firm doing that and I would say it's probable that a large majority of the firms do that.

Speaker B Good point.

Speaker A It's that and that our approach. And the resistance when we try to get on the program of these associations is that's too prescriptive. We don't want to be confined by these assumptions which we as participative process people, do not like because it has levels of capability and we have an egalitarian system where everybody participates and we do not like the language or approach where this is not true. So anyway, I just wanted to reinforce that.

Speaker E Ron.

Speaker B Yes.

Speaker E Coming back to these prescriptive traits, so said traits of the theory myself, I name the theory as the natural organization in the sense that it is based on laws we carry inside us. For example, the CPI, the levels and the different chemistry of each level. So I have the same problem as you have that sometimes students are saying, well, this is too stiff and everything is according rules, et cetera, et cetera. But I always stress about the fundamentals of our human nature at the bottom of the theory. So we call it the national the Natural Organization.

Speaker B Okay, thank you. Quick little question, Ron. You talked about two and a half $1,000 saving potential per employee. How do you get that? You get that in terms of identifying redundant positions. And what you do is you do the analysis. So you look at gaps in compression. So typically what we would do is we would go in and look at a whole system, whether it be a whole organization or a whole business unit. We would do an assessment of that. We would do an analysis and make recommendations. The 2500 comes from looking for positions that are redundant positions, redundant managerial positions that you can pull out of the system. And it's a fairly conservative number because we'd only take ones that we felt could come out. And also the number we use is only the compensation number. So it's kind of salary plus expected bonus. We don't include benefits, which could be another 30%. So we feel it's a fairly conservative number. I forget what the percentage is, but in terms of a percentage of positions, it's a relatively small percentage when you think that on average 40% are compressed. If we were to push it, I think we could push that number up. But our view is that our job is to help the organization get to a point where it can optimally perform. And this number for us is a relatively conservative number. So it sounds like it's on the order of about 2% of their overall managerial payroll. Yes, it would be in that kind of neighborhood. So for us it would be low hanging fruit. If an organization wanted to do more, one could use other methods to identify other positions, but for us this would be relatively low hanging fruit. Yeah, good question. Ron.

Speaker F I want to take you back to customer satisfaction and the employee relationship with the manager. Now, I'm not sure whether it's the cause of looking through the lens of requisite organization or whether it's just because I'm quirky. But when I look at words like customer satisfaction, I wonder what it means. And when we poll customers or employees well, sorry, employees when we poll employees about their satisfaction, they're sitting in a particular context. If we assume that we're going to reform the organization or the relationship between the employee and the organization or the employee and the manager, then the context presumably will change. My question is in that new reformed context that I think is different from the old context. My question is what is the employee entitled to be satisfied with in the contract of employment and what is the employee entitled to be happy with or satisfied with in the relationship with the manager? That's a quirky question. It sort of inverts a lot of what we understand as employee relationships and employee satisfaction. Did you consider that question in your assumptions around employee satisfaction in the work you've done?

Speaker B So in terms of our work, when we go into an organization and do first measures in the assessment, there's been no intervention. So in terms of an intervention, an intervention would align positions, do work on accountabilities and authorities and so on. In many cases we've got pre post measures. So in terms of this instrument, whatever it might be, sometimes it's our employee satisfaction questionnaire, sometimes it's questionnaires organizations currently use. There are clear indicators that this has improved in terms of the question as to exactly what employees deserve to be satisfied about, entitled to be satisfied about. Quite frankly, that's a more abstract question than I would get into in terms of this methodology. I mean, I think it's good and important, but I would be more concerned in what we do, that we've got a reasonable measure of satisfaction and we're doing things that appear to be beneficial in terms of the organization. So I'm not saying your question is not an important one. I'm saying that in terms of our work and our focus, we would be spending more time in terms of the doing and measuring rather than getting more deeply into an important question like that.

Speaker E Which is the experience that comes out about practices. When you speak about 360 degrees surveys, what do you think about the impact on organizations of that practice?

Speaker B So we don't use 360 degree surveys, so it wouldn't be a practice that we would recommend. Quite frankly, in terms of going into organizations, I would see our role as going into an organization and helping the organization to be more effective and and we would have some methods that we think will help that. We've got some measures in terms of satisfaction, employee satisfaction, customer satisfaction, financial performance that we think are reasonable measures in terms of whether things are the same or better or worse and we would focus on those things. I wouldn't claim that the organizations we work with are perfect organizations so that an organization we work with may do a 360 degree survey. It's not something that we would recommend doing. But I would see, quite frankly, if I saw our job as being to create a perfect organization in the requisite organization model, I'd go nuts. I see our job as improving organization performance by creating better design. And if I can do that and be reasonably satisfied, I am through the methods we use, through the direct experience of working with people on those methods, through the research measures we do, through the anecdotal data we get from the companies then I think we're doing good. Are we perfect? No. Are there some deeper questions that we haven't answered? Yes, but I really see our job as helping organizations improve by having better designs, even in a 360 degree. My curiosity from that question, which is very interesting to me, is, does doing 360 actually disrupt natural tendency toward requisite structure? And I don't know if anyone has any experience with that. I doubt anyone has any data, but that's a very interesting question. It seems to me it works backwards.

Speaker D Against do you use Elliot Jack's Felt Fair Pay theory at all in your work?

Speaker B So in terms of our work, we do use compensation, but we don't use Felt Fair pay. So when we go into an organization and do an assessment, we like the idea of having converging data to understand the roles. So when we go in, our ideal is and we usually do this we interview all managers. So by doing that, we get time spans on all employees. We ask managers what they think their time spans are. So we get some indication of delegation, we get compensation information from the organization, and we stratify it, and we call that compensation spans. So when we look at a role, assuming it's a managerial role, we've actually got three data points on the role plus the roles above and below that also give us guidance in terms of thinking about the levels of those positions. We've also got research on compensation relative to time span, relative to job evaluation systems, but we haven't used Felt Fair Pay directly. Lam.