Improving the Organization Performance by Optimizing Organization Design

A keynote presentation to the 2014 GO World Conference in NYC by Ron Capelle summarizing his book Optimizing Org Design

In his keynote address, Dr. Ron Capelle discusses Optimizing Organization Design. This approach is based on over 100 large scale projects and 24 research studies that have been completed over the past 25 years. They show that this approach leads to better employee satisfaction, client satisfaction and employee performance. Ron presents some of the key features of this approach, including comprehensive assessment and implementation methods and the use of benchmarking databases.

Speaker A Now I'd like to get right into the keynote. Ron Cappell is one of the founding group of the Society, one of the early sponsors and has been active throughout. And when we started working wit..

Speaker A Now I'd like to get right into the keynote. Ron Cappell is one of the founding group of the Society, one of the early sponsors and has been active throughout. And when we started working with Elliot, and I think Ron was in the very early groups in Toronto, he had a very early appreciation for the need for some metrics. He was one of our first analytics guys, and I know Glenn Meltredter at the same time where's Glenn here was doing things. And because Elliot was a psychoanalyst and had client confidentiality, I think Glenn and Ron discovered you were doing similar things but had not known about each other. But Ron has been working independently for many years putting together data and recently has put it all together with his methods in this book, Organizing Optimizing Organization Design, so out last November, and we're very proud to have him here and share it with you. And with that, I give you Ron.
Speaker B Great pleasure for me to be here speaking with you today. I've really been looking forward to this. What I'm going to be talking about is optimizing organization design. And optimizing organization design is the term that we use in terms of the work that we do. And what I'd like to do during the course of this presentation and then we'll have some questions and discussion after, is talk about traditional Ro and how this optimizing organization design approach has evolved. From that, there are some differences. I'm not suggesting that this way of doing it is better than other ways. I'm not suggesting that you should do it this way. What I am suggesting is that this is something that we've developed over time. There's very good data that it works, and there may be some ideas in here that might be useful to you. So the objective is really to share this with you and give you an opportunity to look at what might work or might not work in terms of how you do your professional. So the beginning is that our approach clearly builds on the work of Elliot, Jacks and others. So that's very foundational for us. And in particular, the time span, method and information processing capability are both core for us. They're core to both our research and to our practice. We consider those to be really seminal methods, scientific methods, research based methods, which we've continued to use and develop. There's a real integrity, I think, in terms of how we approach those foundational pieces. However, things are always evolving. And as Elliot was doing his work, things evolved during that point in time. Part of my thinking was that if someone's going to make a claim that something is useful, something improves organization performance, then I think it's incumbent on that individual to have some evidence supporting that. That's very rare in the management consulting fields. So my sense is that there are two proofs that are relevant. One is a research proof. So there's actual research showing that this makes a difference or that these are related to these and also executive experience. Have executives actually been able to use this to make a difference? So that's been a foundation, and I'll talk more about all of these points. Benchmarking Databases so over the 25 years we've developed benchmarking databases, we've got over 59,000 Manager Direct Report relationships and over 13,000 employee satisfaction responses. We've developed an assessment approach that I.
Speaker A Think you were getting a very faint.
Speaker B Ring and I think is quite effective and efficient in terms of how it's done. We've developed an implementation approach. One of the interesting things for me as I went back over books on organization design is that virtually none of them talk about implementation yet. If you go back in the research to quality, reengineering, you name it, one of the biggest problems was the implementation. The research indicates about 60% of them don't deliver the results that are expected. So there's an implementation approach, there are systems based models. It's interesting. Ro. An original term was stratified systems theory. I find systems theory to be extremely valuable in thinking about and working with an organization. I think some of that systems approach has been lost and we've tried to bring it back in in the work we do. I think too often Ro is thought of as a black box inside an organization with not enough understanding of the environment and the external connections. We've done work on what we call deliverables. When we go into organizations, we often find that there are multiple systems that are not connected well. So we've developed a term called deliverables. What are people actually delivering and what are the systems that are connected to those? And then finally, we've used the term task in a different way. For us, a task is a small activity or piece of work that someone does. When we do research on this, a task has to equal at least 5% of someone's work, at least 5% in terms of the activity. So that's how we size it. And then we have multiple measures of tasks. So that gets down to a more micro level, which is a nice complement to some of the broader pieces. So I'll be talking about all of these, but this is sort of a summary of what I think are some of the highlights in terms of development. So the first statement is optimizing organization design leads to improved organization performance. And this conclusion is based on 25 years of experience. We've got 24 research studies that we've done over the years. 23 of the 24 are in the book. We've got executive proof. We've done over 100 large scale projects and have material related to those. We've got this. Manager direct report. Benchmarking database. So over 59,000 manager direct report relationships from 76 organizations. So we've got an opportunity to benchmark what a particular client is doing relative to this. We've also developed and this has been really useful. We've also developed an employee satisfaction benchmarking database. We developed it particularly for organization design. So it's different than a typical employee satisfaction survey. And we've got over 13,000 responses to this. One of the advantages of this is that that allows us to look at how organization design does relative to employee satisfaction. So we can do some measurements in terms of some related pieces that are important in terms of organization performance. What we do clearly builds on Ken Crattock and the annotated bibliography. So that's just a fine piece of work. And it was wonderful that, Ken, you were honored earlier in this session. But there are other pieces as well that are important. One of the links is to Buckingham and Kaufman. They talk about this is the Gallup work. First, Break All the Rules was the book that came out a while ago. They talk about the importance of the relationship with the manager. So the relationship with the manager relates to employee satisfaction, customer satisfaction, financial performance. They've got quite a bit of work on that. What we believe is that the manager direct report alignment is foundational to the relationship with the manager. So one of the interesting things about their stuff is they don't talk as much about how you make it better. But we believe that the relationship with the manager direct report alignment is foundational to the relationship with the manager. There's another stream of research by Hesket and others on the service profit chain and again they look at the link between satisfaction, employee satisfaction, customer satisfaction, financial performance. So we've got some of the related pieces, and these two streams of research, I think further strengthen some of the conclusions that we've derived. So this is all summarized in the book that Ken mentioned that came out recently. It also has four case studies. We use language in different ways at times, so it's got a glossary at the back. One of the things that Elliot talked about that I think is important is that you operationally define what you're talking about. So we've got a glossary at the back, executive comments, 23 pieces of research. And then the major part of the book is talking about how one does this kind of work. So the benefits, better employee satisfaction, optimizing organization design, improves a manager direct report relationship, and numerous other related factors. So because we've got this employee satisfaction questionnaire, because we've been fortunate enough to be in situations where independent research was taking place on a pre post basis, we've got some good data on that. We've got data on better customer satisfaction. So optimizing organization design leads to better customer satisfaction, better financial performance. When we go into an organization and do an assessment, and I'll talk about how we do that later, what we find is that the potential annual cost savings works out to about $2,500 per employee, times the number of employees in the organization. So 1000 employees, that would be two and a half million dollars. Quite frankly, that's low hanging fruit. It's a very conservative amount. And our clients would generally say that that's a nice byproduct on the road to better performance. It's not the purpose, but it's nice to have that up front. And then the improved performance on an ongoing basis is clearly the prize from a financial perspective, as well as these other interrelated outcomes. Sustainable competitive advantage. So if you can do those three things, that gives you some competitive advantage. Our view is that when it's implemented properly that it becomes a sustainable competitive advantage. It's harder to copy, you can change your price and someone else can match it overnight. But if you put this in and do it well, it's more sustainable. Significant return on investment, better strategy implementation. This for us is a real key point. Organization design is a foundation for strategy implementation. To the extent that your organization design is suboptimal, by definition, your strategy implementation will be suboptimal. So from a CEO perspective or a business unit head perspective, this becomes quite important. And then better human resources management, you folks would be quite familiar with this provides a foundation for this. How many levels are strata? Putting positions in the correct stratum, improving the manager direct report alignment, breaking down silos and improving work across the organization and improving talent management. Virtually every organization that we go into complains about having silos and not working effectively across the organization. Virtually no organization we go into has effective cross functional accountabilities and authorities. Cross functional accountabilities and authorities are the prize. But the work is getting the positions aligned vertically and functionally, getting the employee and managerial accountabilities and authorities in place. This provides a foundation over which you can overlay the cross functional accountabilities and authorities, which is a significant prize. So what is organization design? Different people define it in different ways. So our definition is it's a stratified human system. First of all, it's a system. Again, we think systems theory is extremely valuable. A system has inputs, it has throughputs, it has outputs, has a feedback mechanism. It's in an environment. So it's a system, it's a human system. Organizations are about people connections with people and it's stratified. There are different levels in an organization. There's some debate around organization shouldn't be hierarchical or whatever. When we go into an organization that's sometimes discussed, one of the things I'll ask is do you have differential titles in your organization? Yeah, we do. Do you have differential pay in your organization? Yeah, we do. Do you have some people reporting to other people in your organization? Yeah, we do. You've got a stratified organization, you've got a hierarchy. I'm not bringing you a hierarchy. What I can bring you is a way to do that more effectively than you currently do it. So we've got a systems based organization functioning and organization change models. So we've got a systems model on how organizations function. We've got a systems model on how organizations change. For me those are the two key pieces. It's not just how they function, it's also how they change. It includes the alignment of positions, accountabilities and authorities, people deliverables and tasks and most of these you'll be familiar with. But I think we've got a couple of pieces that are interesting. It's research and principle based so it's robust and flexible. A lot of you folks know if you can learn the principles and understand that then you can adapt the organization as things change. It's not about having a carved in stone organization and the starting points are understanding the strategy and understanding the work. Those are the two mantras and the strategy pieces from outside the organization. So better alignment of positions. We've been spending a lot of time talking about this so I'm not going to get into it very much. Vertical and functional alignment of positions. Functional alignment is related to strategy and just a comment here and I'm going to comment on it at the end of the presentation as well. My sense is what we've tried to do is build on the strengths of Ro but also develop things that are related to either omissions or things that we think are not done as well. I think the strategy piece linking strategy to functional alignment is not done as well in Ro as it is in some other approaches. I think that's an area that we can learn more about. So if you think about functional alignment in a situation where you've got a corporate office and a bunch of business units, a person named Gould has done some very good research on that. I think Jay Gelbraith has done some very good research on looking at the alternatives one has in terms of primary alignment being by type of customer or type of product or geography and how you do some of these things. I don't think his methodology is as strong in terms of how one sets that up, but in terms of making the links I think we can learn some things from that. Vertical alignment can be determined by time span analysis as you well know and as you well know, helps to determine how many levels or strata are necessary in putting positions in the right level or strata. Vertical alignment of positions. This would be quite familiar to most of you in terms of sample position, time span and information processing. Two comments. One is that when we go into an organization we find the likelihood is and one has to examine every situation, but the likelihood is that a lot of the issues are at a stratum three level. Stratum two managers and professionals tend to be a bit clear stratum four vice presidents tend to be a bit clear. In our experience it's a stratum three level that often is not well defined. And part of the problem with stratum three is that organizations have these planning systems that are one year long. So in terms of the Stratum three folks, they're often not assigned tasks or deliverables that are appropriate for that level of work. So they end up doing more Stratum two work rather than the unique added value at three. The other comment I'd have is that in terms of the complexity of work, the time span is the primary measure and we use that information processing capability is important in terms of individuals. The other interesting use of it is that it can also become an information processing requirement for a stratum of work. So a stratum of work has both a time span and also an information processing requirement. So for example, at Stratum two, for a Stratum Two professional, one would say the time span is three to twelve months. One would also say the information processing requirement is diagnostic or cumulative. Now when you look at those two together it provides some interesting situations because they should line up similarly and when they don't, then there's something that's important to delve into. So for example, we found situations where an MBA will come into an organization, be assigned analytical tasks that clearly require a Stratum two diagnostic capability, but in terms of the time span is being given one month assignments. So if that continues for an extended period of time without some explanation and without some development, you've got a significant issue. So we find that those two together are useful in terms of some checks. Manager Direct Report Alignment this has been a surprise for us. So when we started the research some time ago, we would have expected hard to do the research, but we would have expected that optimizing organization design would lead to good outcomes, better employee satisfaction, customer satisfaction, financial performance. What we wouldn't have expected was that any subfactor of organization design by itself would be robust enough to itself lead to those outcomes. And what we found was that the Manager Direct report alignment by itself is related to those outcomes. And again, it gets back to what I said earlier. If you look at the research of Buckingham and Kaufman on the importance of the relationship with the manager, we believe the Manager Direct report alignment is foundational to the relationship with the manager. So it kind of makes sense that if this is really important and you get this wrong, you're not going to get that right and you're going to have all the downsides in terms of the relationship with the manager. So the idea which you folks are familiar with is that every employee should have a manager exactly one level or stratum above both in terms of the complexity of work done and the capability to work at that level. So you're quite familiar with that. So three possibilities it could be correct, it could be compressed, or there could be a gap. You're familiar with these three things. One comment on compression. Compression is a very good example of the relationship between employee satisfaction and financial performance. Because you're paying that manager extra money to do this kind of work. Well, that manager is not doing that kind of work. You're wasting your money on that manager. Not only that, but that manager is compressed with the direct report and you've got dissatisfaction from the direct report because that person's probably being micromanaged. So you got a financial issue and you've got a satisfaction issue all rolled up into one situation. Our research database in terms of numbers shows that when we go into organizations, the alignments correct about 55% of the time. 55% of the manager direct report alignments are correct, about 36 are compressed and about 9% are gaps. My sense is that the number correct is probably a bit overstated. The reason for that is in our database we've got a lot of stratum 21 relationships and those are easier to get right. My hunch is that the correct is probably a little bit on the high side relative to actual population, but it's a pretty good representation. By the way, just looking at this, one of the big things these days is talent management. Talent acquisition, management, retention and so on and so forth. If you think that the manager direct report alignment is the single most important factor in organization design, it's directly related to satisfaction, directly related to relationship with manager. I couldn't think of much more important thing that you could do to improve talent management than fix your manager direct report alignments. But that is virtually never on the calendar of people who are involved in talent management. Better alignment of accountabilities and authorities, employee, supervisor, manager, manager once removed. We talked about the three levels improve cross functional accountabilities and authorities break down silos and has advantages over traditional matrix approach. So I want to talk a little bit about this approach. And again we've adapted some things, but this goes back to some of the fundamentals that we've all learned in terms of cross functional work. One of the things that we find particularly important is identifying the crossover point manager. We define the crossover point manager as the lowest level manager that controls all or most of the resources that are necessary to take advantage of an opportunity or deal with a problem. So it depends on the issue or situation. It could be here, could be here, could be here. When there's an issue or opportunity. Our advice is that the first thing you should do is ask who the crossover point manager is. If you don't do that, you often get the problem worked on at the wrong level and that precludes getting it done properly. Our experience is that organizations don't understand crossover point manager. People who should have those roles don't know they should have them and the work isn't done properly. There's actually not a lot of work to be done, but it's very very powerful. So what's the work? Well, setting context and prescribed limits, saying this is the way I want things done. These are the managerial and cross functional accountabilities and authorities and so on, setting up an issue resolution and context clarification process if something comes up to a crossover point manager. It's interesting. The important thing is not that one issue. The important thing is improving the context and prescribed limits because that's probably happening 99 other places. Okay? And the opportunity to improve the cross functional accountability I'm sorry, the context and prescribed limits is usually missed. An accountability to establish managerial and cross functional accountabilities and authorities. The cross functional accountabilities and authorities that have come out of tiers, I think are very powerful. And part of the power is that A, they're defined and B, they're authorities that go with them, which is pretty different than matrix stuff. The one thing that we've added, we tend to follow these the one thing that we've added to this, which is not cross functional, but we find it fits in very well, is recommend policies or standards to one's immediate manager. So if I'm, the vice president of human resources, recommend significant human resources policies or standards to the CEO, CEO has overall accountability for human resources. And we find that that combination of recommend and monitoring creates a small G governance. So if I'm a CEO and I've got a vice president of human resources, I'm really interested in knowing what our standards and policies should be and I'm really interested in monitoring to find out if we're doing better or worse. Those are probably two of the most fundamental things that I want to know. So this small G governance, I think, is very, very important in terms of this type of work. One can decide whether one wants to directly do services or outsource or so on and so forth. So there's lots of variability and possibility. But my sense is that this small G governance is absolutely fundamental. Better alignment of people. So current matching future requirements. We've been involved in directly assessing information processing capability. Our preference is that and our experience is that when an organization's been properly stratified, managers can make those judgments as well as outside assessors can. So if you go back to Elliot Jackson Catherine's book on human capability, they've got some good research showing that. We've got a research study in our book showing that. So that puts the accountability in our sense, it puts the accountability where it belongs with the manager. Three key factors. The first two skilled knowledge and application. We've modified a bit based on some work that has been done by Ian McDonald and some of his colleagues. And in terms of skilled knowledge, we look at knowledge to do the work. Technical skill and social process skill. Social process skill is people skill. So for anyone in an organization, it involves being able to get along, being able to work in a group, so on and so forth. And as you move higher in the organization it gets into other things as well. This breakdown we find is really useful because you often find there's a big difference between the technical skill conclusion and the social process skill conclusion. And separating those is kind of neat. Someone may be very good technically but may have very poor social process skills. So in terms of being a stratum two manager may not be very effective in terms of valuing the work. We use the term application. The question here is does someone fully apply themselves to all requirements of the job? And this again becomes particularly important when people move from professional or technical positions to managerial positions they may not really want to manage. That's the only way to move up the organization. So you can lose one of your better professional or technical people and get one of your worst managers in one move. And then the third one is information processing capability which we use in the traditional sense better alignment of deliverables. This is one place that we've shifted. So when we talk about accountabilities, we're really talking about basic accountabilities and authorities not related to specific outputs. So we treat the output part in a separate way. We call it deliverables. We don't call it tasks. We call it deliverables. And our sense going into organizations is that there are a lot of disconnects. We often find that there are strategic planning systems up here. There are business planning systems in between that are usually financial planning and then there are human resources performance management systems that are out there. Our experience is they're not connected. You got these disparate systems that are not connected. So one of the challenges I think is how can you create an integrated what we would call an organization planning and review system that integrates these different systems so that everyone in the organization is moving in similar directions. We also in doing this use six concepts which are not new concepts. One is a bit different actually. So vision, where are we going to go? Mission what's our business values? We talked a little bit about values here. Strategic positioning, which I want to explain. Operational Plan so what are you going to do? What are you going to accomplish? And then resource plan what resources are necessary to do that? So we kind of split the operational and resource but have them both in. We don't like the term strategy. We find it to be an amorphous term. So the term we like is strategic positioning. And it gets back to the systems idea. Strategic positioning is how do you position your unit, business, whatever you want to call it in such a way that it better meets the needs of the market and clients relative to competitives and alternatives taking into account the environment in terms of regulatory and so on and so forth. Constraints. So strategic positioning for us is a more precise and useful concept than strategy is. Here's something else that's different. We think that strategic positioning is too important to leave to just senior executives. So if you think about how the work gets done, it's a cascading iterative process. So if I'm a Stratum Three Director of Training within the context that my vice president of Human Resources sets, I think I should have my own plan for my business. It's got to be within that context. It's got to be appropriate. I can't just go off and do whatever I want. But I think a good question is what's your vision of where you want it to be in 18 months? How do you define your business? Training is an interesting word. How do you define your business? Values tend to be consistent. What's your strategic positioning? How are you going to provide better value to this organization than your competitors provide to their organizations? Okay, so it might be that what we're going to do is we're really going to focus on elearning and we're going to focus on management development because we want to build in some of our unique practices and culture. On the other hand, we're not going to do anything on communication training because it's a commodity and we can buy it for $99 or $49 or whatever a seat. So that's strategic positioning at that level. So I think this strategic positioning adds power. I think moving it just from the C suite down through the organization in an appropriate way, context bound way, adds a lot of power. I think people have more capability to do that than we give them credit for. And I don't think they're using the full capability that they have in delivering their work. When we go into organizations, we often find that the level of work is below the level of compensation. So I'm paid to work at this level. When we go in and do an analysis, it's actually this level. A simple example is if you look at sales, stratum One, sales is transactional. I give you $5, you give me that article stratum Two, and it's very limited in terms of time. Stratum Two is relationship management, three to twelve months. Diagnostic or cumulative? Stratum three is linear. It's twelve to 24 months. And from our perspective in sales, it's around territory management. How do you develop that territory and also manage those Stratum Two relationship managers? Our experience is that the folks at Stratum Three, because that's never really been properly clarified, tend not to do each stratum has unique added value work. They tend not to do that unique added value work in that twelve to 24 month time frame. And they spend most of their time doing Stratum Two relationship management and babysitting the rest of the relationship managers. Not adding very much value at all. Looking at the level of work and relating it to compensation, we found is very useful. Better. Alignment of tasks. So as I said before, we define task in a different way. It's a smaller activity, has input throughput output in terms of size of task, it has to account for at least 5% of someone's work. So 5% someone could have up to 20 tasks. We find that people have maybe eight to 14 tasks on average. So we go in and do some analysis. We work with the managers around what they want to know, and then we do a survey. We go to the employees and do a survey. And from that survey, in terms of people saying what they do, we know what tasks are done, how much time they take. We get salary information so we know how much they cost. We can tag the tasks in terms of whether this is client focused, whether this is core work to the business or support work. And we've also worked on determining whether a task can be done at a stratum one level or whether it needs to be done at a stratum two or higher level. And in doing that, we found that professionals spend about 50% of their time doing lower level tasks. And this both is a waste of money, but it's also an issue in terms of satisfaction. The potential annual cost savings, and again, the numbers we use are quite conservative is over $10,000 per professional position and an opportunity to improve satisfaction. Again, the satisfaction and money stuff go hand in hand. We work with a pharmaceutical company in their quality assurance function. They're having all kinds of problems in terms of the nature of the work, turnover and so on and so forth. Went in, did an analysis, find out that they have a policy, that they want to hire the best people. So we look at what's happening. What they've done is they've hired a whole bunch of PhDs. Well, for any of you who have worked in quality assurance, you know, it's basically bench chemistry and it needs to be proceduralized. Well, these PhDs weren't very happy with doing this proceduralized work, and their great joy came out of continually modifying the procedures. You can imagine that this didn't provide the results that this pharmaceutical company was looking for in terms of consistency. So how do you improve organization design? From our perspective, there are two steps. One is assessment. The other is implementation, both equally important. And I'd suggest that in the management field in general, and in our field in particular, the implementation side of things hasn't had as much attention as it should. So in terms of assessment, and again, with these things, I'm talking about what we do. I'm not suggesting it's the best way to do it or the only way to do it, or you should do it, but it may have some ideas for you. So we would start with an initial discussion proposal and contract. This would determine the scope. We would tend to work with either all of an organization or a subsystem of the organization. And the subsystem is often a pilot project. They want to check it out, they want to try it. So that works fine. We find as long as it's a whole subsystem, it works fine. We gather information, including the time span analysis. This could include a document review, so we always get documents. What are your business plans? Let us see role descriptions. Do you have any employee information, customer information, industry information? Want to learn as much as we can about the situation in order to do the best job. Strategy is always part of that, either from documents or from interviews. Literature search we always do a computerized literature search. Quite frankly, we tend to find very little of value in the literature search we do on the computer. In terms of organization designs, people are suggesting most of it is not terribly helpful, but we keep doing it. Employee information, name, title, grade level, compensation level, manager's name, et cetera, et cetera. And we put that into our database, by the way, for analysis. We do interviews. The main way of getting information for us is through interviews. And what we do is we generally do it's not carved in stone, but generally we interview managers in interviews up to 1 hour. And in those interviews we learn about the work of the manager and the work of the direct report. We do time spans for the direct reports. We also ask the manager what they think their time span is. We call that self span, and it becomes an interesting measure of clarity of delegation. When we have data on the organization, we have time span data. We call it compensation span. What stratum is the compensation. And then for managers, we have a self span, which is a check on delegation. So we have some converging data that we can use in terms of assessing the situation. We also have this questionnaire, and the questionnaire could be completed by all employees or just managers. Takes about 20 minutes to complete it. At our website we prepare a report so it would include a detailed analysis of what is this is your organization, these are the issues, so on and so forth. We'd use our benchmarking database and we would make recommendations. So not unlike the folks who were in the exercise, in one of the two workshops, we'll do a report and make recommendations on what we think the organization design should be. And the recommendations are detailed. So we would include in that virtually all, if not all, management positions and then the positions below. Just in terms of titles and numbers. We don't get into micro stuff like you should have seven accounts payables clerks instead of eight. It's not that micro, but in terms of the full alignment, it's there. We've done this with organizations ranging from under 100 people to up to 16,000 people. So quite a range in terms of possibilities. And again we would talk with our client as this was evolving. Once we were clear with the client on this, we then meet with the client and the management team to make high level decisions and set the overall parameters. And then in the implementation, we actually go through the organization in terms of management meetings, making the final decisions within context. So there are a couple of checks and balances on this. Our job is to provide the best advice and the executives and organization's job is to make the best decisions. So we're very respectful of that situation. And part of our job is to help them with that in the best possible way. What we find is that 80% to 90% of our recommendations get accepted. And the reason is it's just a really robust method. It's databased. It gets around the politics. In fact, if you have someone being political in a meeting trying to protect their turf, it's so obvious, it's embarrassing. So it gets around a lot of those kinds of issues. Then at that point, an organization makes these primary decisions. So it's time to move on to implementation. Our reports have a section on implementation. So if clients want to implement on their own, they can. Most clients believe, and George Weber talked about this in the session yesterday most of our clients believe that. And we agree that the best value comes from having an internal external team. So we would bring in the methods. We've got materials, skills, we've done it before. You don't have to reinvent the wheel and work with an internal team. So we determine project scope, structure and process. We have a change management. If you think about change management, you need project management, people change management. And in this particular case, you also need organization design methodology. Those are three key components. In terms of sustainability, we think there are three keys. One is to improve the organization's systems and practices. So for example, if information processing capability is a useful way of matching people to positions, we'd work with the organizations to put that into their talent management system as much as possible hardwire things into the system. So that's one piece. Second piece is to train and qualify an internal team. So we'd work with an internal team. They would facilitate sessions. And the third is to develop managerial capability. So we'd have Cascading sessions, management teams down through the organization. There'd be education, there'd be real work, there'd be feedback and they would actually be doing the organization design. So a first cascade might be in terms of aligning positions, might include position descriptions. There'd be a cascade on matching people to positions. There'd be probably a cascade on deliverables. We find that tasks are useful in some parts of an organization, but not all. So this is not something we do across the board. And the objective is a sustainable improvement. So sustainable has two meanings. The meaning that's most important for us is sustainable in terms of that system. We talked yesterday around the problem when CEOs change, and that is an issue that's a different issue related to sustainability, but getting it really built into the organization so it becomes part of the way of life of the organization very quickly. In the book there are a couple of other topics. I'll just mention them briefly. The role of the board. My sense is that these approaches can be very valuable for looking at the work of a board of directors. Information processing capability, for example. What level should a board be at? One of the interesting things I found in the literature was that I don't think there's a real good definition of governance. If you look at some of the legal documents, it's often talked about in terms of the board supervises the CEO well. What does that mean? Part of what we've done is develop a definition of governance and talk about how that applies in a board situation. Project Management I did a review of project management literature about ten years ago. Haven't done it since, but I'd be surprised if the conclusions were different. Very good stuff in terms of cost accounting, scheduling, so on and so forth. So there's a lot of value there. One area that they don't understand is organization design, and that causes all kinds of problems in terms of these big It applications. So they bring in champions, steering committees, operating committees, numerous things that completely confound and cloud any semblance of accountability and authority. So I think there's great opportunity for these concepts to be extremely valuable. We've been brought in by a client who we've been working with who was having an SAP project going off the rails, and he knew enough that some of it was organization design related. So we worked with him and some others in terms of setting the framework that was appropriate. And it was really interesting because it didn't take much time from the CEO. But it just made a huge difference in terms of him setting the context and doing the crossover point manager work. Process Management we're not process management in terms of going out and doing Lean or Six Sigma or whatever, but we have a couple of approaches that tie in and conceptually. We talk about a task as a small activity. I think a task is the link between organization design as we define it and process. You can take the tasks and organize them into positions. You can take the tasks and organize them into processes. We generally find when we go into organizations that our work can be very helpful in terms of setting the framework for the process people. And then finally, compensation. We generally find that our clients don't use time span as the primary job evaluation method a couple have, but what they can do is they can use it to clarify the boundaries better, which the job evaluation systems don't do and also deal with individual contributor positions, high level individual contributor positions better. So finally, future opportunities, where do we go from here? I think the first one is Strategy organization design linkages. I think that our field doesn't do a good enough job in terms of those linkages and the implications. Second is Process organization design linkages. I think there's all kinds of further opportunity to better integrate those approaches. Other organization design situations, contractors, they're not employees. How do you deal with them? Informal networks in an organization, not as a substitute for the accountability hierarchy, but how can you understand those better in terms of doing the work outsourcing, which is often not done very well. And also interorganization, there's more and more joint ventures and so on and so forth. How do we develop more clarity in terms of how those should be organized using some of this methodology? And finally, in terms of research, the first one is to define the intervention. So a lot of people here talk about doing Ro or you read literature about doing Ro. What does it mean to do Ro? What's being done, what's not being done, what's the activity? So getting more clarity on that measure outcomes. So we've worked hard to measure outcomes. I think there's more opportunity and requirement to measure outcomes. A lot of the research is sort of looking at interconnections among time span is related to information processing capabilities, related to felt fair pay. That's important stuff in terms of the foundation of a science. But what about the outcome measures? What's the research on that? I think we could do more there. Third one is to define or measure failure. If you look at the literature on reengineering quality, whatever, it indicates that about 60% of the projects fail to deliver the results that are expected. So we've gone back over our projects and I can identify four that I would consider to be failures. One fairly early, we didn't have the same expectations as a CEO, we haven't done that since. But that's one of them. A second one, we did an assessment, agreed on an implementation. There was a new vice president of human resources. They changed the way they were doing the implementation. In my view it was being done without integrity and we resigned the project. And then there were two situations. Getting back to some comments yesterday where we did an assessment and as we completed that work, the CEO changed and the new CEO wasn't interested in going ahead with that. So I'd consider that a failure as well. So I think understanding those has value. And then the final one is to understand and improve, sustainment. What is sustainment? What do we mean by that? Do we actually get traction beyond the initial intervention? So those are some ideas, some suggestions in terms of where we go in the future. How about if I just take two or three questions now. Is that okay? Ken and then what I'd suggest is that I'm going to be hanging around in the morning. I'm going to have a table at noon. If people have questions as well as that, I'm going to have to leave before the end of the afternoon. But I'd be happy if people don't get a chance to talk or whatever for people to contact me. My information is pretty easy to get after the conference is over. So I'd be delighted to hear from you with any questions or comments that you might have. So let's take maybe two or three questions quickly. Yes. Elf.
Speaker C Since this is the most extensive documentary work that has been published within the field and also that you've been clean. You've been using the technology without trying to manipulate it into something that it isn't, and you've been using it as a science, then I would recommend everybody in this room to make use of this book and also spread the word about and ensure that it gets the recognition that it deserves. That's my comment.
Speaker B Thank you.
Speaker D So, Ron, you mentioned a phenomenon that I have come across and have talked with at least two others here with, and I know my colleagues and I scratch our head about the very issue, and it's around the time span. And we similarly will find non managerial roles at two, which clearly require cumulative capability. So the diagnostic or the analytic work that do not throw up time spans at level two and I have some thoughts on that. You had mentioned well, let me go back and say so. One of the things that we can use to think through time span is project work. And you had mentioned that often level three work is not really being done in your organizations. I have that same experience. A lot of the operational improvement projects should be conceived and planned at three, and pieces of those get chunked off and given to roles at two to carry out maybe a four month or a six month piece of that. And I'm wondering, for managerial roles at two, quite often the longest task is hiring and training a new person. So a non managerial role doesn't have that. I'm wondering if the longest task in an l two role in those types of roles should be project work, but the projects are not. The continuous improvement projects are not being generated at three that spin off to those pieces at two. And what I will often say to a client is, I'm wondering clearly this takes level two capability. I'm wondering if you're getting your full value out of the role, and I'm wondering if your continuous improvement projects are occurring at three and pieces being given to two. So I'm wondering how you reconcile that situation.
Speaker B Okay, I think there are a number of causes, but I think that is a definite possible cause and solution. So thank you for that.
Speaker E Brown once again, just incredible. My question is a much more pragmatic one, at least in the US. There's so little knowledge about requisite organization. It's much more knowledge about it in Canada that even when I make a good connection with the CEO, I find it very hard to convince the CEO to do a full project at the outset, especially knowing how much it's going to cost. Not just in my fees, but cost in terms of time they're going to have to spend, et cetera, et cetera. So I usually kind of refer to it as I earn my way to progress to the next level, to the next level, to the next level. The practical implication for me is that I find it impossible to ethically put an overall project price on it at the beginning because I never know where it's going to go, right? And every time I've kind of had my arm twisted to have a we will do X for two years, it'll cost you Y. It's always been way too little. What are your thoughts on that?
Speaker B Two things. One is, in terms of the CEO, I agree that it's difficult to do the whole thing. The first time we found pilot projects to be a viable and legitimate, we say to them, one of the problems with a pilot project is you can't hardwire the whole organization because you're just doing this piece. But we find that viable. We generally find that the pilot projects, if you're doing a pilot project, a high quality leader, someone who's respected in the organization, someone who's going to be committed to this. And our experience has been that the pilot projects, a high percentage of them, do lead to a full implementation in terms of pricing. What we do is we price the assessment as a fixed price because we know exactly what that's going to be. We've defined the scope. It's x number of employees. There's this number of managers, so and so once we get the scope, we can cost the assessment with an implementation. What we do is we talk with a client around the parameters of that, what it's going to look like. We give them a projected budget on it, given these assumptions, and then we give them it takes some administrative work, but we give them monthly detailed accounting on the various streams of the implementation, how much is budgeted for it, how much has been used, what it's been used for. And we find that that combination works. But I agree with you. I could not cost the whole thing in terms of a fixed price. Okay, thank you.
Tuesday Aug 5, 2014

Major organizations and consulting firms that provide Requisite Organization-based services

A global association of academics, managers, and consultants that focuses on spreading RO implementation practices and encouraging their use
Dr. Gerry Kraines, the firms principal, combines Harry Levinson's leadership frameworks with Elliott Jaques's Requisite Organization. He worked closely with Jaques over many years, has trained more managers in these methods than anyone else in the field, and has developed a comprehensive RO-based software for client firms.
Founded as an assessment consultancy using Jaques's CIP methods, the US-based firm expanded to talent pool design and management, and managerial leadership practice-based work processes
Former RO-experienced CEO, Ron Harding, provides coaching to CEOs of start-ups and small and medium-size companies that are exploring their own use of RO concepts.  His role is limited, temporary and coordinated with the RO-based consultant working with the organization
Ron Capelle is unique in his multiple professional certifications, his implementation of RO concepts through well designed organization development methods, and his research documenting the effectiveness of his firm's interventions
A Toronto requisite organization-based consultancy with a wide range of executive coaching, training, organization design and development services.
A Sweden-based consultancy, Enhancer practices time-span based analysis, executive assessment, and provides due diligence diagnosis to investors on acquisitions.
Founded by Gillian Stamp, one of Jaques's colleagues at Brunel, the firm modified Jaques;s work-levels, developed the Career Path Appreciation method, and has grown to several hundred certified assessors in aligned consulting firms world-wide recently expanding to include organization design
Requisite Organization International Institute distributes Elliott Jaques's books, papers, and videos and provides RO-based training to client organizations