ORGANIZATIONAL DESIGN & STRUCTURE

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AN OVERVIEW

• What is it?
• Isn't it done that way now?
• So, what's the problem?
• Why does it happen?
• The solution? Reorganization
• The steps

WHAT IS IT?

Organizational Redesign is structuring an organization, division or department to optimize how it supplies products and services to its clients and customers.

Designing an organizational structure is dependent upon:

• The kind and quality of information it gathers from its customers, suppliers and partners
• How the company gathers the information
• How it interacts with each of these constituents
• How this information flows through the organizational structures
• Who has access to it and who doesn't
• How is the information utilized in making decisions
• How the information is stored for ease of use and analyzed
• Whether both the organizational processes and systems reflect and mirror information flow

ISN'T IT DONE THAT WAY NOW?

In general, NO!!

Most organizations look like this:

SO, WHAT'S THE PROBLEM?

The typical organization structure results in many of the problems with which we are asked to deal, such as:

• Conflict between departments (e.g., the perennial one between Sales and Operations)
• Long lead times in developing new products and services
• Quality problems, billing inaccuracies, etc.
• Inefficiencies (which are usually blamed on individuals)
• Not being able to keep up with customer demands
• Low employee morale (often related to staff not being empowered to make decisions)
• Departmental goals and performance measures not being cascaded down through the entire organization (goals stop at the top of the hierarchy without a real appreciation of how "it all fits together")

WHY DOES IT HAPPEN?

The early stages of a business's relationship to its customers often look like this:

Information about a customer would be gathered by one department which then would parcel it out to the other departments as it saw fit. Frequently, the information wasn't disseminated and discussed between and among the departments.

This structure and flow of information is usually sufficient for an early stage or smaller company to function. The information needed about customers is usually limited ("Do they like it or don't they?").

However, for large and rapidly growing companies that have been accumulating competitors by the bushel-full, the picture changes to ........

The company is larger, there are many more customers and different kinds of customers, each with a different variety of needs, expectations, strategies, etc.

The old structure, however, persists in too many companies with the one department (usually sales and/or marketing) remaining as the "gatekeeper" for the dispersion of customer information.

The net result is that the information each department requires to do its job is either lacking, late or incorrect.

No wonder, then, the problems that plague large and growing companies!! And, we would venture to say, companies that are stagnant also fail to consider the importance of its structure.

THE SOLUTION? REORGANIZATION

Example #1:

The Problem: A firm supplies large medical equipment to hospitals, care centers, etc. Their problem was that the cost of inventory (of both parts and equipment) was eroding their margins, along with a growing failure to deliver service on time, the emergence of quality issues and similar concerns. Their firm's structure was traditional, with each department being its own "silo".

Historically, Marketing's discovery of new markets led to Sales selling any new product they could get a hold of (which were the most financially rewarding for the sales people), the net result being a lack of "family of products" and, therefore, an absence of standardized (and fewer) parts, a need for an ever increasing number of Service personnel as well as an ever demanding need for increased training of Service personnel.

The Solution: Replacing the silos with cross-functional teams, i.e., with members from each discipline, at the top. The cross-functional teams retained the old designations (Marketing, Sales, Service, Operations).

The Result: All four teams focused on who their customer was, is and should be, and what could be in the best interest of these units. For example, the Supply team (composed of representatives from each discipline and headed by a Supply person) had as many suggestions as to which customer niche should be targeted as the Marketing team. They offered the characteristics of an ideal customer based on repair rates, additional services required, machine capabilities, etc. Sales and Purchasing, thus, had their marching orders; Marketing had the necessary constraints placed on where they could go to find customer niches; and, as a result, Supply lowered their costs. Compensation programs for sales people were adjusted accordingly. Their IT system was restructured so as to capture the appropriate customer information and shuttle the information each team required .

Example #2:

The Problem: A large and growing infertility medical practice was experiencing complaints from patients, problems with staff, quality problems (e.g., patients kept waiting, late test results, etc.). Based on interviews with the entire staff and workflow observations, it was clear that there was a serious rift between the Finance/Business and the Clinical Departments. People in one department complained bitterly about people in the other.

The Solution: Determining and designating who in fact was the "customer", namely, the patient and her husband. They had to be served.

To mirror this, the entire company was placed under the Clinical Department after a director with the requisite skills (both clinical and financial) and background was found. Patient care became pre-eminent. For example, the receptionist (a clinical function) had immediate access to basic insurance information that patients sought - previously a patient seeking information talked to at least three people before obtaining the data she needed. The design of the offices which earlier had been a function of what the Business section deemed financially prudent became a clinical decision, resulting in much more inviting and pleasant surroundings. The business functions (billing, collections, financials) were redesigned so that any information needed about patients was immediately accessible by any department that needed it (marketing, clinical, etc.). In addition, programs to ensure the comfort of the patient couple were introduced.

Also, corporate goals and performance standards were created and cascaded downward through each section so that everyone knew what was expected of them. This forced each department of the company to "negotiate" not only their goals but to ensure that their action steps were supportive of and integrated with those of the other departments.

The Result: The number of new and retained patients has increased, expenses have been reduced, collections from insurance companies and co-payments have ratcheted upward dramatically, morale is good and growing.

THE STEPS

1. Determining How the Company Goes to Market
• Sketch how the current organizational structure (e.g., departments, roles, responsibilities, information flow, decision-making, etc.) supports how the company goes to market. Include:
• What the current structure does well.
• What the current structure does not do well.
• If possible, "numbers" that put a value to what is done well and what not.
• Draw an ideal organizational structure (first draft) that reflects better how the company goes to market. This step is crucial in establishing the value of the organizational change. Focus on:
• How it can improve upon the current situation (in "numbers")
• What it can improve upon.
• How it will affect the organization and its parts, processes and people.



2. Planning
• Determine who should be involved in the planning process, in particular "RACI", i.e. who is Responsible, Accountable, Consulting and who should be kept Informed.
• List the major players who perform or are involved in the key processes that support the current structure.
• What would the ideal organization (processes, roles, people) look like (first draft)? Who would fill what position? How can/might/should the current players be utilized in this new schema?
• What new equipment, technology, resources, people, skills or systems would be needed in the new structure?



3. Implementation
• Develop a schedule (dates and RACI) for the change from the current situation to the ideal state. Create flowcharts that capture the changeover. Be specific about:
• When and how the change from the old to the new will occur.
• Impediments that might appear during the transition (e.g., a huge amount of business that might distract people's attention). Create scenarios of what might occur and how they can be handled.
• Create a program that would prepare employees for the change.



4. Administrative Issues
• Salary adjustments?
• Assignment of roles: Sponsor, Project Manager, Oversight Committee, Teams
• Regular communication to staff regarding the progress, decisions, plans, etc., of the project.
• A written plan that is shared with key personnel, that is referred to periodically, updated when necessary and referred to continually.
• Scheduled "monitoring" meetings between the Project Team, Sponsor, Oversight Committee.