Organizational Design & Role of the Center
- Reorganization efforts can be messy and complex. ExpertActions's approach focuses on a decision perspective that helps ensure the changes will have the desired effect: better performance.
- Chief executives often believe that changing the design of their businesses will produce better performance. But a ExpertActions study of more than 31 reorganizations found that most had no significant effect on performance.
- There's a reason for this disconnect. The chief determinant of an organization's performance is its ability to make and execute its key decisions. Most organizational changes don't change what needs to be changed. And many organizational issues can be resolved by diagnosing and fixing decision difficulties, without the trouble and expense of an organizational restructuring.
- But sometimes organizational structure really does impede good decision making and execution, and a new organizational design is necessary. The key then is to launch adecision-driven reorganization. Companies that have done so have learned the importance of the following lessons:
- Identify your organization's key decisions. These will include major strategic decisions made in the C-suite and the boardroom and some of the everyday operating decisions made on or near the frontline.
- Determine where in the organization those decisions need to be made. Some decisions are easy to place–major capital investments, for instance, usually belong with the corporate center–but some require an assessment of trade-offs.
- Structure the company around its sources of value. If different customer segments require different kinds of decisions, for example, you may want to structure the company around those segments.
- Figure out the level of authority your decision makers need, and give it to them–regardless of their organizational status.
- Adjust other parts of your organizational system as necessary. A change in organizational structure may require changes in decision roles, incentives and the like.
- Equip your managers to make decisions quickly and well. Smart companies ensure that people have the skills required to make and execute good decisions.
Role of the Center
Examining the role of the center helps firms with ineffectual structures determine the best organizational model for their firm. Centers must be fit for purpose, with roles aligned to firm's business profile, strategy and leadership style, which means that there is no standard formula.
Where can the corporate center add value to the enterprise, and where is corporate governance a drag on performance? Examining the role of the center helps with bloated or ineffectual structures determine the best organizational model for their holdings. It allows for improved decision making and resource allocation by assigning which functions and decisions are the corporate headquarter's responsibility and which the operating units can best handle.
- ExpertActions identifies four models for the role of center, based on the relationships among the business units. Having developed a thorough understanding of the advantages and disadvantages of each, we help clients decide which one best suits their needs. We focus on limiting the center's role to where it aligns capabilities, strategy, culture and people.
- ExpertActions starts with an assessment of key functions, comparing the informational, reporting and cost advantages of centralization versus decentralization. As part of this work, we quantify the benefits of moving or maintaining various corporate roles. We then help design a new blueprint for the center, develop ways to communicate the center's role to the organization and set up an ongoing evaluation program.