This article is the second in a three-part series on applying systems diagnostics to understand the sources of organizational underperformance (Using systems diagnostics to drive process improvement and change), why transformations often fail to deliver (this one), and how to keep transformations from going off course (Diagnosing and adjusting transformations to ensure success)). It is based in part on my Strategic Analytics book. The issues addressed in the series will be covered in depth in the upcoming virtual workshop Driving Organizational Change with Data.
The first article addressed the sources of problems with organizational performance. Too often, we do not dig deep enough into:
- How the work is structured and aligned from top to bottom: from the job/individual level, to the team level, to the business process level, and back down again; and
- The three main elements of job design and performance: how the job/team/business process is designed, how it is staffed, and how engaging/motivating the work is.
A proper diagnosis of the sources of organizational performance requires a systematic assessment of alignment across and among these work levels and elements.
With that foundation in place, we here turn to diagnosing the problems with strategy execution and how transformations are designed. Executing the strategy and successful transformation, simply put, means ensuring that future organizational performance happens as intended – that we are able to get the organization to perform in different ways than it does currently. But since it’s so easy to improperly diagnose why organizational performance falls short today, there is a huge risk of compounding the problem by continuing today’s design flaws in tomorrow’s operating model.
The solution is to start with a thorough systems diagnostic as a core input when designing any transformation. This enables any key flaws in the current work design to be addressed in the design of the new operating model – so that they are not unintentionally perpetuated.
Understand the root causes of today’s flaws to stop perpetuating them
You know the adage, those who forget (do not understand) history are doomed to repeat it? Something similar applies to organization design and strategy execution.
Over the past almost half century, my colleagues at the Center for Effective Organizations (CEO) and I have done a very large number of organizational assessments. Companies come us to for help when they cannot diagnose why organizational performance is falling short, and the knock-on impacts on strategy execution and transformation. What we find consistently is that the sources of under-performance are usually embedded deep in the work design, rewards, ways of working, and leadership behaviors – the integral parts of the operating model.
One solution is to directly address those deep-seated factors, and correct them in the current operating model before embarking on any substantive change effort. Given enough time, this is the preferred path. Because addressing the longstanding challenges is easier when they are the sole focus of the leadership. When that is the number one priority, and leadership commit themselves to getting things right, the weaknesses in the current operating model can be corrected.
But back in the real world …
Yet that ideal happens very rarely for two reasons. First, when problems have persisted for a long time, it’s hard to muster the alignment, energy and commitment needed to right the ship. These perennial problems, as I like to call them, are ones that people have tried to address in the past, using many different approaches. Sometimes a solution will move the needle and improve performance (somewhat); other times, no impact. Even when progress is made, though, it’s not enough to improve organizational performance to the desired levels. Hence why the problems are perennial.
For example, a pharmaceutical/biotech company struggled with decision making that was very slow. They had tried a number of attempts to speed up decision making, including introducing RACI processes into meetings governance, among other changes. Yet the repeated attempts to improve the situation kept falling short. Moving forward with any large scale transformation without first determining the root causes of their slow decision making stood an extremely high risk of perpetuating the problem.
Second, there is always a mandate for change. And it’s much easier – and more interesting – to focus on building for the future rather than trying to fix what’s left over from the past. So leaders think they can gloss over the parts that work less well today, in the hopes that designing the future operating model will not rely on a work design and ways of working that will perpetuate today’s weaknesses.
Only focusing on designing the new operating model risks perpetuating current challenges
Yet our experience has shown that is very far from the case. When leadership does not take the time to understand why things aren’t working well today, the future operating model they design usually transfers many, if not most, of the root cause problems to the new design.
In the case of the pharmaceutical/biotech company, it turned out that the sources of slow decision making were (a) a culture of consensus-based decision making, dating back to its early days, (b) senior leadership were too concentrated in one location – the global headquarters, and (c) a lack of discipline in designing and working out new processes. The end result created two deep-seated problems:
- Not enough decision discipline: the over-emphasis on consensus was ok in the company’s early days, when the number of employees was small and everyone could easily gather in one place to work things out. But as the company grew, and the work processes and organization became complex, retaining any commitment to consensus only slowed things down without any real benefit.
- Insufficient awareness of how processes designed at the HQ impacted global operations. The lack of senior leaders outside the HQ meant lines of communication were over-extended, and it took way too long for feedback about work processes to make their way back to where they could be appropriately addressed.
Moreover, these deep-seated issues had persisted through a number of previous transformations. When the company did a systematic diagnostic addressing all the work levels and elements, these sources were finally identified. This enabled the leadership to design the next transformation to directly address them – which they did successfully.
This is just one of many examples my colleagues and I have worked on over the years. We see repeatedly that the underlying challenges of under-performance, like in this example, often show up as “that’s the way we do work here,” “that’s one of our challenges, but we always find a way to overcome it” with people having to burn the midnight oil, work extra hard, and more, to keep organizational performance from completely tanking. Yet a culture of having to fire fight or be resigned to always coming up short from operational and strategic objectives should always be viewed as a huge warning sign: if you proceed with designing a transformation without directly addressing (diagnosing) the root causes, you run a very high risk of perpetuating those weaknesses in the new operating model.
Hence why it is so critical to do a full systems diagnosis before launching any transformation – and early enough that the results can be fully incorporated into the new system design.
Previous article: Using systems diagnostics to drive process improvement and change
Next article: Diagnosing and adjusting transformations to ensure success
