When speed and agility are at a premium, having a well-aligned operating model is absolutely crucial. Having one that doesn’t depend on constant reinforcement by leadership is even better! And yet, many leaders struggle with thinking through, let alone designing, what such a model should look like. And there’s always something that slips through the cracks.
What I’ve found over the years is that many leaders land on a few preferred levers for how to get an organization aligned around a particular operating model. For some, it’s all about structure. You’ll know those guys – they sit around spending hours re-drawing the organization chart, only to be astonished later when the musical chairs with names and titles produces very little. For others, it’s all about culture – which sets in motion a lot of workshops, boot camps and other opportunities to create a warm and transparent, psychologically safe culture. That would be great, but if you have an incentive system that sets everyone at one anothers’ throats, no amount of cultural incantation is going to get you the results you want.
Instead, I’d like to propose an alternative that is a point of departure. This is to think of your operating model for your organization like a kite. A child’s kite. It’s a metaphor that I like because it evokes some useful cautionary notes. Firstly, you can’t force a kite to fly. You can yell at it, threaten it, promise it goodies, and none of that will work. Like an organization, if don’t build your kite in a balanced, well-structured way and if you don’t launch it into the right conditions, it won’t fly, it will just sit there. Finally, the answer is combinatorial – it is of course the structure, and the culture and the incentives…and and and. The goal here is to think in terms of wholes that have to work together. You have many levers at your disposal – but they need to be combined to achieve what you want.
The best place to start as a leader to influence how your organization will operate is quite literally with your own agenda. What do you spend your time on? What items are on the list of action items? What routinely gets ignored? What meetings do you call?
Your agenda should be driven, in an ideal world, by your strategy. While that sounds logical, I see disconnects between the strategy and the actual management agendas of firms all the time. A company I worked with on improving their innovation capability said that innovation was high on their list. They were worried about capable competitors entering their space and that they wanted to raise their level of innovation proficiency (even going as far as to take my innovation proficiency survey across the company). But when it came time to set up a governance process for innovation by establishing a growth board, the senior-most leader kept putting it off. We explained that getting innovation going was going to take some training budget, but the sessions were never set up. And we tried to suggest additional metrics beyond the backward-looking ones that they used to assess success (and award bonuses). It was no surprise that the innovation effort foundered, the champion for it was eventually let go and the company isn’t much better off on the innovation journey than they were.
So, a little homework for you. First, can you articulate your strategy, which should be a central, integrated concept of how you are going to achieve your objectives? If you can’t do that, get in touch and I’ll help with some resources that might be useful. Next, dig out the management meeting agendas, board agendas, that sort of document for say the last 3 months. Then, go through those agendas and apply the Martian test. If someone dropped in on those meetings from Mars, without knowing anything about your company, what would they say your priorities are? If the answer isn’t lined up with your strategy, that’s a problem. Start there – if your agenda isn’t clear, the rest of your “kite” hasn’t got a prayer.
Norms, or organizational culture, refers to the unspoken beliefs that underlie behavior. Because they are unspoken, they are often quite hard to see. They are also often quite different than what is formally espoused when people talk about the culture of their organization.
For instance, guess which company had these 4 elements as their core values?
The company that claimed to follow these? Enron, a company whose misbehavior was so egregious that it upended the world of reporting and accounting!
While many kinds of cultures can be successful, high-performing ones tend to have several things in common. Firstly, people are held accountable for the commitments that they make. While this sounds like common sense, I’m always struck by the way in which some organizations seem to be really lackluster about both defining what those commitments are and holding people to account for achieving them. I was reminded of this idea some years ago, when our son, newly employed at the consultancy Accenture, explained why we couldn’t leave for a planned dinner yet – he hadn’t completed his time and expense reports and it was the last day of the month. “Oh, surely it can wait,” I said. Foolish me. “Mom, he said with horror,” there can be floods, there can be earthquakes, you can have the bubonic plague, but time and expense reports go in on time!”. I thought to myself, “wow, that company has accomplished in just a couple of months what 24 years of child-rearing never could!”.
Of course, to hold people accountable means that expected goals and action are clear and that there are mechanisms to reinforce them. A terrific reference on getting this right is John Doerr’s book Measure What Matters: How Google, Bono and the Gates Foundation Rock the World with OKR’s. It describes a system, originated in part by former Intel CEO Andy Grove’s concept of high output management, of defining objectives and key results – things to be accomplished with measurable outcomes in a specified period of time.
A second core idea behind high performing cultures is that of psychological safety. Discovered by my good friend and Harvard Professor Amy Edmondson, psychological safety refers to the ability of an organization to create the conditions under which people can speak up without fear of being punished. Absent that (and we see an awful lot of ‘absent that’ situations these days), people keep potentially important information to themselves, don’t correct errors and in the worst cases, allow disastrous things to happen because they are too personally afraid to speak up or intervene. To learn more, I’ll refer you to Edmondson’s terrific book The Fearless Organization.
Finally, cultures are more powerful when they are widely shared because a common set of norms tends to lead to regularities in people’s behavior. Shared values and culture can go off the rails for any number of reasons – politics, jockeying for position, national culture mismatches and so on. One of the most common in my experience is when a merger takes place but the integration of the merged organizations does not. As former CEO David M. Cote shares in his recent book Winning Now, Winning Later: How Companies Can Succeed in the Short Term While Investing for the Long Term, during his early days at Honeywell, it wasn’t uncommon for people to ask, “well are you red or are you blue?” He initially thought it meant something political, but no – it meant had the person been a former Honeywell person or a former Allied Signal person! This kind of thing will get you exactly nowhere.
News and Information Flows
Communication in an organization is essentially about finding a bit of information (or a lot of information), identifying what it means and telling others our conclusions. The information – the news – may take many forms – some of it will be quantitative, as in accounting information or statistics. Some of it may be qualitative as in stories. The interpretations we make of it may be sensible and forward looking or completely lacking in insight – or even worse, false narratives. But the core question to think about is, “can the people in this organization get the information they need to do their jobs?”
Here again, one finds surprises all over the place. In a knowledge-is-power kind of culture, information may be locked up in siloed systems or individual decision-makers heads. It sometimes is not clear where one should find necessary information. Or the information is provided, just too late to be useful.
Without decent information flows, it’s very difficult to honor the cultural element of accountability (see how these things start to work together?). If you don’t have a way of measuring what happened, how would you tell if the outcome was the correct one or not?
Communication, too, runs the gamut, from people in the organization feeling that they are effectively kept informed about strategic priorities to people feeling that they are shut out, don’t understand what’s going on and are barred from making potentially valuable contributions.
One other point, that is particularly valuable in these times of pandemic, has to do with how information flows when people can’t be together. Research into the work of scientists found that information flowed easily and richly when they were co-located. As soon as they were physically separated – on different floors, for instance – the easy, unplanned transmission of information drops dramatically. What that means in these times of COVID isolation is that you are going to have to be much more intentional about how information is shared than you might have in an office or co-working setting. As an acquaintance of mine bemoaned – “we used to sit together and kind of know what was happening. Now, everything is a meeting!”
People and Structure
Of course, the central element of our kite – you can think of it as the skeleton – has to do with how people are connected to one another within what structures, both formal and informal. A few things to be aware of here – the formal organization is almost never an accurate depiction of how people relate to one another and how work gets done. It’s the informal ties between individuals that are often the key to organizational functioning.
Further, many of the structures in place in the operation are likely to be holdovers from some previous regime. Consider that in the early days of the Internet, companies often set up their digital divisions separately from their “normal” businesses – with the result that internecine warfare for resources, attention and other perks of the operation often erupted, hobbling those early attempts at going digital.
It is also not the case that changing structure is necessarily a bad thing, but there’s a right way and a wrong way to do it. Re-organizations that are confusing, made for unclear purposes or that don’t have a clear beginning and end can be demoralizing and unproductive. What you want is clarity about why we’re making the moves, what the results are expected to be, what roles people will have after its done and when we expect to be finished with it, for this period.
I’ve actually come to believe that organizations use reorganization to learn new capabilities. So we go into a market-facing structure and learn all about our customers, only to find that we’re falling behind on technology. Or we use a functional structure and realize we’ve become siloed. Or we use a regional structure and have a problem with global standardization. The reorganization corrects the deficit, only to yield future weaknesses of its own.
And of course, the right structure, absent excellent systems of recruitment, development, and training aren’t going to be all that useful. One of the most hopeful ideas in this regard are that creating good jobs, in which people are empowered, learning, offered a chance to develop and grow are actually associated with higher performance. Zeynep Ton’s Good Jobs Institute and Gary Hamel’s work on Humanocracy show us how.
Regardless of what your grand strategy statement says, how you allocate resources determines what it really is. Allocations express themselves in what projects get the green light and which are blocked. They express themselves in what gets rewarded (and not). And they express themselves in what investments are made – in people, in R&D, in technology and so forth.
Let’s start with projects and programs. Most organizations of any size or complexity do a pretty poor job of managing their portfolios of programs and opportunities. They don’t know what projects are in them. They don’t know which are moving forward and which are not. They don’t know how many they have! Correcting this means you need a way of mapping your total opportunity portfolio – you can read about a process for doing this here.
Then we have incentives, and there seems to be no shortage at all of ways in which incentives drive exactly the wrong behaviors. For instance, a client of mine had made a big investment in building an innovation “boot camp” complete with instructors, guides, manuals, sticky notes and all the bells and whistles of a great ideation session. It was introduced to a roomful of Managing Directors with great fanfare – the corporate office would provide all the content, and all the MD’s would have to do is pay for the travel expenses associated with running the boot camp out of their own budgets. Meeting done, we all decamped for lunch. One of the managing directors casually said to me, “well, that’s not going to happen in my unit.” I was surprised and asked why. “Oh,” he said, “that’s simple – the way they calculate my bonus, covering the expenses for this is going to personally cost me at least €60,000 this year, so there’s no way I’m doing it.” Replicate this a few hundred times and its not really surprising that innovation in that organization remains a struggle.
And of course we have the budgeting process itself, an often energy sapping exercise in a corporate game of charades. We have to pretend that we know what the next year will hold. Figures are made up. Negotiations about fictional expectations often end up with a dubious compromise. And so it goes. For an alternative, check out the Beyond Budgeting Round Table, an organization determined to show us all a better way of handling this particular corporate chore.
Finally, we come to leadership. Like the string of the kite, leaders can’t force organizations to do much of anything – at least, not for long. And yanking on the string often produces erratic results. One must exercise influence, and one of the most powerful mechanisms to do this is through the skillful use of symbolism.
Everything you do as a leader has both substance – the objective reason you are doing something – and symbolism – the meaning others make of your actions. The more senior you are, the more symbolic fallout there will be from everything you do.
The most skillful and high-impact leaders among us have mastered the art of making sure that the symbols they use create the meaning they intend in those observing them. Madeline Albright, the former U. S. Secretary of State, used to communicate her state of mind with the pins she wore on her outfits. “Read my pins” turned her jewel box into international diplomatic statements! In contrast, bad symbolism can have negative effects that reverberate. Remember in the throes of the Great Recession when auto company executives took their private jets to Washington to ask Congress for a bailout? That sure didn’t sit well with the average person.
Operating model in balance
The reality of an effective operating model is that there is no silver bullet – in spite of our natural desire to find the one solution that will solve it all. The good news is that once you have a framework, creating greater alignment between all the elements of your “kite” becomes much easier.