Research Report Bersin by Deloitte

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PREDICTION

Organization design, including structure, roles, talent mobility, and the role of leadership, must become flexible and adaptive—changing many elements of HR.

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Prediction 1: Organizational Design Will Be Challenged Everywhere

The first prediction for 2017 is one I seem to talk about with every company—we need to rethink the way our organizations are designed. For more than 100 years, companies have been set up for scalable efficiency. We build functional teams that run product design, engineering, manufacturing, sales, marketing, finance—all with a focus on scale. How can we ship more products per dollar, gain more leads per advertisement, and achieve more sales per salesperson?

Today, in the world of rapidly changing markets, and digital products and services, the traditional concept of “scale” and “efficiency” no longer applies. Thanks to the cloud and the Internet, barriers to entry have been lowered. You cannot “keep your market” just because you are big or efficient—someone else will likely reinvent it before your eyes, and then his / her company may disrupt yours in only a few years.

As John Hagel, director of Deloitte LLP’s Center for the Edge in Deloitte stated,

Today, the key to organizational success is not “scalable efficiency,” but “scalable learning.” You, as an organization, must be able to experiment, put prototype products in front of customers, rapidly learn from your competitors, and stay ahead of your marketplace, industry, and technology trends. This means your whole organization has to focus on customer-centric learning, experimentation, and time to market.⁶

The solution is often easy to understand, but hard to implement. We should break our functional groups into teams—teams focused on product releases, customers, markets, or geographies. These teams should be smaller, flatter, and more empowered—and leaders should focus on hands-on leadership, not leadership from behind a desk.

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KEY POINT

We should break our functional groups into teams—teams that are smaller, flatter, and more empowered—and leaders should focus on hands-on leadership, not leadership from behind a desk.

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Cisco studied its organizational structure and found that the company already has more than 20,000 teams, with people sitting on many teams at the same time. This is true in nearly every company; we just have to design for it.

In 2017, companies will discuss and struggle with this mightily, and I suggest some of the changes should include:

• Formally creating small team structures (Jeff Bezos⁷ famously stated, “… if the team needs more than two pizzas for lunch, it’s too big.”)

• Radically reducing the number of job levels to incent people to strive for results and learning, not just promotions, as they move from job to job

• Changing reward systems to reward team success, not just individual success

• Redesigning goal management, so that goals can be updated quarterly, not annually, and goals are transparent and shared publicly

• Promoting young professionals into leadership early, so they can rapidly contribute to team success

• Teaching managers to manage “projects” not “people” (WL Gore)

• Providing “career coaches” and “sponsors” instead of “managers” to help people to grow

• Creating always-on learning, and a culture of exploration and discussion to enable continuous invention

• Sponsoring hackathons and other collaborative development programs to let people at all levels contribute

• Implementing information systems that deliver real-time dashboards and reports, so that all teams can operate with the same insights and perspectives

The books Team of Teams⁸, The Silo Effect⁹, and Reinventing Organizations¹⁰ describe how organizations will be structured in the future. These books, which I recommend you read, give examples of companies that outperformed their larger peers by keeping teams small, communicating vigorously between teams, and using shared culture to bring people together (see Prediction 2).

I also want to reinforce one more point—the old-fashioned concept of “organizational design” is going away. The redesign of your organization does not mean doing a spans and layers analysis; it means looking at the way work gets done, studying the organizational networks you have (using organizational network analysis), and then designing work to support cross-functional success. In most cases, it means making teams smaller, creating more open office spaces, creating new cross-team roles, and often changing functional leadership.

Case in Point: Organization Restructure

One large IT department found that its current functional structure (e.g., application design, infrastructure, security, client service, etc.) had created silos of people who could not be shared among projects. Managers were “hoarding” their teams—and preventing people from being promoted or moved, primarily to protect their positions. Also, leaders considered their jobs sacrosanct because they had “paid their dues,” so to speak, and would not move into new roles.

The CIO, who was facing dozens of new projects that cut across functional teams, totally redesigned the function. Hundreds of people were promoted into team leadership roles; many vice presidents were demoted to team leadership roles; and many technical experts suddenly had teams built around them.

While the redesign was challenging, within only a few months many of the younger, more ambitious leaders rose to the occasion; several of the senior vice presidents resigned; and the CIO found the organization was more engaged, excited, and productive than ever. He realized that no spans-and-layers project would ever have solved this problem—and now is excited to see an agile, “digital” organization emerge, one with more leaders, more empowerment, and much faster time to market.

Other Predictions:

Reference:

• Based on conversations with Bersin by Deloitte.

• http://www.businessinsider.com/jeff-bezos-two-pizza-rule-for-productive-meetings-2013-10.

• Team of Teams: New Rules of Engagement for a Complex World, General Stanley McChrystal / Portfolio, 2015.

• The Silo Effect: The Peril of Expertise and the Promise of Breaking Down, by Gillian Tett / Simon & Schuster, 2016.

• Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness, by Federic Laloux / Nelson Parker, 2014.