Organise for the future
Report | June 2016 | Kanvic Grey Matter
Growth in the new era will require a process of organisational transformation at India Inc. To succeed leaders should focus on four key dimensions of change.
Once leaders have hit the reset button, they need to develop an organisation capable of driving the business along the new ROAD to growth. This requires a fresh look at how the organisation is structured, the kind of culture that is encouraged, the paths people can take to progress, and the way in which their performance is managed.
First and foremost, India Inc. needs to overcome its preference for rigid traditional hierarchies and replace them with more fluid structures that can adapt quickly to new market opportunities and challenges.
This transition to more fluid organisations was first pioneered by software developers. They drove collaboration and innovation through self-organising cross-functional teams that continually adapted code to meet ever-changing customer requirements. Such principles have now been applied to both larger and more traditional industry settings as the pace of change has picked up.
At the core of the change to a more fluid organisational structure is a shift in the locus of power, from the traditional management hierarchy to distributed roles that can act autonomously. These roles are defined around tasks and are regularly updated as the whole organisational structure continually iterates.
In order to systematise these ideas across the business, new organisational concepts like holacracy have been developed. Conceived by software entrepreneur Brian Robertson, holacracy is intended to make the organisation more productive as it scales - much like a city, rather than a company which typically becomes more bureaucratic as layers of management are introduced. The concept has been applied at over 300 organisations, most prominently at US online shoe and clothing retailer Zappos.
However, such changes are not without their challenges. In making this transition organisations need to balance the necessity of adaptability in today’s world - which more flexible structures encourage, with the requirement to maintain reliability - which the existing structures and processes are often effective at delivering.
As a result of these seemingly conflicting needs, large companies like Procter and Gamble have tended to implement more fluid structures in areas like innovation, while at the same time retaining the more conventional matrix organisation to integrate their different brands, geographies and functions.
Re-designing the organisation for the new era can also help Indian companies attract and motivate the new generation of millennials that are set to transform the workplace. India has more millennials of working age than any other country in the world, with 209 million people in the 24-35 age bracket. Hence, the challenges and benefits of tapping the potential of this generation could perhaps be greater than anywhere else.
A first step toward managing this generation is often to create an atmosphere of informality. Harsh Goenka, Chairman of India’s RPG Enterprises requested the company’s 20,000 employees just call him ‘Harsh’, a significant step in a country where the typically hierarchical work culture usually requires deference to seniority and experience.
As well as a preference for informality, millennials also want to have their voice heard within the organisation. Therefore creating an environment of openness and collaboration is appealing. For example, one leading industrial goods company teamed up younger workers with older colleagues to bring millennials into the decision-making process and help the company leverage their unique skill sets. As a result of this initiative the new recruits could integrate faster within the company, while at the same time the experienced employees had the opportunity to better understand millennials’ way of working.
As well as changing the organisational structure of the business, companies need to adopt a new approach to conducting their work. In the earlier era of market stability and long product life-cycles, companies could spend time on perfecting their offering. However, in today’s volatile and uncertain world the external market environment can change quickly, while digital disruption can render technologies and business models redundant in a short matter of time.
In this dynamic context companies should adopt a culture of experimentation as it provides the most direct feedback, both in terms of speed and reliability. An experimental approach helps an organisation quickly decide whether to pursue an initiative, make adjustments, or drop it altogether. As a result it can move faster, avoid sinking costs into failing projects, and be more opportunistic.
Experimentation can be used at three different levels of business: strategy, tactics and implementation.
At the strategic level a company can experiment on where and how it wants to compete in the future. For example, technology giant Google restructured itself to form the Alphabet group, creating separate business entities that could pursue ambitious ‘moonshots’. These companies have the freedom to take bold bets on the future, which are periodically reviewed by the group and allocated further funding based on their progress and potential.
At the tactical level a company can experiment to test new products, new concepts and new markets. Swedish furniture retailer Ikea is testing the viability of its large format stores in new geographies by first opening smaller stores. These small stores function as a pick-up point for online orders and feature a small showroom with store-to-web capabilities. This allows customers to do digital planning for their home and then place further online orders in-store. Only once local market demand has been proven in this way does it commit to investing in a big-box store.
Lastly, when it comes to implementation, experimentation can help companies quickly improve their marketing and product or service delivery. For example, A/B testing is regularly used in digital marketing to test different versions of websites to find out which result in a greater customer conversion rate.
This three-level experimentation approach is essential if companies are to meet the fast-evolving needs of their customers and fend off rapidly emerging competitive threats.
A new organisational approach also needs to be supported by a fresh take on performance management. Most performance management systems are linked to the traditional yearly planning process. However, with business and therefore individual goals continually shifting, performance management systems need to change if companies are to achieve their growth ambitions.
The performance management process has three major objectives: 1) to review results achieved against the objectives 2) to ensure the optimal configuration of individuals, roles, and responsibilities and 3) to identify gaps in competencies. Each of these three objectives can be better met through more frequent performance reviews.
Firstly, more frequent reviews of objectives and results enables faster adjustment of actions, or revisions to targets, based on the current market scenario.
Secondly, more frequent review of individuals and their roles helps stretch high performers and motivate those who may be lagging. For example, top performers can be given non-obvious moves to build diverse competencies and strengthen their leadership capabilities.
Thirdly, more regular reviews of individual competencies and the requirements of their position help identify the need for skill development and upgradation. This is particularly important given the rapid rate of technological change impacting all industries.
Today, leading businesses like IBM are making this shift to more frequent performance reviews. The company recently switched from their traditional annual review of employees to a ‘Checkpoint’ system, where employees set shorter term goals and managers provide feedback on their progress at least every quarter. What is more, the five dimensions on which employees are now assessed at IBM were crowdsourced from employees, and the system itself is managed through an application.
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