Gregory Kesler - Leading Organization Design: How to Make Organization Design Decisions to Drive the Results You Want

Contents

Leading Organization Design

Copyright 2011 by Gregory Kesler and Amy Kates. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Kesler, Gregory.

Leading organization design: how to make organization design decisions to drive the results you want / Gregory Kesler, Amy Kates.1st ed.

p. cm.

Includes bibliographical references and index.

ISBN 978-0-470-58959-5 (cloth); ISBN 978-0-470-91283-6 (ebk); ISBN 978-0-470-91284-3 (ebk); ISBN 978-0-470-91285-0 (ebk)

1. Organizational change. 2. Leadership. I. Kates, Amy. II. Title.

HD58.8.K467 2010

658.4'06dc22

2010034868

Foreword

It was not long ago when doing what comes naturally was sufficient for designing organizations. Leaders were advised to simply hire the best people. Everyone knew that good people could make any organization work. Whether these views were valid or not, they are not going to work today. We are now in a different era.

The overly simple views of organizing have gone away along with the mass market. That mass market was served by mass production and reached through mass media. Companies sold stand-alone productsand each one was based on its unique analogue standard. When faced with complexity, these companies divided themselves into multiple divisions, each of which was a separate profit-and-loss center. They created corporate centers that allocated investment funds to divisions based on various portfolio models. Those models further classified the profitability and growth potential of the divisions into dogs, cows, or stars. The international business climate was characterized by deregulation and privatization. The best performers under this set of rules were companies like Hewlett-Packard (H-P) and 3M. Their organization design approach was based on the biological process of cell division. That is, when a business unit got to be too large, it was divided into two smaller divisions. And those two later became four, and so on. Each division was a fully functional and autonomous business. This model no longer works for H-P or 3Mor most other companies. H-P and 3M have gone outside for their last two CEOs as they attempt to transition to new models of organization.

This book, Leading Organization Design by Greg Kesler and Amy Kates, contains exactly the kind of advice that leaders need to navigate in todays business environment. Organization design requires the more thorough and more thoughtful approach that the authors demonstrate for us. Instead of serving a mass market with mass production, companies now face a fragmenting and segmented market that is served by mass customization. Instead of familiar Western markets, todays growth is in emerging markets with different cultures, active host governments, and state-owned enterprises acting as competitors, customers, and partners. Instead of stand-alone products and services, companies are being asked to integrate products, software, and services into solutions based on digital standards. Today everything can talk with everything else. Parts of companies that used to work separately now must work together.

So today leaders need to do what is required and not what comes naturally. The lessons that leaders learnedlike keep it simple and all you need is good peoplewill not work anymore. What is required is the kind of explicit design process that Kesler and Kates present in this book. While growing up in the business, most leaders did not learn how to design and execute three- or four-dimensional matrix organizations. But by following the five-milestone process in the book, leaders can learn to design todays more complex and necessary organizations.

The book has some unique features that make it valuable. It is one of the few and certainly only recent books to take us through an explicit process to design modern organizations. This is accomplished with the five-milestone process. The process is not a simple cookbook. Indeed, the authors have achieved a balance between process and content. They introduce the content at appropriate places in the design process. In so doing, the authors show us what to do as well as how to do it.

The other unique feature is the marriage of organization design with organizational change. Many of us believe that change begins with design. By following the Kates-Kesler process, companies can involve many key players in the design-change process. This is a good way for everyone to get his or her fingerprints on the design.

I recommend this book to all of the men and women who are charged with the stewardship of our institutions. The successful execution of leadership roles today requires an ability to design and change the organization. There is no more important and challenging task. Leading Organization Design should be one of the guidebooks for todays leaders.

Jay Galbraith

October 2010

La Conversion, Switzerland

Introduction

Why Organization Design

A business leader can directly impact three levers of performance:

1. The strategy where and how the firm competes, and where it chooses not to compete