A New Organisational Framework

"Insanity is doing the same thing over and over again and expecting different results." - A.Einstein

Summary

One of the most relevant problem that organisational structures have had to face during their lifecycle has been to create, and then maintain, the Strategic Alignment among all their functional areas and reference markets.

This might require, together with a correct corporate & business strategy definition, a significant effort to analyse the processes's multiple interaction existing between the organisational structure and the "external world", as well as a profound "internal" analysis.

The ideal "modus operandi" could be to conceive the various organization’s functional areas not as separate entities, but as a "Systemic Set" made up of multiple elements that constantly interact and influence each other. I have defined this viewpoint as an "Organizational Holism Approach" (OHA). The intent of this paper is to propose a new Organisational Framework structure that could:

• Improve the organisation's Strategic alignment with the specific logics of each market.
• Facilitate Knowledge Sharing.
• Define KPIs (financial and not financial performance metrics) to better measure organizational performance and its alignment with market needs.
• Enhance companies' ability to adapt to the rapid changes in the "business environment" that we are continually witnessing.

A Critical Problem

One of most relevant problems companies are dealing with, today, is to maintain the "Strategic Alignment" between their functional areas and reference markets, which are subject, today more than ever, to continuous changes (market shocks).

" Competitors rarely cause a company to lose market share. They may be there to scoop up the advantage, but the loosing company create its losses through its own business policies."

The essence of the problem is rooted in the way “ Corporate Organisational Structure” is conceived.Most of the organisational models used up to now, in fact, consider the relationship between companies' functional areas and their business environment as a "mono-dimensional" entity and not as a complex “multi-dimensional system”.

The great limitation of this approach is to? create organisational structures that endeavour to align? their behaviour with the continuous? markets evolution. It means, a high time company responsiveness to market shocks that could be crucial for the long term corporate future.

"In general, Western societies' approach to solving complex problems have, always, been oriented - from psycological point of view - to assume that the causes of problems are out there rather than in there".

The System Thinking to Design a New Organisational Framework

The new approach consists in considering - using the theories of "System Thinking"- the combination Market/Company organisation as a Complex System.

A complex system is an interconnected set of elements that is coherently organised in a way that achieves something. It consists of three kind of things:

• Elements
• Interconnection
• Function or Purpose

Therefore - considering this new angle - the combination organisation structure & market can be considered as a complex system made up of three pillars that are:

Elements: The corporate macro functions (Sales, Finance, Operations....)? and? the customer groups ( from what concern the addressed markets).

Interconnections: The relationships that regulate the interactions between business macro-functions and those with customers.

Function/Purpose: The necessary steps that the elements must carry out through their processes (Interconnections) to obtain the desired results (Output).

Key Added Value Business Activities (KAVBA)

For sure, the organisation Purpose could be considered as one of the more relevant factor in light that is related to the definition of the company's vision and mission. So - in terms of System Thinking - we can think to an organisational Function/Purpose as:

"The combination of all the key activities required by the market which, performed efficiently by the corporate macro-functions (Elements) through certain processes (Interconnections), allow the achievement of the organisation's mission and vision".

I have called this dimension " Key Added Value Business Activities - KAVBA."

The most complicated part in creating the new model is? to define the KAVBA "dimension" that should be able to determine the Organisation Strategic Alignment with the market.

This process requires an accurate analysis of the business environment characteristics, organisation's resources and capabilities as well as their behaviour.

Conceiving KAVBA as the Combination between Sales Funnel & Support Activities

Considering B2B environment, I do believe? the best way to define the KAVBA dimension is to combine all the activities that refer to the sales funnel - specific to the business - and the funnel support activities - often transversal to every business.

A New Bidimensional Organisational Framework

Integrating the two dimensions, previously defined, it is possible to create a new organisational framework that allows taking into consideration:

The corporate macro functions' holistic behaviour which are, therefore, seen not as isolated elements but as a single entity.

The model underlines N intersections? which defines the required behaviour of each corporate macro functions referred? to a particular business phase aligned with? the market needs.I have defined these components? Basic Organisational Cluster - BOC.

One way to decline the Basic Organizational Cluster (BOC), might be to use two classic tools:

• The STAR model (Situation, Tasks, Activities and Results) which can be declined with a top down approach starting from the functional area and then moving on to the individual resources that are part of it.
• The RACIS model (Responsible, Account, Consulted, Informed and Support) which allows, for each KAVBA, to define the activities and information flows among all the functional areas.In this way is possible to create a real "Accountability Model" for each BOC, making an accurate job description for each corporate function aligned with each business Key Added Value Activities (KAVBA).

The New Model's Advantages

The design of a two-dimensional organisational framework based on system thinking provides several advantages:

• It takes into account the corporate macro functions' Holistic Behaviour.
• Facilitates the strategic alignment's achievement.
• It is an useful tool to integrate different companies in an M&A process.

A Different Way to Design Organisational Metrics

The new model allows the creation of a new conception of “Organisational Metric” that could be defined as follow:

• "Functional Metric”. It? measures the behaviour of each corporate macro-function along all business path that reflects market expectations.
• "Business Activity Metric”.It measures the Interactions & Performance of all business functions referred to each Key Added Value Business Activity - KAVBA.

"This new "Organisational Metric" perspective opens up considerable possibilities for the efficient harmonisation of Financial and Non-Financial metrics.The advantage of that, lies in the fact that the new model's framework allows? to define homogeneous KPIs throughout the value chain generated by the organisation completely with the markets needs".

Final Consideration

The proposal for a new "Organizational Framework" is the synthesis of my managerial career in the last 23 years, the most of which as Managing Director in different business environments, in different geographical areas (Europe, Americas and Asia) and in different types of organisational structures (Family-owned, multinationals and companies governed by private equity).

I do believe that in light of the markets' radical changes, not only due to macro-economic reasons, but also to the drastic changes in the people behaviours, a new way to conceive companies' organisational structure is becoming mandatory. The reasons are not only to support the companies’ responsiveness to market changes but also to “harmonies” new typologies of Financial and not Financial “organisational metrics” that could be able to oversee (might be with new technologies as AI) all the aspects of the Company’s organisation and its Strategic alignment with the markets.

In light of that, I am convinced that the analogy between an Organizational Structure and Complex System, and consequently the resulting “bidimensional model”, I am proposing, might be useful to face this new requirements.?

References

***** " The Fifth Discipline:The Art and Practice of the Learning Organisations written by Peter Michael Senge"*****