Visualizing organizational strategy

We all know what an organization looks like: it's a bunch of departments with a bunch of managers having lots of coordination meetings. Oh yes, and there's some frontline staff face to face with, well, us, customers, and then somewhere teams making the stuff and a vague group of people called suppliers or vendors or partners - other organizations. And also leadership teams - let's not forget leadership teams. Then it gets really complicated. The people who make the stuff need machines and software to do so. These machines are easier built in-house by other people or purchased. They also need to be maintained by an other group of people... somewhere in the organization. These maintenance teams need to be supported by HR just like everyone else: if you try to draw it in detail you end up with a noodle soup.

It's easier to assume that each department is there for a reason and if each department performs productively, the organization as a whole will do so. Each department is in charge of a sub-system that does something for the org as a whole and can be checked for:

• hygiene: basic habits and routines are maintained to do the job day to day
• health: produces good outcomes reliably with decent flexibility
• vitality: strong voice, lots of energy and comes up with initiatives and innovations

These features are not a scale. A system can have good hygiene and rigidly produce sub-par work for its customers. Or can be healthy without great hygiene as in the case of a very competent team doing great work without procedures or processes just because they are good at what they do and work well together (when one member leaves, the lack of hygiene can deteriorate health quickly). You'd think you want vitality in all your departments, but think about what a very vital finance department can do to your business - with a loud voice, a final say on every decision and innovative ways of introducing more finance - think Enron, GE, Boeing, etc.

We this in mind, we realize we need some level of hygiene, health and vitality in all departments but we also need to understand how departments interact with each other. To visualize the dynamic of the organization as a whole, we need to figure out who leads, who follows and who gets in the way. For instance, think of a departments often treated as the fifth wheel of the wagon: customer service. Customer service can either lead the organization, as Jeff Bezos set it up in the early days of amazon, and thus orient every other department towards better customer outcomes (by putting pressure on engineering and production to come up with better products and services). Or it can follow sales and try and fix customers problem as they come up. Or it can get in the way by being so bad that unhappy customers simply desert the brand and then bad mouth it when they can.

To figure out what is what, we can draw an influence / dependence graph. Take any department, say, Marketing, and ask yourself:

1. Which other departments can it give instructions to : count 1 point when it does, 0 when not. For example, if Engineering has to follow Marketing briefs, Marketing gets one point, if Engineering can ignore Marketing, Marketing gets 0 - overall you end up with an influence score for Marketing.
2. Which other departments can give it instructions: count one point when it is dependent, 0 when not. In our example, if Marketing has to wait until production is ready to launch a campaign ad for a new product it is dependent, 1 point, if it can go ahead whether production is ready to ship or not, count 0.

In this case, the CEO is an ex-Marketing executive, so Marketing is fairly influential: CEO office, Sales, Engineering and IT have to listen to it, so it scores 4. It is also low in dependence as it only has to follow the CEO office and production, and scores 2. Things fo couse could change if Finance took a larger role, through increased vitality and Marketing dependence score would move to 3.

Here the score board would look like:

Which you can plot as the following:

What does this chart tell us? We can distinguish four areas:

• The masters: high influence, low dependence. They give the real orientation to the rest of the organisation, their decisions steer the company and they are pretty much a law unto themselves. Their thinking will permeate everything other departments think.
• The relays: both highly influential and highly dependent, their decisions; actions and day to day behaviors will impact everything in the company although they are not fully masters of their fate.
• The peons: they do the hard long labour. Although they can represent the bulk of company employees and have a huge impact on customer outcomes, these folks pretty much have to do what they're told without a say in all key decisions.
• The judges: neither influential nor dependent, judges do affect the system as a whole precisely because they are independent - their opinions will count, even on the masters who will be weary of not being judged too badly - which could change power balances in the future and lead to a leadership change.

This is not how each of the actors would probably see themselves, but in this company, Finance, Marketing and HR are dominant - with Finance far more influential than all others. The CEO office is less in charge than it thinks but is a key working part of the system (as opposed to its strategic head) and all revolves around IT. Production and Sales, the people in front of customers and who make stuff are simply victims of other people's power games - and engineering the ultimate judges of all decisions that are made, post hoc.

There are some glaring absences in my example, such as Purchasing, Procurement, Logistics, Legal, and so on - or the board and customer associations - and part of the benefit of such map is to make sure we have a clear view of the entire relevant system (without including the whole wide world). The dynamic goes this way:

With each actor trying, as they can, to gain influence and reduce dependence. As you can imagine, hygiene, health, vitality of each of the sub-systems will have a great impact on how the organization behaves as a whole.

Where do people come in? Each section head will have a huge influence on how they take their role - what perspective, energy, competence, experience, and leadership they bring to the department. In this case, strong competence and vitality of a new head of sales might just completely change the game by either pushing sales towards being a relay in gaining influence, or gaining independence towards a judge - which would affect Marketing first, but also finance and HR.

This back-of-enveloppe analysis is just a starting point, but it leads to central strategic questions:

What is the operational crux of your strategy? What is the leverage point you want to press on to move your strategy forward? Sometimes, it doesn't appear on the map, as customer service in the previous example, or logistics. Strategy is essentially finding the crux of a problem and developing operational capabilities to exploit it - there is no clear difference frontier between strategy execution. A sound strategy depends on what you can actually do and a brilliant strategy means developing unique abilities. This maps can show hints about why your preferred strategy will stubbornly not execute: maybe your entire system is set up on reaching other hidden goals.

What perspectives do your leaders bring to their roles? Each leader will bring an individual perspective, experience, energy and leadership to their department, repositioning it as they go through hygiene, health, vitality, which will also affect the system through their relationships with the other leaders. How do you want to do the steering? How do you want to do the rowing? What kind of leader do you need where according to your overall strategy? Can you renegotiate their perspectives? Or will they do what they do no matter what?

How do you want to drive this car? Where do you need to invest? As you look at the map, how would you like it to move in order to realize your strategy? Which department should lead, which should follow and which should stop getting in the way? And consequently, are your budgets and efforts aligned with your intent? For instance should we give a greater role to customer service (stronger leader, more budget, more CEO attention)? Or logistics? Because power is relative, we can't have all at the same spot, so we need to make choices: where is the critical edge to gain competitive advantage?

Where is the tension? Will the system pushback? As one leader takes a more active role, where will others pushback, resist, get in the way and so on. There is a normal tension between sub-systems, such as Marketing and Engineering (dreaming up products we can't engineer/enginer sticking to what they know) or Engineering and Production (designing products we can't build / not learning to produce essential new features to succeed on the market). These tensions are neither negative nor positive (for instance, no pushback on a crazy Marketing plan can lead to a disaster) but they need to be seen and handled.

What interfaces do you need to structure? each sub-system influences each other through a flow of human communication and automatic data sharing - these information flows have an impact on the influence / dependence structure. For instance, Finance usually receives data through reporting and then structures budgets without having to listen to what other departments say - this simple mechanism gives it far more influence and far less dependence that one might wish, as well as implicitly imposing a financial worldview on the entire setup.

The overall outcome of a system is more (or often less) than a sum of outputs from its sub-systems. It's easy to believe that if we seek performance and productivity from each department, the company as a whole will be healthy and react to its set directions according to its strategy. Organizations, it turns out, are unruly beasts that tend to behave as they usually do, according to their own internal power logic and habits.

Visualizing your organizational dynamics and clarifying your own organizational strategy is a key part of having a strategy at all - one that can actually be executed in the real world according to how things are set up, who runs which sub-system and how much effort you put into it. Master strategist Sun Tzu tells you to discover the strong and weak points of your adversary in order to appear inactive when you're moving, or far away when you're near, or strong if you're weak and weak where you're strong - but all of this involves investing in scouts to figure out where the enemy is and on what terrain, and making sure the scouts are listened to by the other generals.

To get an organization in control you first need to get a feel for its dynamics - and this starts with a quick and dirty visualization of influence and dependence. Clearly, there are no answers in the chart itself, but the beginnings of the right strategic questions.