Structural and Process Impedance: A Key Factor for Organization Design and Strategic Acceleration

Organization structures are essential mechanisms for delivering strategic objectives. They are like the equipment shell or the chassis in (or on) which the rest of the hardware and software is integrated to develop a product that meets design objectives. That structure is an enabler for strategy is well researched and well validated. Alfred Chandler in his path-breaking work established that structure followed strategy. Yet, not much research is focused on the enabling and disabling capabilities of an organization structure, relative to its strategic objectives. Organization structure is an enabler to “house” qualified and experienced individuals to meet both strategic and governance requirements. It is also an enabler to fix accountability and responsibility. Rightly designed, therefore, it must provide competitive advantage to a firm.

Like structure, process is a key component of delivering strategic performance. In several ways, process is like the operating system of a computer. However, unlike the operating system of a computer, the processes are as varied as firms are. Even within a firm, processes can vary across businesses, functions, sites and geographies. Process follows structure because process prescribes how different parts of a structure “talk” to each other. The more efficient a process is the more effective a structure would be. In practice, however, organization structures, like equipment or houses, provide a base for talent but do not automatically enable complete deployment of talent while processes, like operating systems, require increasing complexity to achieve even minor differentiation in delivery.  This blog post proposes that rather than the structure or process it is the level of structural and process impedance that determines a firm’s efficiency and effectiveness.

Impedance, conductance

Impedance is the total resistance of electric equipment (a wire, for example, at the simplest level) to the flow of power. The lower the impedance the better would be the equipment efficiency. Electrical impedance depends on the geometry and material. A thin copper wire would be more resistant than a thick copper wire while an iron wire would be more resistant than a copper wire of the same thickness. The same principle applies to structural impedance too. If an organization structure is geometrically complex and if the individual parts are resistant to organization-wide change, structural impedance would be strong. Processes tend to get established to manage structural impedance.  However, processes which are essentially aimed at information flow also suffer from process impedance. The flow of information also tends to be like flow of current in the electric wire. The mindsets of people determine the resistance level to information flow.

Conductance is the inverse of resistance. The greater the conductance of a material the lower will be the resistance.  Interestingly, the flow of electrons in a material determines the levels of resistance and conductance. The principles of impedance are similar to principles of mechanical friction as well as hydraulics. The information flow, in particular, bears a similarity to pressure differential in flow of water from source to a destination, the pressure at later stage being lower than at source. The choice of materials and the geometry are important in design; so is the importance of additional accessories to achieve efficiency.  For example, resistors and boosters are added in equipment and pipeline designs to overcome issues of resistance.  The important point to note is that natural human elements as well as synthetic material elements display widely varying characteristics. It is necessary to choose options that meet design objectives.

Design language

Products, as we know, have design language. Organization structures and business processes also have their own design language. While a product’s design language is to appeal to customers in a differentiated manner, an organization’s design language is aimed at promoting internal efficiencies. The deployment of the right geometry in an organization design can lower the otherwise inevitable structural and process impedance in an organization. One of the best geometrical patterns in organization design is Rensis Likert’s Linking Pin Organization (LPO), which offers an elegant balance between vertical hierarchy and horizontal span, while ensuring absolute clarity on how chain of command and cross-functional links could work across an organization. There are several other organization design constructs and principles but few are as clear as the LPO is.

Clarity in organization design came to be affected over time as concepts of line and staff functions began to take root. The emergence of multi-business and multi-site global organization has led to several organization structures that sought to impose diversity on line-staff differentiation. Structural complexity has resulted in further efforts to impose additional structures to manage complexity. Firms adopting this route tend to be impacted, rather unknowingly, by the increased structural and process impedance caused by the complex organizational geometry. The increased fragmentation caused by such structures also has been inhibiting the ability of firms to develop leadership pipeline. The Strategic Business Unit (SBU) concept provides an ideal design solution to bring the simplicity of LPO structure to highly diversified businesses; the success of a diversified construction major such as L&T in India to find homegrown internal leadership succession is related to a combination of SBU and LPO structures.

Structural planning

While it is widely accepted that structure follows strategy in a generic sense, not many give attention to the need to let organization structure to follow business structure in a specific context. Strategic planning happens, in most organizations, every year to look at a five year perspective on a rolling basis. Many emerging businesses become mature businesses and mature businesses become declining businesses while green shoots of new businesses emerge in the strategic plan horizon. Mostly however, firms try to make do with only minor adjustments to organization structures that could hopefully accommodate strategic changes as much as possible rather than proactively reinvent organizational structures along with strategic shifts. The positive way is to make organization design an integral and concomitant part of the annual strategic planning process and make development of a new organization structure mandatory before any strategic investments are planned.

Structural planning should focus on creating independent but accountable organization structures for new strategies. Typically, today’s organizations should be created for tomorrow’s results. The costs of not being organizationally proactive could be immense. Tata Motors’ inability to make a sustainable growth path in the car market is attributed to its unwillingness to create an end to end discrete sales, marketing and dealership organization for passenger cars, distinct from that of its traditional commercial vehicles.  Leading hospitality chains, from Hyatt and Hilton to Taj and ITC, are able to achieve complete market coverage by developing discrete hotel infrastructures and marketing organizations appropriate to each segment. These business strategy driven organization structures reduce structural and process impedance by design.

Design behaviors

Managements, somewhat strangely, tend to prefer complexity rather than simplicity. Some managers find creation of new organization structures ahead of business development to be an avoidable expense. Some managers find it difficult to let go of career opportunities that could come along with additional responsibilities when an existing structure is burdened with additional scope. Some managers, of course, fail to appreciate the nexus between strategy and structure. The combined effect of these embedded behaviors is the creation of monolith firms that become unwieldy and complex. Enlightened managements, however, recognize that the costs of discrete organization structures are more than compensated by increased business efficiencies within each structure. The success of conglomerate business model is based on such realization.

The fear that individualization of organizational units promotes non-standardization or non-harmonization of enterprise processes is ill-founded. A linking pin organization that connects the leaders of individual organization structures into a conglomerate leadership group addresses most such concerns. Proactive organization design approach requires the choice of right heads for right structures and trust in their ability to lead accountably at SBU level and integrate responsibly at conglomerate level. Envisioning an organization of the future needs to be an integral component of leadership vision for new businesses, whether mono-product standalone businesses or multi-product conglomerate businesses. Understanding the physics and mechanics of organization structures and the role of structural and process impedances is a key component of successful organization design and development.   

Posted by Dr CB Rao on June 28, 2014

Team Building: Gross and Subtle

Amongst the various programs for learning and development in organizations, team building ranks among the most delivered (jostling for ranking among other popular programs such as interpersonal skills and communication skills). This fact points to the importance accorded to team building in the overall gamut of organization development and performance management. From an idealistic concept that the entire company is nothing but one team (irrespective of diversity of businesses and locations) to a practical concept that teams must be small, connectable and manageable (with shared day to day execution goals), team building takes many configurations. Yet, the fallacy lies in the premise that teams can be built in one or two day workshops and based on lectures and games.

Without debating whether the macro team philosophy or the micro team approach is right (as potentially both are dovetailed), the focus should be on whether the teams can be built in the classrooms or need to be built in the shop floor (denotes, of course, any area of daily work). This is because teams are governed by logical relationships and shared goals on one hand, and by competitive pressures and disruptive pulls on the other. Moreover, teams are both formal and informal in structure and both static and dynamic in operation. In practice, teams are formed vertically and horizontally, cutting across hierarchy and entity. There is, simply, no way by which the challenge of organizational team building can be tackled in limited duration classroom exercises.

Understanding teams

Teams are groups of people brought together to deliver on a common goal. As in a sports team, each member of an organizational team must exist for a specific purpose. As in a sports team, each organizational team must operate as per certain processes. However, unlike a sports team, where the objective is to win over the competing team, organizational teams are not expected or enabled to have direct competition internally or externally. Many times, organizational teams have to compete against an unknown team with an undisclosed goal. A design team, for example, needs to develop a competitive product not because it can see or perceive the design team in the competing organization develop such a product in visible competition but because product development is an intrinsic strategic goal of the management.

Organizational teams are more complex to manage as unlike the sports teams they are less self-reliant. Typically, they require inputs and support from a number of other organizational teams. An organizational team, typically, wins against its own (set) target rather than an external competitive target. Unlike the sports teams, therefore, organizational teams are susceptible to self-modification of goals. Organizational teams have to generally live with the assigned membership and leadership, and would not have the flexibility the sports teams have in terms of selection of team members, captain, coach and manager. Organizational teams, therefore, are designed to deliver with fixed (human) assets (and liabilities!).

Business processes

Organizational teambuilding has to be an integral part of the design of organization structure and business process management. Teambuilding has to be also differentiated from competency building. Competent individuals are the fundamental building blocks of effective teams, and the reverse does not necessarily hold good. Certain industries, particularly consulting, information technology and construction industries, have appreciated the need for aligning team building to business process requirements and the benefit of building teams (from a large talent bench on call) in a customized manner for specific clients and specific processes.

Most industries and most companies, however, are unable to build such flexibility into their business processes and organization structure designs. To be effective and competitive, teambuilding has to be cascaded down from vision, strategy and program setting, selecting the right talent for the right jobs. This would require that, if not a whole company, at least entire departments must be open to continuously organizing and reorganizing themselves in project mode. This, in turn, requires that the temptation of managers to hold on to competent executives must be replaced by an openness to lend and borrow talent across the organization.

Competency grid

Given that the fundamental building block of team building is competency building, the first objective of learning and development is competency development. This, in turn, requires the development of a competency grid that identifies the required types of competencies across grades (say, from executive to functional head) and across projects (say, from design of a component to design of a car). Although, it may appear that there would be a correlation between project progression and grade progression, it is not necessarily true. In line with contemporary technologies, relatively fresh entrants may accomplish more sophisticated jobs. This would actually need to be encouraged than baulked at by established seniors.

Competency building also requires that the C Suite is filled by leaders who are multi-functional rather than mono-functional. This would lead to organizational flexibility in targeting projects and developing talent. Many conglomerate groups in India, including the Tatas and Birlas, have been successful in multi-specialization of their top executives. Even in their case, competency grid development is more by default focused on select personnel rather than by design spread across the organization. The human resources departments have a major role in building the competency grids. This, in turn, requires that that HR executives and managers have a thorough grounding in the technical and business matters.    

Team bonding

Once competency building is accepted as the main plank of successful teams, team building needs to be replaced by concepts of team design and team bonding. The right membership of teams, with each member serving a very specific purpose, ensures that the teams appreciate interdependency and avoid internal conflicts. The team design needs to be accompanied by identification of team manager (essentially for program and logistics administration), team leader (to strategize and develop action plans) and team mentor (to coach the team for higher functionality and motivation). The members of the team could be cross-domain as is the case with the concurrent engineering teams in automobile industry.

Team bonding, in the context of a competent team, has several process nuances. Firstly, the team must understand how the firm and team value chains work. Secondly, the team as a whole must understand how the team accomplishment would impact the overall corporate accomplishment (and impact of non-accomplishment too). Thirdly, the team members must understand how their performance or non-performance would impact the team accomplishment. Fourthly, the roles of team manager, team leader and team coach must be clearly understood. Fifthly, the team should agree on the processes of team working, performance assessment and feedback management. Sixthly, the team must be inculcated with the necessary interpersonal skills to be able to overcome rough edges and jell together.

Multi-step process

As the foregoing explains, teambuilding is a multistep process which is to be fundamentally grounded in competency building. Without competencies to support team performance, mere advocacy of soft skills would be nothing more than patchwork. Teambuilding has to be carried out in real time on the job situations, under expert guidance. Human resource departments need to acquire an appropriate knowledge of business strategies and technical matters to be able to deploy the right tools such as competency grids. Finally, organizations must provide for flexible structures with talent mobility to ensure that teams are customized for effective delivery.

Posted by Dr CB Rao on December 29, 2012               

The Four Laws and Four Phases of Career Life

In today’s world of increased longevity, the career span for a typical talented executive has significantly extended. As a result, the new generation could be expected to have a long career span of five decades, from 25 to 75 years of age. Compared to the current and older generations who coasted along the career paths (retiring at a ripe young age of 55 or 58 years!), the new generation has the aggression and aspiration to shape their careers in an accelerated manner (without resting till they reach the young ripe age of 70 or 75 years!), and that too more by design than by default. This new trend is, in turn, shaped by the new generation’s quest (and the parental pressures) for joining elite institutions and premium courses to leverage into companies and careers of potential high net-worth in future. This has led to a phenomenon of rapid and early career burnout in most other cases, leading people short of the opportunities of a career marathon.

With a bit of philosophical reasoning, external awareness and candid introspection, one would surmise that in life, the law of averages would eventually work out, coincidentally again in most cases. There are, in fact, four laws that govern career life, understanding of which would provide an appropriate perspective to appreciating the long term realities of career life. Once these realities are appreciated, it would be possible to look at a more orderly and structured progression of career life. Hinduism prescribes four stages of life to a typical male.  Shakespeare has formulated 7 stages of life in his play “As you like it”. This blog post hypothesizes four stages of life for career aspirants so that the new generation can face the corporate life with equality and stability. But, first the four laws of organizational life need to be appreciated.

The four pyramidal laws

The first law of organizations is the Law of Pyramids. Whatever the nomenclature and color given to the structural dispensations of organizations, the enduring law is that any organization is a pyramid in terms of departments and people. In fact, the typical organization tends to be several pyramids within a master pyramid. Each time, one reaches the apex of a pyramid (read, department) he or she will find that that place is, in fact, the bottom of another pyramid. The second law of organizations is the Law of Slippery Walls. Like pyramids which offer no easy steps or holds to climb, organizational pyramids also offer no easy way to climb to the top. The path is steep and slippery, almost inevitably.

The third organizational law is the Law of Multiple Climbers. This law teaches that even if one is fortuitous to be alone on the climb on one’s side of the wall, there would inevitably many climbers from the other sides of the pyramid (read, sections, departments or businesses in place of walls, depending upon which level of pyramid one is trying to perch oneself onto!). The fourth organizational law is the Law of Spiked Chair.  This law, which is the most profound of the four laws, can only be experienced and not taught. It states that if one is able to climb up the pyramid with one’s diligence and persistence, and fair amount of luck, one will find the apex far too sharp and spiked to afford any chance of comfortable stay. Unfortunately, there would be no honorable climb-down either.

Whoever reaches the apex of the ultimate pyramid would, no doubt, wonder why at all he or she has aspired for, and worked towards, reaching the apex of the organizational pyramid. However, like everyone despairs about life looking at others’ travails (be it studies, jobs or marriage) but goes through exactly the same rigmarole, members of organizations go through the motions of multiple pyramid climbing with great zeal and application. Those who understand the four laws in a philosophical perspective would, however, be in a state of equanimity to understand and pass through structured career phasing.     

Four phases of life

Hinduism classifies one’s life in terms of four phases or stages, each being called “ashrama”. The first stage is the “brahmacharya” or the “student” stage. The second stage is the “grihastha” or the “householder” stage. The third stage is the “vanaprastha”  or the “hermit” stage. The third and final stage is the “sanyasa” or the “ascetic” stage.  Without going into the full details of what each stage is expected to involve in a classic Hindu way, it would be sufficient for this blog post to understand the basic purposes of each of the four stages of life.

The student stage is a period of formal education. It lasts until the age of 25, during which, the young male seeks to attain, under a famed guru, both spiritual and practical knowledge. During this period, he is prepared for his future profession, as well as for his family. This is a phase wherein the greatest dedication and application is expected of the young learner.

The second period of householder begins when a man gets married, and undertakes the responsibility for earning a living and supporting his family. At this stage, Hinduism supports the pursuit of wealth as a necessity, and indulgence under certain defined social and cosmic norms. This ashrama lasts until around the age of 50. However, given the rigours of the subsequent two stages, the second stage virtually lasts a lifetime these days!

 The third stage of a man begins when his duty as a householder comes to an end: his children are grown up, and have established lives of their own. At this age, he should renounce all pleasures, retire from his social and professional life, leave his home, and go to live in a forest hut, spending his time in prayers. This kind of life is indeed very harsh. No wonder, this third ashrama is now nearly obsolete.

In the fourth and final stage, a man is supposed to be totally devoted to God. He is a “sanyasi”, he has no home, no other attachment; he has renounced all desires, fears and hopes, duties and responsibilities. He is virtually merged with God, all his worldly ties are broken, and his sole concern becomes attaining moksha, or release from the circle of birth and death. (Suffice it to say, very few can go up to this stage of becoming a complete ascetic.)

Four career ashramas

Given that the career span of the talented new generation is tending to be five decades long, one may hypothesize four distinct phases, which have similar intentions and applications as in progression of life. In the first phase, or the first decade of the career (say, age, 25 to 35 years) which may be called the development phase the incumbent must, irrespective of prior education and background, be focused on learning. The first phase represents the golden phase to master the products, processes, domains and businesses of a corporation. The more one learns, and applies the knowledge as one learns, the stronger will be the foundations of one’s career. And the stronger the foundation, the bigger and taller can be the superstructure. It is also important to secure the right guru or mentor during the learning phase.

The second phase, which corresponds to the householder phase, is the real career building phase. This phase or the second decade and half of the career (say, 35 to 50 years) represents the period of bounty to generate wealth for the corporation, and also simultaneously stabilize professional and personal life balance by providing peace and prosperity to the family. This is the phase when the aspirant needs to bring out all his energy and enthusiasm to lead and manage teams, climb up the slippery pyramids and reach to positions of substance. At the end of the phase, the career aspirant would have typically arrived.

The third phase, which corresponds to the hermit phase, is the stage when one brings one’s experience and wisdom to become a leader, who is expected to lead from the top. This stage, corresponding to 50 to 65 years of age, is one where the incumbent starts becoming increasingly lonely, with both his competitor groups and partner groups becoming thinner. As a hermit discovers truth through prayers, the leader in this phase discovers the larger purpose of leading an organization, which is beyond professional growth or personal riches. The truth as one would understand in this phase is to satisfy multiple stakeholders and craft an executable vision.

The fourth phase, which corresponds to the ascetic stage, is represented by the last 5 to 10 years of career life (say, 65 to 70 or 75 years of age). Clearly, this phase represents one of organizational “nirvana” for a leader. This is the phase wherein highly capable leaders become non-executive chairmen of corporations or become advisers and mentors to a wide spectrum of for-profit and not-for-profit organizations. They start looking for leaders who would fulfill or improve upon their legacy. Those in the first phase of learning could ideally lock themselves to mentors of the fourth phase to establish the right “parampara”.

Journey, not the destination

As one grapples with the four pyramidal laws, and undertakes the rollercoaster ride through the four phases, reaching in the process the narrow and sharp apex, one understands that the journey of organizational life is more important than the destination itself. Some, if not all, would muse that the fortune of satisfied life tended to be more at the bottom of the pyramid rather than at the top. If only there would be a way for the young career aspirants to fast-track themselves through the organizational time machine to simulate and assimilate the philosophical learning, there would be an opportunity for them to savor the journey of corporate growth through contributions each day, rather than waiting to occupy the sharp peak to make an elusive impact. For most people, an incremental contribution each day, from the very first day of a five decade career could be more rewarding than the aspiration of creating a stunning impact at the helm, decades later.

Posted by Dr CB Rao on December 29, 2012