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Organization:

Overview of Core Frameworks

Local Training Module For First-year Associates


Associate Handbook

FOREWORD AND OBJECTIVE


This Organization Practice(OP) document provides an overview for use in local training
sessions for first-year associates. It is part of a series on functional areas. The objective of
the series is to introduce McKinsey practitioners to the basics in each of our functional areas of
expertise. All the documents in the series are comprehensive in nature and describe the current
tools and frameworks in that functional area
At the end of this document, you can find a section describing a selection of the core
documents and handbooks that can give you further details on some of the frameworks
descried here. All of these documents are now on PDNet; and hard copies of them can be
requested from PDNet Express, which will deliver them in 24 hours
The contents of this document have been adapted for local training sessions through
Switching Tracks OPs first-year module videotape, which communicates the basic
concepts in a concise and visual way using an actual client The Scandinavian Railroad
Company. It is 40 minutes long and should be presented in 3 short segments. Between these
segments, the faculty member runs the attached exercises, adds any commentary he/she
considers necessary to clarify the concepts, and provides personal experience on selected
topics. A copy of the videotape and moderators guide with exercises can be requested from the
Firm

This document seeks to answer 4 questions


SECTION 1 Why do associates need to consider organizational issues in every engagement?
SECTION 2 What frameworks do we use to help our clients improve organizational
performance?
SECTION 3 What role does an associate play in organization work?
SECTION 4 Where can an associate find out more?

McKinseys mission is to have lasting and substantial impact on our clients.


To succeed, we need to work all three of the critical elements: choose the best strategy, develop
world-class operations, align the organization.
These three elements both reinforce and constrain each other. The best strategy is only relevant
if it is operationally and organizationally feasible. The optimal organizational design depends
upon the strategic requirement and the operational methods of the client.
This document focuses on one vertex of this triangular relationship. It would be wrong,
however, to believe that you can achieve the impact we seek by focusing on one vertex. We
need to consider all three in every study.

CRITICAL ELEMENTS FOR IMPACT

Successful
strategy

Efficient
operations

Effective
organization

We only achieve impact when the organizations we serve are successful in implementing the
strategies and operational methods we propose.
However, a recent survey of engagements in which clients failed to implement proposed
strategies found, in three cases out of four, that the client organization was not change-ready or
even capable of implementing the strategy we proposed.
To ensure that we have impact, we need to consider organizational issues as we devise
strategies. We must choose strategies the clients are ready and able to implement or
complement our strategy work with investment in building the organizations skills so that the
organization can step up to the challenge the superior strategy poses..

3 OUT OF 4 STRATEGIES THAT FAIL DO SO BECAUSE OF THE


ORGANIZATIONS INABILITY TO EXECUTE
Percent

100%=340 responses
Other
McKinsey
recommendations
flawed

Client not
change-ready or
committed

Organization lacked
the capabilities to
execute strategy

The demand for organizational work is increasing.


Trends in the marketplace and the evolving nature of our clients largely explain this increase in
demand.
The pace of change in the marketplace is accelerating . A strategic choice or an operational
innovation evokes a rapid reaction from competitor. Rarely can a durable competitive
advantage be found in these choices. Rather it is the development of a unique organizational
capability with the inherent flexibility and commitment to sustain world-class performance that
provides durable competitive advantage in these times of rapid change.
The clients we serve are changing as well. They have increasingly hired in-house strategic
capabilities. Most have built strategy shops close to the CEO. Few, however, have the in-house
capability and objectivity to do the organizational work required to make change happen.

ORGANIZATIONAL WORK GROWING IN IMPORTANCE

McKinseys engagement mix


Percent of time
Evolving marketplace
Quickening pace of
strategic adaptation
Durable competitive
advantage often rooted in
unique organizational
capabilities
Evolving players
Many businesses acquiring
in-house strategic capability
Making change happen
remains the neglected art

Increasing
demand for
help with
organization
issues and
change
management

Crafting the
answer

Helping
implement
change
10 years
ago

Source: Survey of 23 MGMs across the Firm

Today

The recent evolution in our clients has not been missed by our competitors. Each of our
competitors has recently introduced a branded organizational element to their portfolio. Their
organizational expertise figures prominently in their marketing campaigns.

COMPETITORS HAVE BRANDED ORGANIZATION TOOLS


Consulting firm

Product

Client example

BCG

Time based competition

GE

General Systems

Process redesign

UPRR

Booz Allen

Continuous improvement

Exxon

United Research

Process redesign and facilitation

Mobil

Delta Point

Transformational change

SmithKline Beecham

McKinseys consulting approach must evolve as our clients evolve. These changes provoke a
shift in the nature of our work and an evolution of the role of the associate on engagements.
The increased demand for organizational work impacts associates directly. Associates are
drawn into leadership roles on larger teams at an earlier point in their careers. This places
greater emphasis on the need for associates to develop quite soon after joining McKinseysuperb team leadership skills.

EVOLUTION IN McKINSEYS APPROACH


From

To

The answer

Solving for the answer and the change


process

Managing client teams

Building client capabilities

Small, analytically focused teams


average client team of 3*

Multiple, highly leveraged McKinsey/client


teams
Average client team of 10*

CEO counseling by senior people

Coaching and feedback at all levels

*Survey of 23 MGMs across the Firm

Before we dive into the organization materials, we should announce one critical caveat: the
frameworks you are about to see are only as good as the judgment and insight used to fill them
out. The frameworks are often mere checklists, useful tools to ensure you do not overlook a
key dimension. The OP can provide interview guides and questionnaires that you can use to
flesh out the frameworks, as well as applied examples in a range of settings. However, almost
all organizational issues are situation dependent, and almost all client settings are unique.
Your judgment, insight, creativity, and organizational acumen will determine whether you add
value in the client setting .

A CRITICAL CAVEAT
CONCEPTUAL

Garbage

Organizational
practice frameworks

Garbage

Checklists
Surveys, questionnaires
Good judgment, keen
insight, creativity,
organizational acumen

Applied examples
Client impact

Garbage in, garbage out

A series of frameworks are available to help clients identify and address organizational limits
on effectiveness or obstacles to change. They also point toward solutions.
These frameworks help teams answer two fundamental questions:
What change is needed?
How should the client implement the change?
The OP has derived a set of six attributes that characterize high-performing
organizations(HPO). By assessing whether your client organization exhibits these six
attributes, you can diagnose whether an organizational performance gap exists as well.
Additionally, the 7-Ss will help you identify strengths and deficiencies in the organization. The
7-Ss focus teams on aligning structure, staff, systems, and style to promote behavioral change
and build skills in pivotal jobholders. By contrasting the required skill set (at both the
organization and the pivotal jobholder level) with the current skill set, you can often clarify the
organizational gap that exists.
You complete the diagnostic by filling out the change board. That exercise helps teams
understand the organizational skill deficits or resistance to change so they can deliberately plan
to build the necessary skills and willingness to change in the organization.
Once the gaps have been identified, the team needs to lay out a change program to close the
gaps. The transformation triangle highlights the three critical dimensions of any effective
change program-top down, bottom up, cross-functional. The proper balance among these
dimensions depends on the gap, the client setting, and the competitive context.
Every change program contains some mix of six fundamental energizing elements. Each must
be considered as we design change programs.
This section of the handbook will discuss each framework in turn.

CORE FRAMEWORKS
What change is needed?
What gaps in organizational
performance exist?

How should the client make change happen?

What organizational
challenges exist?

What initiatives comprise


the change program?

High-performing
7-S framework
organization attributes
CEO
led

Vision

Performance

Winning formula
Strategy

Pivotal jobs

Skills

VISION

Simple

Skills

People

Shared
values

Transformation
triangle

Energizing
elements

Design levers
Organizationa
l structure

Staff
Management
systems
Leadership
style

Change board

How do we create energy


for the change program?

Agend
a/platf
orm

Direction setting
Structuring
Bottom-up energizing

Performance
management
Vision and
leadership

Problem
solving process

communication

Organizational
infrastructure

People
development

The OP undertook a study of 10 high-performing companies, true industry leaders, that we


knew very well. The companies had sustained pace-setting performance in their respective
industries over 2 decades.
These 10 HPOs shared six management attributes, each of which focuses on performance. By
comparing your client organization to these HPOs, you may identify opportunities to improve
your client organization.

HIGH-PERFORMANCE COMPANY ATTRIBUTES


What change is needed?
Gaps in
performance

Driven by leaders

Aligned by simple
structures and core
processes

How should the client


make change happen?

Organizational Initiatives
challenges

Energizing
elements

Built by relentless
pursuit of beforethe-fact
strategies/vision

Energized by an
extraordinarily
intense,
performance-driven
environment

Based on worldclass skills

Rejuvenated by
well-developed
people systems

The first three of the six common management attributes:


Driven by leaders. The leaders of these companies had very high performance
aspirations. For these leaders there was no such notion as good enough. At the
center of these leadership groups, we consistently found demanding, unreasonable
CEOs.
Built by relentless before-the-fact strategies/visions. HPOs spend their time
looking forward, not back. Their strategies drive relentlessly for both profitability
and growth.
Energized by an extraordinarily intense, performance-driven environment.
HPOs have a demanding, occasionally punishing, work pace. There is real
accountability, especially at the top. HPOs, while being very good places to work,
are not always nice places to work.

ATTRIBUTES OF AN HPO
Driven by leader

Built by relentless pursuit


of before-the-fact
strategies/vision

Energized by an extraordinarily intense, performance


driven environment

Very high performance


aspirations held by all key
leaders
Demanding, unreasonable
CEOs
Effective working group at
top
Ability to penetrate to microlevel of their businesses
Single-minded adherence to
simple, clear success
measures-not just financial
Productive fear of failure

Highly motivating, if not


inspiring, end state
Frequently oriented toward
industry leadership
Consistently striving for both
profitability and growth
Passionate defenders of core
businesses
Understanding of how
industry(s) works, what
customers want, and what
competitors can do- and how
these might change

Demanding, occasionally
punishing, work pace; on call
all the time
Real follow-through on
accountability especially at
the top
Aggressive learning from
things that do not work
good places to work but
not always nice
Performance shortfalls
change careers
Members feel rewarded by
being part of winning
institution

The last three common management attributes focus on structure, skills, and systems:
Aligned by simple structures and core processes. HPOs align authority, accountability,
and performance challenges. Lines of communication and approval are simple and are
mirrored from one division to the next.
Based on world-class skills. HPOs are world class in at least one critical skill of their
industry, e.g., product development in high technology, risk management in wholesale banking,
direct-to-store delivery in consumer goods, best-cost manufacturing. Additionally, HPOs
exhibit superior process management skills that in and of themselves become a source of
competitive advantage.
Rejuvenated by well-developed people systems. The CEO in these companies is the Chief
Personnel Officer. The CEO interacts regularly with the entire leadership group, understands
the individual development needs and goals, and leads staffing reviews.

ATTRIBUTES OF AN HPO (CONTINUED)


Aligned by simple
structures and core
processes

Based on world-class
company skills

Straightforward alignment of Do many things well, but at


authority, accountability, and
least 1 functional skill at
performance challenges
world-class competence level
underpins strategy
Uncomplicated lines of
communication and approval Also focus on building
line to line
corporate skill in the way
they run the place
Similar internal structural
units and key management
Company key management
processes across the company processes viewed as real
Minimal critical staff reviews competitive advantage
Regular calendar of key
management processes and
communication

Rejuvenated by welldeveloped people systems


CEO is Chief Personnel
Officer
Clear focus on performance
and motivation successful
long-term wealth-building
programs seem key
Management processes
ensure leaders have
informed view of key
contributors 2-3 levels down
CEO leads annual staffing
review best people/teams
in most critical/demanding
jobs
Bench strength is a top
priority

The HPO research found something else common to the HPOs: all 10 were experimenting with
self-governance. Self-governance in these HPOs means empowerment with accountability. The
HPOs share the common characteristic of involving a wide range of or broad cross-section
of employees in driving for improved performance. Their goal is to imbue every employee
with an owners mind-set.
Self governance in these HPOs is different from that practiced in other engaged and
empowered companies. In HPOs the single-minded objective of empowerment is
performance.
In the matrix below, the HPOs we studied were all in the top half of the matrix (high
performance); many were reaching, in addition, for the right-hand side of the matrix(engaged
and empowered).

PERFORMANCE AND EMPOWERMENT AT HPOs

Performance

High
Performancefocused, topdown-driven
organizations

Performancedriven, empowered,
and accountable
organizations
HPOs

Average
Hierarchical,
command- and
control-oriented,
entitled
organizations

Activity-driven,
engaged and
empowered
organizations

Low
Command and control
Management approach

Engage and empower

Most large companies start out in the lower left-hand corner of the matrix (low performance
and command-and-control management approach). We discovered that HPOs that have
successfully transitioned to the upper right-hand corner have first achieved high performance
and then experimented with and adopted empowerment. Empowerment without first
establishing a true performance ethic in the company tends to result in continued low
performance.
If your client falls in the lower left-hand corner of this matrix, it needs to concentrate first on
building a true performance ethic. Empowerment, alone, is unlikely to yield performance
improvement.

TRANSFORMATION PATH
Path followed by highperformance companies

Performance

High

Path experienced by companies


that fail to instill performance
ethic first

Emerson
Pepsico
Sonoco
Sun Trust
VF

3M
GE
Hallmark
Johnson&Johnson
Many high performers on the journey

Most companies

BP
FP&L
Wallace

Average

Low
Command and control
Management approach

Engage and empower

As discussed above, the first phase of the organization diagnostic identifies performance gaps.
The second phase focuses on identifying organizational issues and impediments to change. The
framework most commonly used to identify organizational issues includes seven buckets that
start with S.
Strategy. An integrated set of actions that deliver a superior value to a set of customers with
a cost structure allowing excellent continuing returns.
Institutional skills. End-result activities the company must be really good at in order to
deliver the value proposition.
Shared values. Simple, agreed-upon principles that say what is important around here.
Taken together, the first 3-Ss define the companys vision: an overriding goal that people in the
organization strive to achieve; that is challenging, valuable, and exciting to them; and valuable
and differentiated to the intended customer. To achieve the vision, the company must design
and align levers to guide the behavior of those holding pivotal jobs close to the front line
i.e., those who directly affect delivery of value to the customer.
Organizational structure. An orderly and predictable system to determine who reports to
whom and how tasks are divided up and integrated.
Staff. The people in the organization considered in terms of their capabilities, experience,
and potential.
Management systems. The processes and procedures through which things get done day-today.
Leadership style. The way leaders focus their time and attention and the personal tone they
set.

7-S FRAMEWORK

What change is needed?


Gaps in
performance

Winning formula

Pivotal jobs

How should the client


make change happen?

Organizational
Organizational
initiatives
challenges
challenges

Energizing
elements

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems

Leadership
style

At the heart of we mean by organizational performance is a winning formula creating a


combination of strategy, skills, and shared values to carry out an organizational purpose.
What links these elements together (the overlap) is the organizations vision:
The vision is the overriding goal of the organization the place where strategy, skills, and
shared values intersect. It is the single, noble purpose that guides organizational priorities
and gives meaning to the day-to-day activity of the staff.
For example, McDonalds has a vision-driven winning formula, as described below.

McDONALDS WINNING FORMULA


Vision :
to become the leading
restaurant chain in the
world

Convenient
Good quality
Consistent
Family-oriented
environment
Fair value

Strategy

Skills

Shared
values

Quality
Service
Cleanliness
price

Quality control over all


aspects of business
Superior site selection
Continuous new product
development
Strong promotion of
products and
McDonalds image

Organizations usually change in response to discontinuities either external shocks (such as


deregulation ) or internal changes (such as new leadership) that make it clear that the old ,
grooved way of doing things is no longer winning. The successful ones will create a new
winning formula that is based on changes in strategy, newer or stronger skills, and/or shared
values.
Contrasting the new winning formula to the old formula identifies and gauges the change that
the organization is considering and defines the vision for the change program.
A change vision is a creed that summarizes what an organization is trying to become and why.
As such, it guides organizational priorities by redefining and recombining business objectives,
required institutional skills ,and corporate values about what is important around here.
A change vision is at the heart of top managements role in improving performance and is often
the first step. It provides the vital bridge between the initial dissatisfaction with the status quo
and the first practical steps taken in a change program the articulation of a clear target that
represents something better that is both logically sound and emotionally appealing.

IMPROVING ORGANIZATIONAL PERFORMANCE


Grooved

Unfrozen

Redirected

Discontinuities
External shocks
Strategy

Skills

VISION
Shared
values

New competitors,
economics
New technologies
Deregulation
Internal changes
New aspirations
New leader

Major change through people

New
strategy

New or
stronger
skills

CHANGE VISION
Shared
values

Certain key people in the organization hold positions that determine success or failure in
instituting a new strategy, skill, or shared value. These people fill what we call pivotal jobs.
We will only succeed in implementing the change vision if we succeed in changing the
behavior of pivotal jobholders.
At McDonalds, for example, pivotal jobs include the centralized purchasers of all raw
materials for all stores, the store managers, and the hourly employees who take and assemble
orders.

PIVOTAL JOBS
What people must do

What are they ?


Positions that have direct impact on
delivery of value to the customer.
Typically they
-Design the product
-Make the product
-Sell the product
Positions that must capably master
new skills

Where are they?


Close to the front line

In a recent study at a chain store retailer, the change vision included a significant improvement
in in-store convenience. Two positions were identified as pivotal jobs the store manager and
the area operations manager.
This study employed a contrast analysis in two forms. The first considered each element of
behavior and defined how the new behavior would need to differ from current practices.
A behavior contrast analysis often proves helpful in defining precisely how the pivotal jobholders need to change.

CONTRAST ANALYSIS
Pivotal jobs: store manager, chain retailer

Elements

Old behavior

New behavior

Use of time

Spend majority of time on daily


routine tasks unloading trucks,
stocking shelves, etc.

Devote much more attention to


training/coaching,
evaluating/experimenting with
pricing, staffing, merchandising

Job objective

Ensure that day-to day store


operations run smoothly

Manage store profitability and


implementation of new
convenience strategy

Critical skills

Conscientious, responsible
Basic math and writing skills

Old skills, plus


Good instincts about how to
affect profits
Leadership qualities

Criteria

Task completion
Financial performance

Old criteria plus added emphasis


on
Customer service
Inventory management
Store appearance

The second analysis contrasted the percentage of time spent on critical tasks under current
practices and envisioned in the future.

CONTRAST ANALYSIS BY PERCENTAGE OF TIME SPENT


Pivotal job: area operations manager
100%
Short vendor contacts

Merchant/
owner

Recruiting SM and
pharmacist
Disciplining

Coach

Balancing inventory
Follow-up on telephone
messages
Inventories
Paperwork
Putting out fires

Expand one-on-one time with SM and


associates
Train and motivate face-to-face for
customer service, inventory
management
Encourage SM to innovate

Player

Monitoring compliance
Policies
Planograms
Answering surveys
Filling out appraisals
District reports

Tailor products, services, pricing, and


promotion to segments
Search for new business
Evaluate business and customer service
performance

Clerical support should eliminate tasks


Administraor
Current

Clerical support should eliminate tasks

Proposed

The 3-S winning formula sets the standards, goals, and mission of the organization. How do
you get people (particularly pivotal jobholders) to actually follow those goals?
While you can dictate what skills and shared values you want , the organization must
provide guidance, motivation, and monitoring to see that the right decisions are made.
This is provided through the other Ss structure, systems, staff, and style. Collectively known
as the design levers, each of these four should be set by considering the specific skills and
shared values you want to instill in the organizations people and balancing them with other
designs that might be suggested by other specific skills and shared values needed.
Structure. Who reports to whom and how tasks are both divided up and integrated.
Systems. The processes and procedures through which things get done from day to day,
including hiring, compensation, performance evaluation, promotions policy, and training.
Staff. The people in the organization considered in terms of their capabilities, experience,
and potential.
Style. The way managers collectively behave with respect to use of time, attention, and
symbolic actions.

ORGANIZATIONAL DESIGN LEVERS AT McDONALDS

Winning formula

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

Hamburger University degree


required
Promotion from within to build
experience

Management
systems

Regular inspections
Franchise expansion based on high
grades on prior inspections
Many procedural mechanisms
aimed at building employee
enthusiasm and loyalty

Leadership
style

Hard-nosed, rigid attitude on how


to run the business

VISION
Shared
values

Centralized buying to control fat


content

The skills and shared values must be used to determine needed changes in organizational design. For
example, McDonalds specific skill of quality control drives many organizational design decisions.
Structure 1. Centralized buying provides more than economics of purchasing. It also helps ensure that
fat content is between 17.0 and 20.5 percent and ensures that burgers are 100 percent beef.
Staff

1. Owner operators have more say on quality of operations than absentee investor-owners.
2. Training at Hamburger University ensures that managers really know how to make the
food right. It is a $40 million facility, with 750-student capacity per 2-week session, and
translation booths for foreign managers. It is the only school in the fast-food industry
accredited by the American Council of Education.
3. Promotion from within builds experience in meeting company standards and reinforces
shared values.

Systems

1. Operating systems, including job descriptions and performance appraisals, ensure that
quality of operations meets standards..
2. All franchises are inspected on a regular basis, including grades( A through F) on QSC.
3. Unlike other franchises that give rights to territories, McDonalds franchises cannot expand
unless they show a history of high quality in operations.
4. McDonalds Personnel Action Manual provides mangers with a wide array of programs to
keep crew members motivated and committed.

Style

1. Little tolerance for variance from operations standards, except as well-thought-out


improvements. No shortcuts allowed.
2. Krocs inspections. Before entering a franchisees office, Kroc would often pick up all the
trash within a two-block radius of a McDonalds restaurant and then dump it on the
franchisees desk to show a need for greater cleanliness in McDonalds vicinity.

ORGANIZATIONAL DESIGN LEVERS AT McDONALDS

Winning formula

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

Hamburger University degree


required
Promotion from within to build
experience

Management
systems

Regular inspections
Franchise expansion based on high
grades on prior inspections
Many procedural mechanisms
aimed at building employee
enthusiasm and loyalty

Leadership
style

Hard-nosed, rigid attitude on how


to run the business

VISION
Shared
values

Centralized buying to control fat


content

The design lever clients exercise the most is probably structure. Too often we hope that by
tinkering with boxes in organizational charts, we can solve organizational problems. Structure
is really about how to arrange people and jobs for optimum performance.
A few assertions about structure:
There is no one best structure for any company. Structure choices for a client may change
over a few years, depending on external environment, leaders strengths, and internal
capabilities.
Structural choice should be based on the desired behaviors for the organization, which are
based on strategic direction.

STRUCTURAL OPTIONS
Strategic direction

Desired behavior

Structural options

1. Greater uniformity
across the
organization

Centralization
Small span of control; many layers
Functional structure

2. Rapid adaptation to
quickly changing or
complex
environment, or
greater response to
market

Decentralization
Fewer corporate staff
Flat structures
Business unit structure to match
strategic direction
(geographic/product/market segment)
Temporary teams across products or
functions

3. Rapid technological
innovation

Centralized technical staff for


economies of knowledge
Decentralized task force for focus,
Initiative

4. Cost reduction

Concentrating staff only at level where


integration is most crucial
Flatter structures; broad span of control

The change board framework can be useful for understanding the commitment and ability to
undertake major change. For each management layer and pivotal job, it asks:
Who among the important players is able to perform is his/her part in providing the new
skill?
What do they have or lack:
Conviction that the new skill is important?
Courage - the guy willingness to do what ever it takes to develop new skills?
Individual ability that is, personal skills or talents?
Organization supports such as the necessary system support?
Investing time in a change board analysis has helped a number of leadership teams
understand the nature of the current gap and gain insight into the most effective skillbuilding program

CHANGE BOARD

What change is needed?


Gaps in
performance

Skill to
be built
Chief executive
(or equivalent)
Leadership group of
area to be changed
Down-the-line
staff affected*
External
Constituencies**
* Modified as appropriate for company
** E.g., customers, suppliers, trade unions

Commitment
Conviction

Courage

How should the client


make change happen?

Organizational
Organizational
initiatives
challenges
challenges

Energizing
elements

Capability to leverage
the commitment
Individual
Organization
ability
supports/obstacle

Specific questions can guide you as you fill out the change board.
Will people have to
Learn new skills?
Learn new behaviors?
Reestablish priorities?
Delegate/assume decision making responsibility?
Build new working relationships?
Compromise other agendas?
Do people have the capacity to make all these changes?
Have people had positive or negative experiences with past change efforts?
Is the change consistent with existing cultural norms?
Beliefs /values
Behaviors
A retail chain provided this example of a completed change board.

CHANGE BOARD CHAIN RETAILER EXAMPLE


Delivering
in-store
convenience

Top
management (6)

Commitment

Capability

Individual
Organization
ability
supports/obstacle
Intellectually
Fair to strong Strong, except
Little support
convinced, but
COO lacks field No performance measures
Distant from
experience
on in-store
field realities
HR position
History of top-down
LBO pressures
vacant
customer service programs
Conviction

Courage

Lip service
Weak
Make the field Moderate
Other
do its job
Officers/owners H.O. does not
Home office (15) understand what
it is asking for
Field (8)

Area operations
Managers (125)

Diagnosis

Fair to strong
Fair

Few support
Segmentalist rivalry
among functions
Inadequate operating
systems
Can do style (do not
admit weakness)

Fair to weak

Overloaded: span of
control=60-80

Suspicious, but
eager to believe

Strong

Cynical (yet

Fair: ready to Fair: most trained Horizontal priorities


as task masters (unrealistic number of tasks
assigned)

Store managers another program) follow clear


and
orders from
assistants (3,200)
above
Associates
(30,000)

Mixed , but many ?


natural supporters

Turnover increasing; too few


Surprisingly
strong, on average labor hours for full service

A completed change board often suggests the actions that may be necessary to build the
commitment and capability required to implement change within your clients organization. In
the chain retailer case, actions included:
1. Lock in support
COO as champion
Full time change leader (facilitator)
Line accountability
3-year commitment
2. Create shared responsibility for progress
Three skill teams, each headed by a field baron
District entrepreneurship: each district manager to experiment with two to three
initiatives and then share lessons
3. Build a success model from below
Focus on one pilot area (14 stores )
Use full-time task force of high-potential area managers (eight managers, 3-to 9month tours )
Trained area managers return to home districts to lead pilot area process there
4. Force awareness of realities
Quarterly workshops to assess progress on skills
Close observation of pilot area ( If we cant make it work in one area, theres no
point in talking about company wide programs )
5. Restructure field organization
Store staffing standards
AOM span of control, supports
New recruiting/selection
Link to pharmacy strategy/skill gaps

CHANGE BOARD CHAIN RETAILER EXAMPLE


Delivering
in-store
convenience

Top
management (6)

Other
Officers/owners
Home office (15)
Field (8)
Area operations
Managers (125)
Store managers
and assistants
(3,200)
Associates
(30,000)

Commitment
Conviction

Courage

Strategy

Capability to achieve change objectives


Individual
ability

1.Lock in
support

Organization
supports/obstacle

4. Force
awareness
of realities

2.Create shared
responsibility
for progress

3. Build a success
model from below

5. Restructure
field
organization

To answer the question, How should change happen? , the OP developed the organizational
transformation triangle that summarizes the three basic management tasks when dealing with
change. Their relative emphasis may vary, but all three of them have to be managed to achieve
fundamental behavioral change.

TRANSFORMATION TRIANGLE

What change is needed?


Gaps in
performance

How should the client


make change happen?

Organizational
initiatives
challenges

Energizing
Energizing
elements
elements

3. Cross-functional initiatives
1. Top-down direction setting
Process design, target,
communications, etc.

Top
management

Link activities and information


in new ways for break-through
performance

Staffs

Operations

2. Front-line performance improvement


Unit-by-unit, team-oriented, problem solving

The well-known GE workout! change program included elements from each dimension of
the transformation triangle.

GE WORKOUT!
1. Top-down direction
setting/culture shaping
No.1 or No.2 in every
business
speed, simplicity, selfconfidence
Delayering

3. Core process redesign


Project teams to identify crossfunctional issues
Process mapping

Best practices workshops

2. Bottom-up performance improvement


Town meetings: 2- to 5- day interactive sessions
Brand name quality processes
Operations: unit-by-unit redesign

The client should seek an appropriate balance across all three dimensions of the transformation
triangle. Overreliance on any dimension will impede change.

BALANCE ON 3 DIMENSIONS IS KEY


Requirements

Dimension

Potential risk from overreliance

Energizing vision
Customer/shareholder/emplo
yee triad
Clear performance targets

Lack of commitment
Confusion
Cynicism

Performance wins
Relevant knowledge and
skill building
Expansion expectation

Unfocused efforts
Ignored or undermined by
management
Cross-functional opportunities
missed

Discontinuities addressed
Clearly understood process
installed
Old systems/structure/
processes eliminated

Overly complex
Beyond existing skill and
capabilities

The OP has defined a wide array of change approaches. Each change approach strikes a unique
balance among the dimensions of the transformation triangle. Your challenge is finding the
change approach that strikes the balance appropriate for your client situation.

OVERVIEW OF 5 PERFORMANCE CHANGE APPROACHES


A

Structured
process-Driven
problem
solving
(compliance)

Empowered
opportunitydriven
innovation

Values-driven
adaptive
improvement

Crossfunctional
process
redesign

Top-down,
skill-driven
building/
improvement

Example

TOP/AVA

Breakthrough

TQM

CPR

Corporate
skill teams

When
appropriate

Step change
Change-ready, Approaching
needed quickly flexible
theoretical limits;
Entitled culture organization
performance ethic
and capability in
place

Crossfunctional
redesign
needed

New basis for


competitive
advantage
needed

Quicker,
cheaper,
better

Lasting
competitive
advantage

Description

Transformation emphasis

Typical goals 40% of


compressible
costs
(imposed)

Up to each
Continuous
team; typically, improvement
stretch targets
in quality, cost,
etc.

No matter what change program is selected, the following six energizing elements should be
addressed. By addressing each one, the client builds the energy required to make organizations
change.

ENERGIZING ELEMENTS

What change is needed?


Gaps in
performance

Ambitious,
measurable objectives
Reinforcing feedback
Consequences

Performance
measurement

Organizational
challenges

How should the client


make change happen?
initiatives

Communications

Vision and
leadership
Winning formula
Winning leadership
group

Energizing
elements

Build commitment
Establish 2-way flow
Manage expectations
Inspire action

Organizational
infrastructure

Problem
solving process
Doer-driven
Fact-based
People-intensive

Systems and process


Structure
People development Roles
New mind-set
New skills, behavior

The OP has a wealth of experience and research to support the design of each element of a
change program.

POSSIBLE ACTIVITIES/TOOLS
World benchmarks
Project performance indicators framework
Performance maps
Performance contracts pro forma
Best practice examples
Performance
measurement
Vision and
leadership
Leading for success
CEO time-leverage
manual

Problem
solving process

Analytical tool kit framework


Analytical problem solving workshop
data to chart video and workbooks
Client advocacy videos
Skill/will/diagnostic
Continuous improvement principles
workshop
Best practice examples

Communications

Communications coordination
team-job specifications
Communications channels audit
Stakeholder analysis
Communications plan
Communications workshop
Best practice examples

Organizational
infrastructure
Core process redesign
Example role description
People development 7-S checklist
Framework for designing skill-building programs
Discrete training modules management skills (MFS),
leadership skills(LFS), building high-performing teams, project
management guide, designing ongoing improvement
Discrete tools RJDs, time-usage logs, change-readiness
surveys, signaling change tool kit, how to run a training
workshop
Beliefs/behavior-prompt sheet staff activity survey
Best practice examples

A packaging company applied these energizing elements as they built the skill they called
value-based systems selling (VBSS):
With a clear vision and leadership settled, the company decided on a problem solving
process that involved six multinational skill teams, each with a credible leader.
Their performance measures were narrowed to two aspects: in terms of input, they
measured account plans created and number of plans created and number of people
trained; in terms of output, they measured price and market share.
To communicate the message, the president embarked on a road show to manufacturing
and sales locations; the senior managers attended workshops; and a newsletter/bulletin
about VBSS was begun.
The organizational infrastructure was modified to establish account teams, global
account managers, and an account planning function.
On the people development front, an action learning program was begun to teach
people more about account planning.
All these tools and activities were focused on achieving a new level of excellence in the core
skill of VBSS that the company knew was critical to its strategy.

VBSS
Input
Account plans
People trained
Outputs
Price
Share
Performance
measurement

Awareness building Presidents


road show
Skill building through workshops
Reinforcement through VBSS
network bulletins

Communications

Vision and
leadership
The leader skill
for becoming $1
billion
President as
sponsor

Organizational
infrastructure
Problem
solving process
Multinational skill
teams with 6 credible
champions
Pilot effort with
leadership to get buyin and advice

People development
Account-based
action learning
program

Account teams
Global account
managers
Account planning

Associates will often step up to manager roles on engagements that address organization issues
and/or implement change. These engagements often involve multiple client teams. Associates
assume responsibility for managing one or more of these client teams. These engagements also
seek the active support of a broader set of client managers. Associates assume responsibility
for developing influential relationships with critical client managers. Engagements which
focus on organization issues therefore provide exceptional opportunities for associates.

ASSOCIATES ASSUME MANAGER ROLES IN


ORGANIZATION ENGAGEMENTS
Traditional view of team roles

Team roles on organization engagements


Client
manager

ED/DCS

Associate
ED/DCS

Client

EM

Associate
Client
manager

Associate

Client
team

EM
Client
manager

Client
team

Client
team

Sr.
client
exec.

Client
team

Associate
Client
manager

Client
team

The effective associate manager serves three functions:


1. The associate manager builds and sustains effective client teams that define, plan, and
implement the change .
2. The associate manager leads problem solving on multiple client teams.
3. The associate manager forges a consensus of support for the change vision among
critical client managers and ensures that managers maintain the energy level required to
effect the change.
All three functions are critical to success. However, in engagements that address organization
issues and /or implement change, building and sustaining an effective team is often the
necessary precondition to success in the other functions. The client team provides the critical
insight, knowledge, and skills required to solve the organizational problem. The associate /
manager needs to build an effective team environment to tap into the essential client input. The
client team should hold the confidence of the critical client managers. Once the associate
manager has earned the endorsement of the client team, the support of the client manager is
much more likely.

MANAGERIAL ROLES

Client
involvement

Problem
solving

Consensus

Chief engineer
Focuser
Structurer
Quality controller

builder

Team
dynamics

Coach and team


developer

Devils advocate

Since effective teams are so fundamental to success in organization work, the OP has invested considerable effort in
understanding how to build high-performance teams. Follow these principles to build high-performance teams.

PRINCIPLES OF TEAM BASICS


Dimension

Definition

Meaningful
purpose

The team purpose must


Inspire the individual team members
Justify the investment of Firm and client resources, as well as the personal investment of each
individual
For an engagement team, the purpose must include reference to substantive and sustainable client
impact

Clear
performance
goals

The best teams translate the purpose into a well-defined set of tangible and measurable goals.
The goals encompass
What will be achieved for the client in terms of performance
What will be achieved for the team and its individual members
Nearer-term goals, as well as completion-related goals

Well-defined
working
approach

The best teams decide up front and throughout the effort how to work together day-by-day, and how
individual team members will apply and develop their skills as they produce collective results above
and beyond what members working as individuals could produce. Their working approach allows
substantive time for unstructured creative team thinking/brainstorming

Complementary The best teams are composed of individuals who provide or are expected to develop the full range and
skills
depth of skill needed to fulfill the purpose. Skill development is seen as a key reward for team
participation. This applies particularly to functional skills, but also to problem solving skills and
interpersonal skills
Mutual
accountability

In the best teams, all team members feel mutually accountable for accomplishing the teams purpose
and performance goals. Individuals do not succeed or fail the team does

Small numbers

Superior team performance can only be achieved by a small number of people who can spend
substantial time working together as a team. A group of more than approximately 15 people has little
chance of becoming a superior team

The principles are described much more thoroughly in The Wisdom of teams, authored by Jon Katzenbach.

PRINCIPLES OF TEAM BASICS

Coach and team


developer

Meaningful
purpose
Clear
performance
goals

Small
numbers

TEAM
BASICS
Mutual
accountability

Well-defined
Working
approach
Complementary
skills

Source: The Wisdom of Teams

A teams potential is defined by the quality of its membership. The associate manager should,
whenever possible, participate actively in the selection of team members. Recent research by
the OP has found that most successful change programs were driven by a few impassioned
leaders. These real change leaders exhibit a common set of characteristics. Look for these
attributes as you consider which client people to include on the team.

REAL CHANGE LEADERS


People with a reputation for improving performance through people and for exceeding
expectations along the way *
Commitment to a better way
Courage to challenge existing power bases
Personal initiative to go beyond defined boundaries
Motivation of themselves and others
Caring about how people are treated and enabled to perform
Staying under cover
A sense of humor about themselves and their situations

* Real Change Leaders

.
Once the associate manager has assembled the right team and built an effective team
environment, solving the problem should be easier. The principles of good problem solving do
not change for engagements that address organization issues and/or implement change. The
way the associate participates does change, however. Here are a few recurrent themes taken
from interviews with associates after their first organization engagement
Let the team solve the problem. You wont have time to solve the problem yourself when
you have multiple teams to manage. More importantly, the team will feel more ownership
for the solution if you let them solve the problem.
Teams should be productive. Focus the team on action and work. Define specific end
products.
If you have assembled the right team, every member has an important part of the answer.
Engage the entire team in solving the problem. Every team member should have a
challenge piece of the problem.
Meetings are necessary evil for effective teams. Keep them to a minimum. Prepare
meetings carefully so that they are a constructive use of team time.
Listen. Especially on organization problems, the client often knows the answer but needs
help recognizing it.

SOLVING THE PROBLEM


Structure the problem, then let the team solve it
Focus the team on action and work not process, talk, and
review
Keep the entire team engaged
Prepare brief, high impact meetings
Listen

Chief engineer
Focuser
Structurer
Quality controller
Devils advocate

If you have the consensus of the team, it should be easier to sustain the support of critical
client managers. A few basic principles merit emphasis:
You need to begin building credibility with client managers early in the study. Talk to them
early and often. Engage then in defining the issues and prioritizing the work. This ensures
that their issues will be addressed.
Managers have specific interests and motivations; these interests explain much of their
behavior. You will be more effective at influencing managers if you spend a few moments
trying to understand their interests. Before each discussion, consider how your
recommendations impact the client managers interests.
When issues or concerns become apparent, address them squarely. There is little value in
avoiding and issue; it will come out eventually. Many issues evaporate when explicitly
discussed. Many others can be resolved by specific analysis. Issues that persist need to be
factored into the teams thinking.
Whenever appropriate, include key team members in important discussions with critical
client managers. Then client manager will get to know the team members better and place
more trust in their advice. When you include team members, the client manager can sense
first-hand the strength of the team consensus. As an added benefit, team members appreciate
the opportunity to interact with managers, and they can help you interpret the client
managers feedback.
Good written materials are always useful in client manager discussions. Preparing them
forces the team to explicitly agree on the content. After presentation they serve as a solid
record of what was said.
The opportunity to interact with client managers in one of the more attractive elements of
organization work. Associates can use this interaction to develop client relationship skills that
will be vital in the years ahead.

BUILDING CONSENSUS
Talk to critical managers early and often
Understand the motivations of the critical managers
Address issues and concerns directly
Include key team members in important discussions
Prepare clear, concise written materials

Consensus
builder

We hope that you take away four major points from this session:
Performance is the point of our consulting work, which involves an integration of strategy
and organization.
Inevitably, at the heart of all our work is change. And at the heart of change is a respect for
and understanding of people.
To understand organization performance and bring about lasting change, it is as important to
problem solve for how ( the engagement process ) as what ( the engagement issues).
Organization work provides associates an opportunity to stretch their people-management
skills early.

WHAT WE HOPE YOU TAKE FROM THIS DOCUMENT


1. Winning performance is based on the integration of strategy and organization
2. Respect for and understanding of people is at the heart of all change
3. Problem solving for process is as important as problem solving for issues
4. Associates have a significant and rewarding role to play in organization work

WHERE CAN AN ASSOCIATE FIND OUT MORE


Selected core documents and handbooks
The overview of core of frameworks in Sections 1 and 2 of this document describes the basics
and provides a template to better understand client organization issues, which should prove
helpful in almost any engagement because no matter what the focus of an engagement is, a
basic understanding of the process of change is necessary to focus on the priorities of the client
Once you are assigned to an engagement of this kind, you may need to read more about some
of these frameworks or gather handbooks about the topic. As you may know, PDNet contains a
large array of documents that may be useful to you. You can get hard copies of such documents
in 24 hours using PDNet Express through your local library
However, there are thousands of documents in the Firms databases; therefore, the key for
efficient data gathering and getting smart fast will be to access only a limited and targeted
selection of documents when you need them. This section provides you with some hints on
key, core documents of the organization practice and related disciplines

Appendix
This appendix contains:
1. HPO bulletins
2. Glossary of 7-S framework
3. Organization transformation triangle
4. Energizing elements

GLOSSARY OF 7-S FRAMEWORK

Winning formula

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

Hamburger University degree


required
Promotion from within to build
experience

Management
systems

Regular inspections
Franchise expansion based on high
grades on prior inspections
Many procedural mechanisms
aimed at building employee
enthusiasm and loyalty

Leadership
style

Hard-nosed, rigid attitude on how


to run the business

VISION
Shared
values

Centralized buying to control fat


content

Winning formula

STRATEGY

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it?

An integrated set of actions to deliver a superior value to a set of customers


with a cost structure allowing continuing excellent returns

What is it
important?

Gives direction and purpose to organization activities


Strongly influences what skills the organization needs, what values are
stressed, and how it should be designed
Provides benchmark for measuring organizations success and redirecting
its activities

What must I
know about it?

Balance between strategic thinking and capability to execute often


unmanaged
Strategy formulation must consider the complexities of external
environment (e.g., discontinuities gaining ) balanced with internal history
and capabilities
Increasingly, superb performers frequently win not by inventing it first,
but by doing it best
In highly uncertain environments, institutional skills may help dictate
strategy

Winning formula

INSTITUTIONAL SKILLS

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What they are?

End result activities the company must be really good at in order to


deliver the value proposition

Why are they


important?

To help people focus on the 2-4 skills critical to delivery of the value
proposition
They drive organization design other organization elements must be
designed to build needed skills

What must I
know about
them?

Institutional skills are organization capabilities, not just abilities of


managers or other staff
Strategy work is incomplete without explicit consideration of the
institutional skills required to execute the strategy
Institutional skills increasingly are the primary basis for achieving
sustainable competitive advantage

Winning formula

Pivotal jobs

SHARED VALUES

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What they are?

Simple terms that say, What is important around here?

Why are they


important?

Provide means to achieve value proposition through


Aspirations, pride, emotion, and energy
Focus, guidance, and learning orientation
Solution space/ tie breakers

What must I
know about
them?

Shared values are probably the hardest S to influence


But ignore at your peril. Any strategy consistent with deeply grooved
shared values will never be implemented
The leadership team must articulate, believe in , and be credible on
shared values
Shared values are shaped by obsessive, persistent communication from
leaders

Winning formula

VISION

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it? An overriding goal that people in the organization strive to achieve; that is challenging,
valuable, and exciting to them; and valuable and differentiated to the intended customer
Why is it Strategy and tactics are for the battlefield, but the battle must be fought for a purpose of
important? value to society
Genichi Kawakami, Yamaha Corporation
Provides meaning, motivation, and source of pride to attract and retain customers and
able employees
Helps drive long-term strategy formulation and development of needed skills and values
Supplies courage in the face of the unknown by providing sense of stability and enduring
themes
Guides and inspires daily behavior, reducing need for bureaucratic rules and systems
What must Leader must set and live by vision for it to permeate institution
I know
Best visions are simple, easy-to-understand, and demand nothing short of long-term
about it?
excellence
Financial goals (e.g., increase SOM, increase shareholder wealth ) are not visions; they do
not excite the organizations people or provide enough competitive differentiation to
serve as standard for behavior
Vision is extremely difficult to change significantly without creating discontent, reduced
effectiveness, and even abandonment of institution by its best people and customers
However, visions can and must be constantly challenged and changed at the margin to
adjust for the institutions changing environment

Winning formula

PIVOTAL JOBS

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it?

Positions, close to the front line, that have direct impact on delivery of
value to the customer (e.g., those who design the product, make the
product, and sell the product )

Why is it
important?

Successful implementation of any change hinges upon the pivotal


jobholders acquiring new skills
Thinking about the new skills these pivotal jobholders must acquire
pushes the depth and rigor of our thinking

What must I
know about it?

Relationship between microskills of pivotal jobs and macroskills of the


organization
Contrast analysis compares microskills required after a major change
program to those currently required in the organization
Reverse-engineer the organizational design start with the results you
expect; identify the behavioral change needed to achieve those results;
then shape the other Ss to influence pivotal jobholders to perform as
required

Winning formula

Pivotal jobs

STRUCTURE

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it?

An orderly and predictable system to determine who reports to whom and


how tasks are divided up and integrated

Why is it
important?

Facilitates coordination and integration


Symbolizes priorities
Focuses organization attention

What must I
know about it?

Design should support needed skills and shared values


Structure is most powerful tool for energizing change
Structuring is not simple
Key structural issues include
Types of structure
Span of control
Centralization vs. decentralization

Winning formula

STAFF

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it?

The people in the organization considered in terms of their capabilities,


experience, and potential

Why is it
important?

Staff composition and productivity are important determinants of current


and future strategic success
The people who make and sell the product/service collectively
determine if the client delivers superior value

What must I
know about it?

Front-line positions require detailed attention to specific skills and


shared values
Key issues can include who to hire, how to train and coach them, how
to motivate and reward them, and what information to give them
Support positions must reflect the needs of the front-line people

Winning formula

SYSTEMS

Pivotal jobs

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it?

The processes and procedures through which things get done from day to
day

Why is it
important?

Most important tool for


Commanding attention
Influencing behavior
Indicating how things really work here

What must I
know about it?

Best companies employ relatively few and simple systems


They should be shaped on a regular basis
Important types include
Management information systems (MIS)
Incentive systems
Planning
Systems to get right information in the hands of the right people are
increasingly important

Winning formula

Pivotal jobs

STYLE

Design levers
Organizational
structure

Strategy

Skills

Staff

VISION
Shared
values

Management
systems
Leadership
style

What is it?

The way people focus their time and attention. There are tow types
Personal tone (e.g., supportiveness, argumentativeness )
How people spend time, what questions they ask, settings they appear in

Why is it
important?

The key lever in shaping values and reinforcing strategy

What must I
know about it?

What people do means more than what they say


The best leaders use style to emphasize a few simple values
While personal tone is hard to change, managers can more easily adapt
how they spend time, questions they ask, and settings they appear in

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