Design for Complexity… Design out Complication...2014/05/28 · for the knowledge age, through...

© 2014 ON THE MARKwww.on-the-mark.com

Webinar

Design for Complexity…Design out Complication

28th May 2014

Welcome!

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2014 ON THE MARK | www.on-the-mark.com

About Niels Pflaeging

Designing for Complexity, Designing out Complication

Niels Pflaeging is co-founder and associate of the BetaCodex Network, and president of his own consulting firm based in Wiesbaden (Germany) and New York, with which he serves as a top management advisor, internationally.

Niels is one of the world´s foremost authorities on the BetaCodex (formerly: the "Beyond Budgeting model"). He has published four books and many articles on the subject, and since 2002 has travelled more than 30 countries, presenting and discussing the BetaCodex mindset, and bringing it to life through advisory work targeted at profound change, and organizational transformation.

Niels´ second book, “Leading with flexible Targets. Beyond Budgeting in Practice” was awarded the Financial Times Germany Best Business Book award, in 2006. Both this book and his previous one, entitled "Beyond Budgeting, Better Budgeting", published back in 2003, were lauded by critics and readers and became bestsellers.Since 2006, Niels has been strongly involved in organizational transformation initiatives in firms both in Europe and in South America.

His latest book, "Organize for Complexity" (published in German in late 2013 and about to be published in English, worldwide) outlines how organizations can become fit for the knowledge age, through adopting a complexity-robust design.

He is a profilic speaker, speaking four languages fluently - English, German, Spanish and Portuguese. Prior to the BetaCodex Network, Niels was a director with the BBRT for five years. He was also a business controller at multinational firms, including ThyssenKrupp and Boehringer Ingelheim.Visit Niels´ website at http://www.nielspflaeging.com and the BetaCodex Network´s website on http://www.betacodex.org

Buy on Amazon

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http://www.amazon.co.uk/Organize-Complexity-Build-High-Performance-Organization/dp/0991537602/ref=sr_1_1?ie=UTF8&qid=1401224655&sr=8-1&keywords=niels+pflaeging



About ON THE MARK & Mark LaScola


• OTM Core Purpose: Enable Our Customers To Realise Their Envisioned Future• Continuously in business for over 25 years• Over 370 successful re-designs and transformations completed• Over 4000 trained in our design and transformation methods and solutions• 6 continents; 27 countries• Every Function• Cross industry

Com m on Results Footprint Complex change accomplished at an accelerated rate Less bureaucracy/increased speed of product/and/or service delivery Improved quality and lower costs More satisfied customers ‘Off-the-charts’ employee engagement scores

• MS in Marriage and Family Therapy – trained in “systems” theory applied to humans• Practicing OD since 1985, Part of the OD community since 1987 – my professional home, Chair of the Local ODN 1996-99• Personally led or delivered over 700 change projects• First organisation redesign experience in 1987

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Focus of the Webinar and What to Expect


A. Define ‘Complicated’ versus ‘Complex’ in organizations and why‘Complication’ has become a problem

– Identify common features of complicated organisations (hierarchy, silo thinking,bureaucracy, matrix structures, fragmentation and its impact on people)

B. Historical trends in organising (How did we get here)

C. Ways of organising going forward…

D. Approaches to making it happen

E. Lessons Learned

– Do’s and Don’ts

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Webinar Ways of Work ing


• Type your comments & questions into the chat window at any time.• We will address ?’s along the way and after each section.• Niels and Mark will both agree and disagree in different areas. This

is by design to provide you with varying viewpoints and practices.• We will be posting the slides and webinar recording on our blog

and will send you all out URL’s to download them so watch your inboxes!

• We are happy to send you any articles referenced or provide more detail around any of the points discussed so don’t hesitate to ask:

Mark: [email protected]: [email protected]: [email protected]

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mailto:[email protected]




Complexity: Complexity is the natural consequence that occurs at the intersection of a business’ product and service offering, plus its customer mix and their varied demands, magnified by the speed of response required.

VS

Complication: Business complication is the self-made processes, structures, practices, mechanisms, protocols and norms embedded in an operating model and organization design that makes up HOW a business manages and copes with its complexity. It is OTM’s experience that nine times out of ten a business over-complicates its operating model and organization design.

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Complexity:VS

Complication:

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Pushing Complication onto the Customer


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The problem of the dominant m ind-set : to im agine organisations as pyramids is a m isguided m etaphor


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Complexity


Products &Services

Customers Varying Demand Speed

Fast Cycle Times

Slow Cycle Times

Stable DemandAll Products

Unstable DemandSome Products

Seasonal DemandOne Product

Unstable DemandSome Products

Stable DemandAll Products

Slow Cycle Times

Fast Cycle Times

Fast Cycle Times

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Complication – Onto the customer experience


Morrisons & Discounters (Aldi, Netto

Lidl)

Tesco Domestic &

International

Sainsbury

&

Waitrose

Asda Walmart High Street (Coop, Somerfield,

Iceland, Woolworths, Boots, Superdrug, Soft

Discounters)

Food • Sales

• CCSD

• Supply Chain

• Finance

Confectionery • Sales

• CCSD

• Supply Chain

• Finance

Purina • Sales

• CCSD

• Supply Chain

• Finance

Beverage • Sales

• CCSD

• Supply Chain

• Finance

Internal coordination

Pet Care

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Complication – Sub-function into oblivion…


ASupply

HHR

CFI Pillar

DProcurement

GFinance

CLean

BC/Logistics

HR OD

EDP

ECategory SC Heads

FCustomer Supply Chain

Max Levels: 5Max Span: 1:13Min Span: 1:3

Each Sub-boundary = Functional, over-specialized, focused on partial work [fragmented value-stream]

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Complication - onto the customer and operations


S1 ARC Team

Kim W2 ARC Team

April

S2 ARC Team Aida

E5 ARC Team Becky

W3 ARC Team Larry

G1 ARC Team Jan

Consumer ARC Team Denise

TFC Support Bob

RDP Paul

Mexico ARC Team Lil

Canada ARC Team Carolyn

Supplier Team A

Chris Collections Team

A

Consumer Fin Team

Edith Balancing Team

A Metric

QC Team

A Juan

Travel Dina

MAX Help Desks

Recon Team Memos Team

A

Analysts

Project Analysts

SDL SDL SDL

SDL Ticketing Analyst Quality Control Collections Balancing Supplier payment

Memo Recon Help desk Project Analysts Consumer Fin RDP

Legend

A A A A A

A A

A

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The practical features of Fragmentation


B. Work

C. Work

D. Work

E. Work

A. Work

F. Work

Leadership Marketing Manufacturing Sales FinanceCustomerSupport

Coordination Coordination Coordination Coordination Coordination

Fragmented value streams [parts of work]. Boundaries around single parts and pieces of work. Human capital responsible for that piece of work only. Over-specialisation of roles. This creates redundant parts: If one part fails another

has to take over… Need for integration and coordination is significantly greater. Control and coordination of work happens 2-5 levels above where real work gets

done. Customer has to navigate the operational maze thus experiencing it.

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The im pact of fragmentation


B. Work

C. Work

A. Work

Fragmented designs: Burdens the diversity of P/S Inhibits rapid Change Creates over-interdepen-

dence of units Fragments the value stream Slows response Looses sight of the customer Outsources complexity onto

the customer experience

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OTM WISDOM: The m ore fragmented a design the m ore effort and resources invested into coordinating and integrating activities to ‘glue’ parts together both vertically and horizontally.


RegionTotal #

IdentifiedMost Common

TypeMost Common

MethodAverage Effectiveness

(Low 1 – 5 High)

Head Quarters 46 Info Sharing Meeting 2.8

Western 16 Info Sharing Meeting 3.5

East 18 Info Sharing, Operational

Meeting 4.1

Central 24 Info Sharing, Operational

Meeting 3.7

Southern 16 Info Sharing, Decision Making

Meeting 3.4

Northern 23 Info Sharing, Affiliation

Meeting 2.8

Overall 143 Info Sharing Meeting 3.4

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Any Questions

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Historical Trends in Organising (How did we get here?!)

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Trends in Organisation Design


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Trends in Organisation Design


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Summary of John Nirenberg’s book Overcoming Ham murabi's Curse -- The Realpolitik Of Building New Organizations by Ezgi Yildirim Saatci

The Administration and Bureaucracy Hammurabi, king of Babylonian, ruled the Babylonian Empire for 42 years from 1792-1750 BC, during which, political, cultural, and religious activities were peaked in Mesopotamia. He was a military man who dominated many of his neighbouring cities but he is mostly recognized for his contributions to the fields of administration and law

At the end of his long period of influence, Hammurabi’s legal decisions were collected and emblazoned on a stone tablet that showed 282 laws known as ‘the Code of Hammurabi’. Apart being significant for legal concepts, these codes also indicated major administrative rules. For instance; code number 72 says that: If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.” It was Hammurabi who first established the principle that a manager was responsible for his workers; each act of a labourer or apprentice was considered the act of the contractor itself can be seen in Frederick Taylor’smost enduring management principle of the 20th century emphasizing ‘management does the thinking (takes responsibility for the work) while labour carries out the plan (follows orders)’

With all the aspects of Hammurabi’s administration, it can be said that public administration in the First Babylonian Dynasty under the rule of Hammurabi had many of the characteristics of Weber's ideal type bureaucracy. There were at least three classes (as opposed to levels) of subordinates: rabianum who were the highest; satammu or minor officials; and the lowest class constituted of labourers and herdsmen. Hierarchy and class structures were very important in the form of governance. In other words, the Hammurabi administration achieved 3800 years ago what Weber describes as a modern bureaucratic phenomenon

Overcoming Hammurabi's Curse

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Organisation Designs that supports complexity

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The im provement paradox: In com plexity, work ing on separate parts doesn’t im prove the whole. It actually damages it.


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Practical Features of Organisation Designs that support Complexity


A. Human capital organized around real workB. Boundaries organized around whole work or deliverablesC. Flatter organisations/broader spans of control

• 3-5 Levels of management to zero mgmt. [Holocracy]• Increased, formalized management mechanisms [not roles]

D. Use of Virtual workers/crowd sourcingE. Capacity of employees -- % of time to focus on other work…F. Move towards value-driven work; finding of relevance and meaning.G. Control, coordination and integration of work happens at levels where real

work gets done [Emery]H. Less specialisation – Multi-functioning organism vs one role/one job known

as “redundant parts” [Cherns]

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Multifunctional organism vs. Redundant-part mechanism [multi-tasking versus…]• Humans have the capacity to do more than one task—we can be multi-functional and

multi-skilled. Yet organizations are often designed to break down whole work into parts and assigning people to those parts. Thus, cross training is required to create backups (redundant parts). People are viewed as replaceable by another warm body. Specialization has lead to fragmented work rather than holistic, satisfying work. Whenever possible, develop roles to be multi-functional and multi-skilled.

Boundary location [Establish boundaries on the basis of ability to deal with variances!]• Place boundaries only where absolutely necessary so that a group/team is

responsible for a whole piece of work (including the rework). “Boundaries” are the time, structure, authority and technology “fences” drawn on organization charts, wire diagrams and in people’s minds, between teams, departments and/or divisions. At best, boundaries clarify which groups are responsible for which tasks. Refer to #2 above.

• These boundaries/fences must be formed to assure that any variance that might be created by a group/team can be detected and corrected by that same group before it moves across a boundary into another area. This is known as the “socio-technical criterion.”

[Boundaries = structural, time, geographic/location]Adapted from A. Chern’s original work

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Organisation Designs that Support Complexity


Work Work Work WorkWork Work

Business Team 1

End-to-end value streams Boundaries around the entire value stream Responsible for the entire delivery of the value stream Multi-skilled (social and technical skills) roles with

specialisation only where absolutely necessary. The process does not break down if another area fails Produces a democratic organisation Structures flattens and self managed teams responsible to

deliver end-to-end are created Control and coordination gets done where work happens

Coordination

Input Output

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Teams work End-to-end


B. Work

C. Work

A. Work

B. Work

C. Work

A. Work

B. Work

C. Work

A. Work

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A solution to enable complexity in a sales organisation


Morrisons & Discounters (Aldi, Netto

Lidl)

Tesco Domestic &

International

Sainsbury

&

Waitrose

Asda Walmart

• Food • Beverage • Core

Confectionery

• Customer Marketing

• Customer Finance • Customer Supply

Chain

High Street (Coop, Somerfield,

Iceland, Woolworths, Boots, Superdrug, Soft

Discounters)

Food • CCSD

• Supply Chain

• Finance

Purina • CCSD

• Supply Chain

• Finance

Confectionery • CCSD

• Supply Chain

• Finance

Beverage • CCSD

• Supply Chain

• Finance


Confectionery



Chain


Confectionery



Chain


Confectionery



Chain


Confectionery



Chain

Pet Care

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A solution to enable complexity in a supply chain organisation


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A solution to support complexity in a supply chain organisationEnd-to-End Teams serving Factories


Supply Stream No.ofteams1

FTE2

York 3 15

Fawdon 2 12

Halifax 2 10

Tutbury 2 12

Hayes 1 5

Dalston 2 12

Brumborough 1 5

Staverton 1 5

Buxton 1 5

CoPack/CoMan 2 8

International 4 16

TOTAL FTE 105

5-6 Roles Per Team

MPS planning

SNP planning

MRP planning

Detailed production planning

Material call off

Supply contracts

IMM project management

Pack change

Supplier management

Product and cost Master Data

Pack techs

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A solution supporting com plexity in a customer support back office

SDL TeamService Support

Large MarketEast

Large MarketNorth

Large MarketSouth

Large MarketWest

Testing/InternalSupport

Projectanalysts

BalancingData Maint.

GovernmentETC/ETS

ETMS

MiddleMarket

ConsumerMarket Help Desks Mail/Print/

ImagingSupplier

Payments

MexicoMarket

CanadaMarket

DomesticRecon

Air MemosDomestic

TrainingTech. Operations

Field

FieldReporting/Support

Functions in Above Teams

Global*Interim Teams

Functions:

*To be incorporated into service Teams P.O.A

- Ticketing- Collections- Quality Control

- Operations Team Analyst- Accounting- CRS

Same as domestic team plus:- Air Memos- Reconciliations

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Im pact of performance in Organisation Designs that Support Complexity


• Decisions are made faster and hopefully better• Frees up top management to focus on external boundaries and

decision making activities such as setting strategy, etc.• More adaptive to customer demands/customer stays in focus• Faster at fixing problems [end-2-end]• Greater and sustained engagement of employees

Work Work Work WorkWork Work

Business Team 1

Coordination

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Any Questions

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How to Mak e it Happen


Implementation Lessons Learned

Adopt a disciplined, h ighly structured, holistic and integrated approach to the transformation

The number one predictor of a successful re-design is visible, unwavering leadership support from start to finish [success was 4 times more l ik ely]

Change behavior while changing structures/processes simultaneously

Conduct unrelenting stakeholder support

Integrate OD, HR and project management to drive transformation

Clear business direction and design principles

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Approach 1


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Iterate: Involve m any people in the process of designing a full network structure

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Contract

Current State

Foundation

Concept Design

Detail Design

Transition

Implement & Stabilise

Evaluate & Calibrate

OTM’s Transformation

CycleApproval, Stakeholder

and Pre-work

Approval, Stakeholderand Pre-work




Approach 2

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Pay Now vs. Pay Later Approach to Change


k

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Why Projects Fail :


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Foundation Phase Key Activities and Decisions


A. Vision & Strategy

B. Priorities

C. Social Attributes and

Values

D. Design Criteria

E. Performance Assumptions

F. Business Case for Change

G. Clear Scope of Work

H. Change Impact Analysis

I. HR Policy

J. Approach and Plan Forward

K. Sponsorship and

Governance

L. Stakeholder Work and Approval

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Any Questions

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Thanks for Attending

We will be sending out a URL where you will be able to download slides and a recording of this webinar so watch you inboxes!

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Next OTM Webinar…

The use of Analytics in Organisation Design

SEPTEMBER 2014

Watch our website and Digest for more info

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Design for Complexity… Design out Complication...2014/05/28 · for the knowledge age, through...

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