Organizational & Competency Development

Partners: John O'Reilly & Michael Norkus

A well-executed strategy process often results in the need for internal development. Growth strategies, for example, typically raise the question of scalability – "Can our current organizational structure support a doubling of our business over the next five years?" Many strategies require the development of new competencies – "For this to work, won't we need a global purchasing capability?" The chances of success are highest if the answers to such questions are developed as a seamless continuation of the strategic thought process.

Our Capabilities

Our approach applies the principles of organizational design (clarity of reporting relationships, appropriate spans of control, minimization of layers, etc.) and concepts of organizational architecture (matrixing, shared services, etc.) within the rational framework created by the strategy. A key objective is to find the "happy medium" between the solution that would be optimal if the client were starting with a blank slate, and the solution represented by the status quo, including the strengths and weaknesses of incumbent managers. (Whereas the status quo is rarely optimal, the purist version of the "right" solution can lead to an even worse outcome if it is forced on a management team that is dead set against it.)

In seeking the right blend of the ideal and the practical, we typically work through issues in three major areas:

  • Business unit definition. This is the linchpin between strategy and organizational design, and as such represents the primary basis of corporate organization. Chartering of business units must be predicated equally on external realities (such as market definitions and competitor focuses) and on internally controlled bases of advantage (for example, leveraging a geographic management structure to deliver two discrete sets of field services). There are often two or more plausible bases of business unit definition, such as product lines, customer industries, or geographies. Making the right decision in this regard is more of an art than a science, and is thus an area where Alliance's depth of experience comes to the fore.
  • Inter-functional dynamics. Eliminating tension between functions is NOT a goal of organizational design. Tension is unavoidable. Depending on the nature of the business, inherent tension can exist among any or all of the major functions -- between Operations and Marketing, for example, or between Finance and Sales, or between Purchasing and Manufacturing. Tension can be constructive to the degree that it breeds healthy rivalry. The key for organizational design is to incorporate an appropriate balance of power and a clear path of escalation. Once again, the theory is easily grasped, but application in a real-world business calls for careful, experience-driven judgment.
  • Measurement and reward. An inevitable byproduct of any organizational design is a set of units whose performance can be measured. This being the case, and measurement being fundamental to the science of management, it is critical to make measurement an explicit consideration during the organizational design process. Defining the focuses and bases of measurement leads naturally to the design of the management reward system, which is typically the most direct motivator of the behavioral changes needed for effective strategy implementation. Alliance does not provide compensation-related consulting services, but assists clients in identifying the right goals and parameters for a strategy-driven reward system.

Case Study

  • Reorganizing around new market realities to kick-start growth
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