Value creation from each & every role
December 13. 2017
I recently heard an executive describe operations as the most important area of the business. There was logic in his statement. It is operations which delivers the product and without operations there would be no revenue and no revenue equals no business. This reminded me of other times throughout my career where I have heard the same statement made about buyers in retail sector, sales in the technology sector, or professions in the public sector, being recognized as the most important contributors to their organization’s success. In all cases, a senior executive usually wants to make a point regarding the criticality of that department and wishes to signal that it should receive all the support and resources required to drive growth and profitability. The unintended effect of such statement is that role holders in the “noncritical” areas of these businesses feel angry, unappreciated, and undervalued.
In our world of organization design, each role creates value. If a role does not create value and cannot be linked to the strategy, then it should not exist.
Let’s start with the mainstream functions which exist to delight customers and bring in revenue (i.e. development, sales, marketing, and operations). Each one of these functions over time has been deemed the most strategically important function by different organizations. They certainly are part of the mainstream suite of functions which drive revenue. But as part of an organization’s “mainstream”, these functions cannot generate revenue in isolation.
- Operators need something to produce and cannot do so without development work.
- Sales cannot add value without having something to sell.
- Retailers (both bricks and virtual) cannot generate revenue without logistics to deliver product
into the customer’s hands.
The above are classic examples of how operationally focused roles create value for the customer. But there is other important work within the functions that support the mainstream services which must also be structured to add value (e.g. IT, Finance, HR). The purpose of these functions is run “the back office” through the management and enhancement of critical support processes to drive competitiveness. The important mainstream work cannot get done without these specialists to manage the finances, provide the information systems or provide the tools to develop and enable people. When designing organizations, these support functions should be designed after the mainstream work so that they operate efficiently and on a cost-effective basis in alignment with the operational work and the organization’s strategy.
Value in organization design is created through the distribution of work into roles from both a level and grouping perspective. Each level of work from the top of the house to the front line must add value to the level below. Senior management creates value by setting direction, identifying new markets, new products or services, and/or new business models for the purpose of sustaining and growing profitability and shareholder value. Middle management creates value by improving processes and efficiencies. Front line staff create value by delivering exceptional customer experiences.
Work also needs to be grouped in a way that allows for efficient distribution across the organization and to minimize cross boundary challenges between distinct groups. Boundaries can never be eliminated, but by grouping similar work together, clarifying cross boundary relationships and clearly defining decision authorities, we can significantly improve cross boundary teamwork. Well designed organizations group work in a way that will maximize value creation. Applying time tested design principles such as those listed below will unleash human capability through alignment of structure, leadership and strategy to transform a business and accelerate profitability and sustainable results.
CORE design principles:
There are several levels of work within all organizations which can be objectively defined and measured
Each level and role are discrete and important in the creation value
Each level supports the one above in achieving strategic goals
Each level adds value to the one below
Work of a similar nature is grouped into functional elements, and then to individual roles to facilitate effective distribution and co-ordination of work across the organization
Our approach to designing organization structures will allow executives to achieve strategic goals more efficiently and in an accelerated timeframe while providing an environment which fosters trust and engagement. If you would like to learn more about our approach and time-tested design principles, please visit our website www.coreinternational.com.
And please, contact us to let us know what you think…
Tagged: Mainstream, Operations, Organization design, Value