Addressing work complexity through organizational design
The world is becoming more complex with events moving faster than ever. Business leaders must respond effectively and navigate social, environmental, economic, and political realities while delivering value to customers and shareholders. One view of a daily newsfeed — from inflation numbers, US elections, unrest in the Middle East, energy costs, cyber attacks, and generative AI — tells you that the world is complex providing opportunity and risk, and it is not slowing down. We know that complexity increases as the number of variables that must be considered increases and many of these variables are intangible, ambiguous, or unknowable. The rate of change is faster and addressing issues and opportunities requires greater degrees of cooperation and interdependence, as leaders are challenged to navigate this rapidly evolving world.
While change is more rapid than in the past, complexity has always been a factor in managing businesses. For those working in large businesses, there is a clear understanding that work becomes more complex the more senior your role is. Addressing that complexity shows up in several ways including increases in accountability, decision authority, outputs, and a requirement to deliver results further into the future. As such the greatest amount of complexity can be found in the CEO’s role, who is accountable to the Board of Directors and shareholders for the outputs of the organization (profit and loss, value creation) …everything eventually roles up to the CEO and the buck stops there.
3 major groupings focus on work complexity creating different types of value
In other words, in any large organization senior roles need to deal with more complexity than junior levels. In recognizing this reality, common sense dictates that organization design needs to reflect this. Not surprisingly, corporations tend to organize to this reality and delineate work into 3 large groupings: corporate work, general management work, and operational work.
Corporate work
Corporate officers provide strategic guidance and control for existing businesses, growing/acquiring new businesses and divesting businesses. Activities focus on long-range planning and decision-making for long-term enterprise goals, economic resourcing, improving balance sheet valuation and executive talent pool development. The focus of work is executing strategies that ensure the organization continues to grow and thrive. Value is created by positioning businesses to build wealth by constructing a future through a corporate strategy to deliver an overarching vision and establishing and structuring the use of financial & human capital to promote long-term enterprise growth and sustainability while growing the businesses, within the enterprise, to increase shareholder returns.
General management work
General management work is about leading and managing an organization over a medium to long term. Business models are created, strategies are executed, and the work focus is on innovation and the creation of new and different ways to deliver value to customers and stakeholders. Leaders are accountable for developing the business models and ensuring the integrated systems are in place to complete the work of the organization and execute the strategy.
The focus is on profitability and growth – balancing the short with the medium and longer terms. The development of business models focuses on ways to create money in the form of profitable income. Value is created by providing effective oversight and support to the operational levels of the business and creating the conditions for increased profitability and growth through innovation, and developing new channels, markets, products, technologies, and business models to foster that growth.
Operational Work
Operational work focuses on the creation and delivery of products and services within the current business cycle and slightly beyond. It ranges from task completion on a day-to-day basis to the achievement of annual operations to preparing the organization to deliver next year’s plan. Value is created by delivering operational outcomes and results and preparing operations for planned growth including developing people, improving processes, and scaling up the operational capabilities of the organization.
Translating these groupings into work levels
The groupings of corporate, general management and operational work can be further broken down into work levels. The chart below provides that breakdown. The number of levels required in an organization is established by the strategy, the nature of work required to deliver the strategy and the overall size and complexity of the organization.
Human Capability to manage work complexity
As we all intuitively know, some people are more able to do more complex work than others. As human beings our capability to manage complexity varies from individual to individual, develops at different rates, and continues to develop throughout our lives. When researchers connected the organization research with research into human cognitive development, they found human capability developed following the same layering pattern as the work levels. Our cognitive development matches levels of work where we first can master simple work before being able to master more complex work. People are most effective and satisfied when the complexity of the work they are performing matches their current capability level
While mental processing capability is a minimum critical specification to successfully conduct a role at a particular level, it was not the entire story. To work effectively in a role at a certain level, you must demonstrate the right information processing capability, as well as knowledge and skills (K/S), you must value the work of the role, and you must be able to behave within the organization’s required values. A person must have the knowledge and skills necessary for the role or be able to acquire them. Valuing the work leads to commitment. For example, recruiting individuals who have the right IPC and K/S to be managers, if they don’t value managing people will not be successful. Lastly is required behaviour. A person must be able to behave in the way required by the nature of the work demanded in the role as well as within the company’s culture and values.
As an individual takes on more senior roles the scope of work complexity within roles increases. As work becomes more complex the need for people to be able to manage and operate within these complexities becomes critical. Having the basic skills and knowledge to conduct the work is the starting point. Role holders must also be able to deal with the complexity of the work, be able to effectively operate in the work environment and value the work of the tasks they are performing to maximize their output and contributions. As work becomes more complex the tasks being performed evolve and change compared to more junior roles. Individuals must stop tasks that no longer add value and approach work in diverse ways—new tasks, new approaches and new ways of thinking and behaving. At more senior levels there are fewer roles and an expectation that the output and contributions of this work are of increasing value to shareholders and other stakeholders.
Complexity is a fact of life in business and managing it becomes increasingly important as the world becomes more complex. Ensuring accountability and capability to manage complexity are properly distributed appropriately across your business ensures you are creating the conditions to prosper and grow in our rapidly changing world.
This blog is part of our ongoing series Organizations that Work. To see all of the blogs in the series that have been posted so far, click here.
Every Tuesday over the next few months, we will be posting blogs that take you from the pain of poor organization design, to identifying the root causes, to the benefits of undertaking strategic organization review. We will discuss the steps needed to effectively align your structure and work with your strategy, and we’ll discuss the processes that take out the guess work and help you to get it done. Through it all we will discuss how to lead the change from start to finish.
If you’d like to speak with us about how we can help you on your journey to an organization that works, please follow us on LinkedIn or book a call directly with one of our partners.
Our approach draws on several bodies of work including Stratified Systems Theory, the work of Dr. Elliott Jaques. For more on Dr. Jaques and his work visit the Requisite Organization International Institute at ROII Requisite – ROII Requisite.