Turn Your Company Outside-In! A paper on cell structure design, part II (BetaCodex09)

1. Make it real! TURNYOUR COMPANY OUTSIDE-IN! Part2.Howtobuildthedecentralizednetworkorganization, guidedbyBetaCodexprinciples. ApaperonCellStructureDesign 09 BetaCodexNetworkAssociates NielsPflaeging,ValéryaCarvalho,GebhardBorck,AndreasZeuch BetaCodexNetworkWhitePaperNo.9.Dec2008

2. Welcometothesecondpartofthispaper. Inthefirstpartofthispaper,we... • ...explainedtherationaleforadifferent,non-tayloristic,waytostructuring organizations–leadingtothequestionofhowtobuildorganizationscapableof (1) accommodatinghumanbeings,and (2) competingintoday'sdynamicandnon-linearmarket-places. • ...describedwhypreviousideassuchassystemstheoryfailedincreating significantmomentumforchangeinorganizationalpractice,andoutlinedthedesign principlesthatdecentralized,networkedcellstructureorganizationsmustadhereto. • ...detailedtheingredientsofsuchstructures,whichinclude (1) asphereofactivity, (2) networkcells, (3) stringsand (4) marketpull. • Finally,wedescribedsomeoftheconsequencesofapplyingsuchadesign, highlightingkeyadvantagesaswell. Inthis,the2ndpartofthispaper,wedescribetwocasesfromourconsultingpractice, inwhichtayloristiccommandandcontrolorganizationswereredesignedas decentralizednetworks.

3. Chapter1: CasestudyNo.1-Technologyfirm fromtheGermanMittelstand

4. CaseStudy“TechnologyfirmfromtheGermanMittelstand”: Anoverviewoverthecompany Thecasecompanyinanutshell: •  Producerofhouseholdequipment,soldtolocalresellersandcraftsmen.Fourdifferent productlines,severaldifferent“saleschannels“,dealtwithbydifferentteamsandareas •  Approx.350people,ageofthefirm:approx.20years •  StrongpresenceinGermanyandItaly,weakerpresenceinothercountries.Twoproduction sites–oneinGermany,oneinChina. •  Sometechnologyandproductionleadership,inastronglycommoditizingmarket–which createspressuretointernationalizethebusiness. •  Hugegrowthpotential,butinthepast,internationalizationhinderedbyinternalquarrels, lackofcoordination,andacultureofinternalpoliticking •  Longhistoryof“feeble”financialresults,and,occasionally,dramaticfinanciallosses, compensatedforbytheownerfamily. •  Alargenumberofproductengineerscontrolsinnovationandotherprocessesandthus actsasapowerfulfunction.

6. Whatthecompanylookedlike •  Structure: ?  5directors:“Technology”,“Finance”,“Production”,“SalesGermany”, “SalesInternational” ?  20middlemanagers,manydepartmentswithmassivecoordinationproblems. Stronglinkbetweensalariesandjobtitles. •  Example:Thefirm'ssalesforceinGermany Previous structure: -29salesforcemavericks (whosedecisionmakingpowershasbeenerodedovertime) -15fieldengineers -15back-officesalesemployees ...neatlydividedintodifferentdepartments,withdifferentbosses,targetsandinterests.

7. Thecasestudy:whattheorganizationalstructurelookedlike Director Sales Germany Director Technology CFO Region 1&2 Region 3&4 Region 5&6 Region 7&8 Cont. educa- tion Control- ling Engeneers, Developers Admini- stration Marke- ting/CI Assis- tant IT HR Region 9&10 Region 11&12 Region 13&14 Region 14&15 Tele- phonists Accoun- ting Assis- tant Customer Services Sales office After-Sales Services Region 16&17 Region 18&19 Region 20&21 Region 22&23 Saleslarge equipments Technical Hotline Projects& Offers Region 24&25 Region 26&27 Region 28 Region 29 Complaints Director Production Director International Branch I Branch II Branch III Branch IV Cont. Educa- tion Qualit y Production Leader Sales OEM Assis- tant Material Planning Admini- stration Sales OEM Assis- tant Marke- ting Sales Sales Sales Sales Work planni ng Pro- duction Assem- bly Customer Services Centralsales support Internalsales services Logistics Purchasing & Disposition Saleslarge systems Technical Hotline Projects& Proposals Process optimization Toolings& Maintenance Complaints Design

8. Thecasestudy–puttingthepiecesoftheprevious tayloristicorganizationalstructuretogether Andwheredoesthemarketfitintothisdesign? CEO Answer:Itsimplydoesn´t! Director International Director SalesGermany Branch IV Director Technology Branch II Director Production CFO Branch I Branch III Region 1&2 Region 3&4 Region 5&6 Region 7&8 Control- Cont. Admini- QualityMaterial Sales Marke- ting/CI Cont. education Sales Production Leader ling education Sales Admini- Sales Marke- Engeneers, Developers stration Planning Sales IT stration Assistant HR OEM Assistant OEM ting Assistant Region 9&10 Region 11&12 Region 13&14 Region 14&15 Sales Accoun- ting support Work Customer Services Sales office planni ng After-Sales Services Customer Services Centralsales Telephonists Internalsales Assistant Pro- ductionAssembly services Region 16&17 Region 18&19 Region 20&21 Region 22&23 Logistics Saleslarge equipments Proposals Technical Hotline Design Projects& Offers Saleslarge Technical Hotline Projects& Region 24&25 systems Region 26&27 Region 28 optimization Region 29 Maintenance Complaints Purchasing& Disposition Process Toolings& Complaints

9. Thecasestudy: Whatwasdone?“Theweekoftruth“ Statusoftheproject,roughly12monthsintothetransformationinitiative 1. 2. 3. 4. 5. 6. 7. Createa senseof urgency Pulltogethera guiding coalition Develop changevision andstrategy Communicate forunderstan- dingand buy-in Empowerall others toact Produce short-term wins Don´t letup Phasein% 1.  Thereisastrongguidingcoalitionthatsustainsthetransformation. 2.  Allovertheorganization,“profoundchange“isconsideredrelevant,thereisasenseofurgency. 3.  Differentgroupsintheorganization (taskforces) alreadyworkonspecificchanges.

10. Thecasestudy: Whatwasdone?“Theweekoftruth“ Approachtoredesign Workshopexecution: •  Three1-day“cell-formation”workshopsrun inearly2008,about1yearafterthestartof theBetaCodexinitiative,heldoverthe courseofasingleweek •  Threegroupsformed: 1.Market,2.Product,3.CentralServices •  About60participants (approx.20%ofthe firm'semployees) representingallpartsof theorganization •  fromallareasofthefirm. •  fromallhierarchicallevels. •  Workshopsdesignedtobreakuptraditional departmentsandhierarchicalpower; theworkshopsstartthecreationofthenew, networked,organizationalstructure Phase1–Speakinga commonlanguage Phase2-Recognize &describecurrentsituation Phase3–Thinkanddescribe networkedcellstructure

12. Groupexerciseduringphase3ofeachworkshop: “Thinkanddescribedecentralizednetworkedcellstructure“ Someofthedesignprinciplesapplied (seepartIofthispaperfordetails): •  Themarketistheboss (“outside“rules!) •  Therearefourkindsofbuildingblocksofadevolvedorganization: ?  Asphereofactivity, ?  networkcells, ?  “strings“, ?  “marketpull“. •  All“keytasks“performedintheoldorganizationalstructure mustalsobeperformedinthenewstructure (“businessmustcontinue!“) •  Acellisnotadepartment:Itisfunctionallyintegrated,notfunctionallydivided! Acellhasclients-externalorinternal–towhichitprovidesservices. Andithasatleast5teammembers,sothatactualteamspiritandpeerpressurecanstrive. •  Everycellaswellastheentireorganizationappliesthe fullsetof12lawsoftheBetaCodex.

13. Cellstructurechartfora“BetaCodex”organization: DefiningtheSphereofActivity Society Clients Legislators Suppliers “Market” Competitors Shareholders Politics Technology “SphereofActivity” Banks Investors Associations Previouslyoutlinedin writingina “caseforchange” manifesto …

14. Definingcellsandtheirroles Definedduringinitialworkshop: •  Cellnameandtype- permanentortemporary (ifprojectortaskforcerelated) •  Roles-functionsandduties •  Clients:Whoarethecells´ customers,internallyorexternally? Definedlater: •  Teammembers: Whoispartofthecellteam? •  Listofproducts/services andpricingforinternalservices •  Reporting:P&Lstatement, internalandexternalbenchmarks “Market” “Cell1” “SphereofActivity”

15. Thesolutionidentifiedduringthedesignworkshops,1stpart: “R-cells“-empoweredbusinessteamslocatedintheperiphery •  Allcustomerresponsibilitywouldresidewithintheso-calledRegionalcells,orR-cells, whichareresponsiblefor“everythingrelatedtothecustomer“–integratingawidearrayof previouslyseparatedfunctions (now:roles).Thepreviousdepartmentsceasetoexist. •  Therewouldbesixsuchintegrated,virtualregionalbusinessteamsfortheGermanmarket andanothertwocellsforothercountriesandregions,subjecttocelldivisionwhenever acute. •  Insteadofdifferentareasandpeopleaimingatdifferentcustomersegmentsandchannels –oftendeterminedbyproductlines,now,regionalteamswould ?  decidethemselvesonthecustomersegmentstheywouldtarget, andontheirstaffing. ?  eachhaveafullP&Laccount,beingrankedmonthlyamongthemselvesinfinancial indicators,andpayingothercellsofthenetworkfortheirservicesandproducts throughaninternalpricingsystem. •  Supportcells:Fromthepreviousdepartmentalstructurewith“marketfocus“,onlytwo market-relatedkeyroleswouldremainseparatedfromthenewlyintegratedR-cells.These rolesare“over-regionalmarketing“ (ofwhich,asoneorganizationmembersaid,“very littleshouldbedoneinthefutureorganization”),andmarket-relatedtraining. Thesetworoleswouldbeintegratedinacellcalled”CentralMarketServices“

16. CellstructurechartforaBetaCodexorganization,I: R-cellsas“mini-firms”withinthefirm Regioncells (“R-cells”) •  Totalbusinessresponsibility (“TheR-cellisthefirm”) •  Allproducts,allchannels •  Clients:Fullownershipofallexternal clientsintheirregions.Noexceptions! •  Roles:Planning&offers,Sales, After-salesservices,Salesoffice, Hotline,Complaints Region North- East “Market” Region Central Region South- East Market Region Italy Region West Region America &Europe Central Market Services Region North Region South- West “SphereofActivity” CentralMarketServices •  OverallMarketing/CI •  Training Clients:AllR-cells

17. Solutionidentifiedduringthedesignworkshops,2ndpart:“P- cells“-fromfragmentedfeudstointegratedproductcenters •  Inthenewdesign,thestrictseparationbetweenresearchanddevelopment,production andsupplychaindepartmentsistotallyremoved. Theconsequence:Morehumbleproductionpeoplewouldbeteamingupwithproduct engineers,whichhadpreviouslybeenoperatingtheirownlittlekingdom,frequently blockingchangeandresponsestocustomerdemands. Fullresponsibilityforproductsthroughoutproductlifecyclesgoestoproductcells.Inthe caseofthiscompany,severalP-cells (e.g.P-cells1-4,and5-6) wouldbededicatedtothe samefamilyofproducts,and“compete”witheachotherwithinthefirm. Internaltransferpriceswillneverinclude“margins”.Allinternalnetworkcellsselltheir productsandservicesonapurecostbasis,withoutretainingaprofit.Profitisthusonly generatedbytheR-cells. Supportcells:TwoadditionalspecialistsupportteamsforP-cellswouldbecreated:one responsiblefor“Equipment” (providingtoolingandfacilitymanagement),theotherforin- andoutgoinglogistics. •  •  •  • 

18. CellstructurechartforaBetaCodexorganization,II: Adding“P-cells”tothedesign. Productcells (“P-cells”) •  Roles:Production,Process&work planning,Quality,Maintenance, Productionlogistics,Process optimization,Materialplanning, Design/R&D •  Clients:AllR-cells Region North- East “Market” Region Central Region South- East Market Equipment •  Equipment (construction) •  Facility Management Clients:allP-cells Product Cell5 Product Cell4 Region Italy Product Cell3 Product Cell6 Region West Equip- ment Product Cell7 Product Cell2 Region America &Europe Central Market Services Materials& Logistics Region North Product Cell8 Product Cell1 Materials&Logistics •  Logistics •  Purchasing Clients:AllP-cells Region South- West “SphereofActivity”

19. Solutionidentifiedduringthedesignworkshops,3rdpart: “InternalServices“:frompowerfulcentraldepartments todevotedservantsforbusinessteamsintheperiphery. • Theworkshopgrouparrivedatahighlyunexpectedsolutionwithregardstothepreviouscentral ”administrative“departments.Thegroupgainedtheinsightthatthe“administrative“function anddepartmentswerebasicallycateringtowards“information“and”organizational“services. Theworkshopparticipantsconsequentlygroupedstaffandfunctionsintoonlytwosupportcells, nowdubbed“Infoshop“and“Orgshop“. • Theserefreshinglynewdenominationsgivetheimpressionthattheseteamsaresomethinglikea new“shopfloor“withinthefirm,signalingalsothatthesecellswouldnotbecentersof commandandcontrolpower,butserviceteamsprovidingnecessaryinformationaland organizationalhelptotheperiphery. • Findings:Duringtheworkshop,themanagersfromControllingandITconcludedquite surprisinglyforsome,thattheyhadintherecentpastworkedsomuchonjointprojectsand activities,closelyworkingtogethermostoftheirtime,thatitwouldmakesenseforthemtoform ajointteam,assumingresponsibilityover“providingusefulinformationfordecision-making” withinthefirm.ItwasalsoconcludedthattheCEOrolewouldbepartoftheOrgShop,together withthetelephoneoperators,assistants,andHR. • Interestingly,comparingthecellstructuredesignwiththepreviousdepartmentaldesign,it becomesapparentthatoutofthepreviousdepartmentalstructureinthecasecompany,only onesingleteamwouldremainbasicallyunaffectedbythenewdesign,atleastinitially. Aftertheworkshopseries,thesmall“tooling“areawouldbetheonlyonethatwouldremain identicalinthecellstructure,intermsofscopeandpersonnel.

20. CellstructurechartforaBetaCodexorganization,III: Addingthesupportcells“InfoShop”and“OrgShop”tothedesign Region North- East “Market” Region Central Region South- East Product Cell5 Product Cell4 Region Italy Product Cell3 Product Cell6 Region West Equip- ment Central Market Services Product Cell7 Product Cell2 Region America &Europe Materials& Logistics Org Shop OrgShop •  HR •  Executiveboard+assistance •  Centraloffice Clients:AllR-andP-cells Region North Product Cell8 Product Cell1 Info Shop InfoShop •  IT •  Financialaccounting Region South- West “SphereofActivity” … •  Controlling Clients:allR-andP-cells

21. Observationsaboutthecellstructuredraftdesign •  Highlyintriguing,simpleandscalabledesign–easilyunderstandabletoallmembersand externalstakeholdersoftheorganization. •  Functionalintegration (asopposedtofunctionaldivision,typicalintayloristicstructures) has manyadvantages.However,itrequirespeopleto“un-learn”previousbehaviorsandbiases, e.g.themyththat“functionalspecializationwithinateam”issuperiortofunctional integration. •  Celldesignisa“noredundancy”design,inprinciple.Sincestructuralgrowthwhentriggered bycellgrowth,andsubsequentlybycelldivision,happensonlyonanas-neededbasis. •  Allcellswillhaveanownprofitandlossreporting,basedonanaccountingforinternal servicespricing/charges (“valueflowreporting”).However,asanimportantprinciple,only R-cellscanretainprofit.Allother,internallyservingcells,operateonacostbasis,andthus aimatafinancial“break-even”,orzeroresult. •  Rankings,or“leaguetables”canbeusedtochallengecellsandtocreateexternalreferences forperformance (seenextslide). •  The12lawsoftheBetaCodexcanfullybeappliedtoacellstructure,butnottoatayloristic, hierarchicalstructure.

22. “Cellstructure“asafoundationformeaningfultarget definitionina“relative“way,usingleaguetables Strategiccascade FirmtoFirm ROCE RegiontoRegion Cost over income 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  FirmA FirmD FirmJ FirmI FirmB FirmE FirmF FirmC FirmH FirmG 31% 24% 20% 18% 15% 13% 12% 10% 8% (2%) P-CelltoP-Cell On-time-delivery etc. 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  RegionA RegionC RegionH RegionB RegionF RegionE RegionJ RegionI RegionG RegionD 38% 27% 20% 17% 15% 12% 10% 7% 6% (5%) 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  P-CellJ P-CellD P-CellE P-CellA P-CellI P-CellF P-CellC P-CellG P-CellH P-CellB 28% 32% 37% 39% 41% 45% 54% 65% 72% 87% Contributiontovaluecreation Leadstolowestoperationalcost!

23. Thecasestudy:Firstfullcellstructuredraftdesignafter workshopseries,tobediscussedfurtherwithinthecompany. “Market” Region Northeast Region Center Region Southeast P5 P4 Region Italy Region West P3 P6 Central Market Services Equipment Region America &Europe P7 P2 Materials& Logistics Org Shop Region North Product Cell1 Info Shop P8 “Sphereof Activity” Region Southwest

24. Furthermeasurestakeninthecasefirm •  Introductionof“trust-basedworkinghoursforeveryone” •  Changesinrewardsystems: ?  Profit-sharingagreementsformanagingdirectorsaredropped-switchtofixedsalaries! ?  Objectivesorvariablesformanagementstaffaredropped (approx.20%ofincome) – switchtofixedsalaries! ?  Annual“appraisalinterview”andallowanceforemployeesaredropped (approx.12%ofincome) -switchtofixedsalaries! ?  Objectivesandcommissionsforsalesforcearedropped (approx.60%ofincome) -switch tofixedsalaries! •  Ahomogeneousprofit-sharingschemeforthegroupiscreated–focusedon“relativemarket performance”,notonachievementofplanned/fixedbudgetfigures •  Duetothecell-formationprocesstherewillbelessmanagementstaff.Inthenewmodel: ?  Someofthemwouldbecomeactingasrealleaders,asopposedtomanagers,accordingto ournewvaluesandmodel! ?  Someofthemwillbecomevaluablemembersofthebusinesscells,becauseoftheirmainly specialistexpertise. ?  Someofthemmaynotidentifywiththenewmodelandwillresign.

25. Chapter2: CasestudyNo.2-Brazilianpackagingproducer withcustomer-dedicatedplants

26. Brazilianpackagingproducerwithcustomer-dedicatedplants Thecasecompanyinanutshell: •  Producerofpackagingforconsumergoodsfirms, BraziliancountryorganizationofaEuropeanmultinationalgroup. •  Approx.400employeesinthecountry •  8productionplants,dedicatedeachtoaspecificcustomer (consumergoodsproducers) •  Massiveinternationalandnationalgrowthpotentialduetostructuralchangeinthe consumergoodsindustry… •  …butalsointernalbarriersandinfightinginthecompany,lackofleadership,strong commandandcontrolculturefromheadquarters,lackof“improvementculture“atlocal plants,lackofagilityandresponsivenesstocustomerdemandsbyplantsteams. •  Resultingin:Continuouslydecreasingprofitabilityovertheyears,lackof competitivenessinacquiringnewprojects •  Plentyofhierarchyatplants,frequentqualityproblems,massivewasteatsome productionsitesorlines,strongcommandandcontrolculture,strongdepartmentalism andnepotism.

27. Previousproblemsandstructureatthecustomerplant •  Largestplant/unitofthecompany,withapprox.130employees •  Strongpowerstructure,withshiftleadersexercisingcommandandcontrol overtheirteams,fiefdomsandintensegame-playingbetweenshifts. •  Departmentslikequality,maintenanceetc.worktotheirowninterestsas well. •  Politicsbetweenshifts.Littlescopeforcontinuousimprovementwork.Fear culturewithintheunit. •  Scrapofupto30%ononeproductionline,lotsofrework. •  Changesareoftenagreedupon,butnottrulyimplemented,improvement initiativesgetstucksomewhere.

29. Approachtochange: “Breakingthepyramid”atanindustrialplant Chronologyandmethods: •  Week1:Urgencyforactionintheunitisidentified bycompany-wideguidingcoalition •  Week4:Initialeventheldattheunitwith19people fromdifferentareasofthelocalteam (“Breakingthepyramid”) •  Transparencyinrelationtochangestobemade (bycommercialdirector) •  “Museum”exerciseandKnowledgeTurntablescreate urgencyandvisionfornewmodel •  Week5:Localguidingcoalitionmeeting •  groupformedbyplantmanager •  outlineofthenewmodeldeveloped •  Detailedpreparationofthefuturecellstructure, includingjobanalysisandfunctionsduringworksessions (local“guidingcoalition”) •  Weeklyworkmeetings/follow-upbylocalguidingcoalition (“onTuesdays“), supportedbycoalitionsupportgroup •  Actiongroupsagainstwasteareformed

30. “Breakingtheorganizationalpyramid“ataproductionplant: Designinganew,networkedmodelfora130-peopleunit •  Unit (local) guidingcoalitionteamdevelopsnewstructure, supportedbythecentralguidingcoalition; •  Membersofotherplantstakepartintheprocess; •  Atfurtherlocalcoalitionmeetings,realexamplesfromtheplant arediscussedindetail,andagreementsmade.

31. Theresults Shareholders “Team” Principlesfordefininga“cell” withinthenewmodel •  Itcontainsseveralfunctions, rolesandduties,whichwould traditionallybeseparatedinto differentdepartments.Acell integratesfunctionsandroles •  Itoffersandsellsproducts and/orservicesonitsown, andisindependentinits decisionsaboutthem. •  Itiscustomerfocused,in thatitrespondstointernalor externalclients,nottohierarchy. •  Itisheldaccountablebythe companyleadershipandis responsibleforitsown valuecreation. •  Itappliesthe12laws oftheBetaCodex. Customer (allcellswithinaunit) Mini-plant5 Basedonformer prod.lineNo.6 Mini-plant4 Basedonformer prod.lineNo.5 Support cellI (restofformer departments) Support cellII Banks Mini-plant1 Basedonformer prod.lineNo.1 Mini-plant3 Basedonformer prod.lineNo.3/4 Support cellIII (ifnecessary) Mini-plant2 Basedonformer prod.lineNo.2 Market Competition

32. Keylearningsonstructure,withinthecasecompany. •  Newlycreatedproductioncells,or“mini-plants“tobeformedaroundexistingproductionlines orgroupsoflines.Theconceptof“shiftsasteams“,whichwaspreviouslypredominant,would betotallyabolishedwithintheplant.Therewouldbenomoreshiftleadershipstaffwhatsoever. •  Inthepreviousstructure,around50%ofemployeeswereworkingin“supportfunctions“–like quality,maintenance,internallogistics,etc.Thosesupportteamswouldmostlybedissolved andteammembersintegratedinmini-plantteams.Supervisors,exceptfortheplantmanager, wouldhavetobecomemini-plantteammembers,or“specialists“withinthesupportcells- dependingontheirindividualtalentsandpreferences. •  Salarieswouldnotbeaffectedbythechanges. Jobtitles,however,wouldatsomepointbetotallyabolished,tosupporttransformation. •  Mini-plantsaloneareresponsiblefortheir“business“–whichincludesquality,maintenance, staffing,productionplanningandscheduling,workorganization,andultimatelyalsoplant layout.Theywouldbeself-managedandempoweredtoacquireservicesfromsupportcellsat theplantandattheheadquarters.Theywouldalsobeempoweredtochallengethesupport teamsforcontinuousimprovement.Mini-plantsmayelectspeakers,andreportdirectlytothe plantmanager (previously,thereweretwoadditionalhierarchicallevels). •  Mini-plantsorganizetheirworkthemselves,insteadofbeingmanagedbysupervisors,asinthe oldstructure.Todothis,newwaysofdisplayingclientorders,performingshiftchanges,cell coordination,andconflictresolution,wouldhavetobedeveloped.

33. Context:FoundationofasetofTaskForcesbegins, inorderto“empowerallotherstoact” •  TaskForce“Cellnetworkswithintheplantunits” (“Breakthepyramid”–createnetworksofhighlyautonomousteamsresponsibleforresults) •  TaskForce“Compensationsystems” (rewardsuccessbasedonrelativeperformance) •  TaskForce“Financialandnon-financialreports” (promoteopenandsharedinformation) •  OtherTaskForces (TFs) andWorkGroups (WGs) tobecreated: “TFCellNetworkinthemainoffice“,“WGWastereduction”intheunitsandattheheadoffice Furtherchangeswithinproductionplantstructure: •  Preparingofimprovementplans •  Attackingwaste •  Transferringknowledgeandtechnicalcompetenciestothecells, redefiningrolesofsupervisors. •  Eliminatedepartmentsovertime,continuouslydecentralizing decision-makingfurther,andintegratingmembersfromprevious supportfunctionsintomini-plants.

34. Decentralizationanditsconsequences–astory Oneepisodefromthisimplementationcaseillustrateswellhowdevolutionworksinverypractical terms. Inthepreviousstructure,shiftleaders (calledsupervisors) wouldelaborateaproductionplanfor theirshiftseachday,forallproductionlines.Theproductionplanwouldthenbeimputedintothe ERPbytheadministrativeassistant,andwouldalsobearchivedinablackfilethatwasalways placedonatableintheshiftleader'sroom.Theofficialpositionwasthatthisfilecouldhavebeen consultedbyallplantemployees.Butthatrarelyhappened.Inpractice,alldecisionsregardingwork organizationweretakenbysupervisors.Productionschedulingwasthusaprocessthatwas decoupledfromtheproductionteam.Problemsorneedsforre-schedulingwouldremainobscureto teammembers,leadingtoconflicts,misunderstandings,andrework.Aswediscoveredtogether, massivereworkwasoftentheconsequence,aswellasscrapofupto30%inoneproductionline. Whentheprocessofdevolvingdecision-makingpowertothedecentralizedproductioncellsstarted, adecisionwasmadetoabolishthe“blackfile”.Eachproductioncellwoulddoitsownproduction schedulingonanas-neededbasis–makingchangeswhenevernecessary.Allproduction informationwouldbetransparenttoall:Customerorders,forexample,wouldbedisplayedonan openpanelneareachproductionline.Schedulingshouldnotbedonebyashiftleader,butbythe entireteam,oranygivenelectedteammember.Orderswouldbescheduledbytheteamonanas- neededbasis,aswellasqualityandmaintenancework,andtraining.Thisway,self-managementby theteamwouldbeinitiated.Theshiftleaderswouldintheprocessloseallauthorityoverthe productionprocess.

35. Chapter3. Generalconclusionsfortransformationinitiatives fromthetheoryandthecasestudiespresented

36. When,exactly,shouldyoudocellstructuredesign, withinthetransformationprocess? •  Don’tapproachyourcellstructuredesignasamentalexercise, decoupledfromaction. Theideaof“findingthesolutionallonyourown“mayseemtempting,butyoushould restrainfromthat.Ifyouwanttodoitanyway,thenavoidsharingyourinsightswithothers intheorganization.Thereason:Developingandagreeingonthenewstructureshouldbe asharedprocess.Doitwithalargegroupofrepresentativesfromallareas,andinatruly sharedsetting.Don’tattempttoenvisionthefullsolutionforyourorganization beforehand! •  Don’tdoittooearly-oninthetransformationprocess. Doitinphase5oftheKottertransformationprocess,notbeforethat (seenextslide). Youshouldconsideritasanelementofthestagecalled“Empowerallotherstoact”. Why?Well,firstofall,youdependonotherstothinkitthroughandtomakeitreal. Soprovidethatyouonlystartworkingoutthenewstructureonceacertainpercentageof organizationmembersareinthe”NeutralZone“. Secondly,beforestartingonthecellstructuredesign,youshouldhaveyourguiding coalitionfirmlyestablished,the“caseforchange”clearlyarticulatedandwidely communicated.

37. Embeddingcellstructuredesignwithinthe “DoubleHelixTransformationFramework” Designingcellstructurefitshere–notearlier! •  ThencreatearrayoflargerTaskForcestochange organizationalstructure,managementprocessesand businessprocesses •  Alignallprojectsanddecisionprocesseswiththe12 principlesandthevaluesdefinedinthecaseforchange Individual changeprocess 1. Ending 1. 2.NeutralZone Createa senseof urgency 2. Pull 3.Beginning 3. Develop change visionand strategy togethera guiding coalition 4. 5. Communi- catefor under- standing andbuy-in Empower allothers toact 6. Organizational changeprocess Produce short-term wins 7. Don't letup! 8. Createa newculture Whattodobeforethat (selected): •  Writethecaseforchange •  Buildawarenessthroughselectiveaction (e.g. abolishingbudgets) •  Winheartsandminds,trainforempowering leadershipstylesandactformoretransparency 1. Ending

38. Furtherinsightsintothetransformationprocess, gatheredduringthecellstructuredesignphase •  A“high-quality“cellstructuresolutionwillonlyemergefromatruegroupexercise. Whatwehavelearnedis:noBetaCodexspecialist,howeversmart,orevenwithintimate knowledgeofthefirmwilldevelopassmartasolutionasavariedteamofcompany representatives.Consultantsasspecialistsonthemethodshouldbasicallychallengeorganization members´thinking,sothattheythemselvescanarriveatasmart,consensus-basedand satisfyingsolution. •  Involveasmanypeopleaspossibleintotheprocess. Involveallpeoplefromtheorganization (iftheorganizationissmall),orwithrepresentativesfrom alldepartments (ideally:representativesdemocraticallyelectedbytheirteams). Theinitialdraftofthecellstructuredesignmustbeworkedoutbytheorganization'speople,or theirrepresentatives,becauseonlyadesigndevelopedbythefirm'smembersthemselveswill gainacceptance,itmustbedeeplyrootedinthecurrentrealityandintheorganization'scurrent senseofurgency.Creatingthiskindofinvolvementguaranteesthattheprocessandtheoutputof thedesignworkshopsisbothrelevantandperceivedasappropriate. •  Cellstructuredesignmeansunleashingahighlyemotionalprocess. Itislikelytomeanaturning-pointwithinthewidertransformationinitiative.Thisiswhywehave sometimesdubbedthismomentthe“weekoftruth”.Supportfortransformation,aswellas opposition,orresistancewillmanifestthemselvesinamoreaccentuatedwayafterthisexercise. Anyorganizationwillhavetodealwiththisemotionalprocessinaconstructiveway,because denyingitwouldleadtoabacklash.

39. Involveasmanypeopleaspossibleinworkingout thecellstructuredesign. Let´s do this together! SeeJohnKotter´sbooks“OurIcebergisMelting“,“LeadingChange“,and“ASenseofUrgency“, forfurtherinformationabouthis8-phaseapproachforprofoundchange.

40. Morereadingandresources Formoreaboutcomplexity-robustorganization:seeourwhitepapersno.12and13. Formoreaboutorganizationalstructures,seeourwhitepaperno.11. Formoreabout“relative“performancemanagement:seeourwhitepaperno.10. Formoreaboutproblem-solvingincomplexity,seeourwhitepaperno.7. FormoreabouttheBetaCodex,seeourwhitepapersno.5and6. Allpaperscanbeaccessedfromthispage:www.betacodex.org/papers Youarefreetouse&sharethismaterial.Ifyoumakeuseofthismaterialinyourwork, pleaseletusknow–wewouldlovetolearnaboutthat! Pleasemakesuggestionstoimprovefutureversionsofthispaper.

41. TheBetaCodexNetworkwhitepapers-sofar Special   Edi+on   Special   Edi+on   FindallBetaCodexNetworkwhitepapersonwww.betacodex.org/papersandonSlideshare. Whitepaper–The3StructuresofanOrganization ©BetaCodexNetwork–Allrightsreserved 25

42. The“OrganizeforComplexity”book Paperbackedition Deluxeedition (withbonuschapter) www.organizeforcomplexity.com

43. Make it real! ValéryaCarvalho mvaleriacarv@gmail.com LinkedIn SãoPaulo NielsPflaeging contact@nielspflaeging.com nielspflaeging.com NewYork,Wiesbaden SilkeHermann silke.hermann@nsights-group.de insights-group.de Wiesbaden,Berlin,NewYork LarsVollmer me@lars-vollmer.com lars-vollmer.com Hannover,Stuttgart betacodex.org GetintouchwithusformoreinformationaboutleadingBetaCodextransformation, andaskusforakeynoteoraworkshopproposal.