Management Reset: Organizing for Sustainable Effectiveness

1. Management Reset:Organizing for Sustainable Effectiveness Christopher G. Worley University of Southern California Center for Effective Organizations

2. Where am I going this morning? • To explore an organization design logic that responds to the traditional forces of technological change, workforce shifts, and globalization, but also to a new set of forces – for agility and responsibility. • To understand the challenges of transitioning to this new logic, we need to explore just a little bit of history

3. A History of Organizations and Organization Design in Two Slides

4. The first management was a “Perfect Storm” Technological Change Efficiency Growth Wealth Changes in Demand Organization Capability

5. The second management fueled the storm… but did not change its character… Changes in Demand Effectiveness Growth Externalities Technological Change Organization Capability

6. The third management represents a very different design challenge • Drivers of Agility Technological Change Changes in Demand • Sustainable • Effectiveness • Financial Results • Ecological Health • Social Integrity • Drivers of Responsibility Organization Capability

7. The Four “Ways” of An Agile,Sustainable Management Organization The way value is created …utilize a differentiated future focus,a sustainability-friendly identity, and a robust strategic intent The way work is organized …employ a “maximum surface area” structure, a flexible resource allocation system, transparent information, and a dynamic work system The way talent is treated …focus on human capital development and flexible rewardsystems The way behavior is guided …leverage a shared leadership philosophy and a remodeled board of directors

8. Sustainability is a Dynamic Capability… …that enables timely and effective organization changes in response to internal and external environmental changes. It yields consistently above average levels of sustainable effectiveness. Sustainable Strategies Perceiving Testing Implementing

9. Traditional View of Strategy, Organization, and Performance • The more clear, focused, and committed a strategy is… • …the more dedicated, resourced, and aligned its organization design… • …the higher its financial performance

10. Nature of Episodic vs. Continuous Change Episodic Change Continuous Change • Relatively long periods of stability are punctuated by short bursts of transformational change • Relatively higher levels of change over long periods of time Amount of Change Amount of Change Time Time

11. Our core management messages have always supported stability as the path to performance • Strategy • Sustainable competitive advantages • Organization Design • Stamp out feelings and pursue bureaucratic perfection • Figure out how to reduce variation – uncertainty is bad • Alignment, congruence, and fit are the keys to performance • Buffer the technical core from environmental uncertainty • Moses in the wilderness • Change Management • Unfreeze, move, refreeze (Lewin and Kotter) • Inertia is a powerful organization condition – resistance must be “overcome” • Reengineering as the last great attempt to treat organizations like machines • Create a sense of urgency – what’s the “burning platform”?

12. Implications of Episodic vs. Continuous Change • Change capability lacking – rented when needed • Focus on efficiency over innovation • Stability = Effectiveness • Change = Enemy • Performance reflects change pattern • Decision making centralized • Resources allocated through budgets • Change capability embedded in organization design • Focus on ambidexterity • Change = Effectiveness • Stability = Enemy • Performance reflects change pattern • Decision making shared/decentralized • Resources allocated through accountabilities Episodic Change Continuous Change Amount of Change Amount of Change Time Time

13. One more thing… • Growth is commitment and stability cloaked in the language of change and agility • Growth is low pervasiveness, low depth change • Growth hides waste • Growth is rooted in assumptions of population growth, but not sustainable • Aggressive growth as an identity contributes to cycles of boom and bust • Aggressive growth has its place and role, but its not sustainable

14. “Shareholders are due a fair return, not the absolutely best return.” William Weldon, CEO J&J “In exchange for permission to pursue profits, business must behave and act in ways that protect and enhance the world we live in. You cannot just look at the bottom line.” Kenneth Chenault, CEO American Express

15. Which is the more effective organization? Nokia Loses More Ground to Its Competitors Wall Street Journal – 1/28/2011 Apple Profit Muscles Past IBM Wall Street Journal – 10/18/2010

16. Long-term Performance in Telecom

17. Nokia’s Sustainable Strategy • Identity: Connecting People • Strategic Intent (~2008): • Breadth • High number of markets served • High in range of mobile devices and related services offered • Aggressiveness • Low “in your face” factor • Differentiation • Strong R&D group • Strong sustainability program/reputation • Currently missing in OS, killer apps, and killer devices

18. Nokia’s Current Strategic Intent Intent: Defend the Brand Identity • Leverage historical breadth but focus on North American market • Narrow product and service offerings in short term BREADTH AGGRESSIVENESS DIFFERENTIATION • Historically passive, pushing for greater speed in relationship with Microsoft • Maintain social and environmental orientation • Leverage brand recognition to create “3rd” ecosystem

19. Nokia’s Core Logic Group Executive Board Nokia Research Center Mobile Solutions Markets Mobile Phones Corporate Functions

20. Nokia’s Agility Routines • Perceiving • Strong future focus (medium and long term) built into Nokia Research Center • All parts of Nokia’s structure are tied into different external environments • Testing • Innovation flow built into NRC and core structure (“no ‘green’ phones”) • Transparent decision making process built on debate andconsensus • Implementing • Twice yearly reviews, a range of rewards, and global leadership development all support flexibility • A bottoms-up (for local responsiveness) and top-down (for integration) goal setting process that creates tension

21. Resolving the Dilemmas of Path Dependency Strategy Dilemma Measures of Effectiveness Intent and Sustainability Knowledge and Awareness Dilemma Sustainable Management is not Just About “Green” Programs Skills and Knowledge The Capabilities Dilemma Managing the Transformation Problems with Changing the Board Changing Identity Lead with the Work System Think Systemically Build in Learning Systems What the Nokia Case Teaches Us about the Transforming to Sustainable Designs

22. About the Center for Effective Organizations Since its founding in 1979, the Center for Effective Organizations (CEO) has conducted cutting-edge research on a broad range of organizational effectiveness issues. As the leading university-based action-research center, CEO has influenced how organizations are managed and made important contributions to academic research and theory. CEO's pioneering research in organization design and effectiveness has earned it an international reputation for research that bridges the gap between academic theory and management practice. Visit our website at: http://ceo.usc.edu