Organisational Design Theory – Using the Seven S Model

Organisational Design Theory – Using the Seven S Model February 2009 www.bachconsulting.com.au

Sections: The Seven S Model & Organisational Diagnostics I The Seven S Model Is A Descriptive Model That Allows Us to Describe Components of an Organisation and Better Understand How They Relate to Each Other II Seven S ‘From What?’ III Seven S ‘To What?’ and ‘To Achieve What?’ IV Identification of the Change Vehicle

Superordinate Goal The Seven S Model Is A Descriptive Model That Allows Us to Describe Components of an Organisation and Better Understand How They Relate to Each Other 7S Model Orienters Strategy Enablers Structure Systems Skills Energisers Style Staff The key to using the model is understanding that all Seven S dimensions are Interdependent e.g.: a change in one dimension, such as strategy, will have a direct or indirect impact on all other dimension. Hence the need to manage transformation through each dimension of the organisation.

Explanation Of Descriptors Superordinate Goal: The long term human and economic leadership vision of the organisation. Strategy: The market segmentation, value proposition,and goals of the organisation and how these goals can be prioritised and broken down into separate accountabilities. A new strategy usually requires a levels shift. Structure: The organisational chart that shows the division and the re- coordination of work in terms of function and level and in doing so defines accountability, authority and potential teams. Systems The formal and informal performance systems and operational systems of the organisation Skills: Organisational skills to support level of capability, skill and intellectual capacity being quite different issues Staff : Support specialists, such as IT, HR and Technical, who support accountable line managers Style: The way we do things around here. Who has authority, who is accountable? How are rewards and sanctions manifested. Are we individually or team oriented or both, contract, limbic or a blend

Conducting A ‘Quick’ Seven S Diagnostic Overview • The best way to conduct a quick seven s diagnostic is by interviewing key members of an organisation. Note that ‘organisations’ occur at many levels. For example a team within marketing is just as much an organisation as Telecom • The aim of the interviews is to gain an understanding of each of the descriptors as understood by each individual and identify perceived ‘tension points’ in how each descriptor operates or relates to one or more other descriptors • Identification of tension points often comes from overlaying the outcomes of various interviews. As such it is best not to conduct group interviews • The easiest interview format is to run though each descriptor in order

Conducting A ‘Quick’ Seven S Diagnostic - The Orienters Super-ordinate Goal • What is the super-ordinate goal or vision for the organisation? At the unit level this may be restricted to a mission. Often people will repeat a generic explicit statement so it is often useful to push for the implicit goal that guides day-to-day activities. • For example: the operations department of a manufacturing company may have an explicit goal to produce the best quality product at the lowest cost whereas the implicit goal is just to meet the production schedule each day. Such a ‘gap’ often reveals a lot about the tensions points within the organisation • Strategy • What is the strategy? Or how are you trying to achieve your goals? It is often interesting to see if the interviewees are able to differentiate between strategy (how and where to compete) and tactics or initiatives designed to achieve that strategy • The lack of ability to clearly enunciate a strategy, particularly by a senior employee, may reveal more about the communication systems or how operating / business plans are developed rather than being a insight into that individuals capability

Conducting A ‘Quick’ Seven S Diagnostic - The Enablers • Structure • What is the structure? Who reports to who? The key to identifying tension points within a structure comes from gaining an appreciation of the clarity (or lack thereof) of authority and accountability within the structure. The basis of this is that an individual should not be able to be held accountable to outcomes for which they do not have the authority to control or impact. • Within a structure it is worth noting the clarity between line, staff and service functions*. Where possible the three should not be found within one role. • *The line are those functions whose output has a directly and critical impact on the customer. The customer is the “unbiased arbiter of performance”, they buy it or they don’t. The line includes new product development, operations, sales and marketing. Staff are those functions that give advice to the line and monitor the line’s performance. They do not directly interface with an unbiased external customer, their customer is internal and their product is advice. Staff functions include human resources, scheduling and quality control. Services are those functions that are not critical strategically and that could be defined so clearly that they could if you wished be subcontracted and managed at arms length. Services include recruiting, information technology, maintenance etc

Conducting A ‘Quick’ Seven S Diagnostic - The Enablers Continued • Systems • There are two types of systems to examine; Performance systems and operational systems • Performance systems are concerned with the use of role descriptions, understanding how tasks are set and monitored, understanding the organisation performance review process and the individual performance review process • Operational systems are concerned with the systems and processes used by the organisation to create its end product. Ie: where does work originate from, what do you do and where do you send it? Often this questioning will reveal system inadequacies whether they be process related or functionally related • Skills • Understanding organisational skills is gaining an appreciation of ‘how good are we’ at a particular function compared to the industry standard (see functional evolution) • The backbone of functional capability is the individual capabilities required to create those competencies

Conducting A ‘Quick’ Seven S Diagnostic - The Energisers • Staff • The staff functions are the support specialists, such as IT, HR and Technical, who support accountable line managers. The questioning of a line function should drive at ‘how well are you supported? What do you like that works? What don’t you like and does not work? • If you are interviewing a staff function, the issue is to understand their side of the story. An example may be where the line managers claim that receive little HR support, whereas HR view their role as to provide a framework for the line managers to work within. Ie: HR is the accountability of the line managers. This situation reveals communication and accountability issues • Style • The way we do things around here. A bit like culture as style manifests itself in the ‘norms’ created by condoned behaviour. While it is interesting to see who can order alcohol and who cannot, it is more useful to find out things like: • Are they task or people orientated? Do they work intensely or are they casual? Do they operate with a long term plan or firefight on a short-term basis? Is performance consequential? I.e. good = reward / bad = punishment Are they fact based planners or gut feel and adhoc? What is prioritised and how? Who are the winners and who are the losers? What is the level of planning? (is it a thousand tasks of low impact or a few with high) What gets resources and why? Busy doing what?

Discuss Superordinate Goal Strategy Structure Systems Skills Style Staff II ‘From What’?

Strategy: • To deliver segmented service propositions based upon customer value • Operate at optimal cost • Improve customer satisfaction • Develop world class systems Super-ordinate Goal: “best cost and best service” • Structure: • The structure is transitional and based around function at the customer level with each function separated by segment • Structure not matched to impact of exogenous internal events (mktg./mobile) • Functional duplication • Line and service accountabilities are mixed • Some time horizon compression at level III • Skills: • Very good at managing change • Underdeveloped commercial acumen • Strong human resource and communication skills • Weak financial skills • Variable analytical skills with limited ‘critical thinking’ • Systems: • Performance Systems • Five performance systems exist but not clearly linked obfuscating accountability • Operating Systems • Telecom operational support processes are the weak link in the business value chain • Limited control of inputs • Proliferation of tools • Style: • Illustrated by ‘coming to work to do a job, NOT to run a business’ • Not fact based and numbers not known • Short-term task focused around customer • A people orientation that is both consensus based and forgiving • Performance accountability most clearly felt at level I Customer Services - Seven S ‘From What?’ Customer Services - From What Super-ordinate Goal Strategy Systems Structure Skills Staff Style

Discuss Superordinate Goal Strategy Structure Systems Skills Style Staff III ‘To What?’ and ‘To Achieve What?’

Strategy: • Clearly understood and communicable strategy • Create customer loyalty through segmented relationship management • Maximise value creation through understanding the cost to serve Superordinate Goal: To be the best commercially orientatedcustomer relationship team in Australasia • Structure: • Structure matched to task • Functional competence with the ability manage inputs from internal relationships and processes • Sensitive of cost to serve high and low value customers • Best people in front of customer • Formal relationships with external parties • Skills: • Develop a level IV functional competence • Strong commercial acumen • Strong analytical skills • World class forecasting skills • Systems: • Performance Systems • Five performance systems reinforce performance and behavioural accountability • Operating Systems • Provide an accessible and informative knowledge repository • Set to deliver a service experience not process customer • Style: • Business owners • Proactive & improvement focused • Fact based with numbers known • Long-term orientation • Balance orientation of task and people • A people orientation focused upon developing performance and capability • Performance is consequential Customer Services - Seven S ‘To What?’ Superordinate Goal Strategy Systems Structure Skills Staff Style

IV Identifying A Change Vehicle • Addressing how to bridge the gap between "from what” and "to what", "to achieve what" requires the identification of a changes vehicle: • Attempting to use a ‘blanket’ approach to organisational change (ie all S’s at once) is difficult due to the loss of focus on priorities and loss of energy due to length of time The Seven S diagnostic process should reveal the lead and support "vehicles for change" that drives measurable performance improvement: • Orienters before Enablers • Enablers before Energisers

Appendix - Seven S Diagnostic in DetailCorporate Superordinate Goal Expectations • A clearly communicated vision of ‘where to compete’, ‘how to compete’ in a way that meets all stakeholder interests • This forms the ‘Five To Ten Year’ context for Business Unit Strategy driving asset allocation decisions and initiatives across business units

Strategy: Operates At A Corporate And Divisional Level • Corporate Strategy: The 3-10 year action plans to deliver on the superordinate goal • This context is derived by the interplay of the CEO VI and group General Managers of Business Units V and their small staff support groups • Corporate strategy will be influenced by the individual business unit strategies • Business Unit Strategy: • The 1-3 year plans for each Business Unit • They are the accountability of the GGMs with some staff support • They must be fact based; the fact base comprising of trended and integrated facts on products, the market place, channels and their financials. Additionally the fact base should include detailed data as to competitive cost structure, shares, aspirations and financials by segment

StructureExpectations (See Levels Theory For More Detail) • Corporate operating at level VI the Business Units at level V providing clear separation in the role of corporate as against division • Wherever possible clearly delineated Business Units operating at level V that have P&L accountability and the resources to carry out that accountability ie a good nexus between authority and accountability • Five levels of management (VI  II) no more no less and without gaps (manager defined) • Clear distinction between the authorities and accountabilities of Staff, Line and Service functions • Key staff functions operating at requisite levels (V and IV) providing commensurate support to level VI and V line managers and each other

Systems Expectations, Task Related, Performance Review, LeadershipAnd Membership • Clearly defined and separate task defining and monitoring systems level by level based on facts • Task defining systems must be • Top down and bottom up • Based on agreed, trended facts • Normalised with a common financial language • ‘Never’ overlayed • Individual performance review based on above task defining systems and task reviewing systems which are fair and consequential • Leadership and membership training systems that re-enforce team behaviours and individual managerial accountability and authority (See detail) VI Corp TASK DEFINING TASK MONITORING Corp plan Board review Divisional strat plan V Monthly divisional review Operating plan IV Functional review Department plan III Department review Schedule II Schedule review Daily Work I Note: Without a requisite structure it is very hard to make systems function adequately

Skills • Each level of management must have both the appropriate intellectual capabilityand learnt skill to carry out their role • There should be explicit training and development programs to ensure the development of cross functional skills for each function at the appropriate level • Leadership and membership skills should be taught and be part of the performance review system • Skills can’t be learnt without cross functional data sharing ie The Fact Book

Staff • The key staff functions of human resource, strategy, information technology and finance need to operate a the requisite level to support the corporation and the Business Units (V and IV) respectively. If they operate at III they will pull the rest of the unit down to III • Staff must clearly understand ‘Staff Authority’ and not undermine the line being held accountable for high level V and IV advice line accountabilities • Staff numbers should be small with the few level IV and V staff having demonstrated cross functional skill/experience

Style Expectations are for a consequential vigorous performance oriented style with a balance between individual and team activity. Style is the resultant of all the other ‘S’ working together • Each individual has a good understanding of • Accountability • Own role and role of manager, subordinates and MOR • What is a manager and the four authorities • Staff, Line, Service authorities and accountabilities • Required leadership and membership behaviours • Inappropriate upward delegation • As a result the organisation is • Task and human focused • Fair and consequential • Individual and team • Active; pro active • Robust debate based on facts and enrolment • Clarity as to who is accountable and therefore the decision maker • Expectant of giving and receiving adequate level of service robust activity when this does not occur

Organisational Design Theory – Using the Seven S Model