The case for a new organizational design

Organizational design has made mammoth steps of innovation and improvement towards sustainable high performance over the last decades – Right?

Well, here is Dilbert from 1996



Looking through corporate announcements and general company news, above is still a very topical representation.

So, not much has really changed.

‘Playing to the gallery’ (= Stock-market) has reduced but still seems to be a major driver and yardstick for corporate success. Performance is still driven by KPIs, or targets in general, both, on corporate and people level.

In the ’90 the concentration was on quality, quality improvement and assurance with ISO9000 and TQM as principal drivers of organizational design improvement and innovation. It led to a large degree of quality becoming a bureaucratic exercise even though improvements in product and product design were undoubtedly made. It seemed, for a while, that organizations were really looking at changing the basic understanding of what makes them successful. But it was quickly limited to quality, an understanding of quality as an input, and applied predominantly to manufacturing environments.

And traditional organization design and self-understanding proved astoundingly resilient and fought back.

In the new millennium, the concentration changed to two cults and the amplification of an old myth.

Cult-like behavior in talent management and CEO admiration, and an emphasis on KPIs and remuneration while reinforcing the link to ‘performance’ Organizational performance is driven or induced to be driven by ever more esoteric targets while at the same time the new concentration on leadership and the increasingly dominant CEO cult is fossilizing old hierarchical structures.

So, let us look at the ‘cult’ element fist.

There is hardly any organization in the World that does not talk about ‘talent management’ as the predominant concern affecting organizational performance in the traditional sense.

But it becomes immediately obvious that ‘talent management’ is not meant to be understood as the management of the ‘talent’ of an organization’s people. In most instances, it is meant to concentrate on management and development of its ‘leaders’ and ‘leader-potentials’ and at worst it is pure lip-commitment.

Over the last decades, a whole new industry has sprung up – ‘leadership development’ with all its trimmings. Consultants, Academia, Magazine & book publishers, practitioners – all jumped onto the bandwagon. Every organization seems to be dominantly concerned with identifying and developing their leaders.

This talent management cult is driving the workforce into an ever-increasing polarization into leaders and losers. Managers are long stigmatized as losers unless they qualify to be converted to leaders. It smacks of a resurgence of the old, long discredited, McGregor theory of category x and category y people.

This preoccupation with developing leaders diverts brainpower and attention from the fundamental questions of competency requirements and role, or purpose, of management and subject matter experts. The requirements for all of it have fundamentally changed over the last decades.

Furthermore, when all the newly ‘developed’ leaders are released into the old organizational infrastructure, conflict, dissatisfaction, and disengagement are the overwhelming consequence which is then countered with ‘window-washing’.

Which is a pity, because an organization’s culture and its competency architecture (represented by its people), are two of the keys to sustainable high performance and good health.

Now to performance.

Performance has long been strongly associated with the reaching of targets, but the last decades gave a whole new meaning to this spurious association. KPIs and increasingly pay-for-performance, the requisite performance usually measured through KPIs, are dominating organizational design, strategy, and development. The seduction of a quasi-mathematical construct and correlation makes this trend a) very dangerous b) very popular, and c) the ‘easy’ option.

Unfortunately, the approach is fundamentally floored.

KPIs and targets are both correlative measures. Performance is causal, therefore correlative measures have no direct impact and are irrelevant for measurement and as management tools.

On the people’s side, to formulate KPIs and targets even as guidelines is a) dangerous as it abstracts brainpower from necessary analysis and change requirement and b) naïve if declared as ‘only guidance’ as people will invariably concentrate their efforts on requisite achievement. KPIs value action over thinking and punish system thinking and cooperation, which are crucial to the success of organizations.

On the corporation’s side, the ‘successes’ of ‘KPI driven’ and ‘letter-perfect’ organizations become the subject of media frenzy, public bailouts, and congressional hearings.

As far as incentive pay or pay-for-performance is concerned, there is no empirical evidence that this improves performance, on the contrary, numerous studies over the last decades convincingly and consistently proved the opposite being the case.

Both, the link of pay to performance and the measurement of performance through KPIs, present a clear and present danger to the health of an organization – it lowers morale and engagement, destroys cooperation, and leads to excellence destroying internal competition.

The underlying issue is not really about talent management or ‘tweaking’ current organizational performance models. It is not even about corporate governance. The issue is, that organizations wanting to continue to be sustainably profitable into the future while fulfilling their ethical, social, and economic responsibilities, will have to rethink, urgently and fundamentally, the underlying assumptions of operations.

Having made, we believe, a credible case that re-thinking the organization is a necessity, allow me in my next post to propose a model for a sustainable high-performance organization.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s