SOURCE: Kates Kesler Organization Consulting

Kates Kesler Organization Consulting

November 17, 2010 09:15 ET

Leadership Alert: Top Performing Global Companies Show That Organization Design Counts as Much as Strategy, Size, or Products

Agile Structures Power Growth as Global Expansion and Tight Resources Demand That Companies Walk a Tightrope Between Global and Local Needs; The Best Leaders Know How to Use Creative Tension

NEW YORK, NY--(Marketwire - November 17, 2010) - The convergence of a tight economy and hunger for growth on the part of increasingly complex, global organizations underscores the difficulty -- and importance -- of focusing resources exactly where growth is possible. That challenge, in turn, highlights a gap in many companies -- organization design.

Organization design -- the deliberate configuration of business units, processes, support functions, geographic offices, reporting lines and responsibilities -- is critical, but many leaders ignore it. Some concentrate on vision, branding and strategy but fail to establish an organization that can execute. Others concentrate on removing tension and conflict or focus on short-term fixes. Still others follow the current trend toward centralizing many activities and functions in order to bring more leverage and global commonality. 

But the most effective leaders realize that a thoughtful balance of center-based leadership, with local initiative, is critical; that the greatest creativity and innovation emerge from managed conflict between central and local initiatives and perspectives; and that creating this kind of tension should be the goal.

"A business leader can only directly control three levers: strategy, the organization design and the choice of players sitting on the top team. A great strategy will fail, and great talent will be frustrated, if the power and decision networks aren't clear," says Amy Kates, managing partner at Kates Kesler Organization Consulting and coauthor of the forthcoming Leading Organization Design: How to Make Organization Design Decisions to Drive the Results You Need (Jossey-Bass, December 2010). 

"A well-designed organization creates agility within businesses and across businesses," says coauthor and Kates Kesler managing partner Gregory Kesler. "There is pressure now to allocate resources quickly and flexibly away from yesterday's priorities and into today's sources of growth. Organization design opens up new approaches to creating agility, for example by building flexible pools of talent in the back end, with more customer-aligned groups in the front. It takes courage to make some of these changes, but there are some exciting things happening in this area."

Ms. Kates and Mr. Kesler are available to discuss organization design with an emphasis on a number of provocative moves that smart companies are experimenting with today. During a discussion they can elaborate on:

  • How organization design determines the effectiveness of global expansion. Companies need to concentrate resources on markets where they can win, rather than planting flags across the globe. "Top performing organizations are aligned to drive brand value across diverse markets, but with empowered local leadership who can adjust the messaging and product formulas to local differences. Executives are learning that governing the tension in this kind of matrix is fundamental to leading in a global environment," Mr. Kesler says.

  • How agility and flexibility -- keys in a tight economy -- grow out of organization design. "It's natural that as an organization gets bigger, it tends to get slower. So the challenge is to get the leverage of size and also be nimble and agile. Sophisticated organization design -- such as using cross-boundary networks, the matrix and well aligned measures -- allow you to move resources quickly and reposition them against new opportunities -- without restructuring every time," says Ms. Kates.

  • How well-designed complexity turns tension into an asset and unlocks value. "Bad complexity creates waste and slows decisions," says Mr. Kesler. "Good complexity creates tensions among competing business objectives and gets the best out of each. For example, creative conflict between a global brand manager and the local country manager will ensure that each priority is addressed. If the brand manager dominates, local market needs won't be represented in the product. If the country manager prevails short-term sales volume may grow, but often at the expense of longer-term profitability and the value of a global brand. The key is to make the tension work for customers, shareholders and the people delivering service."

  • How bad organization design stifles talent. "Many argue that great leaders can overcome bad organization design, and it may be true. But who would choose that course? Many leaders make the mistake of bringing in experienced, successful players at senior levels and expect them to drive change. But without changing the rest of the system they are entering, we often see them quickly fail or leave in frustration," says Ms. Kates. "A good design helps attract talent -- it turns the employer brand into something real and allows good people to do their best work -- and gives them opportunities to develop."

  • Why senior executives need to govern complex organizations:  "Leaders need a well designed organization to make and effect the right decisions quickly, but they cannot redesign the organization and then step away from it. They need to govern it," says Mr. Kesler. "The governing leader stays deeply involved; he or she knows how to bring the tension of the competing voices -- for example, between a local country executive and a global product person -- to the table and get to the bigger idea that benefits from those competing perspectives."

  • How top companies make effective use of organization design.  Many organization designs can be effective. The critical element is that they align to the strategy and that they mirror the desired culture. According to Ms. Kates and Mr. Kesler, John Chambers at Cisco accepts a degree of chaos and dissonance and is willing to govern it by using many cross-business units and cross-functional panels. Procter & Gamble leadership has thrived by applying an engineer's discipline to an organization comprised of a complex structure of global categories. Nike executives are hands-on and their organization design enables them to quickly roll out multitudes of different products for different markets and countries. IBM is one of the most complex organizations in the world -- IBM leadership skillfully uses management committees, reward systems, talent management and succession planning to build bridges all over the company. "Sam Palmisano didn't just establish a vision -- he built a machine to execute it," Ms. Kates says.

To arrange a conversation with Amy Kates and/or Gregory Kesler, please contact Frank Lentini at Sommerfield Communications, Inc. at (212) 255-8386 / lentini@sommerfield.com.

Greg Kesler and Amy Kates are the authors of the forthcoming book, Leading Organization Design: How to Design Your Organization to get the Results You Want (2010, Jossey-Bass).

Amy Kates is a managing partner at Kates Kesler Organization Consulting. In addition to consulting work, Kates teaches organization design in the M.B.A. program at the Executive School of Business in Denmark and through Cornell University. Amy is the author of several publications including the books Designing Dynamic Organizations and Designing Your Organizations with Jay Galbraith. She is an editor of the journal, People & Strategy

Greg Kesler, managing partner at Kates Kesler Organization Consulting, has worked with more than 50 major corporations in Europe, North America, Latin America, Africa and the Pacific. He has published numerous articles on succession planning, executive development and human resources strategy. Before beginning his consulting career, Mr. Kesler held senior HR-management positions in three Fortune 200 companies in the US and Europe.

About Kates Kesler Organization Consulting

Kates Kesler Organization Consulting is an organization design and strategy firm which provides leading companies with organization design assessment and implementation, executive talent development, human resources capability building, and management development programs. The firm's methodology, which has been refined through 20 years of application and learning, is the standard in the field and is used at companies such as Intel, Bank of America, Dell, Merck, Nike, MetLife, John Deere, Coca-Cola, Beiersdorf, SC Johnson, Gallo, and Disney. To learn more visit www.kateskesler.com.

Contact Information

  • Contact:
    Frank Lentini
    Sommerfield Communications, Inc.
    (212) 255-8386