Every organization wants to be effective. Ask any business executive whether they want to achieve a level of organizational effectiveness, and no doubt the answer will be positive – who wouldn’t want that? But to achieve it, we first have to define what it really means.
Maryann Gallivan, President and CEO of Tunnell Consulting, agrees that it can be a fuzzy term, and the first step is to come to a mutual agreement about what it means. Tunnell assists life science companies in achieving optimal compliance and quality performance, operational excellence and organizational effectiveness. “The way I define it, which has evolved over 25 years of consulting, is that we have an overall strategy for our organization: What do we do, how do we want to do it, and how do we differentiate ourselves? Those questions need to be answered. When I think of organizational effectiveness, I think of the design of it, and then the continuous improvement of it.”
What does OE deliver?
“What it delivers is your strategy. Organizational effectiveness is not an end to itself, it needs to be designed to support what you’re trying to do from a strategic perspective,” said Gallivan. “I always start with strategy, and then go to organization. If you do it the other way around, it’s the tail wagging the dog.”
There are always two major goals in any organization, which are part of the basic growth strategy: Gaining value through growing market share and entering new marketplaces, and gaining more value through internal improvements and efficiencies. OE figures prominently on both fronts. On the market share front, Gallivan notes that in cases where a company wants to enter a given market or release a new product, when the decision-making is not clear, it can slow down the process considerably. “The pharmaceutical industry is a perfect example of that,” she says. “Launching a pharmaceutical product is a complex task. A formal organizational structure isn’t the vehicle to make that happen, because you need a lot of people with different skill sets. One of my levers is process, and having very clear decision-making and accountability to make sure you can achieve your growth strategies. If those things aren’t well thought through, you will eventually get it launched, but it will be much slower.”
Gallivan also says that especially in the pharmaceutical and life sciences companies she works with, the biggest challenge is always in the product pipeline. “They deal with regulatory issues. Their organizations have dealt with them long enough so that they’ve build in the capabilities, the process, and the systems to handle all the routine things. For big companies, the challenge for them from an organizational effectiveness perspective is on their pipelines.”
On the cost side, formal structure is often organized around functional capabilities, such as quality control, regulatory, and manufacturing. “But supply chain by definition is a cross-functional process,” said Gallivan. For many companies that have historically taken a functional approach, it is difficult for them to manage any other dimension. “But a lot of companies have gotten better at managing processes across dimensions, and that requires support from other levers in the organizational architecture. You need a different kind of culture if you’re going to optimize across the organization, as opposed to functional optimization. Supply chain by definition requires a lot of thinking around organizational effectiveness.”
On the growth side, exponential growth is easier to achieve during the early stages – witness the explosion of dotcom growth during the “boom” of the ’90s – but gets progressively more difficult as companies mature. This type of pressure requires companies to pay more attention to their organizational architecture to make sure they can effectively deliver the growth they need to deliver, and with a different set of margin assumptions than they might have had in the past.
Smaller organizations on the other hand, have a very different set of problems. With those smaller and startup organizations, the individuals running them often come from larger organizations which had a process already in place, which gets tweaked along the way, but they never had the job of designing it. In the smaller company there needs to be more of an intentional focus on organizational effectiveness, with the CEO being the point person, who will often have to convince the venture capital people that it is important. “A lot of it has to come from the top, at least the design of it,” said Gallivan. “Then the execution and continuous improvement of it can be delegated throughout the organization. But for smaller organizations, it has to come from the top.”
Building a culture
Building organizational effectiveness into the corporate culture is key to success. “If there’s four or five people sitting around a table, you would think it’s pretty easy to align yourself, but if you haven’t made it clear as to what the key decisions are, when we need to make them by, and how we are going to make those decisions, it can really slow things down,” said Gallivan. “Culture is an important lever in the design of your organization. The way I approach impacting culture is to impact the other levers of the organization.”
One of the most important levers in diagnosing the culture of a company is looking at the decision-making process, to gain a better understanding of how the organization works together, how they involve others in the decision-making process across the organization, and how long it takes to make a decision. “One of the quickest ways to impact the culture is to focus on improving or changing the way decisions are made, and sometimes clarifying how they are made.”
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Dan Blacharski is a thought leader, advisor, industry observer and author of the book Dotcloud Boom. He has been widely published on subjects relating to customer-facing technology, fintech, cloud computing and crowdsourcing, and he is editor of NewsOrg.Org. Follow @Dan_Blacharski