Organizations today face increasing pressure from multiple stakeholders and relentless global competition, forcing them to become more innovative in everything they do and produce (Latham, 2013).
What is needed is nothing short of a renaissance of organization thinking and design. The organization architect of the future will need to master both the technical AND human aspects of design and change. Effective organization design builds bridges between theory and practice to create new and innovative management approaches and organizations that facilitate humans achieving their full potential. [Re]designing our organizations to create value for multiple stakeholders requires that we align six key design dimensions including stakeholders, strategy, systems, scorecard, culture, and context.
The formula, Leadership + Design = Sustainable Excellence™ is the notion that the right kind of leadership combined with organization and management design can produce ever increasing value for multiple stakeholders. Stakeholder-centered organization design is a theory-driven process informed by the unique wants, needs, and desires of the multiple stakeholders. The formula has emerged from and in turn, drives my research agenda and current research projects. It is also the foundation for my studio work helping leaders become “architects of enduring organizations by designing systems that create sustainable results for multiple stakeholders” (Latham, 2012).
The formula is not a predictive algorithm but rather a combination of concepts that inform flexible frameworks. Two flexible frameworks have also emerged from my research + practice that help guide the processes of leading transformation and stakeholder-centered management design. In this context, “sustainable excellence” is characterized by ever improving results across a comprehensive scorecard that represents value for multiple stakeholders including employees, customers, investors, suppliers and partners, the public (communities) and the natural environment.
The design or redesign of management and organizational systems requires leaders to become architects of their organizations. Leader as organization designer is a special kind of leadership that consists of specific leadership behaviors and approaches combined with individual leader characteristics all operating within a high-performance culture to effectively use the forces and facilitators of change to transform the organizational systems, people, and culture. It requires the creative combination of “art” and “science” in order to develop an environment where people create value for multiple stakeholders and enjoy the process of reaching their potential both individually and as a group. While there are many leadership theories and approaches, the combination of transformational + transactional, servant, and spiritual leadership seems to provide an effective foundation for developing a custom authentic approach that fits the unique leaders(s) and the situation (Latham, 2013b). For more on my call for further research into these theories and hopefully a convergence see my perspectives paper Latham (2014).
When many people hear the words “design” and “designer” they often think of fashion, interior design, or the design of everyday items such as glasses, salt shakers, and so forth. However, everything that is not created by nature is designed by humans (consciously or unconsciously). Thus, our human-created organizations can be purposefully designed or redesigned to produce even greater value for the multiple stakeholders. For our purposes,
Organization design is a stakeholder-centered approach to aligning and integrating the systems, strategy, and scorecard with the organization’s culture and the unique context.
Organizations are human created entities. They were designed, consciously or unconsciously, by humans and consequently can be redesigned. “Thoreau wrote, ‘The mass of men lead lives of quiet desperation.’ The corollary in the modern organization might be, ‘Most leaders spend their careers desperately trying to optimize poorly designed systems'” (Latham, 2013a, p.37). All too often the management and organizational systems design that leaders inherit make sense only if you accept the explicit and implicit assumptions built into the design. Unfortunately, those assumptions often do not reflect what is needed to succeed in the contemporary environment. Leaders today face many challenges that will require the design of new organizational systems or the redesign of their systems to achieve and sustain high performance. As with leadership, this requires the combination of analysis + creativity.
Elements of Organization Design
Organization designs consist of artifacts that convey information about the systems, culture, and context. Artifacts take many forms from diagrams and descriptions of systems to visual displays of data to organizational symbols. Organization design is composed of three key elements including corners stones (stakeholders, strategy, systems, scorecard), culture (symbols, rituals, heroes), and context (purpose, industry, geography, facilities, technology).
The four cornerstones of organization design are the stakeholders, strategy, systems, and scorecard. All four are manifested in artifacts including documents, speeches, etc. Organization design begins with the identification of key stakeholders and their needs, wants and desires, and it ends with the deployment of systems that create value for those stakeholders. Stakeholders are the “WHY” of organization design. Of course, the process of continuous iteration and improvement of organization design never ends. A comprehensive strategy includes two key components – the external products and services and the internal operations, people, and culture that produce the products and services. Strategy is the “WHAT” of organization design. What do we produce? The organization system of systems brings together the internal and external stakeholders and provides the structure necessary to facilitate the production of the products and service. This is the “HOW” of organization design. A comprehensive scorecard measures how well the organization is meeting the needs of the multiple stakeholders including the product and services and operations. The scorecard is the “HOW WELL” of organization design and is necessary for the evaluation of design changes. The first four components are “inert” without people serving people to bring them alive. The values of a culture are not directly visible. The values are inferred from how people act (practices) and the symbols, rituals, and heroes of the organization which are visible and audible. A culture of service is the “GLUE” that holds the other components together. One of the main reasons to go through the trouble of developing a “custom” design is so the design “fits” the unique characteristics of the organization and situation “like a glove.” The context contains information including the facilities, the technology, type of work (e.g., nuclear power vs. education), and the purpose and mission of the organization.
Why Organization Design?
We focus on organization design because it influences the behavior of those who work in and with the organization. Stakeholder experience the organization’s many processes and practices, interactions, and artifacts.
While interacting with the organization, stakeholders hear and see many manifestations of the organization design. What they hear and see influences what they think and how they feel. What they think and feel influence what they say and do – their behavior.
The goal of design and transformation of the organization is to achieve and sustain high performance by creating sustainable value for multiple stakeholders. Sustainability in and of itself is not the objective – survival is essential but not sufficient. While all life might be transient, high-performance that is fleeting or causes unintended undesirable consequences in other areas is not worth pursuing. The goal is high-performance that is sustainable. This requires redefining “success” for organizations of all types (profit-seeking, non-profit, and government). Success in this context is the ever-improving creation of value for multiple stakeholders. The purpose of the firm is to create value – but value for whom? Sustainable excellence requires a broad definition of value creation beyond our current ability to measure and analyze the system economic rents. Sustainable excellence will require that we understand the integrated system of stakeholders and develop organizations that create value for ALL the stakeholders – investors, customers, employees, suppliers and partners, the community, and the natural environment.
Role of Research
The creative process of organization design is informed by theory and empirical evidence. Evidence-based management has received a lot of attention lately. However, as Jeffrey Pfeffer and Robert Sutton in their book Hard Facts, Dangerous Half-Truths and Total Nonsense: Profiting from Evidence-Based Management point out, practitioner’s actions and practices are often not based on the latest scientific theory and are often practices that we already know do not work. It is hard to imagine an engineer or architect designing a new bridge without understanding the scientific knowledge on metallurgy (Latham, 2012). Yet, managers design organizations, policies, processes, and so forth based on little empirical evidence and often on myth passed down from generation to generation. It seems there is no shortage of demand for quick fixes and answers and no shortage of blog posts promoted on social media offering simple answers and advice. “Unfortunately, some of the advice is nonsense made up to ‘fill’ blog posts so the authors can increase their authority on the topic in the eyes of their online followers” (Latham, 2014, p. 12). The notion here is that leadership and design practice are enhanced when they are informed by, and consistent with, the latest empirical evidence for that particular practice. Research, in this case, was used to develop the frameworks AND it informs the application of the frameworks in my studio.
- Latham, J. R. (2014). Leadership for quality and innovation: Challenge, theories, and a framework for future research. Quality Management Journal, 21(1), 5. | Download
- Latham, J. R. (2013a). How much does your organization weigh? INNOVATION, 32(2), 4. | Download
- Latham, J. R. (2013b). A framework for leading the transformation to performance excellence part II: CEO perspectives on leadership behaviors, individual leader characteristics, and organizational culture. Quality Management Journal, 20(3), 22. | Download
- Latham, J. R. (2012). Management system design for sustainable excellence: Framework, practices, and considerations. Quality Management Journal, 19(2), 15. | Download