The Formula

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, 2013a).

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. 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 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.

Leading Transformation

The design or redesign of management and organizational systems requires leaders to become architects of their organizations. Leader as an 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” 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 provides a 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). | Framework | Research

Management Design

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, saltshakers, 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 multiple stakeholders. For my 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 makes 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 a combination of analysis + creativity. | Framework | Research

Sustainable Excellence

The goal of the 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 of 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.