As the year draws to a close, many organisations have renewed their strategic plans and are preparing to finalise budgets early in the new year. This heralds different internal conversations amongst leaders as many begin to plan and prepare for a new set of pressures provided by the current economic climate.
As organisation design experts, this is a very encouraging change in conversation.
Why? Typically, transformation under cost-pressures often brings out the worst in organisational change behaviours and ‘slash and burn’ is the modus operandi. Ironically, this often results in organisations ‘bloating’ further, as over time the cost creeps back in, because individuals were either never clear or never bought into the rationale for the change.
In 2023, much of our content will focus on how leaders can reshape their organisations to deliver more value for customers and employees, and in doing so create a more efficient organisation.
Head of Melbourne, Melissa Kirby, provides four key watch-outs when it comes to planning and executing for any scale or type of transformation in your organisation.
When an organisation fundamentally shifts its mindset to focus on the customer, along with operational and IT improvements, it can generate a 20 to 30 percent uplift in customer satisfaction, a 10 to 20 percent improvement in employee satisfaction, and economic gains ranging from 20 to 50 percent a company’s cost base1.
Executing any transformation in a way that not only upsets but alienates your customer base is very dangerous. It is also difficult to come back from. If the transformation you are seeking is so radical that you cannot help but completely evolve your revenue streams (and therefore customer base) then we would suggest doing so in a considered, phased approach.
As part of any transformation understanding the true cost base of the organisation, and how it creates value for customers is key.
Irrespective of whether there is a cost target attached to the transformation, an organisation must know its cost base. Furthermore, studies have shown that with a cost management control system in place, there is a positive knock-on effect of organisational performance2.
Quite often organisations focus on arbitrary targets “reduce our cost base by 10%” and methods “every function needs to find 10%”. However, all costs are not created equal. It also fails to recognise where and how value is created in the organisation. This involves conducting detailed analyses to identify and quantify the activities and capabilities that truly differentiate your business in the eyes of your current and future customers. It also requires internal alignment on the types of activities that we are defining as ‘value add’.
Future operating models should be built around these valued and differentiated capabilities. Leaders today are beginning to explore how they can digitally enable an organisation design capability within their teams, so that they can adapt and pivot their operating models against changes in their customer base.
In every transformation a clear description of a ‘north star’ vision is critical in exciting employees about their role in the future of the organisation. The promise of an even better, brave new world should also outweigh the short-term pain that may be needed to get there.
Finally, leaders shouldn’t forget the ‘hygiene’ factors that are vital to employee engagement in any transformation – trust, respect and communication.
Leaders often forget that a change they have been mulling over for months, possibly years, may be new news to the impacted employees. Therefore, giving employees a line of sight to the changes, the rationale and the suspected impact on employees is vital. Furthermore, studies show that the more employees trust their organisations during a change; in other words, they can rely on their organisations’ words and actions, hold faith in organisational justice, fairness, and competence in surviving the change, the more likely they are to support the change3.
If you’d like to learn more or have any questions about this article, please email melissa.kirby@q5partners.com
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