Jeff Standridge:
Hey guys, welcome to another episode of the Innovation Junkies Podcast. I’m Jeff Standridge.
Jeff Amerine:
And this is Jeff Amerine, glad to be back.
Jeff Standridge:
Yes, sir. Good to have you. So we started last week talking about business strategy and strategic growth planning and having a strategic growth system. Today, I’d like to spend some time talking about organizational strategy and how that affects kind of the human element and the performance of the organization. Have you ever seen organizations where people were moving? Boxes around on a whiteboard trying to figure out kind of what the right structure is for the organization when they really hadn’t spent any time planning on where they’re trying to take the organization.
Jeff Amerine:
Yeah, it’s a good point. You know, knowing, knowing what to do and knowing kind of, uh, the directionality of the business and having that strategy figured out before you start rearranging the organization is important. And I think a big part of it too, is making sure that you’re in a position to influence the behavioral change that you’ll need in order to implement a new strategy. A lot of the times that’s where these things fail because the, you don’t have the organization on board.
Jeff Standridge:
Yeah, the adage that I like to use is, we’ve used the adage before that Peter Drucker adage that culture each strategy for breakfast, right? So no matter how good your plan is, no matter how good your strategy is, if you don’t focus on the culture, it will absolutely consume the strategy. Well, the other adage I like to use when we think about business strategy versus organizational strategy is structure follows strategy. So don’t, you know, and I think a lot of people maybe took some of Jim Collins words, where Jim Collins used to talk about in his book, Good to Great, get the right people on the bus, get the right people in the right seats, and then ask them, where are we taking this thing? And I think that tended to at least connote for a lot of people, okay, get your talent in place, get them in the right seats, meaning structure, and then we’ll plan the strategy. And I don’t know that he necessarily meant that. Get the right people. build the right strategy and then figure out what’s the right organizational strategy and the resulting structure in order to achieve that. It could be a centralized strategy where you have a number of the shared functions centralized and then farmed out to the various business units. It could be what we used to call a franchise structure or a decentralized structure where everybody, every business unit has its own CFO and its own talent leader and its own. kind of business unit leader or CEO, so to speak. It really comes down to who are the talent that you have and where are you trying to take the organization.
Jeff Amerine:
Yeah. And it’s always a lot better to have the direction figured out and the targets figured out before you do too much realigning in the various different possible organizational structures.
Jeff Standridge:
That’s right. It really brings us to the McKinsey, sometimes called the 7S model, which was created by Tom Peters and Robert Waterman back in the 70s. And it’s really used to diagnose the effectiveness of an organization and to design a well-structured organization based upon the very first S in that 7S model is the strategy. So what’s the strategy of the organization? What’s the plan designed to win in the marketplace against our competitors?
Jeff Amerine:
And then you can get into questions about structure. Is it something that’s more hierarchical? Is it project-based? Is it gonna be a flat organization? Is it gonna be a matrix? I mean, all those other things flow from understanding what’s the strategy and what are the targets.
Jeff Standridge:
That’s right. And what are you going to call them? You’re going to call them divisions. You’re going to call them departments. You know, we used to have divisions in one of the organizations where I worked. And one of the days, one day we had this big epiphany that said, what does division mean? Just when you think about the word division and it well, it means complete and separate. It means no information tends to flow back and back and forth. And we were operating just like that. And so we ended up. We ended up canning the use of the word divisions because it was driving the wrong behavior in terms of what we needed to accomplish. At a particular time in the early to mid-90s, the word division worked exactly like we needed it to because we were growing very, very rapidly, and we needed to have people separated so that they weren’t going to get distracted or mired in the organizational morass that can be a mammoth sized company. So we created specific divisions. Well, then in about 2008, when the economy really started to struggle, we didn’t, we weren’t growing as rapidly. We didn’t need divisions. We needed economies of scale. So we chose to ban the word division, so to speak, and bring everything back to a whole with matrixed centralized functions and what have you. So.
Jeff Amerine:
And those things, those structures can be the right thing at the right time, it can be the right thing at the wrong time. But I guess one of the calls to action there is be ready to make change.
Jeff Standridge:
That’s exactly right.
Jeff Amerine:
If you need to go from a P&L and a division structure to matrix, or you need to flatten it out, or you need to eliminate hierarchy, the thing where you see organizations struggle is they build in silos, which might’ve been really good when you needed the silos in the beginning, and then those silos continue to exist beyond a point to where the efficiencies are really realized.
Jeff Standridge:
Yeah, the organizational structure crosses over a change in strategy, and they don’t think about changing the structure to match that new strategy, for instance.
Jeff Amerine:
Let’s segue to this idea of systems. I know a lot of times we’ll get called in by potential clients and they’ll be struggling mightily with the idea of we need to buy a new ERP or we’ve got a line around a certain IT system, and they get really wrapped around the technology and what it might or might not do. And you ask fundamental questions of what are the processes? Who’s mapped the processes for what you’re doing? And a lot of times you realize… Nobody’s mapped those processes end to end. They haven’t gone through sort of a fundamental, a lean view of the organization about thinking about how from initial customer engagement through delivery, they’re actually doing things. When they do that, they may find we don’t necessarily need new systems. We just needed better processes, but talk a little bit more about that.
Jeff Standridge:
Well, yes, and many times they ignore the entire process of looking at processes and systems because they assume that they have to look at all of them and that is overwhelming to them. And really they just need to look at those daily routines and daily processes that directly connect to the implementation of the strategy. At least that’s where they need to start.
Jeff Amerine:
Right. For sure.
Jeff Standridge:
Now, ultimately we’d like to look at all of them, but it’s the 80-20 rule, right? Look at the 20% of the processes that are directly tied to strategy that are responsible for 80% of the results. And to your point, when I was running a software development shop inside an organization, and people would want us to automate their processes, I would say, run them on an Excel spreadsheet for at least three cycles before you ask me to build software around them.
Jeff Amerine:
Exactly.
Jeff Standridge:
Because you’re going to learn a lot of things about where the process is broken and not optimized.
Jeff Amerine:
You know, and in startup speak, a lot of times they’ll say, do things initially, they don’t scale so that you really understand the process. And then you can figure out where can the efficiencies and the automation really go. And some people, sometimes people forget that, and they end up wasting an ordinance amount of time and money trying to apply a system that they believe everybody else has without having a good rationale for.
Jeff Standridge:
Yeah. The next one’s about shared values. We’ve talked about that a lot over the course of multiple episodes. Even in the last episode, we referenced it. The core values of the organization that really manifest themselves in the collective behavior and general work ethic of the organization. So not going to spend a lot of time on those. So we’ve got strategy, structure, systems, shared values, and style. And this is kind of a subset of shared values. But it’s the leadership style of the organization, how they communicate, what are the behavioral patterns, how do the managers operate and how do they communicate versus how do the directors and senior VPs and executive leaders of the organization? Is there a chasm between the two, et cetera?
Jeff Amerine:
Yeah. And this is one where kind of the call to action on the style is leaders have to have a high enough emotional intelligence to understand the maturity of the professional maturity of the individuals on the team, what sort of leadership styles will work best. And that’s not to say to kind of create a persona that’s not you, but it is important to understand not all the people on your team need the same sort of leadership. Some are going to need a lot more latitude to make their own decisions. be able to be fully empowered. Others are gonna need more direction. Your job as a leader is to understand that and apply the style and the approach that’s most effective for each of your direct reports.
Jeff Standridge:
Yeah, and then we start getting down to the actual individuals, right? So we talked about organizational strategy, structure, and systems. Then we move down to kind of the collective people in terms of shared values and style. Now we’re moving down into actual staff and skills, which are the sixth and seventh S’s of the McKinsey 7S model. The staff being, you know, the employees and their overall capabilities. In other words, do we have the employee population that we need to carry out this strategy, leveraging this structure. And then finally, when it gets to skills, it’s do we have the knowledge, the skills, the abilities, the competencies of all of our employees, and do we have those skills and capabilities in a manner that really differentiates us in the market from our competitors?
Jeff Amerine:
And these really these last two things in particular, talk to something that Gino Wickman covered in traction, where he talks about that part of that accountability matrix, where you essentially size people up by do they get it? Do they want it? Do they have the capability or the capacity to actually do it?
Jeff Standridge:
That’s right.
Jeff Amerine:
And that’s, again, another thing that’s really important that ties to staff and skills.
Jeff Standridge:
That’s right. And that capacity or capability could be capability. In other words, they just don’t have the capability of building those competencies and skills in the timeframe that we need them to, number one. Or it could be they don’t have the capacity because they’re fully engaged in another aspect of the business. And it could be either or both of those.
Jeff Amerine:
Exactly. And the thing that’s tricky about that is, and I think it’s germane for today, if you’ve got a limited resource of subject matter experts, like data scientists, for example, and you just keep dumping more and more and more data science or analytical work on them, eventually, it’s the point where, yeah, they’ve got all the capability in the world, but they just don’t have the capacity to be able to fulfill what you want them to do. Those sorts of things are important. I mean, it puts you in the frame of mind of understanding the resource loading that you have that’s gonna help you fulfill or not fulfill a strategy.
Jeff Standridge:
That’s right. So to bring it back around, we’ve got strategy, which is who are we, where are we going, and how are we gonna get there? And then we’ve got our structure. Don’t forget that number one, structure follows strategy, but just because it follows strategy doesn’t mean that you can skip over it. We gotta look at, do we have the organizational structure. Is our organizational strategy mapped to our business strategy? And can we actually execute against the things that we’ve said we’re gonna execute based upon those seven S’s that we’ve just talked about from the McKinsey model. Our strategy, our structure, and systems, overarching, our shared values and style, which is kind of the collective population of people, and then staff and skills when we start looking down to the individual on an individual basis at people. You do that, you’ll make sure that you’re headed in the right direction, and you’ve got the organizational capacity to come along and execute on that.
Jeff Amerine:
pretty timeless framework.
Jeff Standridge:
Good stuff, good stuff.
Jeff Amerine:
Absolutely.
Jeff Standridge:
Anything you want to add?
Jeff Amerine:
No, I think that’s it. I think we covered the waterfront there on the McKinsey 7S model. It’s another useful framework and tool.
Jeff Standridge:
All right. This has been another episode of the Innovation Junkies Podcast. We appreciate you for joining.
Jeff Amerine:
See you next time. How many minutes did we go there?