Duplication of tasks, broken customer promises, over-promises, mis (or no) management of expectations, customer issues passed around, dropped without clear ownership, blaming other departments, hiding away from the customer when things go wrong, inefficient and complex processes and inconsistent customer experiences — recognise any of these? Why do these things happen in some companies and less so in others and how should an organisation be structured to minimise these internally driven flaws to really focus on the customer?
In Deloittes’ 2016 ‘Human Capital Trends’ study with 7,000 senior business and HR leaders around the world in 130 countries, organisational design topped the list of priorities. However, only 14% of these executives believed that their companies were ready to effectively redesign their organizations; 21% felt that they were expert at building cross-functional teams, and only 12% understood the way their people worked together in networks. This was 5 years ago, I wonder how much has really changed?
Where should ‘power’ lie?
Interestingly, the oldest or first reported organisation chart is not the top-down linear chart we’re all used to seeing, where power flows from the top. The oldest chart belongs to the Erie Railroad, one of the largest railroads of its time in the Northeast of the USA, responsible for transporting goods across 500 miles of track.
The Erie chart appears a more efficient way to deliver critical information for the right person than perhaps many organisations’ charts in 2021. If the railroad chart was mismanaged, there were dire consequences. People close to the action in the Erie railroad example appear to have been empowered to manage operations ‘locally’.
“One delayed train, for example, could disrupt the progress of many others; the stakes were high: with engines pulling cars in both directions along a single set of rails, schedule changes risked the deadly crashes that plagued 19th-century railroads.”
What have been subsequent typical organisation design options?
The Divisional Organisation
This structure was born as companies expanded and ‘tacked’ on new divisions through organic growth or acquisition; I’m thinking of a Proctor & Gamble or traditional high street banks of old. Each division tended to have its own (duplicate) departments e.g. marketing, finance, sales and they operated under one central CEO which is where the dots were connected. Each division had its own P&L, strategy & plans and may have even engaged with the same customers but did so quite separately. Operations were often isolated within the division (silo), with little cross-division communication or cooperation.
The Functional or Matrix Organisation
Then came the realisation that many departments were indeed duplicated and could better support the organisation in a cross-functional manner. Those of us with a little grey hair will remember these from the 80’s and 90’s. Think one IT department, one HR department, etc., even if the organisation had different product areas (or divisions). The cross-functional nature of departments such as finance led to a consolidated company-wide P&L but the removal of some degree of ownership and accountability from those involved in delivering products or services to customers. The silos here are not divisional but functional but, importantly the silos still exist.
Starbucks is a good example. The main features of their organisation are:
- Functional hierarchy – HR, Finance, Marketing
- Geographic divisions – physical location of operations with 3 regional divisions of Americas; China & Asia-Pacific; Europe, Middle East and Africa
- Product-based divisions – product lines e.g. coffee and related products, baked goods, merchandise
- Teams – at a lower level in the organisation in customer-facing roles e.g. in their cafes
Starbucks has evolved its model as it has incorporated new services or acquisitions to ensure that it meets the organisation’s needs at the relevant time.
The Flat or Horizontal Organisation
Flat organisations remove the perceived middle management barrier and divest power to those close to customers, the market, action, and give them a direct line of sight to strategy and leadership. There tends to be more ‘horizontal’ practice getting around traditional silo issues.
Well-known examples are Apple, Google, Amazon, Facebook – newer organisations with a relatively blank sheet of paper when it comes to organising itself around company’s (and customers’) needs.
The Network Organisation
In Network organisations groups of empowered and engaged people collaborate around a shared problem, goal, project, or initiative. This way operational delivery is integrated, efficient and well-coordinated.
One example: Spotify’s use of Squads, Chapters, Tribes, and Guilds. This approach brings less formal process, flexibility, and more autonomous working.
- Squads: similar to a scrum team, they are cross-functional small (6-12 people), self-forming teams with common goals. Each squad reports to a Product Owner.
- Tribe: Squads coordinate within each other and form a Tribe (40-150 people). Each Tribe has a Lead and ensures alignment across Squads.
- Chapters: are specialists and bring best practice to Squads. Each Chapter has a Lead, typically a senior technology lead in Spotify’s case.
- Guild: team members can come together to form a community with like-minded individuals from across any number of Squads, Chapters, and Tribes around a shared topic or interest.
In both the Horizontal or Network organisation there is still a need for some shared expertise in the form of centres of excellence or ecosystems — marketing, business & customer insight/data, talent development who can ensure consistency and cohesiveness to brand, strategy, and customer.
What’s the most appropriate design for a customer-focused company?
There isn’t necessarily one organisation design that will ensure customer success although the Horizontal or Network models are more akin to the ways of working that will ensure a customer-centric culture and avoid the issues mentioned at the very beginning of this piece.
Companies need to design and shape their organisation around its goals and customers’ needs aligned with its strengths and constraints. What works for one, won’t work for another.
There are, however, some elements of organisational design that can be baked into practice to ensure that the customer is truly at the heart of the organisation.
- The customer lifecycle or end to end journey is well understood, designed for, managed, and delivered
- Decision-making and operational process are aligned to this journey
- There is an Insight (and data) ecosystem or centre of excellence that involves direct engagement with customers and ongoing customer story-telling
- Empowered, trusted, collaborative teams cooperate, own, and act in the best interest of the customer
- Communication is consistent, seamless and coordinated and operates across all organisation demarcations
- KPIs and measurement foster the right behaviours for the customers as well as the organisation
Of course, there’s a benefit
Shifting organisational design isn’t easy and in an older company, it can take time. According to a McKinsey study, the benefits after 3 years can be an average increase in return of assets of 11%.
Much of this activity can be done in small steps – aligning processes to the customer journey, consolidating customer insight, reviewing RACIs, and as ever… Smiling Companies mean Happy Customers.
Good read and yes org design is tough stuff…everyone loves change until they are personally required to. The main reason this is so hard is that org design influences who has power. Many times orgs aren’t organized logically because people = power and people=resources. I know some consulting firms say “organize around the journey” which is all well and good but doing it practically is difficult.
It seems though that some of the highest performing CX organizations do share some traits. First, as you mentioned, pushing authority down to lowest level and given autonomy (provided you hired and trained the right folks). Second, removing artificial functional boundaries that negatively impact the customer experience. The one that comes to mind is the division between pre purchase (marketing) and post purchase (operations) which the CCO is suppose to help solve.
Also, while localization can be great for the customer it has drawbacks. First, as anyone who lives in the states having 50 different DMVs with 50 different rules and 50 different websites, etc. is just about as inefficient as you can get. Many times centralization of shared resources can result in increased efficiencies and reduction of resources (and increased speed) if done correctly. Balancing what to centralize vs. what to keep local all while keeping it in the lens of what is right for the customer (vs. what is convenient for the org) is the trick.
Thanks for the thought provoking article.
In a survey of 438 CEOs the CEOs said:
the most important was having a customer strategy and second was having no organisational silos.
Together they made up 68% of what is required for a successful customer organisation