In both good and bad economies, company functions such as human resources, finance and IT are in a continual cycle of growing and shrinking, centralizing and decentralizing. They seem to be continually re-engineering, downsizing, outsourcing or creating shared-service organizations. One day, these groups are asked to increase responsiveness; the next, they’re asked to cut costs and improve efficiency.
When management attempts to improve functions without aligning them with the larger organization as the primary outcome, it usually ends up hurting rather than helping overall business performance. In these functional changes, the following types of misalignments often occur:
Optimizing the function: There are many examples of business functions implementing changes that make their work more efficient or easier, while making it more difficult for the larger organization to accomplish its goals. Before any improvement can begin, support organizations must be vigilant in understanding the groups with which they’re connected and what impact their actions will have on the core part of the business.
Standardization versus customiza-tion: Standardization is a frequent solution to cost-cutting initiatives and streamlining functions. When properly applied, standardization does create tremendous value and cost savings. However, when the business drivers are customized, standardizing them results in re-work, shadow organizations and other drains on people’s time.
Utilization versus availability: Functional departments are frequently challenged to be available whenever someone wants their services, but they also are expected to be lean enough so their people are fully utilized. The same thing holds true for technology tools. Juggling utilization and availability often feels like a bind, and, in fact, trying to do both is a no-win situation. It is critical that managers of functional departments clearly understand what the primary drivers of business success are, so they can determine whether utilization or availability should be the organizing principle.
Solutions looking for problems: Far too many improvement efforts fit the category of solutions looking for problems. Many functional departments, with good intentions, will identify a concept they find particularly compelling, get management support, and implement the concept without understanding its relevance or application to day-to-day work. Much of this is done in the name of being proactive. The tendency to create work for others may be the issue that creates the largest credibility gap between functional departments and the people they serve.
Accountability confusion: The concept of accountability confusion shows up in situations in which functional departments have the role of policing budgets, policies and procedures that belong to line organizations. They become accountable for issues that belong to the line.
It is alarming to realize how often this occurs and how many functional departments want this type of responsibility. This approach creates serious misalignment, makes victims of those being policed, and becomes a rationale (in some cases, a good rationale) for the line department to not accept responsibility and accountability for results.
Designing Support Organizations: The misalignments listed above have various causes and solutions. Some misalignments are related to a misunderstanding of what effective support looks like.
Some of these solutions are as straightforward (not to be confused with easy) as understanding business requirements and determining what type of response drives the most value. The most lasting solution to functional effectiveness goes back to understanding the purpose and strategy of the larger organization well enough that all functional departments are aligned to the same result.
While most organizations understand the need for alignment, what is often left unanswered in change efforts is what they are aligning with. This goes much deeper than cutting costs or improving quality, and it takes time and effort to sort out.
Without this clear direction, it is difficult to make the necessary trade-offs in a consistent or aligned way. When done well, functional groups delight those they serve and gain the credibility necessary to truly enhance overall business performance.
Mark Nyman, a principal with The RBL Group, has expertise in organization design and alignment, change management, strategy development processes, executive coaching and team-based organizations.