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© 2024 N. Dean Meyer and Associates Inc.
Excerpt from www.NDMA.COM, © 2024 N. Dean Meyer and Associates Inc.

Book: How Organizations Should Work

Executive Summary: Organizational Strategy -- Your Transformation Road-map

build the "machine" capable of generating and delivering myriad business strategies

by N. Dean Meyer

Book: How Organizations Should Work

"Strategy" can be categorized into four distinct types, all operating in parallel, all the time:

  • Business strategies: What businesses do we want to be in, and how will we get there?

    For internal service providers (like IT), this includes alignment with enterprise strategies.

    This can be highly volatile, subject to changes in technologies, the competitive landscape, the economic and regulatory environment, business opportunities, etc.

  • Capabilities strategies: What capabilities do we need in order to support today's and tomorrow's business strategies?

    By nature, this must be relatively longer term, since it takes time to build distinctive competencies.

    In IT, for example, this includes technology innovation strategies.

  • People strategies: How can we attract, motivate, guide, and retain the best talent?

    This has to be ongoing, at every level, in every function in the enterprise.

    "Strategic planners need to focus on organizational strategy right alongside business strategy. Great strategies won't amount to much if the organization doesn't have the capability to execute them. To understand organizational strategy, you need go no further than this [Meyer's work]. It not only says it all. It's inspirational!"
    Victor Jerez, corporate strategic planning
    and business development executive

  • Organizational strategies: How will we build an organizational ecosystem in which everybody can succeed?

Great leaders do more than formulate brilliant business and capabilities strategies, hire and inspire the right people, and make tough decisions.

They build organizations designed to succeed from the ground up.

Case Study: Don't Just Fix It! Build an Organization that Fixes It
My job is to develop an organization that can solve problems and deliver outstanding results, with or without me.
by Preston T. Simons (2018)

By focusing on organizational strategy, you can leave the legacy of a high-performing organization -- an organization capable of inventing and delivering dynamic business strategies, now and into the future.

"We implemented Meyer's approach to building a high-performing organization, and it's provided lasting value with tangible daily benefits.

Organizational transformation took strong leadership, energy, and perseverance; but the payoff made that investment extremely worthwhile."
Steve Monaghan
CIO and Chief of Staff, County of Nevada, CA

The Organizational Ecosystem

Organizational strategies focus on designing the "organizational ecosystem."

What, exactly, is that?

Organizations send signals that guide people in their day-to-day decisions and actions.

These signals may be confusing, conflicted, and sometimes just wrong. If that's the case, even the best people will ultimately fail.

Here's a classic example:

We want people to be frugal, reduce costs, and conserve headcount.

But some antiquated job-grading systems award higher grades (with more compensation and status) to those with bigger budgets and more staff.

The result: People may pay lip service to controlling costs, but they build empires -- because that's what the organizational signals are telling them to do.

What's the alternative?

  • Design jobs as businesses within a business.

  • Measure managers as internal entrepreneurs -- on competitive rates (unit costs).

  • Treat budgets as checkbooks that customers control; and require customers to limit their demand to what they can afford.

  • Allow customers to find additional money to spend on the organization if they want more (perhaps from their own budgets).

  • Require managers to break even -- to limit spending to the revenues they get from the sale of their products and services. That is, measure them on their bottom lines (breakeven), not their top lines (total spending).

In this way, you have complete control of costs. There's no incentive for empire building.

Beyond that, internal entrepreneurs are customer focused, innovative, and results oriented. And they're free to expand their supply (spending more) if customers want to buy more and provide the funding.

The organization is frugal, flexible, and aligned with customers' needs.

This is just one example of programming the organizational ecosystem to induce the right behaviors.

"...management is a profession on a parity with Law, Medicine, and Engineering. No less than these does management involve a recognized body of knowledge and skills to be used by its practitioners. At best it is an innovative force in society."
Arjay Miller, Dean, Stanford Graduate School of Business

That ecosystem comprises five organizational systems:

Symptoms of Problems in your Organizational Ecosystem

Haphazard or wrong signals from the organizational ecosystem make it tough for even great people to succeed:

  • Cause people to waste their talents and energies doing the wrong things.

  • Fail to coordinate work, forcing executives to step in and manage tactical issues.

  • Send people too many ways at once, diluting their talents and often creating conflicts of interests and unnecessary stress.

  • Scatter critical internal lines of business around the organization, leading to lost collaboration, redundant and conflicting work, and lost synergies.

  • Cause people to work at cross-purposes, compete with one another, and resist teamwork.

  • Overload staff, which causes them to cut corners, sacrifice their own training and innovation, and burn out.

  • Train staff in unproductive patterns of behavior (the culture that they call "our reality").

The Antidote: Organizational Programming

Sure, great people can overcome these hurdles. But wouldn't you rather your great people focus their precious time and energies on achieving great things, than spend it dealing with self-imposed obstacles which can (and should) be fixed?

Organizational strategies have leverage:
...a great manager is essentially an organizational engineer....
They see their organizations as machines and
work assiduously to maintain and improve them.
Ray Dalio

Leaders can "program" those signals so that they're appropriate, well aligned, and clear.

Then, people can be empowered and they'll naturally do the right things.

One of the most important jobs of leadership is to design an organization in which everybody can succeed. That means programming the organizational ecosystem.

The Need for an Organizational Strategy

Organizations can only absorb a limited amount of change at a time. You can't address all five systems at once.

It's far better to work on one organizational system at a time, rather than a "scatter-shot" that makes little changes in multiple systems in parallel.

Focus allows you to really get it right, and to institutionalize the changes in one system before moving on to the next. Also, a success in one organizational system builds staff's enthusiasm for the next change.

So you have to plan the right sequence of changes, one organizational system at a time. That sequence is your "organizational strategy."

The Best Sequence of Transformation Initiatives

Getting that sequence right is very important. Some organizational systems are more powerful than others, and should come earlier in your organizational strategy:

  1. The big three: The first three -- structure, internal economy, and culture -- determine the overall character and capabilities of an organization. These are transformational, and should come early in an organizational strategy.

  2. Fine tuning: The last two -- methods and tools, and metrics and rewards -- do not lead to transformational change. They institutionalize and fine-tune the big three, and drive continual improvement (not transformation). Thus, these two generally are addressed late in an organizational strategy.

    More on why Methods and Tools, and Metrics and Rewards, should be late in an organizational strategy....

    Methods and tools: Some methods and tools are applicable to many different jobs in the organization. These can be introduced at any time.

    But methods and tools which are profession specific need a home -- a group dedicated to perfecting those specific methods. Thus, this is best done late in the strategy, at least waiting until after structure defines groups that specialize in each of the needed professions and hence are eager for the tools of their trades.

    Methods and tools may also await work on the internal economy, so that staff have time and money to invest in these internal improvements.

    Metrics and rewards: The role of metrics in transformations is often overstated. The adage, "If you want to fix it, measure it," applies to incremental change -- fine tuning an organization -- but not to transformational change.

    In fact, metrics can make people less open to change, and more focused on maintaining the known status quo so that they can more easily achieve their objectives. Imagine people saying, "Don't change the rules on me, boss. I'm trying to make my numbers."

    Beyond that, metrics are not as powerful as structure, internal economy, and culture. Here's why:

    • Metrics help when people don't know what they're supposed to be good at, or don't know whether they're succeeding or failing.

    • The primary purpose of rewards (consequences) is to amplify the power of the metrics. Rewards are important only when people don't care how well they're doing.

    • Most people know when they're winning or losing, and they care about their work. Thus, metrics and rewards are not strong transformational tools.

    For these reasons, metrics and rewards are best addressed very late in an organizational strategy, after the new paradigm is in place. At this time, they're useful to institutionalize the changes and drive continuous improvements.

The specific sequence is a matter of your unique challenges, as well as the interdependencies among the five systems.

Change Management

Organizational strategy leads to big changes -- it can be transformational, affecting every aspect of how people work. Thus, change management is an important component of an organizational strategy.

"Dean answers an age-old question: What do successful leaders actually do (versus who they are)?

Most writings on success look at a billionaire, focus on one personality trait among dozens, and suggest that we all act that way.

Dean is talking about something quite different: the skills involved in leading organizations. So, short cut your learning curve and
get your organization really performing by studying Dean's work."
Jim Studer
CIO, Univision Communications, Inc. (retired)

There are three essential elements of a conducive climate for change:

  • Burning platform: Clear dissatisfaction with the status quo

    Staff may recognize some problems. But they won't willingly change unless they have to. It must be very clear that staying where we are is not an option. You don't have to say we've failed in the past; but you do have to say that our organization isn't prepared for the future, and will fail if we don't change.

  • Vision: A clear and detailed description of where you're taking us

    Staff may recognize that they're sitting in a hot pan; but they won't jump into the fire. They need to see a compelling vision of the end-state to believe that the change is safe and worthwhile.

    This vision can be inspirational. It brings staff together to work in concert on a shared goal. It also ensures that each step in the strategy adds up to a consistent end-state.

  • Strategy: A clear path from here to there

    People need faith that the change will work before they take the risks and invest their energies in the process. A step-by-step strategy builds trust that we can do this.

    Also, understanding how each step fits into the broader plan encourages patience, and precludes cynicism about the "management flavor of the month."

If you allow your leadership team to participate in the development of your organizational strategy, all three of these change-management requirements can be satisfied while coming to consensus on your plan.

How Organizations Should Work

How to Develop Your Organizational Strategy

The most powerful way to develop an organizational strategy is to engage your leadership team in a participative process.

The major benefits of a participative process are:

  • It takes advantage of participants' deep knowledge of how the organization works and what its problems are.

  • It develops participants' understanding of the vision and plan, so that they're better able to implement it.

  • It builds their commitment, since they created the plan and hence believe in it.

The disadvantages include:

  • It takes their time.

  • The elapsed time is a bit longer.

  • It makes public the ambitious nature of your plan, which may not be appropriate in some conservative, risk-averse enterprises.

The alternative is that you, the leader, plan your strategy and then communicate it to your staff.

In either case, the steps are essentially the same:

  1. Listen to staff and clients, and gather their concerns. This becomes part of the burning platform, the impetus for change.

  2. Develop a clear, detailed vision of the end-state -- hopefully based on the business-within-business paradigm. A vision is more than a few glowing words. It describes in detail what's expected of the organization in the future for it to be considered successful.

  3. Assess your current organization against your vision (the "stretch assignment") and identify the gaps. Input from clients and staff can be used to calibrate the self-assessment. These gaps contribute to the burning platform.

  4. For each gap, diagnose root causes in the five organizational systems. Ask yourself, "Why would our good people fail at these specific visionary expectations?" This focuses you on systemic changes (rather than just treating symptoms).

  5. Assemble the root causes into corrective actions, grouping together multiple root causes that would be treated with the redeisgn of a single organizational system.

  6. Sequence those corrective actions (the organizational systems) into a plan, based on the urgency of your concerns as well as technical interdependencies among the organizational systems.

  7. Communicate the plan widely before proceeding with the first step.

Your organizational strategy should win you trust, patience, and commitment, while guiding you at a sensible pace through a logical series of changes that add up to a consistent vision.


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