Overview

Creating a superior organization is just as important as developing a growth strategy in terms of long-term shareholder value growth.   This is because ultimately it is the organization which must embrace, support and drive the necessary change.   Without the proper leadership talent, accountabilities, organizational structure and processes, the change program may falter, failing to capture value despite having a well-designed growth strategy.

Examining organizational effectiveness in a vacuum does not tend to be very informative.   That is why Avondale typically considers organizational effectiveness as part of a larger strategy development program with a considerable change management component.   Within this context we have advised clients on the following organizational topics:

• Organizational structure and design
• Decision roles and accountabilities
• Incentive compensation
• Management processes and the role of the center
• Leadership & talent assessment

Our Perspective

A competitive advantage that stems from better products or lower cost positions is relatively tenuous to maintain.   It is relatively easy for competitors to build a better mousetrap or create a lower cost structure, which is why it is critical to invest in continuous improvement and stay ahead of the curve.   Conversely, competitive advantages built on organizational structure, processes and capabilities are nearly impossible to replicate due to the high complexity and dynamic nature of organizations.   Thus building organizational advantage creates the most sustainable source of competitive advantage, which makes investing in organizational effectiveness well worth the effort.

The main objective of organizational effectiveness is to facilitate good decision making throughout the organization.   And the key to good decision making, in one word, is clarity .   Clarity in business boundaries, roles and accountabilities, and management processes.   Establishing distinct and independent business boundaries ensures decision making isn't hampered by complex interdependencies with other business units.   Similarly, assigning clear roles and accountabilities, especially when also aligned with incentive compensation, communicates what decisions managers are responsible for and helps drive ownership and accountability for results.   Lastly, defining the interactions between business units and the corporate center and the expectations for management processes including target setting, strategic planning and budgeting, resource allocation and performance management levels the playing field and serves as a common playbook.   In our experience, creating such clarity and removing ambiguity from structure, roles and processes tends to improve decision making and unleash productivity.

Typical Questions to Consider

• What is the economic map of the business?   How is the business currently structured?   Are there any implications regarding the key value drivers and evolving strategies?
• Is there clear line of sight and authority for decision-making in the organization?   Are roles and responsibilities clearly defined?   Is there a sense of accountability for follow-through?
• What are the key components of management incentive programs?   Are these measures aligned with the key value drivers in the business?   Does the incentive program support the strategic direction of the business?
• What are the key management processes in the organization between the corporate center and the business units?   Are these processes effectively communicated with clear timelines, templates and expectations?
• Does the organization have the leadership depth to drive change and deliver results?