Organisational Design Theory – Using the Seven S Model

February 2009

www.bachconsulting.com.au

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Sections:

The Seven S Model & Organisational Diagnostics

I The Seven S Model Is A Descriptive Model That Allows Us to Describe Components of an Organisation and Better Understand How They Relate to Each Other

II Seven S ‘From What?’

III Seven S ‘To What?’ and ‘To Achieve What?’

IV Identification of the Change Vehicle

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Orienters

Enablers

Energisers

Superordinate

Goal Strategy

Structure

Systems

Skills

Style

Staff

The key to using the model is understanding that all Seven S dimensions are Interdependent e.g.: a change in one dimension, such as strategy, will have a direct or indirect impact on all other dimension. Hence the need to manage transformation through each dimension of the organisation.

The Seven S Model Is A Descriptive Model That Allows Us to Describe Components of an Organisation and Better Understand How They Relate to Each Other

7S Model

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Superordinate Goal: The long term human and economic leadership vision of the organisation.

Strategy: The market segmentation, value proposition,and goals of the organisation and how these goals can be prioritised and broken

down into separate accountabilities. A new strategy usually requires a levels shift.

Structure: The organisational chart that shows the division and the re-coordination of work in terms of function and level and in doing

so defines accountability, authority and potential teams.

Systems The formal and informal performance systems and operational systems of the organisation

Skills: Organisational skills to support level of capability, skill and intellectual capacity being quite different issues

Staff : Support specialists, such as IT, HR and Technical, who support accountable line managers

Style: The way we do things around here. Who has authority, who is accountable? How are rewards and sanctions manifested. Are we individually or team oriented or both, contract, limbic or a blend

Explanation Of Descriptors

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Conducting A ‘Quick’ Seven S Diagnostic

Overview

The best way to conduct a quick seven s diagnostic is by interviewing key

members of an organisation. Note that ‘organisations’ occur at many levels.

For example a team within marketing is just as much an organisation as

Telecom

The aim of the interviews is to gain an understanding of each of the

descriptors as understood by each individual and identify perceived ‘tension

points’ in how each descriptor operates or relates to one or more other

descriptors

Identification of tension points often comes from overlaying the outcomes of

various interviews. As such it is best not to conduct group interviews

The easiest interview format is to run though each descriptor in order

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Super-ordinate Goal

What is the super-ordinate goal or vision for the organisation? At the unit level this may be restricted to a mission. Often people will repeat a generic explicit statement so it is often useful to push for the implicit goal that guides day-to-day activities.

For example: the operations department of a manufacturing company may have an explicit goal to produce the best quality product at the lowest cost whereas the implicit goal is just to meet the production schedule each day. Such a ‘gap’ often reveals a lot about the tensions points within the organisation

Strategy

What is the strategy? Or how are you trying to achieve your goals? It is often interesting to see if the interviewees are able to differentiate between strategy (how and where to compete) and tactics or initiatives designed to achieve that strategy

The lack of ability to clearly enunciate a strategy, particularly by a senior employee, may reveal more about the communication systems or how operating / business plans are developed rather than being a insight into that individuals capability

Conducting A ‘Quick’ Seven S Diagnostic - The Orienters

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Structure

What is the structure? Who reports to who? The key to identifying tension points within a structure comes from gaining an appreciation of the clarity (or lack thereof) of authority and accountability within the structure. The basis of this is that an individual should not be able to be held accountable to outcomes for which they do not have the authority to control or impact.

Within a structure it is worth noting the clarity between line, staff and service functions*. Where possible the three should not be found within one role.

*The line are those functions whose output has a directly and critical impact on the customer. The customer is the “unbiased arbiter of performance”, they buy it or they don’t. The line includes new product development, operations, sales and marketing. Staff are those functions that give advice to the line and monitor the line’s performance. They do not directly interface with an unbiased external customer, their customer is internal and their product is advice. Staff functions include human resources, scheduling and quality control. Services are those functions that are not critical strategically and that could be defined so clearly that they could if you wished be subcontracted and managed at arms length. Services include recruiting, information technology, maintenance etc

Conducting A ‘Quick’ Seven S Diagnostic - The Enablers

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Systems

There are two types of systems to examine; Performance systems and operational systems

Performance systems are concerned with the use of role descriptions, understanding how tasks are set and monitored, understanding the organisation performance review process and the individual performance review process

Operational systems are concerned with the systems and processes used by the organisation to create its end product. Ie: where does work originate from, what do you do and where do you send it? Often this questioning will reveal system inadequacies whether they be process related or functionally related

Skills

Understanding organisational skills is gaining an appreciation of ‘how good are we’ at a particular function compared to the industry standard (see functional evolution)

The backbone of functional capability is the individual capabilities required to create those competencies

Conducting A ‘Quick’ Seven S Diagnostic - The Enablers Continued

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Conducting A ‘Quick’ Seven S Diagnostic - The Energisers

Staff

The staff functions are the support specialists, such as IT, HR and Technical, who support accountable line managers. The questioning of a line function should drive at ‘how well are you supported? What do you like that works? What don’t you like and does not work?

If you are interviewing a staff function, the issue is to understand their side of the story. An example may be where the line managers claim that receive little HR support, whereas HR view their role as to provide a framework for the line managers to work within. Ie: HR is the accountability of the line managers. This situation reveals communication and accountability issues

Style

The way we do things around here. A bit like culture as style manifests itself in the ‘norms’ created by condoned behaviour. While it is interesting to see who can order alcohol and who cannot, it is more useful to find out things like:

Are they task or people orientated? Do they work intensely or are they casual? Do they operate with a long term plan or firefight on a short-term basis? Is performance consequential? I.e. good = reward / bad = punishment Are they fact based planners or gut feel and adhoc? What is prioritised and how? Who are the winners and who are the losers? What is the level of planning? (is it a thousand tasks of low impact or a few with high) What gets resources and why? Busy doing what?

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SuperordinateGoal

Strategy

Structure

Systems

Skills

Style

Staff

II ‘From What’?

Discuss

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Structure:

• The structure is transitional and based around function at the customer level with each function separated by segment

• Structure not matched to impact of exogenous internal events (mktg./mobile)

• Functional duplication

• Line and service accountabilities are mixed

• Some time horizon compression at level III

Staff

Structure

Skills

Style

Super-ordinateGoal

Systems

Strategy

Super-ordinate Goal:“best cost and best service”

Strategy:

• To deliver segmented service propositions based upon customer value

• Operate at optimal cost

• Improve customer satisfaction

• Develop world class systems

Systems:

Performance Systems

• Five performance systems exist but not clearly linked obfuscating accountability

Operating Systems

• Telecom operational support processes are the weak link in the business value chain

• Limited control of inputs

• Proliferation of tools

Skills:

• Very good at managing change

• Underdeveloped commercial acumen

• Strong human resource and communication skills

• Weak financial skills

• Variable analytical skills with limited ‘critical thinking’

Style:

• Illustrated by ‘coming to work to do a job, NOT to run a business’

• Not fact based and numbers not known

• Short-term task focused around customer

• A people orientation that is both consensus based and forgiving

• Performance accountability most clearly felt at level I

Customer Services - From What

Customer Services - Seven S ‘From What?’

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SuperordinateGoal

Strategy

Structure

Systems

Skills

Style

Staff

III ‘To What?’ and ‘To Achieve What?’

Discuss

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Staff

Structure

Skills

Style

SuperordinateGoal

Systems

Strategy

Customer Services - Seven S ‘To What?’

Superordinate Goal:

To be the best commercially orientatedcustomer relationship team in Australasia

Strategy:

• Clearly understood and communicable strategy

• Create customer loyalty through segmented relationship management

• Maximise value creation through understanding the cost to serve

Structure:

• Structure matched to task

• Functional competence with the ability manage inputs from internal relationships and processes

• Sensitive of cost to serve high and low value customers

• Best people in front of customer

• Formal relationships with external parties

Systems:

Performance Systems

• Five performance systems reinforce performance and behavioural accountability

Operating Systems

• Provide an accessible and informative knowledge repository

• Set to deliver a service experience not process customer

Skills:

• Develop a level IV functional competence

• Strong commercial acumen

• Strong analytical skills

• World class forecasting skills

Style:

• Business owners

• Proactive & improvement focused

• Fact based with numbers known

• Long-term orientation

• Balance orientation of task and people

• A people orientation focused upon developing performance and capability

• Performance is consequential

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IV Identifying A Change Vehicle

Addressing how to bridge the gap between "from what” and "to what", "to achieve what" requires the identification of a changes vehicle:

Attempting to use a ‘blanket’ approach to organisational change (ie all S’s at once) is difficult due to the loss of focus on priorities and loss of energy due to length of time

The Seven S diagnostic process should reveal the lead and support "vehicles for change" that drives measurable performance improvement:

Orienters before Enablers

Enablers before Energisers

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Appendix - Seven S Diagnostic in Detail

Corporate Superordinate Goal

Expectations

• A clearly communicated vision of ‘where to compete’, ‘how to compete’ in a way that meets all stakeholder interests

• This forms the ‘Five To Ten Year’ context for Business Unit Strategy driving asset allocation decisions and initiatives across business units

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Strategy: Operates At A Corporate And Divisional Level

Corporate Strategy: The 3-10 year action plans to deliver on the superordinate goal

• This context is derived by the interplay of the CEO VI and group General Managers of Business Units V and their small staff support groups

• Corporate strategy will be influenced by the individual business unit strategies

Business Unit Strategy:

• The 1-3 year plans for each Business Unit

• They are the accountability of the GGMs with some staff support

• They must be fact based; the fact base comprising of trended and integrated facts on products, the market place, channels and their financials. Additionally the fact base should include detailed data as to competitive cost structure, shares, aspirations and financials by segment

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Structure

Expectations (See Levels Theory For More Detail)

Corporate operating at level VI the Business Units at level V providing clear separation in the role of corporate as against division

Wherever possible clearly delineated Business Units operating at level V that have P&L accountability and the resources to carry out that accountability ie a good nexus between authority and accountability

Five levels of management (VI II) no more no less and without gaps (manager defined)

Clear distinction between the authorities and accountabilities of Staff, Line and Service functions

Key staff functions operating at requisite levels (V and IV) providing commensurate support to level VI and V line managers and each other

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Clearly defined and separate task defining and monitoring systems level by level based on facts

Task defining systems must be

• Top down and bottom up

• Based on agreed, trended facts

• Normalised with a common financial language

• ‘Never’ overlayed Individual performance review based on above task defining systems and task reviewing systems which are fair and consequential Leadership and membership training systems that re-enforce team behaviours and individual managerial accountability and authority (See detail)

Systems Expectations, Task Related, Performance Review, LeadershipAnd Membership

Note: Without a requisite structure it is very hard to make systems function adequately

TASK DEFINING TASK MONITORING

I

II

III

IV

V

Corp plan

Divisional strat plan

Operating plan

Schedule

Daily Work

Department plan

Board review

Monthly divisional review

Functional review

Schedule review

Department review

VICorp

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Skills

Each level of management must have both the appropriate intellectual capabilityand learnt skill to carry out their role

There should be explicit training and development programs to ensure the development of cross functional skills for each function at the appropriate level

Leadership and membership skills should be taught and be part of the performance review system

Skills can’t be learnt without cross functional data sharing ie The Fact Book

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Staff

The key staff functions of human resource, strategy, information technology and finance need to operate a the requisite level to support the corporation and the Business Units (V and IV) respectively. If they operate at III they will pull the rest of the unit down to III

Staff must clearly understand ‘Staff Authority’ and not undermine the line being held accountable for high level V and IV advice line accountabilities

Staff numbers should be small with the few level IV and V staff having demonstrated cross functional skill/experience

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Style

Expectations are for a consequential vigorous performance oriented style with a balance between individual and team activity. Style is the resultant of all the other ‘S’ working together

Each individual has a good understanding of

• Accountability

• Own role and role of manager, subordinates and MOR

• What is a manager and the four authorities

• Staff, Line, Service authorities and accountabilities

• Required leadership and membership behaviours

• Inappropriate upward delegation

As a result the organisation is

• Task and human focused

• Fair and consequential

• Individual and team

• Active; pro active

• Robust debate based on facts and enrolment

• Clarity as to who is accountable and therefore the decision maker

• Expectant of giving and receiving adequate level of service robust activity when this does not occur