But take a walk around your organization and ask two questions across all levels and see what you learn: “What is our core business function?” and “Who is our core customer?”
If you work for a museum and you speak with a curator, you will likely hear that, “We’re in the business of collecting and preserving great works of art.” The head of exhibitions might report, “We’re in the business of presenting and interpreting great works of art.” Meanwhile the head of marketing will say, “We’re in the entertainment business.”
Is a blood bank’s core business to collect, manufacture, distribute, or transfuse blood? Is its core customer the blood donor, the hospital, or the patient? Is a food bank in the business of collecting food? Storing it? Packaging and distributing it? Educating the community around the problem? By now you’re declaring “They’re in the business of all of that.” You’re on your way toward a high Organizational IQ.
Organizational IQ is comprised of four key elements:
- Full comprehension of what business you’re in.
- Full comprehension of your core customers.
- An organizational structure/design that supports your vision.
- Business processes that are aligned with your goals.
Organizational Structure
Let’s take the example of the broadcasting company that believes it knows its business and core customers – leadership views it as obvious. So they structure their organization around five divisions: two TV stations, one radio station, a magazine, a production company, and a fifth division that is responsible for the smaller projects the other divisions don’t want to do.
Each division has its own general manager, sales department, creative, technical, and administrative staff. They share the corporate finance and HR departments, and each GM reports to the same CEO. They also share a common understanding of who their major competition is – each other. They compete with each other internally for budget allocations from the CEO and they compete with each other externally for advertisers, sponsors, and investors. Their organizational structure essentially requires they put the other out of business to thrive. Clearly a zero-sum game.
So what could they do differently? They could see themselves in the business of 1) content development and 2) content distribution. Had they designed their organization around that premise, their structure would look very different.
Leaders with high Organizational IQ run businesses that are more efficient, more effective, and more agile. Efficiency cuts costs through the reduction of waste and redundancy. Effectiveness increases customer service and satisfaction. And agility makes organizations more responsive to change.
Among the driving characteristics of highly functional organizations are:
Internal/external management teams: These organizations do not operate in silos where departments and divisions operate independently of each other. Communications and data flow freely among all departments and work is accomplished collaboratively. The managers of all divisions have a shared view of the core business and all internal operations support the resources required to operate the core business. Successful organizations include all relevant perspectives to ensure effective and efficient business strategies and processes.
Strategic partnerships: Entering new markets or expanding existing markets is often best achieved through alliances. By leveraging core business competencies and forging strategic partnerships, an organization can provide new products and services to a broader audience (external) or it can more effectively and efficiently provide operational support (internal) for services such as IT, HR, finance, facilities, training, etc.
Most CEOs come into organizations with the structure already in place – having been built and remodeled time and again over the lifespan of the agency. Whether new to the organization or a seasoned veteran, the CEO must continually institute new strategic initiatives. Often these initiatives are not fully successful due to an inherited organizational design that is out of alignment with how business is conducted today. Once the framework within which the organization arranges its lines of authority and allocates it resources is aligned with its core business and customers, it begins to approach the Mensa level of Organizational IQ.
Business Process Improvement The next element to achieving organizational genius is to fully understand how the work is done – how we do what we do. This is achieved through business process improvement tactics. The organization must develop the techniques and skills to look at its business processes, understand them, identify ways to improve them, and implement changes.
What is a business process? It can be filling out a purchase order, preparing the annual budgets for the organization, recruiting and scheduling volunteers, order entry, or fulfillment. It is how we do what we do.
To exemplify business process improvement let’s head back to the museum and this time focus on its customer interactions. The museum’s organization is still structured around the silo model, so the frontline staff receives multiple messages and directions.
When a visitor approaches the admissions desk the staff is expected to: 1) obtain zip code, 2) determine membership, 3) sell admission ticket or membership if not currently a member, 4) present highlights of current special exhibitions (some with upgrade fee), 5) complete financial transaction, 6) provide museum guide and answer any questions the visitor may have.
The entire transaction cannot exceed 60 seconds and the admissions staff must provide outstanding customer service. Is this possible? No. The directives are coming from multiple departments representing multiple business objectives (increase membership, cover costs of special exhibition, provide demographic profile to funding agencies…). None of those issuing the directives have ever spoken to the admissions staff or have any knowledge of the admissions process from either the staff or customer point of view. No one is trying to be difficult. Everyone has a valid request. It is the process that is flawed.
What can be done to replace the cross-departmental finger-pointing with customer-focused solutions that achieve the museums goals? Begin by gathering the right people – the process owners (admissions, membership and marketing) and have them define the current process using a flowchart. This flowchart depicts a step-by-step map of the activities, actions and decisions which occur between the starting and stopping points of the process. For possibly the first time, they are all looking at the same business process with a common agreement. From here they can begin to gather the data required to simplify and resolve the issues.
Business process improvement techniques allow those employees who are directly involved to work together as a team to eliminate waste and streamline activities. Once the silos have been dismantled through a realigned organizational structure, process improvement allows employees to radically improve performance through cooperative problem solving. By this point in improving the organization’s functionality, the core business and customers are defined, and the structure is in place both to support the organization and plan for the future. Business process improvement addresses the tactical demands and moves the organization away from incremental change to continuous improvement.
The benefits of training employees in the techniques of process improvement include:
- Creation of cost savings through efficiency.
- Reduction of redundancy and error correction.
- Improved ability to service customers.
- Improved internal communications.
- Increased productivity.
- Simplified processes and workflow.
The visual representation of how work gets done leads to an enlightened and empowered workforce. By examining the methods, the assumptions and the misconceptions, organizations become highly functional. The result of this process is higher effectiveness, efficiency and the agility to respond to growth and change.
Growth ReadyWith a high Organizational IQ no challenge is too great. Test yourself by first drawing a flowchart of your core business. How do customers/clients come into your system? What are the program/service options? How do they navigate your system? What happens when they exit? On a parallel plane, identify the administrative/support services required to fulfill each step of the core business.
Once you have a visual depiction of your core business functions you can begin to identify the stumbling points. You will likely be surprised by what you find. Perhaps it’s a client left abandoned at a particular point or the omission of a key support area in servicing a critical function. With a visual representation of your core business you can now begin to align your organizational structure on an informed level. You will see how your decisions impact your clients and your employees.
You may consider bringing in independent counsel to provide an impartial perspective or expertise in organizational design. The more entrenched the silos the greater the need for independent consultation.
Building your Organizational IQ is a discipline. Continuous improvement is a commitment. Both are driven from the top and position your organization for growth and sustainability.
Rhonda Peters
Rhondajoy09@gmail.com
941-806-8464
Great post! Whenever I am treated as a donor or customer should be treated, I know someone has been trying to raise the Org IQ across departments. Why is it so rare? Because there is still so much staff turnover? Because we refuse to make the appropriate investment in training and infrastructure? Because we like our silos?
ReplyDeleteFor all the reasons you stated plus the biggie -- most planning is done at the highest levels of the organization and doesn't include the process owners. As a friend of mine so aptly phrased it "top leadership designs the strategic business plan -- tosses it over the cubicles and says "Here -- have at it."" Can you imagine constructing a building without blueprints or manufacturing a product without a detailed description of each stage of production? These allow everyone to discuss the business from a shared vision. Yet most of us can't produce the basic blueprint drawings for our own organizational structure and core business functions.
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