Organization Restructuring

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OrganizationRestructuring
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Organization Restructuring

• Reorganize around business processes
• rather than discrete functions
• Refocus on key customer priorities
• Eliminate organizational duplication
• Reduce layers of management
• Improve channels of communication
• Create clear responsibility and
• accountability

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Organization Restructuring

• From this To this

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Conceptual Framework-Design
Mission, Vision Values
Organization Goals Strategies
Organization Culture
Organization Design
Leadership
Policies, Procedures, Processes
Organization Structure
Reward and Incentive Plans
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Conceptual Framework-Structure
Internal Stakeholder Input
Organization Technology
Customer, Suppliers Other External
Stakeholders Needs
Organization Structure
Structural Dimensions
Redesigned Processes (Internal)
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Organization Structuring Principles

• The development of a set of guiding principles is
  the first step in the organization structuring
  process - they define the parameters and desired
  attributes of the new organization.
• Creating organization structures requires a set
  of guiding principles that are consistent with
  the overarching direction of the organization,
  but are specific and relevant to the individual
  processes.

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Structuring Principles-Examples

• Create an environment that fosters continuous
  improvement
• Create widespread ownership of results through
  meaningful employee involvement
• Focus management systems towards outcomes rather
  than transactions
• This will be attained through informed decision
  making supported by measurement and analysis

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Structuring Principles- Examples

• Provision of service to customers is paramount
• Foster a collaborative environment (teamwork
  culture)
• Design the process to balance the critical needs
  of process owners, stakeholders and customers
• Accountability is commensurate with authority

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Structuring Principles-Examples

• Move decision-making as close to the point of
  customer contact as possible and apply supporting
  state-of-the-art technologies
• Ensure that customer/client feedback
  opportunities are maximized and easily
  accommodated
• This will be supported through the design of
  service and performance measures into each
  process

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Structuring Elements
There are several principle prerequisites or
elements that must be clearly defined prior to
identifying relevant organization structuring
principles

• Clarity of Mandate
• Unity of Purpose
• Clarity of Relationships

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Structuring Elements

• Clarity of Mandate - the objectives, activities
  and outputs of an organization component must be
  clearly defined and must be differentiated from
  all others within the department/branch/section.
  The activities and outputs of the organization
  should be easily linked to the stated
  organization objectives.

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Structuring Elements

• Unity of Purpose - ensure that all organization
  components within the larger organization work
  towards common goals and that all work performed
  must relate to the larger departmental
  mission/objectives.

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Structuring Elements

• Clarity of Relationships - how discrete
  components of the larger organization relate to
  one another, where interdependencies exist, and
  how the organization interfaces with internal
  stakeholders (other departments, across branches,
  etc.) and external stakeholders (customers,
  suppliers, general public etc.).

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Detailed Approach
Organization Definition
There are six basic steps in organization
structuring
Identification of Organization Drivers
Selection of Organization Model
Development of Organization Options
Evaluation of Organization Options
Organization Structure Selection
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Step 1 Organization Definition

• Defines specific elements that will set the
  context for organization structuring
• organization mandate/purpose
• consistent with the guiding principles
• specific organizational attributes
• nature of relationships
• centralized /decentralized operations
• organization culture considerations

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Step 2 Key Organization Drivers

• The Major factors which influence the
  organization structure.
• 1) Services/products delivered Ensure that they
  directly reflect the organizational mandate and
  the organization/process vision.
• 2) Organizational relationships Organizational
  interdependencies and external relationships
  (suppliers, general public, etc.)

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Step 2 Key Organization Drivers

• 3) Opportunities for improvement Address issues
  that currently exist within the organization that
  should influence the redesign process.
• 4) Organization constraints / Organization
  requirements
• Organization constraints are the boundaries that
  have been predetermined Organization
  requirements are the elements that are must
  haves in the proposed restructuring.

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Step 2 Key Organization Drivers

• Constraints / Requirements
• Transaction volumes
• Economies of Scale
• Availability of skills
• Need for accountability
• Leveraging technologies
• Customers (nature / location)
• Geographic presence
• Process or functional orientation

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Step 2 Key Organization Drivers

• More Constraints / Requirements
• Fixed real estate/facilities
• Risk management issues
• Pending legislation
• Unions and collective agreements
• Other initiatives
• Administrative support
• Resource capability
• Resource availability

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Step 3 Select the Organization Model

• Key activities to be performed by the
  organization are clustered according to the
  organization model selected.
• These groupings will begin to define the
  individual mandates of the organization units

Activity Clustering
ACCOUNTING
Sub Ledger Accounting
Domestic Accounting
International Accounting
Treasury Related Accounting
Payroll
Payroll Taxes

• ACTIVITIES
• Accounts Payable
• Accounts Receivable
• General Ledger
• Auditing
• Audit Compliance
• Consolidation Accounting

Tax Compliance
FINANCE
Budgeting
Financial Analysis
TAXES
Tax Research/Advisory
ADMINISTRATION
Administrative Services
Facilities Management
Human Resources
Acceptance Testing
Operations Support - Development and Production
System Maintenance - Operations
Data Security
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Step 3 Select the Organization Model
Based on the organization definition,
organization drivers, and key activities, select
the appropriate organization model that best
matches the requirements
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Step 3 Select the Organization Model

• 1) Functional
• Activities and employees grouped according to
  their business function
• Functional expertise supports core competencies
• Applicable when technology is routine, small
  number of products, and/or if interdependence
  across functional units is minimally required

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Step 3 Select the Organization Model

• 2) Product/Service
• Each unit is responsible for the design,
  production, and administration of a service line
• All resources are directly available to the unit
• Each service unit is responsible for planning,
  within the context of the organizations business
  strategies

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Step 3 Select the Organization Model

• 3) Geographic
• Geographic regions report directly to the
  corporate head office
• Each region has full control of all activities
  within its geographic boundaries
• Corporate head office retains responsibility for
  strategic planning

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Step 3 Select the Organization Model

• 4) Front End/Back End
• Some functions focused on customer interaction,
  while others focused on service development
• Front end sales, service, software applications
  
• Back end special projects, engineering,
  purchasing, accounts processing
• Relatively recent model both ends may have their
  own separate accounting

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Step 3 Select the Organization Model

• 5) Customer Focused
• Business organized around customer groups such as
  by department, branch, SOA, types of vendors etc.
• Teams with shared expertise in customer area and
  functional areas are assigned to customer groups
• Decisions are driven by customer demands
• Support levels refined based upon customer needs
  -- both unique and recurring

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Step 3 Select the Organization Model

• 6) Process-Centered
• Business organized horizontally around linked,
  end-to-end processes
• Multifunctional teams, not functions or
  individual jobs, define the structure
• Decisions are made at point of contact by
  empowered employees
• Decentralized, with few supervisors
• Functional expertise maintained through centers
  of excellence

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Step 3 Select the Organization Model

• 7) Matrix
• Multiple reporting relationships represented by
  grids and webs
• Formal systems of multiple decision making,
  communications, and balance of power
• Common in engineering and project intensive
  organizations
• Multiple contacts are intended to facilitate
  collaboration and coordination

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Organization models compared against
organization attributes
Step 3 Select the Organization Model
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Step 4 Develop Organization Options

• There are four elements that are included in this
  step
• 1) Position Creation/Task Analysis Create
  logical grouping of activities and their
  component tasks to create actual positions for
  the proposed organization

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Step 4 Develop Organization Options

• 2) Position Integration
• Further integrate the proposed activities and
  positions within the existing structure, and
  minimize duplication through position integration

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Step 4 Develop Organization Options

• 3) Establish Reporting Relationships
• Once positions have been established, the
  appropriate level of management/supervision is
  determined.
• In keeping with the guiding principles, each
  level of management needs to be justified.

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Step 4 Develop Organization Options

• 4) Develop Organization Structure Options
• Building on the previous three steps, develop
  several (at least 2-3) organization structure
  options for analysis.

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Step 5 Size the Organization Options
Process
Organization
Finalize the To-Be organization structure
Finalize the proposed activities and tasks
Proposed Organization sizing requires inputs from
both process design and organization design
For each activity develop 2-3 effort key drivers
( of transactions)
For each position identify activities to be
performed
Estimate the effort required to perform each
driver
Multiply estimated effort by the driver volume to
determine total required effort to perform
activity
Sum the estimated effort by activity for each
position
Proposed Organization Size
Round up the amount of effort to the number of
employees required for the position
Sum the estimated effort for each activity
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Step 6 Select the Appropriate Structure

• The strengths and weakness of each option should
  be clearly defined.
• Each option must be evaluated against several
  criteria
• adherence to guiding principles
• agreement with organization mandates
• supportive of the desired culture
• fit with process/organization visions
• opportunities for further organizational
  integration

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Step 6 Select the Appropriate Structure

• evaluate the efficiency of each option. There
  are four measures most often used to identify
  organization efficiency
• total organization cost
• cost to manage
• span of control
• layers of management

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Step 6 Select the Appropriate Structure

• Structural Efficiency Is Based on Four Primary
  Measures
• Total Organization Cost
• Spans of Control
• Cost to Manage
• Layers of Management

Cost Salary Costs of Managers
to Manage
Salary Costs of Workers Managed