by Benjamin Bourmaoui and Alexander Thiel
Republished from McKinsey, May 14, 2018
Embrace change, contended Greek philosopher Heraclitus, because it is “the only constant in life.”
In today’s workplace, companies are in a nearly constant state of organization change – whether it’s a large-scale makeover or a shakeup of departments or geographies – McKinsey research finds. And if they aren’t continual, the redesigns emerge in faster and faster intervals.
The reasons for warp-speed change are clear: to keep pace with ever-evolving consumer needs and technology, the persistent drive for efficiency and productivity to meet investor – and often activist – demands, and to compete with nimble rivals.
Yet, while org redesigns aim to be smooth, short, and deliver more efficient and effective operations, they often spark frustration and failure. They frequently trigger business disruption that strains affected employees. Their intended impact seldom occurs, and they often deliver only incremental results and significant disruption costs.
What’s the recipe for success?
Zero-based org design, or ZBO, is where the answer can lie. This is a blank-sheet approach and it requires starting with a clean whiteboard to move effectively from incremental to transformational impact within an organization. Erase from your mind the current organization with all its structures, processes and stakeholders, and ask this question: How would the perfect future organization look if it were built from scratch?
Where to start?
First, define a theoretically ideal organization by removing all restrictions of status quo bias – the inability of affected stakeholders to imagine and believe in a truly transformed organization. This moves towards generating strategic priorities and opportunities while confronting marketplace challenges. To achieve this, leaders must employ a highly structured and closely facilitated process.
Only when the ideal is developed can an organization consider making it reality and address all the restrictions of the status quo – whether they encompass capability gaps, existing structures, etc. And while no immediate action may be implemented, by realizing this optimal organization, firms can determine what they need to do.
What are the benefits?
- More transformational outcomes. Instead of moving a few organizational boxes and lines, agile squads, centers of competence and new operating models appear.
- Significant cost savings. They ensue by not asking what can be cut but determining what truly is needed. With this constructive process, many unnecessary activities and bureaucracies disappear automatically since no one would propose introducing them.
- Energizing instead of draining experiences. What energizes and invigorates people is the ability to create a future org setup that everyone feels sets them up for success. This provides the organization with a bolder vision that everyone can support.
So, how do you make ZBO happen? It’s not as simple as assembling a working group in front of a whiteboard, and it requires specific ZBO exercises.
How can success be achieved?
Mindset: The working team must relinquish its status quo bias. This is achieved by holding so-called survival minimum workshops to envision a bare-bones organization as a starting point.
Strategic clarity: Determine what the optimal future organization needs to deliver before deciding what it should look like. Often, a clarification of the underlying strategy is required first because while ZBO promises myriad changes, the organization must follow a strategy.
Creative and inspiring input: On that initial blank page, offer lots of inspiring examples of how successful organizations have done it. These provide valuable input lessons learned from the best.
ZBO redesigns unlock the ability to identify an organization’s steady and secure backbone and launch those elements ripe for dynamic change. Given the landscape littered with failed organizational designs, there’s no reason not to try the blank-page approach.