Figure 1: Checkside’s scaling curve

As any experienced mountain climber will tell you, knowing where you are and where you want to be by when is key to survival and having a well-developed and communicated plan is the key to success.

Having located your company on the Scaling Curve and looked with nervous excitement at the next highest peak, you can now map out an appropriate ascent. CEOs who plan to ascend the scaling curve whilst also investing in the maturation of their Management Operating System are the best prepared, most aware of the challenges and with the supporting internal machinery to emerge into the next scale-up stage with industry leading profitability, robust systems and high performing executive team.

Start-Up

“An organisation formed to search for a repeatable and scalable business model” [1]

Start-up CEOs thrive in organised chaos, dynamically building a product or service. The excitement of hiring and building a team that they trust and bond closely with compensates for the lack of structure, Management Operating System and policies and procedures. They know every employee, maybe even every customer and moving fast is adrenaline for the team. When success strikes how well prepared is the organisation to meet the demands of the more sophisticated customers, a larger workforce and how will the culture survive?

Scale-Up

“A transitional organisation built to develop the ability to execute growth and attract capital” [2].

Scale-ups have moved beyond the Start-up phase as they grow rapidly due to having found product-market fit and are creating economies and efficiencies through their scale.

Moving to Scale-up stage has its risks – crossing the ice crevasses from base camp to the next level is the valley of death for most Start-ups, so how do you survive? Having one foot in Start-up and one foot in Scale-up territory is a start and then slowly shifting the weight as the business and Management Operating System matures.

• A professional sales team and system is created
• Experienced employees are recruited to create processes and procedures
• Roles are more clearly defined, and accountability ascribed
• Strategy becomes an annual event, reviewed quarterly
• Management and finance systems and leadership skills are starting to be developed

 Professionalise

As companies mature their Management Operating System, its complexity and robustness increases, enabling them to weather more storms. CEOs of professionalised businesses have achieved this stage by developing and communicating a clear Scale-up and growth plan. Everyone in the organisation is engaged climbing the mountain.

At this stage the organisation has fallen into a rhythm of monthly, quarterly and annual meetings with a leadership team striving for accountability for their own outcomes and to each other.

• Sales channels are expanding
• Divisions and departments have their own aligned strategic plans and Objectives and Key Results (OKRs)
• Reporting dashboards and profit centre results are in place
• Policies and procedures are maintained and have consequence
• Poor performance is addressed, and positive achievements rewarded with bonuses supported by further investment in leadership skills and culture is ongoing

Enterprise

Of the very small number of companies which reach the Enterprise stage, most have a broader ownership structure, are operated by a professional leadership team (often independent from the owners/founders) and have the reporting, management and financial systems to support it as part of their advanced Management Operating System. From the Board down to shop floor, everyone is aligned on the strategy and their role in achieving the goals.

• Leaders understand the value of 1:1 coaching as they tackle new challenges and complexity
• Documented processes exist on an ERP platform
• Sophisticated reporting functionality and a rhythm of meetings to keep aligned and focused on the OKRs is in place
• Strategy is reviewed quarterly, and planning cascaded down to divisions/functions
• Culture is embedded and supports expansion to multiple geographies and business areas

No two companies’ journey is the same and moving up each stage of the curve can take 5-10 years or more. Checkside has guided hundreds of our clients over the years up many mountains, navigated treacherous valleys and helped those who have lost way get their back on track.  Planning the evolution of your Management Operating System is the key to successfully growing your business and maximising your shareholder value.

Helping our clients navigate the Scale-up Curve is part of our value proposition as trusted advisors and partners in success.

Contact us to talk about where you want to be on the Scale-up journey.
The Checkside Team

[1] https://www.imd.org/ibyimd/innovation/how-to-scale-seven-qualities-of-successful-scale-up-ceos/

[2] https://www.imd.org/ibyimd/innovation/how-to-scale-seven-qualities-of-successful-scale-up-ceos/

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Or put another way “structure must follow strategy”.

With the COVID-19 pandemic forcing many companies to rethink their business strategies – and in some cases necessitating radical changes – we have seen an increase in organisational restructuring initiatives in recent months.

COVID-19 sees a spike in organisational redesign activity

In the wake of the COVID-19 pandemic, many companies are being forced to make hard decisions on just how many people are necessary to get the job done.

The Department of Education, Skills and Employment states that 30% of companies have reduced staff since the onset of the COVID-19 pandemic. 28% expected to reduce staff in the coming months, while 22% stated they were ‘unsure’ of how they expected their staffing levels to change.

That leaves only 20% of companies with any level of confidence that current staffing levels would be maintained or would grow.

Having advised hundreds of Australian companies on organisational redesigns since 2005 (most notably in the wake of the global financial crisis), we have seen “the good, the bad and the ugly” of organisational restructures.

Common challenges that we have seen companies face over the last few months include:

• Current structures and/or talent not able to deliver the post-COVID strategy
• Inefficient, bloated structures which have evolved over time and need to be realigned with the post-COVID world
• Overly expensive structures (costs disproportionate to post-COVID revenues or funding) which need to be rationalised
• Too many middle-managers – but not enough leadership and accountability

It’s easier to summit Mt Everest than it is to successfully complete an organisational redesign

In the process of working on these engagements, I revisited a McKinsey article from 2015 which delivered the classic line “organisational restructuring is far more than just tinkering with lines and boxes”.

Given the heightened importance of organisational redesign in the post-COVID 19 world, we thought it appropriate to revisit some of the key insights provided by the article.

To start – let’s look at some frightening statistics on organisational redesign:

• 44% of organisational redesign projects are never completed
• 33% of organisational redesign projects fail to meet objectives or improve company performance after implementation
• Less than 25% of organisational redesign projects are successful

It’s easy to skim through those statistics without fully appreciating them. But when you consider that only 29% of attempts to summit Mt Everest are successful, it puts the difficulty of successfully complete an organisational redesign into perspective.

The nine golden rules of organisational redesign

McKinsey researchers studied 1,323 organisational redesigns and identified nine “golden rules” which can significantly increase the likelihood of success:

• 73% of the companies that followed more than six of the golden rules enjoyed successful organisational redesigns. These companies were six times more likely to declare success than companies that adopted just one or two of the rules.
• Following all nine rules in a structured approach yielded an 86% success rate

Rule 1. Focus first on the longer-term strategic aspirations

Companies should be clear from the start about what the redesign is intended to achieve.  This aspiration must be linked to strategy. This means assessing each structural decision based on whether it aides the achievement of your company’s key strategic pillars and operating processes.

Rule 2. Take time to survey the scene

Design casts the longest shadow. Taking the time to analyse the root cause of current pain points will reduce the risk of miscommunications that have to be walked back (i.e. over/underestimating the extent of the redesign) and/or revisited in supplementary restructures down the track.

Time invested upfront to fully explore, analyse and stress test the situation will save significant time and expense down the track.

Rule 3. Be structured about selecting the right blueprint

The field of organisational redesign has established principles, best practice guidelines and rules of thumb that should be carefully considered by leaders. Unfortunately, many companies base their new structures on untested hypotheses or intuitions. Established principles, best practice guidelines and rules of thumb all need to be considered and discussed in order to understand the right macro and micro-structure for each company’s unique mix of strategy, people and other assets.

Intuitive decision making can be fine in some situations – but this involves little pattern recognition, and there is too much at stake to rely on intuition in organisational redesign.

Interestingly, whilst many believe that benchmarking other companies and trying to adopt some of their structural choices might be an important ingredient of successful redesigns – there is no evidence from the research that it is.

Rule 4. Go beyond lines and boxes

A company’s “lines and boxes” are only one dimension of an organisational redesign. Companies that used a more complete set of levers to design their organisations were found to be three times more successful in their efforts than those that only used a few.

Going beyond lines and boxes means looking at areas such as a company’s operating (or accountability) system, seating arrangements, layout of communal spaces, work polices, processes, communication and performance management systems.

Rule 5. Be rigorous about drafting in talent

One of the most common—and commonly ignored—rules of organisational redesign is to focus on roles first, then on people. This is easier said than done. The temptation is to work the other way around, selecting the seemingly obvious candidates for key positions before those positions are fully defined.

Companies should be careful not to assume that any individual will ‘sit’ in a particular box until all boxes have been identified and performance profiles completed. The helps to avoid any forgone conclusions that may detract from ensuring that the right talent sits in the right seats.

Rule 6. Identify the necessary mind-set shifts—and change those mind-sets

Leaders of organisational redesign efforts too often forget the people element. Organisations are collections of human beings, with beliefs, emotions, hopes, and fears. Ignoring predictable, and sometimes irrational, reactions is certain to undermine an initiative in the long run.

Getting the basics of change leadership right is key. Communicating a compelling reason for change, role modelling the new mind-sets, putting in place mechanisms that reinforce the case for change, maintaining momentum and building new employee skills and capabilities will help drive towards a successful outcome.

Rule 7. Establish metrics that measure short- and long-term success

No sane pilot would fly a plane without a functioning cockpit display system, yet a surprising number of companies roll out an organisational redesign without any new (or at least specially tailored) performance metrics.

Simple, clear key performance indicators (KPIs) and objectives that focus on how a changed organisation is contributing to performance over the short and long term are vitally important.

Rule 8. Make sure business leaders communicate

Any organisational redesign will have a deep and personal impact on employees – it’s likely, after all, to change reporting lines, team structures, how work gets done, and even where they work. Impersonal, mass communication about these issues from “corporate office” will be far less reassuring than direct and personal messages from the leaders of the company, cascaded down.

Rule 9. Manage the transitional risks

In the rush to implement a new organisational design, many leaders fall into the trap of going “live” without a plan to manage the risks. Every organisational redesign carries risks such as interruptions to business continuity, employee turnover, a lack of engagement, and poor implementation. Companies can mitigate the damage by identifying important risks early on and monitoring them well after the redesign goes live.

Bringing it all together

Done right, organisational redesign involves the integration of structure, processes, and people to support the implementation of strategy.

These initiatives need to be supported by strong change leadership and communication.

Following the nine golden rules of organisational redesign described in this article will increase the odds of a successful outcome for your company.

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One of the common and very human reactions for some of these business owners is a sense of responsibility or guilt that goes with doing very well whilst others are suffering around them. This empathy for the community is admirable and most are offering help in some shape or form to those less fortunate, which is great to see and I am sure it will continue. However, the often-repeated Winston Churchill quote ‘never let a good crisis go to waste’ needs to also ring true if you are a business doing well through Covid-19, particularly when you have the financial means to invest for the future.

So what should you be doing to take advantage of your situation and set your business up for ongoing high-performance?

1. Review the way you manage the performance and expectations of your people. Your employees will all know people who are struggling and should understand how lucky they are to be with a business that is going well. Use this time to talk to your people more about what is going on in the world and the short-term objectives and KPIs that you need to work towards together to strive. In other words – explain why you are continuing to succeed whilst others are struggling, what part each employee needs to play and increase the cadence with which you do this. If you don’t already have a disciplined operating system in place to drive accountability and focus on key numbers, now is the time to do it.

2. Review your structure and executive talent pool. We are not saying be ruthless with your team here, but the reality is that there are many businesses that won’t make it through the next year and more talented executives looking for smart and relatively stable companies to work with, often at discounted fixed remuneration packages. Do you really have the right structure and people to take your business through your next stage of growth? Now’s the best time to ask yourself this question.

3. Invest in income producing assets whilst they are at discounted prices. Sounds rather obvious, but reality is that most of the world is ‘on sale’ at the moment, plus the government is providing incentives for investing, so putting decisions on hold now might be something you regret in the future.

Each of these strategies relates to improving strategy execution, which remains one of the major challenges facing business in any environment. At the end of the day, the best performing companies in any sector all share the following traits:

• A clear strategy and aligned structure
• The right talent in the right roles
• A high performance operating system to drive improvement and accountability
• Leaders developing at the pace of change
• Succession plans to underpin continuity

So if you are lucky enough to be in a position to invest in your business now, don’t hesitate to make your move. It might be the best opportunity you ever have.

If you’d like to discuss your next move with one of our experts, via phone or obligation free video chat, then please contact us here.

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The reality of course is that the right structure will depend on a number of factors (and primarily your business strategy), but the core underlying functions of virtually every businesses are effectively the same.

How to choose the right organisational structure to achieve your business goals.

Understanding the key functions and where there are gaps and/or duplication points will help you prepare to choose the right organisational structure to achieve your strategy.  A key to achieving this is an understanding of the key differences between potential organisational structures together with the pros and cons of each.

Another critical piece to note is that as businesses grow and evolve, there remains a need to revisit your organisations structure to ensure it remains relevant to your strategy and provides an ongoing growth platform as opposed to a handbrake preventing successful growth.

Using the Business Value Chain model to assess organisational structure and capacity.

Our business value chain model (below) provides an overview of the typical core functions found within most organisations (across every sector), together with the common management support functions required in any growing business:

Figure 1: Checkside’s Business Value Chain for assessing organisational structure and capacity

What are the most common organisational structures?

The 4 primary organisational models include FUNCTIONAL, DIVISIONAL, HYBRID or MATRIX structures.

A FUNCTIONAL structure typically has functions (i.e. Sales, Marketing, Operations, Finance, IT, and Human Resources) reporting into the CEO or MD.  Each function is responsible for delivering on their functional area of expertise under the direction and strategic guidance of the CEO.

A DIVISIONAL structure typically sees the business structured along product or market lines. A division may be set up to focus on a particular customer segment or around different products.

A HYBRID structure contains a combination of functional and divisional elements. In this case you may structure your organisation with particular divisions based on products or customer segments however have some form of shared services across the business.

A MATRIX structure involves having a pool of resources that are drawn on to complete a finite number of projects. This involves having the core functions and a number of projects.

A key risk for many mid-market and emerging companies is that their structures evolve around the talent, capability and capacity that currently exists in the business rather than being designed around what the business actually needs moving forward to achieve its strategic objectives.  The exercise of assessing the most appropriate structure for your business is critical as it goes directly to the ability to execute your strategy and drive performance.

It typically requires some expert help to not only assess the most appropriate structure that is best suited for your business right now but determine your key capacity ratios to guide resourcing changes and a workforce plan for your future growth.

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Imagine Qantas has purchased a brand new 787-9 Dreamliner from Boeing to service their new Perth-London route. They’ve taken delivery of the plane…but then let it sit in a hangar for a month because they didn’t have a suitably qualified pilot.

What would the cost be to the airline?

Rather than leave this hang as a rhetorical question, we turned to Google:

• Carrying capacity of the 787-9 Dreamliner is 236 passengers
• Assuming they’re booked a month-out, economy ticket currently goes for $1,168 (166 seats), Premium Economy $3,349 (28 seats) and Business $9,348 (42 seats)
• Civil Aviation Authority data from June 2018 shows that average passenger load was 83.7%
• Qantas is operating a daily flight in each direction
• Estimated operating costs are $27,500 an hour
• Estimated journey time is 17 hours 20 minutes

Based on a 30 day month, some back of the envelope math suggests:

• Estimated Revenue of $34.2 Million
• Estimated Operating Costs of $28.6 Million
• Estimated Gross Profit of $5.6 Million

In this simplistic example, not having a suitably qualified pilot for this route would cost Qantas $5.6 Million dollars per month.

So it’s not surprising that the cost of a vacant leadership position may also cost growth businesses into the millions of dollars per week.

Consider also the reality that the duration of many vacancies often exceeds 100 days, and you are talking about some serious financial impacts.

So, what can you do to minimise the impacts of a vacant leadership position?

There are three key levers companies can pull to minimise the impact of a vacant leadership position:

• Attraction
• Time to fill, and
• Retention

And the research suggests that it’s not all about the money…

Attraction

Your employer brand is defined by the public image of your company and how you’re viewed as an employer by former, current and prospective employees. In today’s increasingly competitive and candidate-centric job market, it’s absolutely essential for companies to cultivate a positive employer brand to attract A-Grade talent.

Companies with strong employer brands on average receive 50% more qualified candidates per vacancy – including ‘passive’ candidates who would otherwise be content to stay with their current job. This means less time wasted on unsuitable candidates and fewer hiring mistakes. 86% of peoplewould not apply for, or continue to work for, a company that has a bad reputation with former employees, or the general public.

Additionally, companies with a strong employer brand are able to reduce the compensation premium required to attract new candidates. Companies with strong employer brands are able to spend 10% less on base pay compared to companies with poor employer brands.

Time to fill a position

By investing in employer branding to aid attraction, you’ll be able to attract more A-Grade talent.

Think about it from a sales perspective: warm leads convert at a much higher rate than cold calls, right? Well, it’s the same for recruiting!

Companies that can attract more talent are able to hire that talent faster because they spend less time searching and selling – and more time closing candidates.

Companies that invest in employer branding are up to twice as fast as the rest of the pack when it comes to filling vacancies.

It is also important for companies to consider their executive recruitment processes to ensure that all stages are adding value (as opposed to unnecessary complexity) and being completed as efficiently as possible.

Retention

More engaged staff means increased productivity, higher company morale and lower employee turnover. Lower employee turnover means a reduction in vacancies.

Employee retention is about promoting employee engagement. It’s largely a combination of respectful treatment, fair compensation, a sense of mutual trust, job security, alignment with purpose and values and how often an individual can use their unique skills to deliver high-performance. Accountability for the majority of these items sits with the direct manager. As such, managers should make it a habit to connect with staff on a regular basis (we’re big fans of the weekly 1:1 for this reason).

Companies should ensure managers have a system for having regular conversations regarding company, team and individual objectives – and to celebrate wins.

Companies should encourage a healthy work-life balance. Unhappy employees are less productive, and more likely to result in turnover. Be proactive about asking employees what they need, and remain vigilant about looking for the signs of employee burnout.

In summary

If you ignore employer branding, you’re basically refusing to acknowledge that your company’s reputation is an important factor in attracting and retaining A-Grade talent.

You, therefore, risk losing top talent to your competitors, not being able to retain your best assets and spending far too much on recruitment and people generally.

Employer branding is statistically proven to make a real difference in how your company attracts talent. If you haven’t given employer branding a thought, then you’re already way behind the pack.

So where to from here?

Creating a unique employer brand does not have to be costly, but this does have to be done in such a way that will separate your company from the competition in the highly competitive labour market.

We recommend starting with this question: “How is our company different from the competition in a way that matters to (prospective) employees?”

Employer branding is a long-term investment: a marathon, not a sprint. It is crucial to keep in mind that your company’s employer brand cannot be created or changed overnight. It takes time to develop and evolve in order to project an authentic brand.

It is, however, important to reducing the occurrence – and cost – of vacancies.

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There are three lots of stats that stand out when we look at the relationship between employee engagement and performance reviews:

• According to Gallup (and most other recognised engagement surveys), the number of ‘disengaged’ employees in Australia is around two-thirds.
• Two-thirds of employees say that they don’t get enough feedback from their manager.
• In a recent LinkedIn poll, two-thirds of employees had a negative view of their annual performance reviews.

It is not hard to draw the conclusion that there is a direct link between providing continuous feedback and increasing employee engagement, but often employers find it to difficult to establish a system that is effective, adds value and easy to implement.

Understandably most clients think it might be more time consuming and costly than an ‘annual’ review process, but that doesn’t have to be the case.

Companies like Small Improvements provide clever, inexpensive, cloud based systems to help eliminate the administration and time associated with managing a performance review and continuous feedback framework.

In a world where more than 80% of companies say their adoption of HR Technology is not strong, it is those that use these enabling tools to increase their efficiency and communication with employees that will really stand-out and close the two-thirds ‘gap’.

Of course, as with any technology, you only get out what you put in – but the software available now is very user friendly (for both you and your employees) and engaging in it’s own right.

In fact, we predict that within 3 years those companies that are not using these modern tools will be viewed by (potential) employees as ‘out of touch’ compared to other workplaces. It’s something to think seriously about.

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Whether you are conducting an online or paper- based survey, there is an abundance of potential issues that could arise.  These issues can reduce response rates and essentially affect the quality of the results. From my experience, the following five tips should be considered to ensure these issues are kept to a minimum.

Create a trial survey.  Use a control group – who have not been involved in the survey’s creation – to take the survey.  Chances are if they have difficulties with the survey or find a question ambiguous, so will your staff.

Demographics. Consider your staff demographics carefully.  Many questions may seem self-explanatory, however cultural and language differences can affect how some respondents interpret certain questions. For example, the Gallup 12 Engagement Survey, developed in America, asks participant’s if they have a ‘best friend’ at work. In Australia, the more common equivalent to this question would be to ask if one has ‘a friend’ at work.

Technology. Consider the technological requirements of the survey.  Often in industries where a computer is not used on a daily basis, an online survey can be found to be quite difficult. If you are administering an online survey and are concerned about the technological requirements, it would be beneficial to provide staff training and assistance, or even choose an alternative medium more suited to your working environment (e.g. printing a paper-based version of the online survey).

Keep it short and sweet. To maximise response rates, keep your survey short. Respondents start to lose interest after 10-15 minutes.  Review your questions and try to avoid asking questions that won’t provide any additional value to your results.

Survey on a regular basis. Companies with the largest response rates are continually requesting staff to complete surveys.  These companies often administer engagement surveys on a six monthly basis, ensuring that the completion of staff surveys is part of usual employment activities.  Companies that keep on top of their HR procedures, including the regular administration of staff surveys, attain the highest response rates and often have the most engaged staff.

A company that takes time to understand employee feedback has the capacity to increase productivity, engagement and retention through the effective management of their people. Considering the benefits of receiving employee feedback, the administration of staff surveys should be a regular and ongoing item on the HR agenda.

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Brand management starts on the inside. What is it about your organisation that attracts and retains employees? 

Understanding and defining your company’s Employee Value Proposition (EVP) can allow leaders to gain a deeper understanding of what it is that attracts potential candidates to join and current employees to stay.

An EVP can be created through communication with your current employees can help uncover what it is about your organisation that’s truly valued.  And it’s not always salary.  In fact, research suggests that 88% of employees do not leave a company because of the salary.  So long as a fair salary has been negotiated, it is rarely one of the deciding factors in employee retention.

The Corporate Leadership Council has defined a set of attributes that employees and potential candidates identify as the value they gain through their employment in varying degrees:

• Rewards (e.g. compensation or benefits)
• Opportunity (e.g. opportunity for development)
• Organization (e.g. Organisation size, ethics or market position)
• Work (e.g. job impact)
• People (e.g. quality of co-workers)

According to CLC’s data analysis, the attribute ranked as most important to employees in 2009 was ‘Job- Interest Alignment’.  This was followed by, ‘manager quality,’ ‘co-worker quality’, ‘people management,’ and ‘respect’.  It is also important to remember that these are general results and an EVP is a very personal thing that can yield varied results in different industries.

Understanding which factors contribute to employees joining and staying with an organisation allows a focused approach to recruitment and retention. The value existing employees place on the organisation combined with internal positive sentiment is reflected outward to the market which can ultimately increase the appeal of the organisation to potential employees.

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