How effective is your company, division or department? I’m not merely referring to the efficient use of resources such as money, technology and materials. Organizational effectiveness is broader than that. It involves setting and accomplishing the right objectives with the right resources in the right way.

Since organizational effectiveness has more than one determinant, I want to share two key lessons I’ve learned that can help you whether you oversee an entire enterprise or a department. These takeaways are especially applicable if you’re moving into a new role in an organization that’s underperforming.

Takeaway 1: Design Is Not Structure

A common way to go awry when optimizing the effectiveness of an organization is by equating organizational design with creating its structure (typically represented by an organizational chart). No matter what your preferred design approach is, keep a core tenet in mind: Solid organizational design involves considering a variety of elements. Structure is simply one of them.

Organizational design elements include:

• Strategy: The way the organization plans to grow and participate (or compete) in its market
• Environment: The external and internal context of the organization (e.g., the economy, government regulations, corporate transformation and culture)
• Work requirements: The integral activities needed for the organization to operate
• Structure: The organizational form that coordinates how work is done (e.g., divisional, functional or matrix)
• Talent: The members of the organization who possess and use needed capabilities to accomplish work
• Processes: The systems and procedures that monitor and facilitate the flow of work

Sound organizational design aligns these elements to achieve targeted objectives. Such a design allocates talent along with other resources to the appropriate areas to execute the strategy. When this happens, there are clear benefits. For example, research has shown that organizational alignment can be a competitive advantage that produces “supernormal profits,” and that it can play “an important role in maintaining high levels of work engagement.”

As you seek to optimize the design of your organization, try these five suggestions:

1. Focus initially on strategy. While strategy is a fundamental element, driven executives frequently jump to other design elements before giving it enough consideration.

2. Weigh the capacity of talent. The design should facilitate the productivity of employees and managers. An overly complicated design can be cumbersome for stakeholders, which can hinder productivity.

3. Use caution when creating structure around people. Reduce the likelihood of redesign in the future by examining work requirements prior to organizational talent. Expect to make some structural adjustments for the people you have, but avoid using people as the sole basis for design.

4. Don’t expect 100% perfection. There is no such thing as the perfect design for all organizations. Making trade-offs is a normal part of the process.

5. Measure success based on implementation. Even your ideal design can fail if you don’t adequately anticipate how its implementation could affect the organization. Create a change management plan to methodically put the design in place.

Takeaway 2: Organizational and Leadership Effectiveness Are Reciprocal

While the best design enables an organization and its leaders to achieve business objectives, exceptional leaders can accelerate this outcome. For my book, The Finesse Factor: How to Build Exceptional Leaders in STEM Organizations, I explored how such leaders not only effectively navigate office politics, manage interpersonal conflict and hold people accountable. They also create a work environment where employees flourish thereby increasing business performance.

In fact, even organizations with less than optimal structures and processes can prosper — I’ve repeatedly seen exceptional leaders compensate for these organizational shortcomings. What’s a pivotal enabler for such accomplishments? These leaders convey a measured presence as they understand, process and deftly perform in tricky situations. In other words, they personify finesse.

Optimizing an organization and its leaders can sustain positive business results. This includes ensuring that you currently have leaders with the needed capabilities in the appropriate roles and constructing a robust leadership pipeline that continues to build a strong bench (i.e., succession management). According to CEB research, companies with strong benches grow revenue and profit about twice as fast as companies with weak benches.

To make sure succession management is an ongoing process instead of an occasional activity, an effective organization ensures that leaders across the enterprise drive it and have metrics to evaluate it. Exceptional leaders take the initiative to do this. They recognize the importance of establishing a motivating work environment and developing a pipeline of leaders with the right capabilities who sustain this environment over time.

Exceptional leaders usually consider building their bench to be a crucial part of their roles. If you asked them who their successors are, you likely wouldn’t get generic responses. These leaders would probably give specific names. They may also provide indicators of their bench strength (e.g., the percentage of positions with a “ready now” candidate and the designated successor retention rate).

If you want to gauge the quality of your leadership pipeline, here are some starting points:

1. Determine the strength at key stages. How well does the pipeline develop those who do the following?

• Lead themselves
• Lead others
• Lead managers
• Lead functions
• Lead businesses
• Lead general managers
• Lead the enterprise

2. Check feeder sources. Feeder sources are key paths and roles that you determine to be precursors to the next stage in the pipeline. Make sure you check the feeder sources for critical roles — without these roles, the organization would struggle to operate.

3. Calibrate with metrics. Define success indicators that you and your colleagues agree measure the quality of the pipeline. In addition to the ones mentioned earlier, examples include:

• The percentage of effective leaders produced at each pipeline stage
• The utilization rate of development programs by high-potential and designated successor populations
• The total number of successors in the feeder source per critical role

As you think about the next steps to ensure that your company, division or department accomplishes its objectives in the right way, keep the two preceding takeaways in mind. Address multiple organizational elements as a part of design. Optimize your leadership’s effectiveness to optimize organizational effectiveness.

Note: This article originally appeared in Forbes.

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Ryan Lahti is the managing principal of OrgLeader and author of The Finesse Factor: How to Build Exceptional Leaders in STEM Organizations. Stay up to date on Ryan’s STEM organization tweets here: @ryanlahti

(Photo: Meeting Room, Pexels)

As a senior leader, what do you do if a new business line in your organization is not performing up to expectations? How do you avoid shutting it down prematurely or continuing to bet on a losing horse?

These are valid questions you may have asked yourself on the way to work, because your responsibilities include looking for new ways to help your company grow. Doing an acquisition is one way. Organic growth is another. Regardless of what option you choose, avoid falling into a common trap if things start going south.

What precedes the trap?

Executives get concerned with questionable business performance, because their companies have invested valuable resources in the line of business. Senior leaders want to make sure they don’t waste these resources. Plus, they realize their credibility and possibly their job are at stake.

Their concern increases when they consider the failure rate for mergers and acquisitions lies somewhere between 70 percent and 90 percent, and the failure rate on new industrial as well as consumer packaged goods and retail products is at least 50 percent. The failure percentage hits 75 with venture-backed startups.

What does the trap look like?

Excessive meetings and analyses which drain resources. The amount of available corporate information combined with the increased concern caused by the prior statistics makes it is easy for executives to overthink the performance issue. Countless reports, spreadsheets and PowerPoint presentations are the results.

If you are on the verge of falling victim to this pitfall, I encourage you to ask three fundamental questions to help you avoid it:

1) How solid is the framework?

Each acquisition, new product line or new service line is built upon a business model. Before you generate a mountain of financial and operations reports that can be overwhelming, clarify the underlying model. Decide on the critical set of items you must know to accurately evaluate whether this framework can sustain results needed to justify continued support. Then seek the information in an easily-digested form.

2) Who is leading the charge?

A sound business model is essential, but it is not enough to guarantee success. The right leader is required to ensure the business line hits performance targets. Clarify in your own mind what you expect of this leader. Here are initial clarification questions:

• To what extent has the leader built and communicated strategic and operations plans?
• Who has the leader put in place to help implement the plans?
• How well does the leader motivate, collaborate and hold people accountable?
• How effectively does the leader hold himself/herself accountable for executing the plans, especially when it comes to recovering from missteps?

3) What is a fair period?

A sound underlying model and effective leadership are essential to the line of business in question. Is this enough to make the call whether to keep or jettison it? No. You need to test how the model and the leadership work together. Whether the line is a result of an acquisition or innovation in house, you do not have an unlimited amount of time to gauge viability. Instead of setting an arbitrary deadline, use objective standards as a guide. Sales and performance cycles will vary based upon a variety of factors including the product, service, industry, geography and economic environment. Consult reliable sources (e.g., industry associations) for the factors required to set a fair timeframe for assessing the business line.

By answering these three questions, you can dodge the trap as you identify the best course of action for the line of business. Streamline how you use the information gathered to keep your heightened concern in check. If you realize the business model is a poor fit, then consider what it would take to revise it and get the desired performance. What if you have the wrong leader? Estimate how long it would take to a) find the right one, b) get this person up to speed, and c) see an impact on performance. If you are trying to evaluate the business model and/or the leader in an unreasonable period, set a fair time extension before you pass judgement.

As an executive, you have the responsibility to ensure a new business line provides the expected returns. When performance is subpar, avoid the viability pitfall by focusing on the preceding fundamental questions. This will help you make the optimal decision and explain it to corporate stakeholders.

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Ryan Lahti is the founder and managing principal of OrgLeader. Stay up to date on Ryan’s STEM organization tweets here: @ryanlahti

(Photo: Business Analysis, Pixabay)

If you are reading this on your computer or mobile device, chances are you and your colleagues will soon be discussing a change needed in your organization. Not only that, you may be asked to help successfully implement this change. Unless you are an expert, change management is difficult to get your arms around. If you are unsure how to help your company successfully implement the change, the right framework makes it easier. The right framework provides a methodical way to handle this intangible, dynamic topic. Once you and your colleagues become proficient applying the framework, you increase the success rate for change.

There are a variety of change frameworks available to you. Just Google “change management” and you will have plenty of choices from experts and thought leaders. Your challenge is to figure out which framework will be the most helpful for the changes you face. You will notice the frameworks have some differences, but you will also find some common elements among them. For example, some form of determining the result you want and motivating others to support the change shows up in most frameworks. Whether you are looking at a change framework by John Kotter, Daryl Conner, William Bridges, Rosabeth Moss Kanter, Jeff Hiatt or someone else, it is worth keeping some things in mind.

• There is no perfect framework. Every framework has its strengths and limitations which become apparent as you explore and apply it. Even if you start with a framework that you think is ideal, don’t be surprised if you end up augmenting it in some way with other tools and frameworks.
• Change is not linear. Change management is really a process as opposed to an event. Frameworks formalize this process in the form of methodologies. Unfortunately, many methodologies are laid out in steps that give the impression that change is linear. From my experience, change is not linear…it is iterative in nature. Although frameworks can provide sequential steps to implement, the reality is you may have to revisit some steps. For example, you may need to go back to certain parts of your company and reemphasize the reason for the change, the end state you are shooting for and the strategy you are using to get there.

As you evaluate different change frameworks, it will be easier to identify the right framework by focusing on the target audience. If you believe that change (especially large-scale change) occurs most effectively in organizations when it is top down, bottom up and side-to-side as opposed to just one of these ways, the target audience for the framework is more than just you and specific colleagues. The target audience is the collection of people in the organization. If you and your company want to get change management capabilities into corporate DNA, this collection of people needs to be able to apply the framework in addition to understanding it.

Having used a variety of frameworks, I found that the right one is the framework that will best resonate with employees in your organization. In other words, it makes sense to them, and they see the value of it. As you decide on the one that resonates the best, try to balance comprehensiveness with user-friendliness. Since change management is hard for many people to get their arms around, why make it even harder by selecting a framework that is overly complicated due to its comprehensiveness? A comprehensive change framework is of little value if people cannot easily explain it and use it.

For many companies, change is a constant. This is why they want to instill change management into the DNA of the organization by teaching a framework that employees and leaders can use. When it’s in the DNA, everyone naturally approaches daily work with a change management lens that helps them identify the desired outcome, the stakeholders, the obstacles and the way to get commitment to the change. This becomes especially critical when the change becomes broader in scope, affects more stakeholders and substantially shifts what many people do on a daily basis.

Change management frameworks are enablers to ensure you and your company successfully deal with organizational transitions. As you sort through the variety of frameworks on the market, remember that the right one resonates with employees which makes it easier for employees to deal with change. By using this one as a foundation, change management soon becomes part of corporate DNA.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Time for Change, Pixabay)

It’s the beginning of a new year which brings interest in what the market will look like for the next 12 months, especially from a merger and acquisition (M&A) standpoint. What do you anticipate? How ready is your organization if an M&A is on the horizon?

When key market stakeholders were recently asked, most expected an increase in M&A activity for 2017. According to Deloitte’s 2016 year-end report of M&A trends, here are the results from 1000 business professionals who were surveyed:

• 71 percent of corporate executives expected an increase in the number of deals in the next 12 months
• 86 percent of private equity investors expected an increase in the next 12 months
• 64 percent respondents anticipated the average size of transactions in 2017 will exceed those in 2016

With this increase in M&A deals, there is the assumption that they will be beneficial to the organizations involved in them. Unfortunately, this is not always the case. In fact, 91 percent of survey respondents reported that deals done within the last two years did not yield the expected value or return on investment (ROI). When asked what the biggest impediments were to successful M&As, the majority cited insufficient due diligence (88 percent of respondents) and failure to effectively integrate (78 percent of respondents). Furthermore, effective integration was identified as the most important factor in achieving a successful M&A transaction.

If M&As are a vital part of your company’s strategy, give some thought to the following lessons learned from companies I have worked with across industries.

Offset Enticement with Prudence

Potential M&A opportunities can surface even when you are not looking for them, and some deals look too good to pass up. Don’t be overly enticed by an unexpected opportunity or by the potential promise of what could be. Gauge the capacity of your organization to take on this new opportunity given acquisitions and company initiatives currently underway. Even if an acquisition looks ideal, you are putting it at risk if your organization is maxed out on its capacity to handle it.

Make Culture a Priority

Preaching that culture fit is essential between your company and the organization you are considering for an M&A deal is a good thing. Just be sure that enough due diligence follows this statement to ensure the organization’s culture aligns well with that of your company. Sound due diligence here as well as the organization’s financials will help avoid a painful integration and a disappointing ROI.

Reduce Redundancy with Rigor

Once you make the decision to combine organizations, you are likely to have redundant roles with a mix of talent in them. Small M&As can make it easy to determine what roles are needed and who should sit in them. With larger, more complex M&As (like those expected in 2017), talented leaders may struggle to figure out where they fit in the “new world.” Many of them may become flight risks. Take the time to set up a robust assessment process to ensure the new, combined organization has the best people in place to lead it.

Change the Breadth and Depth

Putting the right leaders in place is a critical step, but don’t underestimate how much combining two organizations into one relies on change management. Announcing the deal and holding a few meetings will only get you so far. A broader, planned approach is needed. Employees may feel their positions are threatened because of the deal. So, dedicate time to manage their expectations and guide them through the transition. Helping the organization deal with this change down to the individual employee level increases your likelihood of success.

In 2017, M&As are anticipated to increase in size and number. Doing a readiness check and building off lessons learned ensures the right deal is made and integration is efficient.

For more information, check out the following posts:

Deloitte M&A Trends: Year-End Report 2016

Lead Employees through M&A Integrations

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Mergers and Acquisitions, NY – nyphotographic.com)