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Competitive Advantage Through Organization Fitness Building Strong Leaders and Organizations Since 1979 Cedar Rapids, Iowa
Organization Fitness <ul><li>A model for: </li></ul><ul><li>Furthering competitive advantage </li></ul><ul><li>Redesigning...
Competitive Advantage   The Traditional or “Michael Porter” View <ul><li>Very few new competitors exist </li></ul><ul><li>...
Competitive Advantage   The Revised View <ul><li>Patents are not that valuable </li></ul><ul><li>Monopolies and regulated ...
The New Competitive Advantage <ul><li>“ The  unique  ways  that an organization architects itself to achieve organization ...
Framework for Organization Fitness Work Culture Structure People Systems Strategy Products
Organization Components <ul><li>Technical competencies </li></ul><ul><li>Behavioral competencies </li></ul>People <ul><li>...
Organization Fitness <ul><li>Like Humans, organizations can  have varying degrees of fitness </li></ul>
What Do You Have? <ul><li>Jaguar styling </li></ul><ul><li>Porsche engine </li></ul><ul><li>BMW suspension </li></ul><ul><...
Steps to Architecting  Greater Fitness <ul><li>Review strategy and operating environment </li></ul><ul><li>Describe curren...
<ul><li>Fortune 1000  </li></ul><ul><li>Diversified Utility and Energy Provider </li></ul>Case Example
Strategic Imperatives <ul><li>Prepare for energy de-regulation </li></ul><ul><li>Create competitive mindset </li></ul><ul>...
Current Organization <ul><li>Longevity and loyalty  </li></ul><ul><li>Paternalistic </li></ul>Culture <ul><li>Very little ...
Required Organization <ul><li>Performance-based; change ready </li></ul><ul><li>Outwardly focused </li></ul>Culture <ul><l...
Key Action Items <ul><li>Built new cultural assumptions into HR systems  </li></ul><ul><li>Measured progress </li></ul>Cul...
Organization Fitness  at Two Retail Giants
Strategy <ul><li>Sell a limited number of items </li></ul><ul><li>Lower cost for higher quality </li></ul><ul><li>Rely on ...
Structure/Systems <ul><li>Buy directly from manufacturers </li></ul><ul><li>Use own warehouses or depots </li></ul><ul><li...
Culture <ul><li>Emphasizes individual worker </li></ul><ul><li>Rewards initiative </li></ul><ul><li>Employees empowered  <...
HR Systems and Metrics <ul><li>$17/hr average pay </li></ul><ul><li>92% of insurance covered </li></ul><ul><li>13% of work...
The Wall Street View <ul><li>“ From the perspective of investors, Costco’s benefits are overly generous.  </li></ul><ul><l...
The Academic View <ul><li>“ It is absolutely not true that all those companies that are not being nice to their employees ...
The Costco Success Story <ul><li>What’s Professor Cappelli’s Point? </li></ul>
Using Fitness to  Develop HR Strategy <ul><li>Structure: </li></ul><ul><li>What business processes need to be reconfigured...
<ul><li>Exercise </li></ul><ul><li>Enhancing Innovation  </li></ul><ul><li>Through Organization Fitness </li></ul>
Roadblocks to Achieving Fitness <ul><li>Politics </li></ul><ul><li>Lack of discipline  </li></ul><ul><li>Seeking problems ...
Key Lessons Learned <ul><li>Strategy drives fitness </li></ul><ul><li>Can’t achieve by decree </li></ul><ul><li>No design ...
Strengths <ul><li>Fad-proof </li></ul><ul><li>Comprehensive </li></ul><ul><li>Comprehensible </li></ul><ul><li>Applies at ...
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Organization Fitness - Iowa SHRM Conference

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Transcript of "Organization Fitness - Iowa SHRM Conference"

  1. 1. Competitive Advantage Through Organization Fitness Building Strong Leaders and Organizations Since 1979 Cedar Rapids, Iowa
  2. 2. Organization Fitness <ul><li>A model for: </li></ul><ul><li>Furthering competitive advantage </li></ul><ul><li>Redesigning an organization; </li></ul><ul><li>Increasing organizational effectiveness; </li></ul><ul><li>Implementing change; and </li></ul><ul><li>Creating human resources strategy. </li></ul>
  3. 3. Competitive Advantage The Traditional or “Michael Porter” View <ul><li>Very few new competitors exist </li></ul><ul><li>No substitutes for the product or service exist </li></ul><ul><li>Buyers/suppliers have little bargaining power </li></ul><ul><li>Very little rivalry exists between competitors </li></ul>
  4. 4. Competitive Advantage The Revised View <ul><li>Patents are not that valuable </li></ul><ul><li>Monopolies and regulated industries are vanishing </li></ul><ul><li>IT and the internet allow rapid diffusion of ideas </li></ul><ul><li>Economies of scale are less important </li></ul>
  5. 5. The New Competitive Advantage <ul><li>“ The unique ways that an organization architects itself to achieve organization fitness” </li></ul>
  6. 6. Framework for Organization Fitness Work Culture Structure People Systems Strategy Products
  7. 7. Organization Components <ul><li>Technical competencies </li></ul><ul><li>Behavioral competencies </li></ul>People <ul><li>Values and norms </li></ul><ul><li>Management philosophy </li></ul>Culture <ul><li>Procedures and policies </li></ul><ul><li>HR systems </li></ul><ul><li>IT and technology </li></ul><ul><li>Product/service systems </li></ul>Systems <ul><li>Organization structure </li></ul><ul><li>Business processes </li></ul><ul><li>Work Design </li></ul>Structure Components Dimension
  8. 8. Organization Fitness <ul><li>Like Humans, organizations can have varying degrees of fitness </li></ul>
  9. 9. What Do You Have? <ul><li>Jaguar styling </li></ul><ul><li>Porsche engine </li></ul><ul><li>BMW suspension </li></ul><ul><li>Rolls Royce interior </li></ul>
  10. 10. Steps to Architecting Greater Fitness <ul><li>Review strategy and operating environment </li></ul><ul><li>Describe current structure, systems, culture and people </li></ul><ul><li>Identify structure, systems, culture and people needed to support business strategy </li></ul><ul><li>Identify gaps </li></ul><ul><li>Develop action steps </li></ul><ul><li>Measurement and follow up </li></ul>
  11. 11. <ul><li>Fortune 1000 </li></ul><ul><li>Diversified Utility and Energy Provider </li></ul>Case Example
  12. 12. Strategic Imperatives <ul><li>Prepare for energy de-regulation </li></ul><ul><li>Create competitive mindset </li></ul><ul><li>Create value-added products and services </li></ul><ul><li>Innovate </li></ul><ul><li>Assemble leadership capabilities to lead a competitive enterprise </li></ul>
  13. 13. Current Organization <ul><li>Longevity and loyalty </li></ul><ul><li>Paternalistic </li></ul>Culture <ul><li>Very little competitive experience </li></ul><ul><li>Long service; little diversity </li></ul>People <ul><li>IT based on legacy systems </li></ul><ul><li>Little real-time reporting </li></ul><ul><li>Limited use of technology </li></ul>Systems <ul><li>Hierarchical </li></ul><ul><li>Highly staffed corporate center </li></ul><ul><li>Designed for regulated business </li></ul>Structure Description Organization Element
  14. 14. Required Organization <ul><li>Performance-based; change ready </li></ul><ul><li>Outwardly focused </li></ul>Culture <ul><li>Transformational change leaders </li></ul><ul><li>Greater diversity and varied work </li></ul><ul><li>experience </li></ul>People <ul><li>Quicker, cheaper and better </li></ul><ul><li>Wider access to real-time info. </li></ul><ul><li>Strategic HR management </li></ul>Systems <ul><li>Stronger customer service function </li></ul><ul><li>Greater emphasis on marketing </li></ul><ul><li>Leaner, but not anorexic; nimble </li></ul>Structure Description Organization Element
  15. 15. Key Action Items <ul><li>Built new cultural assumptions into HR systems </li></ul><ul><li>Measured progress </li></ul>Culture <ul><li>Robust leadership development </li></ul><ul><li>Early retirement program effort </li></ul><ul><li>Increased use of “outsiders” </li></ul>People <ul><li>Enterprise information system </li></ul><ul><li>Automated meter reading </li></ul><ul><li>Total compensation overhaul </li></ul>Systems <ul><li>New call center and processes </li></ul><ul><li>Formal marketing function </li></ul><ul><li>Business development function </li></ul>Structure Description Organization Element
  16. 16. Organization Fitness at Two Retail Giants
  17. 17. Strategy <ul><li>Sell a limited number of items </li></ul><ul><li>Lower cost for higher quality </li></ul><ul><li>Rely on high volume </li></ul><ul><li>Target small business owners </li></ul><ul><li>Aim for upscale shoppers </li></ul><ul><li>Pay workers well </li></ul><ul><li>Sell a limited number of items </li></ul><ul><li>Low cost over value </li></ul><ul><li>Sell memberships </li></ul><ul><li>Target mass consumer </li></ul><ul><li>Keep labor costs low </li></ul>
  18. 18. Structure/Systems <ul><li>Buy directly from manufacturers </li></ul><ul><li>Use own warehouses or depots </li></ul><ul><li>High degree of integration in logistics </li></ul><ul><li>Costco more streamlined; fewer levels </li></ul><ul><li>Walmart highly centralized </li></ul><ul><li>Sam’s Club/Walmart – World-Class IT </li></ul>
  19. 19. Culture <ul><li>Emphasizes individual worker </li></ul><ul><li>Rewards initiative </li></ul><ul><li>Employees empowered </li></ul><ul><li>Highly egalitarian </li></ul><ul><li>Emphasizes uniformity </li></ul><ul><li>Customer is king; daily cheer </li></ul><ul><li>Employee behavior specified </li></ul>
  20. 20. HR Systems and Metrics <ul><li>$17/hr average pay </li></ul><ul><li>92% of insurance covered </li></ul><ul><li>13% of workforce unionized </li></ul><ul><li>Turnover rate of 6% </li></ul><ul><li>$11.50/hr average pay </li></ul><ul><li>65% of insurance covered </li></ul><ul><li>No unionization </li></ul><ul><li>Turnover rate of 21% </li></ul>
  21. 21. The Wall Street View <ul><li>“ From the perspective of investors, Costco’s benefits are overly generous. </li></ul><ul><li>At Costco it's better to be an employee or a customer than a shareholder.” </li></ul><ul><li>Bill Dreher, Retail Analyst, </li></ul><ul><li>Deutsche Bank Securities </li></ul>
  22. 22. The Academic View <ul><li>“ It is absolutely not true that all those companies that are not being nice to their employees are simply stupid.” </li></ul><ul><li>Peter Cappelli, Professor of Management, Wharton </li></ul>
  23. 23. The Costco Success Story <ul><li>What’s Professor Cappelli’s Point? </li></ul>
  24. 24. Using Fitness to Develop HR Strategy <ul><li>Structure: </li></ul><ul><li>What business processes need to be reconfigured or improved to help achieve business strategy? </li></ul><ul><li>Systems: </li></ul><ul><li>Will changes in structure or staffing place new demands on recruitment, staffing, leadership development or succession planning? </li></ul>
  25. 25. <ul><li>Exercise </li></ul><ul><li>Enhancing Innovation </li></ul><ul><li>Through Organization Fitness </li></ul>
  26. 26. Roadblocks to Achieving Fitness <ul><li>Politics </li></ul><ul><li>Lack of discipline </li></ul><ul><li>Seeking problems for solutions </li></ul><ul><li>Inadequate resources </li></ul>
  27. 27. Key Lessons Learned <ul><li>Strategy drives fitness </li></ul><ul><li>Can’t achieve by decree </li></ul><ul><li>No design is perfect; there is no one best design </li></ul><ul><li>Don’t change culture by changing culture </li></ul><ul><li>People are not the final source of competitive advantage </li></ul>
  28. 28. Strengths <ul><li>Fad-proof </li></ul><ul><li>Comprehensive </li></ul><ul><li>Comprehensible </li></ul><ul><li>Applies at enterprise or operations levels </li></ul>
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