Uploaded byNicolay Worren
Defining high level organizational architectures
The consultant was hired to help clarify roles and responsibilities across a large Nordic bank's organizational units. They gathered data through interviews and documentation. They mapped the bank's high-level functions to its organizational structures, noting deviations from its governance principles. They also modeled alternative structures with more independent functions to potentially improve performance by reducing coupling between roles. The analysis aimed to increase understanding of current issues and raise awareness of design options.
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Defining high level organizational architectures
- 1. Defining high level organizational architectures NicolayWorren Worren Consulting www.organizationdesign.net
- 2. Case Company Leading Nordic financialservices group Executive Mngmt team CFO Rated as one of the world’s safests banks by Global Finance Mandate Employees Approx. 14 000 Project team Customers More than 2.3 million retail customers Advisor/ External More than 200 000 corporate customers Internal consultant consultant That's me © Nicolay Worren
- 3. Project mandate Decisionapproved in executive mngt meeting January 19, 2011 “One has attempted to clarify the high level roles with associated responsibilities in the Group Governance document. As a follow-up to this, each area, including sub- units, should describe and clarity their roles and responsibilities according to the allocation of roles given in the the Group Governance document. It is particularly important to distinguish between delivery roles and Group roles of the different areas as well as the interfaces between the areas. It is natural that HR will provide coordination and quality assurance in carrying outthis task.” © Nicolay Worren
- 4. What the GroupGovernance document said Board of Directors Business Area (BA) Support Unit (SU) Group Audit Staff Function (SF) Group chief executive Marketing and Communications Corporate Centre Group Finance and Risk HR Management Retail Large Corporate Non-life Life Insurance and Asset Insurance and Markets Operations IT Banking and International insurance insurance management Division Country X © Nicolay Worren
- 5. Some constraints Existing work having been done to define “Unclear roles” identified governance principles as key risk in Operational Risk Committee Previous reorganisation had led to combination of Limited willingness in staff and support roles business areas to participate © Nicolay Worren
- 6. Discussion: How wouldyou have proceeded? Example: - What steps would you have followed? - What data would you have gathered? - How would you have analyzed the data? In groups of 3, spend a few minutes discussing this © Nicolay Worren
- 7. Guiding principles © Nicolay Worren
- 8. The notion ofarchitecture is increasingly seen as a powerful metaphor for organization design © Nicolay Worren
- 9. A system’s architecturecan be operationalised by considering its functions and structure Function (Functional Requirement) Structure (Design Parameter) Supply O2 to blood and Biological system Lung remove CO2 from blood Physical system Transport passengers Bus Organization Support IT users IT Help Desk © Nicolay Worren
- 10. One way toexamine a design is to map the correspondence between functions and structure Function (Functional Requirement) Structure (Design Parameter) Maximize quality care Many physician visits, local Provide presence, expensive equipment, health care etc. services… Optimize costs Fewer physician visits, centralized care, less expensive equipment, etc. “Coupling” Key assertion: Coupling decreases (system) performance (By the way, in some contexts, ambidexterity can be defined as the ability to remove coupling between functional requirements) © Nicolay Worren
- 11. The actual implementation(and presentation) of a design may differ from the optimal solution How it is presented How it actually works… What would be ideal… © Nicolay Worren
- 12. How we proceeded © Nicolay Worren
- 13. Steps 3 months Analyse and Write report Gather data V.01 to V.17… interpret • Interviews with • Describe each of the • Present/distribute and representatives from all 14 units update based on areas • Create detail + high feedback from all areas • Process documentation level FR-DP matrix • Link to and integrate • Consider other banks (35 FRs) with other ongoing • Create interface initiatives diagrams for 14 units © Nicolay Worren
- 14. The first stepwas to consider why a bank exists and what it does Broken down to 35 more detailed FRs … Sell financial services and products Develop financial services and products Maximize economic profit by providing Provide delivery capacity financial services Manage risk, secure funding, and allocate capital Ensure compliance to guidlines, policies © Nicolay Worren
- 15. We then mappedthe units and their interfaces - SIMPLIFED EXAMPLE - CFO Credit limits Loan Group Finance and Funding products Individual Retail Banking Risk Management clients Transactional services Operations (For details about this methodology, see my 2006 ODF presentation or my textbook, which contains a chapter about subunit interfaces) © Nicolay Worren
- 16. …and attempted todraw units and their functions © Nicolay Worren
- 17. We noted severaldeviances from the principles outlined in the bank’s governance document Busines Support Staff Areas Units Units 5 4 Sell financial services and products Develop financial services and products 3 Provide delivery capacity 1 2 Manage risk, secure funding, and allocate capital Ensure compliance to guidelines, policies © Nicolay Worren
- 18. We then indicatedthat it is possible to consider a model with more independent functions… Sales Product Support Staff units units units units Sell financial services and products Develop financial services and products Provide delivery capacity Manage risk, secure funding, and allocate capital Ensure compliance to guidelines, policies © Nicolay Worren
- 19. …and asked whatadvantages such a model might confer Decouple product development and sale /distribution Sales Product Support Staff units units units units Sell financial services and products Consolidate transactional processes Develop financial services and products Provide delivery capacity Manage risk, secure funding, and allocate capital Separate staff and Ensure compliance to guidelines, policies support roles © Nicolay Worren
- 20. 0° self-evaluation What Ithink we may have accomplished What I would do differently next time Increased understanding for how the bank Tried to use more goal oriented FRs works and the gap between intended and (increases saliency of «coupling») actual role allocations Differentiate more strongly between Contributed to a process of reflection re. operational and financial interdependencies role requirements and potential role conflicts (?) Perhaps attempt a bit more strongly to gain more involvement among areas at early Identified some key “fault lines” in the stage current organisational architecture Raised awareness re. an alternative, more scaleable organisational architecture © Nicolay Worren
- 21. This was acollaborative project The client has not been named to preserve confidentiality but gave permission to use the case. I gratefully acknowledge this opportunity. © Nicolay Worren
- 22. For more information My textbook where I extend on the principles described here will be published shortly by Pearson Education. I will post updated information on my blog: www.organizationdesign.net I will publish an article about organisation design of banks in the upcoming special issue of People & Strategy. You can view my 2006 ODF presentation here: http://www.slideshare.net/NicolayWorren/managing -interdependencies-in-complex-organizations- 2406305 The approach described here is inspired by systems theory as described by Ackoff & Emery (1973) and the axiomatic design approach developed by Suh (2001). I also recommend the 1997 article by Gresov & Drazin in the Academy of Management Review (Issue 2, p. 403-428 ) © Nicolay Worren