Organization Restructuring

n Reorganize around business processes rather than discrete functions n Refocus on key customer priorities n Eliminate organizational duplication n Reduce layers of management n Improve channels of communication n Create clear responsibility and accountability

Organization Restructuring EXISTINGREVISED From this: To this:

Organization Design Organizatio n Goals & Strategies Organizatio n Culture Leadership Organization Structure Reward and Incentive Plans Mission, Vision & Values Policies, Procedures, Processes Conceptual Framework -Design

Conceptual Framework - Structure Organization Structure Organizatio n Technology Customer, Suppliers & Other External Stakeholders Needs Redesigne d Processes (Internal) Structural Dimensions Internal Stakeholder Input

Organization Structuring Principles The development of a set of guiding principles is the first step in the organization structuring process - they define the parameters and desired attributes of the new organization. Creating organization structures requires a set of guiding principles that are consistent with the overarching direction of the organization, but are specific and relevant to the individual processes.

–Create an environment that fosters continuous improvement –Create widespread ownership of results through meaningful employee involvement –Focus management systems towards outcomes rather than transactions This will be attained through informed decision making supported by measurement and analysis Structuring Principles- Examples

–Provision of service to customers is paramount –Foster a collaborative environment (teamwork culture) –Design the process to balance the critical needs of process owners, stakeholders and customers –Accountability is commensurate with authority

Structuring Principles- Examples –Move decision-making as close to the point of customer contact as possible and apply supporting state-of-the-art technologies –Ensure that customer/client feedback opportunities are maximized and easily accommodated This will be supported through the design of service and performance measures into each process

Structuring Elements Clarity of Mandate Unity of Purpose Clarity of Relationships There are several “principle prerequisites” or elements that must be clearly defined prior to identifying relevant organization structuring principles:

Structuring Elements Clarity of Mandate - the objectives, activities and outputs of an organization component must be clearly defined and must be differentiated from all others within the department/branch/section. The activities and outputs of the organization should be easily linked to the stated organization objectives.

Structuring Elements Unity of Purpose - ensure that all organization components within the larger organization work towards common goals and that all work performed must relate to the larger departmental mission/objectives.

Structuring Elements Clarity of Relationships - how discrete components of the larger organization relate to one another, where interdependencies exist, and how the organization interfaces with internal stakeholders (other departments, across branches, etc.) and external stakeholders (customers, suppliers, general public etc.).

Detailed Approach There are six basic steps in organization structuring Organization Definition Identification of Organization Drivers Selection of Organization Model Development of Organization Options Evaluation of Organization Options Organization Structure Selection

Step 1: Organization Definition Defines specific elements that will set the context for organization structuring: organization mandate/purpose consistent with the guiding principles specific organizational attributes: –nature of relationships –centralized /decentralized operations –organization culture considerations

Step 2: Key Organization Drivers The Major factors which influence the organization structure. –1) Services/products delivered: Ensure that they directly reflect the organizational mandate and the organization/process vision. –2) Organizational relationships: Organizational interdependencies and external relationships (suppliers, general public, etc.)

Step 2: Key Organization Drivers -3) Opportunities for improvement: Address issues that currently exist within the organization that should influence the redesign process. –4) Organization constraints / Organization requirements: Organization constraints are the boundaries that have been predetermined Organization requirements are the elements that are “must haves” in the proposed restructuring.

Constraints / Requirements: Transaction volumes Economies of Scale Availability of skills Need for accountability Leveraging technologies Customers (nature / location) Geographic presence Process or functional orientation Step 2: Key Organization Drivers

More Constraints / Requirements: Fixed real estate/facilities Risk management issues Pending legislation Unions and collective agreements Other initiatives Administrative support Resource capability Resource availability

ACCOUNTING Sub Ledger Accounting Domestic Accounting International Accounting Treasury Related Accounting Payroll Payroll Taxes Tax Compliance FINANCE Budgeting Financial Analysis TAXES Tax Research/Advisory ADMINISTRATION Administrative Services Facilities Management Human Resources Acceptance Testing Operations Support - Development and Production System Maintenance - Operations Data Security ACTIVITIES: Accounts Payable Accounts Receivable General Ledger Auditing Audit Compliance Consolidation Accounting Key activities to be performed by the organization are clustered according to the organization model selected. These groupings will begin to define the individual mandates of the organization units Activity Clustering Step 3: Select the Organization Model

Process Centered Front End / Back End Product Custome r Focused Matrix Geo- graphic Function Step 3: Select the Organization Model Based on the organization definition, organization drivers, and key activities, select the appropriate organization model that best matches the requirements

Step 3: Select the Organization Model 1) Functional Activities and employees grouped according to their business function Functional expertise supports core competencies Applicable when technology is routine, small number of products, and/or if interdependence across functional units is minimally required

Step 3: Select the Organization Model 2) Product/Service Each unit is responsible for the design, production, and administration of a service line All resources are directly available to the unit Each service unit is responsible for planning, within the context of the organization’s business strategies

Step 3: Select the Organization Model 3) Geographic Geographic regions report directly to the corporate head office Each region has full control of all activities within its geographic boundaries Corporate head office retains responsibility for strategic planning

Step 3: Select the Organization Model 4) Front End/Back End Some functions focused on customer interaction, while others focused on service development Front end: sales, service, software applications Back end: special projects, engineering, purchasing, accounts processing Relatively recent model; both ends may have their own separate accounting

Step 3: Select the Organization Model 5) Customer Focused Business organized around customer groups such as by department, branch, SOA, types of vendors etc. Teams with shared expertise in customer area and functional areas are assigned to customer groups Decisions are driven by customer demands Support levels refined based upon customer needs -- both unique and recurring

Step 3: Select the Organization Model 6) Process-Centered Business organized horizontally around linked, end-to-end processes Multifunctional teams, not functions or individual jobs, define the structure Decisions are made at point of contact by empowered employees Decentralized, with few supervisors Functional expertise maintained through centers of excellence

Step 3: Select the Organization Model 7) Matrix Multiple reporting relationships represented by grids and webs Formal systems of multiple decision making, communications, and balance of power Common in engineering and project intensive organizations Multiple contacts are intended to facilitate collaboration and coordination

Organization models compared against organization attributes Organizational Attribute Functional Product/ Service Geographic Front End/ Back End Process Centred Customer Focused Matrix Responsiveness to department needs (speed) Clear delegation of authority Flexible to new technologies Ease of transition Quality conscious Transparent to customers Promotes teamwork & collaboration Revenue generation/cost recovery Vendor-customer focus Clear definition of roles & responsibilities Step 3: Select the Organization Model

Step 4: Develop Organization Options There are four elements that are included in this step: 1) Position Creation/Task Analysis: Create logical grouping of activities and their component tasks to create actual positions for the proposed organization

Step 4: Develop Organization Options 2) Position Integration: Further integrate the proposed activities and positions within the existing structure, and minimize duplication through position integration

Step 4: Develop Organization Options 3) Establish Reporting Relationships: Once positions have been established, the appropriate level of management/supervision is determined. In keeping with the guiding principles, each level of management needs to be justified.

Step 4: Develop Organization Options 4) Develop Organization Structure Options: Building on the previous three steps, develop several (at least 2-3) organization structure options for analysis.

Step 5: Size the Organization Options Finalize the proposed activities and tasks For each activity develop 2-3 effort key drivers (# of transactions) Estimate the effort required to perform each driver Multiply estimated effort by the driver volume to determine total required effort to perform activity Finalize the To-Be organization structure For each position identify activities to be performed Sum the estimated effort for each activity Sum the estimated effort by activity for each position Round up the amount of effort to the number of employees required for the position Proposed Organization Size Proposed Organization sizing requires inputs from both process design and organization design ProcessOrganization

Step 6: Select the Appropriate Structure The strengths and weakness of each option should be clearly defined. Each option must be evaluated against several criteria: –adherence to guiding principles –agreement with organization mandates –supportive of the desired culture –fit with process/organization visions –opportunities for further organizational integration

Step 6: Select the Appropriate Structure evaluate the efficiency of each option. There are four measures most often used to identify organization efficiency: –total organization cost –cost to manage –span of control –layers of management

Step 6: Select the Appropriate Structure Cost Salary Costs of Managers to Manage = Structural Efficiency Is Based on Four Primary Measures Total Organization Cost Spans of Control Cost to Manage l Layers of Management Span Layers Salary Costs of Workers Managed