There is an enormous waste of effort in even the best organized companies.
The gains for those who achieve a requisite total organisation system with effective accountable managerial leadership are large.
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5S Operating Model – Key Elements
Over years of research and practice, to ensure smooth integration of organisational capabilities within an Operating Model. The following organisational dimensions were identified as critical, for which the alignment must be developed:
- Strategy matches the level of Business Complexity
- Strategy Operationalisation Requirements
- Cascading the Strategy through the organisational levels
Understanding the complexity of the company, of the business unit within the company – the complexity of the value chain for which the business unit is accountable
- Grow complexity – Level up
- Maintain status quo – the same level
- Organisational Culture
- Organisational Communications
- Managerial Leadership
- Business Continuity
- Social & Environmental Bottom Lines
- Value Stream / Value Chain Model
- Business Process Architecture (Complexity Levels of Business Processes)
- Maturity of Organisational Systems
- Role Design (Accountabilities, Tasks, Authorities
- Competency Mapping for Roles
- Felt Fair Pay
- Cross-functional Accountabilities & Authorities
- Critical Roles
- Career Paths
- Capability match with Complexity
- Potential Assessment and Talent Management
- Gap Analysis
- Workforce Planning
- Succession Planning
- Training & Learning
Operating Model Question – that is rarely asked, answered
“What is an optimal number of organisational levels for a particular company?” must be the primary question that is asked before any reorganisation starts, unless you are happy with the “less is better” answer
| Levels | Value Chain | Strategy | Value Proposition | Revenue | FTE | Stratified Systems |
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| Levels 8 | Multiple global | > 50 years | Non-Linear Parallel | > 100 bln USD | Up to 1 mln and more | System Application to Multiple International Chains |
| Levels 7 |
Multiple multinational or Single global |
20 – 50 years | Non-Linear Serial | Up to 100 bln USD | Up to 100,000 | System Application to Multiple Value Chain |
| Levels 6 |
Multiple national or Singe multinational |
10 – 20 years | Non-Linear Cumulative | Up to 10 bln USD | Up to 30,000 | System Application to Multiple Business Units |
| Levels 5 |
Single national or Multiple regional |
5 – 10 years | Non-Linear Declarative | Up to 1 bln USD | Up to 6,000 | Business Units |
| Levels 4 | Single regional | 2 – 5 years | Linear Parallel | Up to 100 mln USD | Up to 2,000 | Business Functions |
| Levels 3 | SME | 1 – 2 years | Linear Serial | Up to 10 mln USD | Up to 250 | Functional Systems |
| Levels 2 | Up to 1 year | Linear Cumulative | Business Processes | |||
| Levels 1 | Up to 3 months | Linear Declarative | Activities |
5S Operating Model – Cost Drivers
One of the key reasons for reorganisation failures is a lack of clarity about an organisational structure’s
cost-drivers and optimal targets aligned to the company’s overall business objectives:
cost-effective Operating Model that fits the business of the company’s value chain.
ORGANISATIONAL LEVELS
What is the right number of organisational levels the company needs to have to be effective?
ROLES PER ORGANISATIONAL LEVEL
What is the right number of organisational levels the
company needs to have to be effective?
PEOPLE PER ROLE TYPE PER ORGANISATIONAL LEVEL
What is the right number of people per role/ organisation level?
PAY PER ROLE PER ORGANISATIONAL LEVEL
What is the right number of people per role/ organisation level?
5S Operating Model Alignment
Requisite Organisation design ensures the complexity level of a business and its environment are considered as work is described and cascaded through strategy, organisational systems, structure, data support and resource capability
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| Levels | Business | Strategy | Systems | Structure | Staff | Sustainability | ||
| Complexity | Environment Complexity | Time-horizon and milestones | Levels of Functional Work |
Titles used |
Type Span Discretion |
Key Aspects of Work |
Decision Making Capability |
Organizational Leadership |
| L.6 | Multiple national value chains | 10 – 20 years | Corporate System | CEO | 10 – 20 years | Creation of a business-friendly environment | Non-linear Cumulative | Sustaining an effective vision and culture which exemplifies the vision and culture of the board |
| L.5 |
Companies with the assets in one country with multiple value chains, with up to 30,000 employees, |
5 – 10 years |
Strategic Business Functions Business Unit |
COO / VP | 5 – 10 years | Business Unit and Environment Scan for changes | Non-linear Declarative | Give organisational leadership by maintaining a sound business unit culture consistent with the corporate culture |
| L.4 | 3 – 5 years |
Business Functions Production Unit |
General Manager |
3 – 5 years | Integration of multiple systems |
Linear Parallel |
Manage discrepancies as they arise, modify and interact with VP/MD where GM considers business unit culture needs to be changed | |
| L.3 | 1 – 2 years |
Functional Systems Operating Unit |
Manager | 1 – 2 years | Pre-planed alternative plans |
Linear Serial |
Transfer vision and culture into Mutual Recognition and Inclusion culture | |
| L.2 | 3 - 12 months |
Business Processes
Output |
Superintendent | 3 - 12 months | Diagnose emerging problems |
Linear Cumulative |
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| L.1 | 3 months |
Activities Direct Output |
Supervisor / Operator |
1 day – 3 months | Prescribed linear pathway |
Linear Declarative |
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Why is Alignment important?
Alignment of the Operating Model with Business Complexity is the most important factor determining the growth, contraction, or the stability of an organisation. Market and economic conditions may provide the opportunities for organisational change, but not the changes themselves.
Level of Business Complexity is higher than the Complexity Level of the Operating Model:
- Do nothing: the corporation will not be able to add value to its subsidiaries / value chains / business units as the potential of the business will not be realised. The share value of the corporation will drop below the aggregate value of its subsidiaries taken separately, creating a situation ripe for takeover, asset stripping and restructuring.
- Increase complexity of Operating Model: realise the true value of the business, it may require additional cost to increase the complexity level of the operating model, and the CEO must swallow hard, move up one, re-orient and re-organise for keeps.
Level of Business Complexity matches than the Complexity Level of the Operating Model:
- Gradual increase in revenue reflect growth by lateral extension within the current level of business complexity and existing operating model until, years later, the next jump might loom on the horizon.
Level of Business Complexity is lower than the complexity Level of the Operating Model:
- Do nothing: the cost of operating model (structure, staff, strategy, systems) is too high for the level of the business complexity and the revenue that the business generates; such situation will be not be maintained for long; cost-cutting, divesting are frequent options.
- Increase the Business Complexity: frequently depends on available talents at C-levels to grow the business to match the operating model; mergers and acquisitions are preferred options; it will cost and require investments but the next level of complexity brings higher levels of revenue.
Simplification of Operating Model
Requisite Organisation design ensures the complexity level of a business and its environment are considered as work is described and cascaded through strategy, organisational systems, structure, data support and resource capability
- Reduce number of products
- Increase complexity of product value propositions to maintain the revenue
- Independent product configuration and activation
- Reduce a number of critical success factors
- Reduce the level of planning horizon (typically, 1 level down in planning
complexity
- Reduction in a number of value chains
- Re-arrange the groupings of business units
- Divesting, etc.
- Reduce a number of business process of higher complexity to match the strategy simplification
- Reduce the cost of business processes
- Evaluate outsourcing opportunities
- Reduce number of Strategic Business Functions
- Reduce number of roles at higher level of complexity (Level s 6, 5 and 4) to match the simplification of the business strategy
- dentify primary value chain activities (logistics, supply chain, manufacturing, marketing, etc.) and evaluate opportunities to simplify the activities with the help of digital technologies
- Re-segmentation of the client base to match the simplified product portfolio
- Full inter-channel integration, omnichannel
- Transformation of sales and services model
- Cost optimisation
- Mergers and acquisitions
- Crisis mode or Turnarounds
- Shortage of Capability / Talent
- Simplify, but do not reduce the level of business complexity
- Sustain an alignment between strategy, systems, structure, and staff (capability)
What actions must be taken to deliver on the modern
purpose of a corporation?
