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Organizational design and management practices, i.e. people and how they are intentionally organized, have arguably more of an impact on your business than anything else. It defines virtually every type of interaction, planning, implementation, and resource use. However, there is often more than one way to skin a cat. In today’s rapidly changing market environment, it is wise to understand how leaders experiment and what kind of results they see.
For some companies, saturation can be an approach that provides a real advantage.
Paving the way for collaborative analysis
How do you solve the mystery of your company’s continued growth path through entrepreneurship and value creation? How do you keep an organization fresh, agile, innovative, and connected to customer needs as you grow?
Enter saturation. We got to know the concept, like many others, by reading about it in a book — in this case, Julian Birkenshaw fast / forward. The concept implies that the model gives privilege to action, where merit confers individual knowledge and bureaucracy privileges authority. In saturation, the organizational structure is transient and depends on market opportunities. Strategy is based on experimentation and management built on critical action and emotional conviction (obvious counterpoint to a data-driven model (only)). Can this model foster entrepreneurship in a company of thousands of people?
Intrigued by these concepts, our team worked hard to lighten our structure from top to bottom. This means that rather than being locked into a rigid hierarchy or functional group, we have kept everything transient. We built growth units (business units, with word growth to emphasize focus) with an overall structure. Executive teams led each growth unit, with each executive, regardless of level (Senior Vice President, Vice President, Director or Director), being a partner in the growth unit. An entrepreneur owns his own destiny in the business – that is, he owns profits and losses, sets his target customers, goes into market strategy and value support and decides when to focus. Nobody is looking for someone above, who talks about three other basic aspects of saturation: speed is of the essence, management is a light touch and judgment is flexible. We have given both growth units and individuals the ability to act independently within clear protective barriers. What tied everyone together was a passionate commitment to opportunity in front of each growth unit. We kept, of course, the supporting structures, such as human resources, marketing, funds and investments as horizontal structures comprising what we called the platform.
Saturation has redirected us towards helping customers accelerate their digital transformation, and we have continued to grow with great success. At the same time, our success caught the attention of Julian Birkenshaw, Professor of Strategy and Entrepreneurship at London Business School and author of fast / forward. Birkinshaw had seen the saturation effect before, but he had never seen it at the scale we achieved. And like us, he wanted to understand the strengths and weaknesses of what we were doing. So much so that he invited us to be part of a case study.
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Mistakes, learning and balance in the end
In the case study, Birkingshaw asked some fair questions: Did we go too far? Was this the right structure for the rapid growth we wanted? What are the right incentives to take risks? Did we cause too much complication? Was the focus on market opportunities and customer response distracting us from coherent positioning?
By the time of the case study, the cross aspect of organizational structure – focusing on market opportunities to determine when to create or decommission growth units or move executives between them, was taken seriously. We’ve created a new process called rebalancing to do this. But rebalancing was happening so often, that some executives put forth the comments that our groups simply didn’t have the time to connect and build a sense of shared purpose. When we looked at some of the key elements in saturation — emotional conviction and coherence within units of growth — we realized that we’ve been swinging the pendulum a lot.
It became clear to us that although we wanted to preserve the freedom we gave our groups to operate without bureaucratic hurdles, we needed a long-term vision for growth units. We’ve slowed down the rebalances and haven’t changed things much. People had time to commit and invest emotionally. Our reward was a huge jump in their enthusiasm. They clearly understood what our customers were dealing with on a deeper level and were more involved in finding solutions.
Seeing this was incredibly motivating. But when we looked at the behavior and position of the growth units more closely, we saw that we had swing the pendulum slightly again, this time in the opposite direction. Growth units had so much cohesion that it created an isolated effect, and we had a hard time moving CEOs between them when the opportunities really demanded it.
Given these extremes, we set a goal for harmony. To be successful, we cannot be too emotionally condemned nor too transient. The executive partners needed time to validate and develop their growth unit business strategy. Through experimentation, with their complete dedication, and at the same time being in minimal harmony with what was happening elsewhere. They realize that we are a whole organization and that other public servants may need help (for example, because they are growing faster than others).
To reach this new goal, we first made sure people understood that we are all on the same team and have the same vision. We encouraged them to share information so that everyone can learn more quickly. Finally, we asked each growth unit to create two strong stories each year and to rate the other growth units against those stories, according to specific criteria. The idea was to give growth units a chance to highlight customer engagement, the problems they faced and how they tried to solve those problems. We presented stories as a way to practice positive self-accountability. To learn and learn about the ideas, data, technologies, contributions and successes going on across the entire company.
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When we started, all of the CEOs who weren’t in one of the platform areas (IT, HR, Finance and Investments) were assigned to the Growth Unit, with one exception: our CEO. This is another aspect where we realized that we swung the pendulum too far: We also needed a few executives who could work and collaborate across units.
The rebalancing process is still in place and has been improved over time. We started with 12 growth units globally. Then we changed the look of some of them a little, then created new ones, merged some and divided others. Recently, we created the concept of alliances – groups of two or three growth units that share goals and a core group of customers that may be too large for just one unit. Smaller growth units seemed to work better for us, which seemed consistent with the concept of Dunbar’s number. So we developed a guideline to keep each growth unit at 400 individuals or less.
Good growth never means stopping learning
How does our saturation work? There is consensus that it has fostered entrepreneurship, a better sense of ownership in everyone, and it has given us more flexibility to identify and serve market needs. We achieved 40% organic growth in 2020 – a result of course that cannot be attributed to saturation alone. But we were happy with our success and became more confident that we made the right choice for our company. The appetite can really allow entrepreneurship to thrive, even on a large scale – and we are currently over 5,000 people. We were also careful enough to fact-check from the case study you gave us – it’s easy to make mistakes, and it’s wise to view your organizational structure as a work in progress.
Of course, the most important thing is to find what fits your business. Maybe it’s saturation. Maybe not. Regardless of your organizational structure, it is important that you constantly work on improving it. Make it your own, based on the unique needs of your company. Because when it comes to action and improvement, the journey never stops.
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