HRHeadStart #98: Reorgs; Peter Principle
The Talent Agenda
Over the course of the last year, several organizations undertook organization (re)designs or reorgs. I have noted earlier that this is not only about drawing boxes and lines to create an org chart. That merely draws out the roles and power structures. However, org design encompasses a broader set of factors and Jay Galbraith’s Star Model is a great framework to think holistically about the problem.
The org structure warrants a change when it is no longer able to serve the business strategy. For instance, the strategy may be obsolete and requires a total refresh, there may be a merger/acquisition etc. But there are also situations when a structure change may not be the right lever to push. For instance, changing structures to cater to an individual person to retain them or to speed up a team’s decision-making. These may be costly and ineffective. Sometimes it is more effective to use levers like process redesign, incentive alignment etc. Check out this piece to understand the role of reorgs and when and when not to pursue them.
The Peter Principle states that organizations promote competent workers until they become incompetent managers. This tends to happen when promotion policies and practices over-index on performance in current job, rather than the capabilities required to succeed at the next job. After all, skills in one job do not necessarily translate to another.
In this interesting paper, the authors evaluated performance and promotions of sales workers across multiple companies. They analyzed sales performance as well as capabilities that are essential to sales managerial jobs like ability to collaborate. They found that making promotion decisions based on current sales performance actually reduces performance in the future.
The traditional linear career track provides limited opportunities for growth unless one takes up leadership roles. It stunts growth of expertise and individual/team performance. To address this situation, many organizations now offer dual career tracks - Managerial and Professional/Expert pathways. Employees who wish to be on the managerial track transfer their focus from technical skills to leadership responsibilities. Those who choose to advance up the professional/expert track continue to focus their efforts on innovation and dealing with complex and important technical work. It is critical to apply self-awareness and feedback from others to choose the right track.
Failures create the opportunity to start over more intelligently.