The organizational design of the future has arrived: It's called Unlocked
by Douglas Swallow on December 17, 2020
With the economic recovery underway and the covid-19 vaccine being distributed at a million doses per day, it won’t be long before America is be back on its feet. But while the global pandemic has rightfully taken front and center stage, the three most significant challenges facing enterprises around the world remain:
1. Identifying the organizational design of future
2. Identifying and selecting a CEO that can deliver a net income percentages and key performance measures 30% above the industry average
3. Eliminating the plethora of people problems that are inhibiting CEOs
In 2017, the organizational design of the future was identified. Over the past three years, the process for safely upgrading to the design without disrupting productivity and morale was identified. In the process, the secret formula for identifying a top-performing CEO and significantly reducing the plethora of employee problems plaguing companies today was identified. This post is an introduction to all three and takes about 15 minutes to read.
This design is the result of 40 years of research and innovation in the CEO optimization space and 25-years of profiling the DNA of companies of all sizes, from startups to those listed on the Fortune 500. It was built on breakthroughs in 12 fields of science and the linkage of 12 valid theories by the most renowned scientists, scholars, and CEOs.
The hunt for the organizational design of the future
For the last 300± years, most of the world has operated on the industrial age organizational design. The organizational design on which a business, community, and country work is its bridge to the future, and since 1980, ours has been out.
On or around this date, two macroeconomic events occurred. These events caused the industrial age organizational design to fail. The first event was the arrival of the sustained, highly competitive environment. The second was the breach of the 25% design threshold for employee personnel problems as a percentage of all workplace problems.
That year I was a senior in college and an intern at the 7th largest homebuilder in America, Shapell Industries. The company was the gold standard in the industry. Their homes sold faster than any other builder. The company was known for achieving the highest profitability levels, building the highest quality homes, having the best people, and employing the most advanced practices. But in the late 1970s, all their tried-and-true business management methods and processes, which had worked for decades, started underperforming, for no apparent reason.
I was hired to develop a new market analytics suite to understand the issue so the leadership could make the appropriate adjustments. But as I would learn later, Shapell Industries was not the only company to experience this problem. It was happening across nearly all industries.
That year the boys in the lab, as I like to call them, the collective body of scientists and management consultants worldwide, went to work on the problem. What was happening was clear; what was causing it was a mystery. All that was known was what had worked well in the past no longer did so.
In 1982, the two brilliant and now famous young consultants, Tom Peters and Robert Waterman, with the firm of McKinsey & Company, published their solution. The title of their book was In Search of Excellence. Their eight-theme solution introduced a new modality of the industrial age organization design, but the issues persisted.
www.amazon.com
Eleven years later, in 1993, James Champy and Michael Hammer took their shot at pulling the sword from the stone. That year they published their solution in the seminal business book, Reengineering the Corporation. Their answer was about one thing: refocusing work around their natural processes. Their theory set aside the over three-century-old division of labor theory and, in its place, put the process-driven organizational design.
www.amazon.com
Together, these solutions put the pedal to the medal on execution and production capacity. They threw everything off the plane that wasn’t essential, thereby allowing it to fly faster than any had flown before. Its predecessor, according to Tom Peters, “was slow, fat, and centralized.” But once again, the issues persisted.
Over the next two decades, no one in corporate America, academia, or the consulting community could identify the problem’s source or the solution. Countless ideas and technologies emerged, but none could resolve the core issues while nearly all of them helped. None of them could slow the precipitous decline in net income percentage or the rising tide of annual premature establishment deaths or equip boards of directors with the ability to identify and select a top-performing CEO. And none of them were able to create workforces with more than a handful of top performers or make a dent in the plethora of HR issues that were and are handcuffing CEOs today.
Fast forward to 2014
By 2014, the underperformance of the industrial age organizational design had reached a critical point. That year was the first year identifying the organizational design of the future showed up as the #1 priority of CEOs in Deloitte’s annual Global Human Capital Trends Survey. Over the past six years, identifying the future’s organizational design that blends people and technology has remained the #1 priority of CEOs worldwide.
Today, less than 4% of all businesses are consistently producing a net income percentage of 30% or more above their industry and size of company average. Ninety-nine percent (99%) of Fortune 500 company boards of directors and 96% of all board of directors, as evidenced by results, cannot identify and select a top-performing CEO. And since 1980, the percentage of top-performing employees the best companies have been able to achieve is 16%. Eighty-two percent (82%) of all managers are underperforming. The rate of employee problems, as a percentage of all workplace problems, remains at over 90%, and despite significant upgrades to the workplace, two-thirds of all employees are still actively disengaged in the US. The figure globally is 85%. The cost of which, in lost productivity, has been put at over 7 trillion dollars a year.
The industrial age organizational design
The industrial age organizational design emerged in England in the early 1700s. Adam Smith introduced the world to the design in 1776 in his book entitled, Wealth of Nations. The book is still required reading in nearly all macroeconomic courses taught in colleges and universities throughout the world today.
www.Amazon.com
The most advanced industrial age operating platform modalities comprise tried, dependable, and proven business theories, practices, and technologies. The industrial age organizational design was built on a foundation of strategies, processes, and technology focused on production and distribution capacity, velocity, scale, market share, price, replication, exactitude, sustaining innovation, low-cost structures, minimal headcounts, over forty-hour programmed workloads, cheap labor, and creating price, supply chain, and legislatively defensible market positions.
It called for enterprises to be led by one individual supported by a group of experienced and loyal managers, and workgroups mainly comprised of youthful skilled and unskilled employees. These workforces operated on a finely tuned centralized management structure and “command and control” core leadership paradigm. Corporate cultures were focused on “doing,” and employees were promoted based on personal relationships, loyalty, experience, academic profile, technical competency, production capacity, and willingness to sacrifice family and health.
The company leader was selected based on their relationship with the owner and or on his/her professional pedigree, financial acumen, ability to grow the company, and develop close relationships with raw material providers, vendors, subcontractors, politicians, legislators, city officials, and key government personnel. In part or whole, that dictated the level of market competitiveness in which the company operated and or provided it a competitive advantage.
The industrial ages primary organizational design created wealth and vibrant economies throughout the world. It did so through a production capacity or volume-oriented core paradigm, non- to moderately competitive market assumption, and an aligned set of economic and business management theories and tools.
However, as seemly perfect as this organizational design appears to be, it had two fatal design flaws. The first was it assumed that environments, industries, and markets would never become highly competitive. The second was employee personnel problems; as a percentage of all workplace problems, would never exceed 20%. That the industrial age human development platform, i.e., how children would be reared and what they would and would not be taught, would continue to deliver young adults to the workplace free of personal problems that would inhibit their ability to engage and perform.
In the mid to late 1970s, the designers of the industrial age organizational design worst nightmares became a reality. The barriers to sustaining non-, low, and moderately competitive industries and markets collapsed. For the first time in US history, according to the US Treasury Department, there were more highly competitive industries than non-, low, or moderately competitive. And by all indications, it was only going to be a matter of time before virtually all businesses would be operating in highly competitive environments, and the strategies on which they operated would begin to fail. Simultaneously, the percentage of personnel problems, as a percentage of all workplace problems breached the 20% level on its way to 92% in 1995, where it remains today.
The cause of the meteoric rise in personnel problems has been traced back to a change in the US human development platform in the mid-1940s. Where a direct link was found between the level of time primary life skill and emotional competency providers, i.e., mothers, fathers, and grandparents, spent with their children and the level of personal problems they would experience in adulthood that would inhibit their ability to perform in the workplace.
The modification to the human development platform, while increasing productivity, lowering costs, and increasing the quality of life of families with two incomes in a single income-based economy, had one profound side effect. It reduced the amount of time primary life skills and emotional competency providers spent with their children. Before the change, engaged primary life skill providers spent approximately 60,238± hours with their children between birth and 18. Under the adjusted platform, that number shrank by over 40% or less than 25,000-hours. Keep in mind children in the US are only spending twelve to fifteen thousand hours in school between kindergarten and graduating from high school.
What was needed was a highly competitive market-oriented organizational design and a way to reduce the plethora of HR problems or eliminate the need for personnel through advancements in technology and artificial intelligence.
Unlocked
The organizational design of the future is the first highly competitive market-oriented design. It operates on a different organizational leadership structure, culture, workforce, strategic platform, and innovation strategy.
It is designed to create dynamic companies and wealth for stakeholders. It operates on the assumption all the businesses that make up the economy will be in highly competitive industries and markets. The design works on a new business performance equation and set of business management theories, practices, and technologies and the belief that unlocked and whole and complete populations will create better workforces.
At its core, as opposed to the production capacity and technology-driven industrial age organizational design, unlocked is a human capital-oriented design. This design significantly upgrades the leadership team’s performance capability and the human elements on which it operates. While at the same time equipping the communities in which they serve with the ability to dramatically improve their economies and the quality of life of their residents.
The new design holds onto the industrial ages’ principles of maximum production and distribution capacity, velocity, scale, market share, replication, exactitude, and creating price, supply chain, and legislatively defensible market positions where possible. However, it sets aside the principles of striving for the lowest possible cost structure, minimal headcounts, over forty-hour programmed workloads, and cheap labor. It replaces them with optimal performance-oriented cost structures, headcounts, workloads, and workforces of more than 60% top-performing managers and employees.
It holds onto the idea that creating and sustaining a thriving business starts with a scalable dominant value proposition, having sustainable demand, and a clean and strong balance sheet. It then moves to employ strategies and technologies that increase sales, production capacity, customer and employee experience, decrease costs, improve logistics, and reduce profit slippage. And lastly, by securing price, supply chain, and legislatively defensible market positions and growth by adding points of distribution, entering new markets and segments, improving marketing, creating a steady stream of sustaining innovations, and acquiring companies and emerging competitors.
The prevailing leadership structure of the industrial age is known as the single leadership structure. This structure is replaced in the new design by the “Lion Killer” theory of leadership. Our most ancient civilizations used this structure and held the leadership of a tribe comprised of three positions: one strategic, one tactical, and the other operational, and the innate abilities to perform each role were mutually exclusive. The titles for these three positions were Wiseman, Great Hunter or Lion Killer, and Tribal Leader. Around the time of the formation of cities, 7,000 years ago, this leadership structure was abandoned for the single leadership structure wherein all three roles were consolidated into one.
In the organizational design of the future, the company is led by not one individual, but three, a Chairman, CEO, and President. Each has the innate ability profile to perform their role at the highest levels, and all three are compensated at the same level and report independently to a new type of board of directors.
The highly competitive market-oriented board of directors shifts from being primarily comprised of former CEOs, key shareholders, and critical resource providers to a balance of strategic, tactical, and operational experts with downline responsibilities. The board of directors committee structure remains the same with the addition of a strategic platform/DNA audit committee.
The roles of General Counsel and Chief Financial Officer are unbundled, and a formal advisory council is formed. This council is made up of value orientation aligned industry experts in each of the critical industry disciplines. Annually, each advisor submits a state of the discipline report in their field, updates their discipline benchmarks, and provides a list and profile of the top ten practitioners in their discipline in the industry.
Company leaders are selected based on the degree to which their value orientation is aligned with the company’s; their innate ability profile matches that of the role they will be performing; and their think, lead, and achieve performance capability indexes are at or above the level sought by the board of directors. Each is equipped with a highly competitive market-oriented dashboard and the tools and resources to perform their job at the highest levels.
The company operates on a finely tuned leadership versus management structure. The “command-and-control” core leadership paradigm is replaced by “inspire and engage.”
The corporate culture is upgraded from a “doing” to a “being” orientation and prioritizes personal value orientation alignment, natural ability, and leader development.
After two decades of working with Michael Treacy and Fred Wiersema’s “Value Disciplines of Market Leaders,” it was discovered that in addition to all strategic elements of an organization being either lowest total cost, best total cost, or highest quality cost solution-oriented, all employees had a personal value orientation. Treacy and Wiersema’s theory revealed that in the smoothest running companies, all their primary strategies value orientations aligned with the company’s. In 2005, the same was found in workforces.
www. Amazon.com
In 1998, a previously unidentified DNA based system was discovered in the heart of the human brain that revealed what enables top performers to produce results over two times their average performing colleague. Currently, these systems are fully activated in less than 3% of employees. In 2014, the research on the system led to the knowledge and tools to allow all employees to unlock and activate their body’s system. Under the new design, all employees’ systems are activated.
The leader development process begins in the onboarding process for all employees versus year three in most non-highly competitive, market-oriented designs for selected employees. Each manager’s leader development index is a variable in employee assessments and posted on each of their evaluations.
This culture is based on the first macroeconomic age’s ten-part leadership and human development platform, known as antiquity’s greatest secret. This platform ensures all employees are in a position in which they can be a top performer, have the knowledge and technology to do so, and are led by an individual who will passionately strive to enable them to become the best they can be in the role they are performing.
Supervisors or managers do not lead workgroups, but rather workgroup leaders. These leaders are not selected based on their academic profile, experience, demographic profile, or loyalty they have displayed. They are chosen based on the degree to which their value orientation is aligned with the companies; they are naturally talented in one or more of the roles the workgroup they will be leading is performing, their level of leadership development, the scope of thought in the discipline, and a professional quality profile index at or above the target level.
Unlocked operates on a ten-part total compensation and eight-part employee development platform highlighted by a focus on employee experience, development, and a workplace oriented towards top performers’ needs and one question. That question is if you had to be one of the best in the industry at your job, what would you need?
Performance feedback is an integral part of the new design. The feedback system is built on three levels: self-directed daily/weekly assessment, brief monthly reviews, and tri-annual leadership reviews that focus on performance, technical competency, behavior, and leader development. Employees are promoted based on their total performance capability index and not on personal relationships, loyalty, experience, academic profile, or willingness to sacrifice family and health for their job.
The CEO’s performance capability in sustained, highly competitive environments accounts for up to 65% of the success or underperformance of a company. Less than 1% of Fortune 500 companies and 4% of all businesses have a CEO that consistently delivers net income percentages 30% or more above their industry and size of company average. The “Lion Killer” theory of leadership ensures the ownership and board of directors of companies have a top-performing CEO today and tomorrow.
The design eliminates the plethora of HR problems and allows businesses to reduce employee problems by more than 50% and increase their percentage of top-performing managers and employees by 400% to 60%. Thereby ensuring they have the workforce, their leadership team needs to deliver superior financial and operational results.
The next two elements are a pure, highly competitive market-oriented strategic platform or DNA and a four-tier innovation management strategy. In 1994, it was discovered all organizational strategic platforms are identical in form and function to human DNA. This led to the sequencing of the baseline organizational genome and the DNA profiler. Over the decades that followed, the DNA of companies of all sizes, from small businesses to those on in the Fortune 500, was profiled. This work’s conclusion was the leading cause of organizational underperformance, and premature establishment death was the use of a non-, low, or moderately competitive market-oriented DNA in a highly competitive environment.
The organizational genome is comprised of 200± primary strategies. Each strategy can be non-, low, moderate, or highly competitive market-oriented and has a value orientation that is aligned or unaligned with that of the companies. The most advanced versions of the industrial age organizational design do not profile their strategic platforms on these two variables. And they do not have a standing board of directors committee that reviews the degree to which the company’s DNA is aligned with the degree of market competitiveness in which the company is operating. The organizational design of the future fully embraces organizational DNA profiling and ensures its DNA is in a constant state of optimal alignment.
The fifth key element of the organizational design of the future is innovation. Countless articles have addressed the importance of innovation. They are filled with stories about companies, like Kodak, the photography company founded in 1888 that became one of the largest companies in America. In 1975 the company controlled 90% of film sales and 85% of camera sales in the US. That same year, a team of scientists working for the company invented a new technology called digital photography. An innovation that is now in over 2 billion smartphones around the world today. Unfortunately, Kodak’s leadership would “pass” on the invention. The impact would be devastating. It led the company to file bankruptcy, reduce its staff from over 125,000 to less than 6,000, and selloff of its most valuable assets. On the other end of the spectrum, companies, such as Apple, Tesla Motors, and Amazon, have created some of the most valuable companies in the world solely on innovation.
Despite the importance and proliferation of innovation, the industrial age operating platform holds innovation is the CEO’s responsibility and that managers and employees are not paid to innovate; they are paid to do. In the organizational design of the future, innovation is not the CEO’s sole responsibility, but something that is fostered and talked about in every workgroup in the company, every month.
As we learned from the late Rhodes Scholar and Harvard professor Clayton Christensen, there are four types of innovation: sustaining, efficiency, disruptive, and breakthrough. Under the industrial age organizational design, innovation is not formally managed, but in the future organizational design, it is. All employees are trained in the four types, encouraged to monitor, develop, and bring forth ideas in their work craft, and if implemented, they are rewarded accordingly.
www.amazon.com
Each month, each workgroup meets solely to talk about innovation. At the corporate level, the ideas are incorporated into the company’s innovation management system. Corporate specialists monitor emerging innovations, and the CEO gives a quarterly state of innovation report to the board of directors.
The Unlocked Initiative
The Unlocked Initiative is the process companies undertake to upgrade their existing organizational design. For large companies, the process typically requires between three and seven years. The costs vary by the company’s size, existing human capital performance capability index, and degree of market competitiveness to which its DNA is oriented. The complete return of investment is less than two years from the launch date.
In 2017, the organizational design of the future had been identified, but how to safely transition to it was unknown. Initial approaches were quickly abandoned because of workforce destabilization and reductions in morale and productivity. The one takeaway from these failures was, you have to build it before you staff it.
The problem was we tried to go too fast, make no adjustments to the leadership structure or DNA, and upgrade people before upgrading infrastructure and workgroup leaders’ leadership skills, abilities, and attributes. From these trials, a multi-phase and year process was developed. The process allows companies to safely, seamlessly, and cost-effectively upgrade to the future’s organizational design without lowering morale, reducing productivity, or having to let people go.
The process is managed by an initiative manager appointed by the board of directors and multiple consulting firms. The Unlocked Initiative is comprised of seven phases:
1. Owners, the board of directors, and CEO introductions (3-6 months)
2. Performance capability and staffing platform audits (3-6 months)
3. DNA, leadership, and management team adjustments (2 years)
4. Product positioning, sales, and revenue optimization (1 year)
5. 95% customer satisfaction index initiative launch (1 year)
6. Culture upgrade and workforce empowerment (2 years)
7. Workforce upgrade (1 year)
The bottom line
The bridge to the future has been built. It embraces the best of what we’ve learned throughout the industrial age, the latest advancements in technology, and unlocks the vast untapped potential that resides within all organizations’ human elements. If your company is seeking to achieve net income percentages 40% or more above its industry’s average, have a top-performing CEO today and tomorrow, and dramatically reduce its level of employee problems, it should consider exploring Unlocked.
I hope you enjoyed this brief look at “Unlocked”. If you would like to learn more about this organizational design, please do not hesitate to reach out to me at doug@orggenetics.com.
ABOUT THE AUTHOR
Douglas Swallow is an innovator, intellectual property developer, author, and speaker on CEO and enterprise performance optimization. For 40 years, he has been unraveling the mystery of what enables top-performing CEOs, managers, and employees to deliver results 1.3 to over five times their equally profiled colleagues. His work has led to the solution to this mystery. But more importantly, to the development of a body of knowledge and collection of technologies that equip enterprises with the ability to increase their net income percentages to 30% above their industry and size of company average. Cut their employee problems in half. Increase their percentage of top-performing managers and employees to over 60%, shattering today’s 16% ceiling. And maybe, most importantly, ensure they have a top-performing CEO today and tomorrow.