How design thinking is changing the structure of business Viewpoint careers advice blog

How design thinking is changing the structure of business Traditional organisational structures are being challenged by flatter models. In the latest Hays Journal, we explored how businesses can apply design thinking to find their best form. Traditionally, most organisations have been structured around a rigid hierarchy. Junior employees report to managers, managers feed back to heads of departments, who pass this information on to executives, who in turn set the strategy. But as the way we work evolves, these structures are coming under close scrutiny. In February 2016, technology giant Cisco hosted a hackathon in a bid to improve its HR processes and make them more responsive to the company’s needs. It closed down the HR function for 24 hours and announced to employees that they would use this time to ‘break’ and then rebuild HR processes for its 70,000-plus employees. The aim of the Global HR Breakathon â€" as it was known â€" was to use ‘design thinking’, which would focus on putting employee experiences at the core of Cisco and ensuring that everything HR did, kept this in mind. Design thinking itself is not new, but the way in which this approach is being applied to employee culture is gaining ground.  As artificial intelligence and automation become more widespread in organisations, and companies need to become more agile to respond to the changing markets around them, it’s crucial to make sure processes are optimised. Over the 24-hour period, teams at Cisco from all over the world came up with 105 new HR solutions covering how to attract talent, induction for new employees, learning and development and leadership. But why break something if it doesn’t need to be fixed? While businesses elsewhere may not be working on global hackathons as big as Cisco’s, there is a growing trend towards reshaping processes and structures to better fit those who will be at the front end of them, whether they are customers, employees or people who use your systems. Removing layers of management There is a significant side effect of this way of thinking, too, in that management boundaries become more blurred and traditional hierarchical structures begin to dissolve. In response to this, some businesses are going so far as to remove layers of management completely, so decision-making is more autonomous and they can react more quickly. US online shoe retailer Zappos, for example, adopted ‘holacracy’ principles, where employees ‘self-manage’ and their roles are defined around the work they do. Business guru and author Gary Hamel also famously suggested that companies “fire all the managers” because they were expensive and made businesses less responsive. And in his book Work Rules!, Google’s former Head of People Operations, Laszlo Bock, describes how the search engine giant tried a similar experiment, but it was short-lived and managers were reinstated in six weeks. Moving away from a hierarchical mindset Leaders need to abandon their territorial mentality, be role models and own the change themselves Clearly, operating completely without hierarchy won’t work for every organisation, as these examples show. “The only way the move to a flatter organisation will work is if the people at the top themselves move away from a more hierarchical way of working,” says Gary Miles, Programme Director at London Business School. “They need to abandon their territorial mentality, be role models and own the change themselves and almost put themselves out of a job in the long run.” Part of the problem is that traditional hierarchies have become so ingrained that turning this culture around is a monumental challenge. Miles adds: “It has to come from the bottom up. There tends to be a silo mentality at the top, which is cascaded down. A real mindset change needs to take place for something different to happen. There’s too much vested interest and prestige in maintaining the status quo.” HR must become flatter too For HR, the removal of management layers is daunting to say the least, even if it means an organisation functions in a more fluid way. Dave Ulrich is co-founder of leadership consultancy The RBL Group. His HR model, which has been widely deployed across organisations globally, argues HR’s role in a world where decisions are made more autonomously is to foster an environment in which people feel comfortable making those decisions. “When businesses become flatter, so must HR,” he says. “The primary purpose of any operating model is to govern or control how work is done. Flatter, less hierarchical businesses often govern work through shared values more than managerial oversight. So, HR’s job is to help shape strong and shared values that govern how people think and act.” Robert Bolton, Partner in KPMG’s Global HR Center of Excellence, believes this will require a shift in thinking. “For HR, it requires them to retune to a new mindset where there is not rigid demarcation of roles,” he explains. “We’ll move away from tightly defined jobs to managing flows of people around career paths and roles that may not even exist yet, but where we need to build capability now. HR will operate in a world of scenarios, rather than serving organisations as they currently do.” Future generations are influencing the management styles of the future One of the currents HR has to fight against is an appetite for rules and regulations, much of it created in response to the economic downturn of 2008. “The global financial crisis shocked us to the core of trust,” says Kirsty Bashforth, Founder of organisational culture consultancy Quayfive. A former senior executive at BP, she led cultural change at the company following the Deepwater Horizon oil spill. “Lots of companies ended up with policies focused on the one person who might cause issues, rather than the 99 per cent of people who are fine. This has reduced risk, but slows organisations down.” At the same time, though, there has been a “generational shift in attitude”, according to Miles, and millennials are beginning to influence the management styles of the future. Bashforth agrees: “Generation X is the last generation to assume that hierarchy is the way things are done. There are more of us who don’t want to run a company for power, but for influence, where leaders become more like air traffic controllers than the boss with the big stick. Young people are less deferential to seniority than previous generations,” she says. A recent piece of research by American Express Global Payments bears this out. It reveals that, while more than half of millennials think a C-suite role would be attractive, 75 per cent believe that businesses of the future will see management look beyond the usual models of doing business. “In the millennial-led business,” it says, “cultural or collegial leadership works better than authority or position-based leadership. Millennials focus more on who you are, what you do, and how you behave, than on your title or place in the hierarchy.” Growth doesn’t necessarily mean more hierarchy A business does not have to rid itself of management and hierarchy altogether to reap the benefits of a less rigid structure, however. At Metro Bank, the first new high street bank to launch in the UK for 150 years when it arrived on the scene in 2010, there has been a concerted effort not to add unnecessary layers of management as the company has grown. Danny Harmer, Metro Bank’s Chief People Officer, explains: “An organisation chart doesn’t tell you how a business runs. It’s the culture that shows whether the layers are a hindrance or a help to how people get business done. As our store network has grown we’ve only added one layer of management and we tend to be fluid about roles, so if someone has too many people reporting to them or if we need more technical expertise, we will ask, can we split a role into two, for example.” Reporting lines are dictated by customer needs, and a prime example of this is the role of Regional Director. While most banks segment customers into sectors such as retail, small business and commercial banking, served by different divisions, in Metro Bank Regional Directors look after all customers regardless of segment. “This is a pivotal role because it means there’s someone who’s thinking about all of our customers at the same time, rather than putting them in silos,” says Harmer. Even the layout of the office reflects this collaborative approach â€" there are slightly fewer desks than there are people and employees sit in ‘team zones’ rather than allocated desks so they can have different conversations and interact with other people in the business. When it comes to career progression, there are ‘job families’, but none of the alphanumeric grading systems that you might find in a more traditional financial services business. Harmer adds: “We review jobs as we go, checking job profiles are still relevant. One of the dangers of rapid growth is that you give someone a level or title they aren’t ready for and that can be a mistake as you don’t want to take things away from people. A more fluid structure means you need to be able to look forward to what the organisation will be in the future and build accordingly.” Leadership may need to evolve Of course, most start-up companies begin life with a flatter structure anyway â€" the challenge is maintaining this fluid set-up once they grow. Miles advocates embracing a model of ‘distributed leadership’, where decisions are devolved as much as possible to those across the business and leadership is more of a social process than a leader/follower way of doing things. For smaller businesses, this could be a means of remaining efficient and effective without adding unnecessary management layers. Ulrich agrees that some layers of management can help to add value to the business rather than stop things in their tracks, particularly line managers and HR professionals. “I think we need both HR managers and line managers,” he says. “Line managers are the owners of business decisions, ultimately accountable and responsible for the integration of multiple systems (such as finance, marketing, HR and IT) to win in the marketplace. HR professionals are architects, facilitators, coaches, and designers of talent, leadership and culture. In building a house, architects provide insights, but owners ultimately make the final decision about how to adapt those insights. Both are necessary.” Ulrich believes that we’ll move away from hierarchical control to ‘organisation governance systems’ where employees act according to shared values rather than being ordered what to do. “Governance through shared values enables large spans of control, remote work and individual autonomy,” he says. “It also requires a different leadership style, moving from ‘command and control’ to ‘coach and communicate’. Leaders in both settings hold employees accountable for the right thoughts and actions, but in management by mindset, instead of objectives, the leader focuses on creating and reinforcing the right cultural norms.” Design thinking meets workplace design The physical nature of workplaces supports this transition to a less hierarchical model â€" Mark Zuckerberg of Facebook famously works in an open-plan office alongside his less senior colleagues, for example. Organisations trying to embrace a less hierarchical approach often have clusters of workstations which encourages greater team interaction, compared with the old idea of status being attached to a manager with their own office, or indeed an executive team that occupied its own floor. Flexible and remote working is encouraged, and there is trust that the job gets done. London Business School’s Miles cites the example of Innocent Drinks: “This is a good example of an innovative organisation that has worked hard to create an open culture where ideas are shared collaboratively at all levels. Fruit Towers, the HQ, is spread over four open-plan floors, but all seating, including for senior management, is allocated randomly. “That way, everyone gets maximum visibility and interacts with people from different functions. They get a broader understanding of different roles and how Innocent works as a whole.” Allow for variance Arguably, the type of management model an organisation will embrace may depend on its geography. Miles adds: “The UK corporate model can still be quite parentâ€"child focused, while in some other European countries, particularly the Scandinavian ones, there may well be a greater degree of openness and less reliance on hierarchy.” Different countries’ systems support organisational structures in different ways: in Germany, for example, there is a strong emphasis on worker representation on boards. While this concept has been mooted in the UK, it is yet to become common practice. But alongside the physical, digital transformation will also accelerate the flattening of traditional management layers, believes KPMG’s Bolton. “We’ll start to see more boundary-less functions â€" so those subdivisions you might typically have seen in finance or HR will no longer exist,” he says. “In HR, for example, boundaries between centres of excellence and HR business partners break down. If you’re using the same insight to make decisions, there’s less of a need to specifically construct roles that do marginally different things with little added value.” In time, he adds, this will spread out across organisations so there is less demarcation between functions themselves. “Armed with artificial intelligence and data insight to augment and support them, there will be less difference between, for example, HR and finance. They both look after forms of capital or resources, and there will be less of a distinction.” A continuous evolution Most importantly, design thinking and how it affects organisational design is not an end state â€" it’s something that evolves over time. “Too few companies are approaching this as something ongoing rather than something that happens in reaction to a disruption â€" say a new CEO or a crisis in the market. Just because you state you want a certain culture doesn’t mean you have it,” insists QuayFive’s Bashforth. The first step is for leaders to listen to their business, rather than trying to impose something on it that does not fit. She concludes: “Leaders need to listen to their organisation â€" problems with culture are often put down to ‘our workers do X or Y’, when in fact the leadership is setting the wrong tone. Put a mirror up to the leadership and ask, what message are they sending out?” If you enjoyed reading this Hays Journal article, here are other blogs that might be of interest to you: Are annual performance reviews as dead as the dinosaurs? Leaders, don’t just expect to be followed Is it possible to unite a remote workforce? How to lead from afar Five ways to give your staff a sense of purpose