An article on the challenges most companies face as they look to have the right organisation in dynamic times. written for NHRD Annual journal April 2012

1. Organisation Structures- Challenges in Dynamic times
K Shankar, Executive Director, HR, BhartiAirtel Ltd
Every now and then, businesses change their structures, usually following a string of badperformances,
or after a new CEO takes over. Some businesses do so proactively to drive new priorities or focus on
marketsmoreeffectively. It has become one of the most powerful levers for CEOs to generate
breakthrough improvement in organizational performance.
Why do structures (or to look at it holistically, 'formal organizational arrangements') become the obvious
tool for implementing changes? First, they are perceived to be substantially easier to modify than either
individual or collective behavior. Second, the formal organization has a much faster and direct result on
behavior, activities and performance. It is also directly linked to strategy and gives clear visibility to the
changes in priorities flowing from new strategic directions.Lastly, it serves as a good expression and
communication of intent – sends a clear message right through the organization and helps align priorities.
However, not all changes in the formal organizational arrangements are successful. An analysis would
show that there are two broad reasons for failures:
1. Not looking at organization design in a holistic way. A good framework for looking at organization
design is the ‘Congruence Model’ that was outlined by Tushman& Nadler, in their book‘Competing by
design-the Power of Organizational Architecture’. For effective organization design, the Congruence
Model advocates a fit between the four key elements:
 The Work to be done, derived from the strategic direction
 The People – their skills, capabilities, interests
 The Formal organization – structures, processes and systems
 The Informal organization –the culture
Therefore, changes in structures alone cannot bring about the desired result. First, they need to be
complemented by appropriate changes in processes(a specifically defined sequence of steps,
activities or operational methods) andsystems(application of physical or social technologies that
enable the performance of work i.e., HR systems, which outline specific sets of policies and
practices that influence how work gets done and by whom). These are integral part of the set of
‘Formal Organization’, and a misalignment here is sure case for failure. Further, the congruence or fit
amongst the other core elements, namely Work,People and Culture need to be ensured.
2. The other main reason for failure of structure changes is what I would call as ‘estimation
defect’ or ‘trade-off bias’. Most of our strategic decisions are about trade-offs between alternate
priorities or courses of actions. These decisions call for an ability to forecast, estimate or predict, and
we go sometimes wrong in those.Such issues are more common among businesses which compete
in highly dynamic environments with rapid &discontinuous technology change.
In this paper, we will focus on how we can understand and reduce such estimation/trade-off bias in our
design of organizations.
Let’s take the example of a company in thehi–tech industry. Normally, a high degree of technological
change exists in this industry, with an average of one big, discontinuous change every decade or so, and

2. numerous other changes. Tushman& O’Reilly, in their remarkable book ‘Winning through innovation’, talk
about four distinct periods in an innovation/product lifecycle. First, there is a period of technological
discontinuity – when a completely new technology breaks through. Take the example of Mobile Phones or
Digital Photography or Quartz watches – these create new paradigms. This discontinuity is followed by a
‘period of ferment’ when competing platform/technologies establish themselves. Continuing with the
example of mobile phone systems,it took a few years before the GSM technology got accepted as the
standard. Similarly, Blu-ray of Sony is an example of a platform establishing itself in a'period of ferment'
over the rival platform. This period is followed by a one of continuous improvement – where the focus is
on incremental change and architectural innovation, where the focus shifts to efficiency,scale,continuous
improvement and stability. Soon, this stability is disturbed by another discontinuity, another breakthrough
innovation – and the whole cycle starts again!
Based on this insight,Tushman& O'Reillyhave articulated three broad types of product lifecycle/innovation
stages- the Incremental/Process innovation usually with small extensions of existing technology, the
Architectural innovation which is reconfiguration of the technology or platform, and the Discontinuous
innovation with completely new operating principles. Each of these address both existing
market/customers and new markets, as shown in Table 2 with an example from the watch industry.
Table 1 – Product Lifecyle/Innovation Stages
Incremental/Process Architectural Discontinuous
( Small extensions of (Reconfigures existing (New operating
existing technology) technology) principles/
Discontinuous
innovation)
New Markets Inexpensive ‘SWATCH’ First Watch
mechanical watch
(TIMEX)
Existing Markets Thinner, smaller Quartz watches
mechanical watches
Now each of these different stages need a different 'eco-system' to thrive- a unique set of People, Formal
Organisation and Informal Organisation. That then is the challenge, more so when all three stages are co-
existing in a particular company. Table 2 outlines the features of the organization and culture for each
stage of the innovation cycle.
Table 2- Product Lifecycle Stages and Organisation/Culture Required
Incremental Architectural Discontinuous
Entrepreneurial
Relatively formalized roles Adding & linkingSub Decentralisedproduct
& responsibilities systems structures
Centralized procedures Relatively young and
Functional structures heterogeneous people
Focus on efficiency Focus on integration & Focuson experimentation,
linkages

3. &continuous improvement multiple but small failures,
learning by doing.
We are now entering an era where such technological discontinuities are far more regular – and this is
putting incredible challenges to our leaders, and our organizations. To add to this complexity, at times we
need to keep driving the business across all the above three stages of product lifecycles- becoming
'ambi-dextrous'! Given this level of heightened uncertainty or complexity, no wonder our 'estimation
defects' are increasing. Further challenges in our quest for 'best fit' organisationare to do with questions of
specialisationvs integration, reduced layers vs managing complexity, and centralisationvsdecentralisation,
etc. :
1. How do we manage our organizations for such dynamic changes?
2. How do we identify which technological changes or opportunities do we place our bets on? How
do we resource these? How do we manage the distractions to our existing core?
3. With each form of innovation needing different capabilities & culture, how do we manage these
seemingly different ‘organizations’ within one?
4. How do we build synergies across these different streams or product groups? How best can we
leverage scale, without losing focus?
5. To what extent do we split functions into further specialised verticals?
6. What needs to be decentralised to business/product units or geographies, and what should be
centralised? What principles help us get the right mix of focus vs synergies?
7. How do we get the matrix of a product line- function-geography to come together effectively?
We will explore some of these issues with a couple of examples, and then conclude with some 'learnings'
that we can use as practitioners.
Let’s take an example of BhartiAirtel, a leading Telecom company. It started as a Mobile services provider
in late 90’s and added a Landline business, and then an Enterprise business. It went into providing DTH
broadcast services in 2009. While the launch of 3G, Data services hasbecame a specialised,
differentiated product line. Airtel Money, a completely new ecosystem for mobile payments and money
transfers, has just got created. Mobile Entertainment (called Value added services in telecom jargon),
Mobile Health and the other new business opportunities are emerging, using the mobile network
platforms. The challenge was to design an organization that focused an efficiency, scale and synergies in
the traditional voice business, but have different set-ups for the emerging businesses. The company
chose to create an integrated Network Services Group to drive the technology backbone synergies, and
an integrated sales and 'go-to-market' organization, while each business unit had its independent CEO to
create and manage the products and its relevant ecosystem, in some ways building on the traditional
‘category organization’ in FMCG.
The other challenge in organization nowadays is the trade-off between specialization and integration.
Let'stake an example: In FMCG companies, the Sales & Marketing function of yore, that was integrated is
now broken up into 3-4 different verticals, as follows:
1. Brand Development
2. Brand Activation /Market Development
3. Consumer Insights
4. Customer Marketing or Trade Marketing
5. Sales or Customer Management

4. While Brand Development, Brand Activation and Consumer Insights are normally grouped by ‘categories’
(a division by product group), Sales is normally integrated across the product groups, but grouped
geographically. Brand Development, for instance, is usually managed globally.On one hand, the split of
the traditional marketing function helps builds deep expertise and provides focus.While Brand
development is on a regional orglobal scale to build on synergies, the Brand activation or Market
Development has a strong country P&Lfocus, thus ensuring a local country perspective.However, there is
a danger of too much 'salami-slicing' of jobs, requiring lot of interfaces between each of the above
verticals- and that's a trade-off we need to make as leaders.
The other perpetual challenge is on balancing the number of layers with increased span of control, and
thus the ability to manage scale & complexity. An additional layer may be a 'span-breaker' (managing a
set of similarroles, e.g National Sales Head, with regional sales heads reporting) or an 'integrator'
(managing and integrating disparate functions, e.g a CEO). As organisations drive to be more agile and
cut out layers, the span-breaking roles are coming under the microscope- and thus there is a need to find
different ways to manage the complexity. We see the emergence of 'interface' management roles, and
simultaneously a more empowering and liberating governance framework, and an increasing reliance of
the matrix relationship.
Perfecting the matrix relationship is the 'holy grail' for all effectiveorganisation design in these complex
times. It is now increasingly clear that more than structures, it is our behaviour and the ways of working,
i.e. the Informal organisation, that enable the success of the matrix.
Therefore, what are some lessons for us as we look at the right organisation design- here are some tips
for practitioners. Follow the SCRIPT:
1. Begin with a deep discussion on Strategy, identifying the key priorities and imperatives, in the context
of the environment and the future. A key learning is to ensure that this is sharply prioritised- the team
must be able to 'stack-rank' the different priorities, so that when it comes to certain trade-offs, we are
sure what is really critical.
2. Look at each business or product group, and identify the Critical factors as follows:
a. what is critical for success of that business
b. what is unique about that business, and our USP
c. what kind of people needed to make a difference in that business or product group
d. what should be the unique culture there to make it win in the market
e. what activities have to be specific to the business
f. what areas can benefit from synergies or scale
3. Assuming you cannot make any structural changes, look at how you could meet the objectives by
changing people. Research shows that most issues in a business can be addressed by a change of
leadership- having the Right Person will make all the difference. A good way to identify this is to first
list out what is ailing the business- in terms of specific shortcomings. Then, identify the key leader and
ask this question "what can this person do better (or stop doing) that will make the organisation more
effective". If the two lists are similar, it points to the issue of the individual. On a more generic level,
the organisation of the future will call for people to be able to work across silos and boundaries, and
depend less on hierarchical orders but more on influencing- and having such types of leaders is
imperative for every company.
4. Many companies are looking at various Innovative ways of managing the mix of People and
Structures. For example, new business project teams are kept as separate 'start-ups' with a group of
young, entrepreneurial people, but led by an esteemed senior person from the mother company to
ensure that they do their work unhindered but still get support from the mother company. Innovative
linkage of reward systems to ensure that relevant people have the skin in the game also helps in

5. managing the different priorities. Use of project/programme management offices also helps drive a
new focus area.
5. The next step, before you jump into structures, is to see if the issues can be addressed by any of the
following:
a. changing any systems or Processes- either a business process or any supporting HR
processes, especially rewards and performance management
b. prioritising new set of measures relevant to the strategy
c. changing or aligning KRAs/targets of key people
d. adding additional role or headcount to look after certain focus areas- there are many
examples where big issues have been sorted out by adding a co-ordinating/interface or a
project management role
6. Only after all the above have looked at, should you look at changes in structures,with strong buy-
in for the Transformation. While doing so, it would be good to use a rigourous structured process.
The methodology followed by the Haygroup is given below. Be sure to test the Congruence or fit
of the four elements- the Work to be done, the People with their skills & interests, the Informal
organisation, i.e the Culture, and the Formal organisation, including structures, processes and
systems.
Following the above SCRIPT- understanding Strategy, identify Critical factors, putting the Right People,
seeking Innovative ways to sort issues unique to your organisation, aligning Processes and finally
creating a strong buy-in for the Transformation will help us avoid the 'estimation defects' we spoke of.
In conclusion, as businesses go through increasingly dynamic environments, they need to be more
flexibile and multi-faceted in how they organise themselves. They would gain from a lot more holistic
approach to managing their organisation design, with a greater focus on People, Culture, Systems and
processes, rather than just structures, and need to come up with winning mix of these elements. In the

6. Indian context, we should be prepared for more frequent changes and tweaks as organsiationssearch for
this winning mix.The perfect organisation design is a myth! No sooner than you think you have found the
'perfect solution', you will find that there is a new problem coming up somewhere. We should be open to
continuous renewal and change, and be constantly looking at ways in which to get the most effective
organisation working for us.
Bibliography:
1. Competing By Design: the Power of Organisational Architecture, byDavid A Nadler and Michael
LTushman, Oxford University Press.
2. Winning through Innovation: A practical guide for leading organisational change and renewal, by
Michael LTushman and Charles A O'Reilly III, Harvard Business Review Press
3. Mastering the Dynamics of Innovation, by James M Utterback, Harvard
Article published in National HRD Network’s Annual Journal (Volume 5, Issue 2) in April,
2012.http://www.nationalhrd.org/quarterly-journal.php?year=2012