12 Oct 1999  Research & Ideas

A Perfect Fit: Aligning Organization & Strategy

Is your company organizationally fit? HBS Professor Michael Beer believes business success is a function of the fit between key organizational variables such as strategy, values, culture, employees, systems, organizational design, and the behavior of the senior management team. Beer and colleague Russell A. Eisenstat have developed a process,termed Organizational Fitness Profiling, by which corporations can cultivate organizational capabilities that enhance their competitiveness.

 

Monday morning. Eight managers, handpicked by their superiors, face one another in the middle of a room. Seated in a semicircle behind them is the company's top management team. As the members of the inner circle report what they have learned about their organization from interviews with colleagues as well as internal and external customers, the top team listens intently, saying nothing except for questions of clarification. What kind of meeting is this?

Actually, it's not a meeting at all. Rather, it's part of a regimen to improve "organizational fitness," something that HBS professor Michael Beer says companies should do on a regular basis. "Business success is a function of fit between a host of key variables within an organization," he says. "Strategy, values, culture, employees, systems, organizational design, and the behavior of the senior management team all have to be in alignment." Along with Russell A. Eisenstat, an independent consultant and former HBS faculty member, Beer has developed a process called Organizational Fitness Profiling, which helps a CEO or business unit general manager and their top team assess how well an operation fits their espoused strategy and management principles.

Beer and Eisenstat began implementing the process ten years ago at Becton Dickinson and Company, a medical products and diagnostic systems supplier. "Ray Gilmartin, who was CEO at the time, was looking for a way to improve the company's ability to implement its strategy more effectively," Beer remembers. He and Eisenstat knew from previous research, however, that strategy implementation depends on how well the organization is aligned with its strategy. Most companies do not take such a view of the organization when they go about managing change. Instead, they develop many disconnected initiatives to bring about change — initiatives that by their piecemeal nature are doomed to failure. "In light of that," Beer explains, "we formulated this profiling process, which allows a leader and top team to do a rigorous analysis of the organization so that significant changes can be made based on what comes to light."

Organizational fitness is based on the premise that an organization is a system. "You can't change all its elements simultaneously," says Beer, "but they are all interrelated, and the connections between them have to be managed." Also, he contends, most people in organizations know what the problems are, but under ordinary circumstances they are unwilling to talk about them. And that, he says, eliminates a sense of partnership and leads to cynicism and a loss of motivation. "Our process is a structural mechanism that alleviates the problem by getting information into the open and helping managers discuss the undiscussable."

But "getting in shape" involves several demanding exercises before an organization can flex any newly developed muscles. To begin with, the top team must first agree on a "statement of strategic and organizational direction" — an outline of what the company must do as a whole in order to gain competitive advantage. They then appoint an employee task force (ETF) of their eight best performers — drawn from all functions one to two levels below the top team. Task force members are by consensus objective, credible, trust- worthy, high-performance, and high-potential individuals. "This is a crucial part of the process," says Beer, "because it's very hard to deny what your best people are telling you when they report their findings. Our research shows that their assessment of the organization is valid and insightful. Senior executives have observed that having employees provide the feedback motivated them and their top team more than if external consultants had supplied that information."

Having received one day of instruction in interviewing, the task force members talk with approximately one hundred employees and, if needed, customers about what they regard as the organization's strengths and the barriers that prevent it from competing in the marketplace as well as possible. (Please see sidebar.) At the same time, a consultant-facilitator (who eventually can come from within the organization itself) is interviewing the company's top managers about their own perceptions and effectiveness.

After an effort that takes approximately a month to complete, the data collected by the ETF are presented during a three-day session that starts with the task force seated in the "fishbowl" arrangement described earlier. "The fishbowl structure creates a perfect setting where members of the task force can speak out as a group, not as individuals," Beer explains. "The fact that they are reporting employee views as a group gives them the legitimacy and courage to be candid about sensitive issues blocking business performance. In over one hundred profiles implemented in seven or eight companies, the process has never failed to deliver an open and high-quality assessment of the organization — nor has fear of retribution for such frank input ever been an issue."

Once the task force has completed its report and left the room, the top team uses this information to reevaluate the organization and develop a vision of how they and the company need to change to reach optimum alignment. Top management later reviews their proposed changes with the task force, which then evaluates the proposals on its own. "Not only does this give high-performing employees a chance to contribute to management's plans," says Beer, "but it forges partnership and commitment, which are necessary ingredients for the next stage — implementation."

Beer and Eisenstat have developed Organizational Fitness Profiling through "action research," a method of inquiry in which the researchers are not simply observers. Instead, they are active participants with management in creating a new management approach and then researching its efficacy. The process has been used successfully at companies such as Merck, Honeywell, and Hewlett-Packard in addition to Becton Dickinson, and at organizational levels ranging from the entire firm to corporate sectors, divisions, and manufacturing plants to sales and services offices.

Recently awarded the 1998 Organizational Development Institute Award for their pioneering work at Becton Dickinson, Beer and Eisenstat emphasize that Organizational Fitness Profiling has to be sustained over time to keep a company headed in the right direction. "It should be as much a part of an organization's agenda as annual employee evaluations and financial plans," says Beer. "That's the next step in our work."

Silent Killers: Six Barriers to Organizational Fitness

When task force members interviewed other employees about barriers to implementing their company's business strategy, the answers they heard were surprising. Instead of pointing to organizational structure, or to systems such as compensation, or to the way information was handled, an analysis of results from many profiles in a number of corporations showed that employees consistently identified the following syndrome of six interrelated and mutually reinforcing management problems:

  • Unclear strategy and conflicting priorities
  • An ineffective top management team
  • A leadership style that is too top-down or, conversely, too laissez-faire
  • Poor coordination or teamwork
  • An inability to speak truthfully to top managers
  • Inadequate leadership skills and development at middle levels

Beer and Eisenstat have dubbed these the "silent killers," because they stand in the way of organizational fitness without being explicitly acknowledged or addressed by management.

- Judith A. Ross

From Working Knowledge: A Report on Research at Harvard Business School, Winter 1999