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What is organizational alignment? What are the signs that a company is “misaligned”?
Organizational alignment refers to the degree to which different functions and departments of an organization are aligned in four key components: 1) strategic direction, 2) structure, 3) core processes, and 4) skill bases. When there is tension between any of these facets, the business cannot thrive.
In this article, we’ll discuss the four components of organizational alignment, how to diagnose misalignments between them, and how to approach alignment efforts systematically.
What is Organizational Alignment?
Your success as a leader is inextricably linked with the overall success of your company and therefore you must contribute to the broader project of achieving organizational alignment within your company. There are four key components to how companies are designed, including:
- Strategic direction (vision and mission)
- Structure (how people are organized and how work is coordinated, measured, and incentivized)
- Core processes (how information and materials are processed through systems)
- Skill bases (the technical abilities and competencies of individuals and groups within the company)
Examples of common misalignments include:
- Strategic direction and skill bases misalignment. Perhaps your company has identified the need to maximize research and development for the creation of new products but the current staff does not have the needed technical skills or training to implement that goal.
- Strategic direction and core processes misalignment. Imagine the strategy is to effectively serve a new customer group but right now no processes are in place to gather information, data, or feedback about those customers.
- Structure and processes misalignment. For example, workers may be organized by product which helps focus expertise but undermines necessary information-sharing regarding best practices that could optimize group-wide performance.
- Structure and skills: Changing the structure of a company (e.g., how employees are organized and who reports to whom) may require different management skills that have not yet been developed within the group.
As you identify possible spaces of misalignment and prepare to take action, remember that there is always cause and effect. So any changes that you make to one area should be done conscientiously and while considering the potential impact on other core elements of the business. Below are some tips to help you avoid creating problematic or unanticipated effects:
- Avoid making changes that are fundamentally motivated by optics or external validation but that are not of actual benefit to your identified goals. Watch out for the action imperative (the temptation to get something done quickly).
- Don’t start moving pieces around without considering how the STARS stages inform the need for possible organizational changes.
- Be careful not to execute organizational restructuring before you know what is at the heart of the problem. The lack of alignment may not be structural in nature at all but rather due to cultural missteps or the lack of necessary technical skills.
- Don’t assume that a more complex structure will solve the problem. Simpler organizational structures are sometimes more productive for creating accountability. Strike a balance between making changes necessary to achieve your goals and not rendering things even more complicated.
- Recognize that structural change can be unnerving and threatening. It often takes time to adapt. Move deliberately but incrementally.
Approaching Alignment Efforts Methodically
Now you are ready to start taking action towards achieving alignment in areas that are integral to your success. It’s important to approach this process methodically, by following these steps:
Evaluate Coherence
Start by clearly evaluating the strategic direction of your company, which is informed by mission, vision, and strategy. Mission is what you are seeking to accomplish, vision is why you think it’s a valuable goal, and strategy is how you’ll implement the steps and processes to achieve it. A few things to think about when evaluating strategic direction:
- Which customers are we seeking to serve? What is our value add to those customers? Which markets will we opt in and out of?
- Where will investments of capital be allocated to or taken from? Is there any anticipation for an influx of new capital? On what time frame?
- What are our strengths and weaknesses in organizational capabilities? Do we have unique talents to leverage? Are there gaps that need to be filled?
- What commitments have we already made that will invariably inform next steps? What upcoming decisions need to be made in terms of how we commit resources?
Ultimately, how to develop a sound strategic direction for a company is a topic for another day. However, for our purposes of evaluating alignment, it’s important to determine whether the various moving pieces mentioned above (customers, capital, capabilities, and commitments) cohere with one another, are adequate to support the company’s direction, and are being effectively implemented.
If there is coherence within your company’s direction, you’ll be able to follow a clear strand of logic between why various components of the business (such as goals, markets, products, technologies, and plans) are set up in a particular way and how they interact with one another. To aid the process of identifying that logic, look for and review documents that describe the mission, vision, and strategy for your company and then compare those descriptions to what is happening on the ground regarding budget, training, and so on.
Evaluate Strategic Direction
Beyond ensuring coherence within your company’s strategic direction, you’ll also want to evaluate whether the current direction is adequate to achieve the articulated goals. Consider using the following tools to conduct such an evaluation:
- Ask your boss some forward-looking questions about how resources and investments will continue to be allocated to your group and whether such allocation is enough to support growth or the goals articulated.
- Ask your boss some backward-looking questions about the origins of the current strategic direction in order to evaluate any possible blind spots, gaps, or shortcomings in the process.
- Use SWOT (strengths, weaknesses, opportunities, and threats) to diagnose how your company fits into the larger market. But this time, start by identifying the threats and opportunities that exist within the external climate. Then, turn to your company’s internal strengths and weaknesses and ask yourself how they do or do not position it for success as the market currently exists. This inversion of the original SWOT framework becomes TOWS and can be a key resource for building a successful strategic direction.
Once you have a sense as to whether the current strategic direction is adequate, assess how effectively it’s being implemented. For example, if successful implementation requires certain skills, are employees being hired and trained accordingly? Or if teamwork is essential across groups, is collaboration happening as needed?
If you identify shortcomings either in the cohesion or the adequacy of your company’s strategic direction, then the direction itself will likely need to change. If, however, the problems are primarily at the implementation stage, then you can allocate resources to making improvements there.
Evaluate Structure
Next, evaluate whether your company’s structure is sufficiently supporting its strategic direction. Structure is made up of: (1) Units (How workers are organized—e.g., by geography, function, product, and so on), (2) Coordination and integration (who reports to whom and how collaboration between units works), (3) Decision-making matrices and rules to align decisions with strategy, and (4) Performance evaluation processes+incentive structures.
Structural changes can be onerous and slow and so it’s important to evaluate carefully whether such changes are truly necessary. Try asking yourself:
- Are our units supporting our mission and maximizing individual contributions?
- Does our reporting structure create accountability and is it conducive to creating integration across units?
- Is our decision-making process productive towards our stated ends? Could we centralize or decentralize more to become more effective? Could we create more standardization or allow greater space for customization?
- Are we measuring and rewarding the right kind of achievements?
You should also be prepared to make trade-offs in choosing a structure but make sure they are the right trade-offs for your company. Beware the following possible traps as you choose an appropriate structure:
- Sub groups may be performing at a high level but are isolated and not supporting integration between teams.
- Employees have too much or too little decision-making authority. Those who are closest to the work are often best positioned to make informed decisions. So don’t centralize decision-making to such an extent that you leave those key voices out. On the other hand, sometimes a broader perspective is needed to truly make more informed decisions. Don’t set your employees up for failure by giving them decision-making power without access to that key contextual information.
- Incentive structures do not align individual interests with those of the group. Perhaps there are no incentive structures at all, or maybe the individual incentives actually undermine the group’s broader goals.
- Not striking a balance in how reporting relationships are structured. Direct hierarchical structures are clean but can also undermine information sharing between groups. On the other hand, complex matrices may support integration but could also render accountability too diffuse.
Evaluate Processes
In addition to the company’s structure, its processes and skills must also be aligned with the overall strategic direction. This can be done by:
1. Working backwards from your defined ends to help develop effective processes. For example, if innovation is essential, some leeway may be needed in the day-to-day to allow for creative processes. But that freedom may still benefit from the creation of key check-points and ongoing communication regarding progress made towards identified goals.
2. Analyzing whether your processes are focused on meeting your goals. For example, if you are tasked with customer satisfaction rather than product development, ensure that your processes emphasize and support that specific goal.
3. Aligning your processes with your company’s structure and the manner in which people and resources are organized. Consider whether your processes are:
- Productive (Are they efficient at converting knowledge, materials, and labor into value?)
- Timely (Do they consistently deliver on the needed time fame?)
- Reliable (Do they perform as anticipated or suffer from regular breakdowns?)
- High quality (Do they result in meeting your identified value standards?)
4. Improving processes by developing a work-flow map (a diagram that explicitly spells out how certain tasks are achieved) and requesting feedback from the team to fill in the information and identify areas for improvement. This exercise has the added benefit of catalyzing collective learning and ensuring that team members have a good understanding of how they fit into the bigger whole.
5. Ensuring that processes are supported by the needed skill sets among employees. Such skill sets may include:
- Individual expertise (relevant background and training)
- Relational knowledge (insight into how individual expertise can be integrated to achieve articulated goals)
- Embedded knowledge (specialized technologies relevant to your group’s work such as R&D or customer databases)
- Metaknowledge (ability to identify sources of key information from outside partners and resources)
6. Conducting a thorough evaluation of where skills and knowledge currently sit so that you can identify both gaps that need to be filled with greater expertise or resources and capabilities that are being underutilized.
Consider also how the STARS stages of your company impact the order in which you’ll seek realignment. Strategy or process changes may need to happen first and inform other aspects depending on what stage you are in.
Finally, integrate further learning and insights as you progress. A deeper understanding of your team and how it operates will in turn create deeper knowledge to inform any strategy shifts moving forward. Ultimately, the value of your alignment evaluation process will be multifaceted. Not only does it help set the foundation for achieving longer term goals, but it’s also an opportunity to also start developing ideas about how you may be able to change culture.
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