Organization:Overview of Core FrameworksLocal Training Module For Firs
t-year Associates Associate Handbookwww.eshuba.comFOR
EWORD AND OBJECTIVE This Organization Practice(OP) document pro
vides an overview for use in local training sessions for first-ye
ar associates. It is part of a “series on functional areas.” The
objective of the series is to introduce McKinsey practitioners to
the basics in each of our functional areas of expertise. All the
documents in the series are comprehensive in nature and describe
the current tools and frameworks in that functional areaAt the e
nd of this document, you can find a section describing a selectio
n of the core documents and handbooks that can give you further d
etails on some of the frameworks descried here. All of these docu
ments are now on PDNet; and hard copies of them can be requested
from PDNet Express, which will deliver them in 24 hoursThe conten
ts of this document have been adapted for local training sessions
through “Switching Tracks” — OP’s first-year module videotape, w
hich communicates the basic concepts in a concise and visual way
using an actual client — The Scandinavian Railroad Company. It is
40 minutes long and should be presented in 3 short segments. Bet
ween these segments, the faculty member runs the attached exercis
es, adds any commentary he/she considers necessary to clarify the
concepts, and provides personal experience on selected topics. A
copy of the videotape and moderator’s guide with exercises can b
e requested from the FirmThis document seeks to answer 4 question
s SECTION 1 Why do associates need to consider organizational is
sues in every engagement?SECTION 2 What frameworks do we use to
help our clients improve organizational performance?SECTION 3 Wh
at role does an associate play in organization work?SECTION 4 Wh
ere can an associate find out more?McKinsey’s mission is to have
lasting and substantial impact on our clients.To succeed, we need
to work all three of the critical elements: choose the best stra
tegy, develop world-class operations, align the organization.Thes
e three elements both reinforce and constrain each other. The bes
t strategy is only relevant if it is operationally and organizati
onally feasible. The optimal organizational design depends upon t
he strategic requirement and the operational methods of the clien
t.This document focuses on one vertex of this triangular relation
ship. It would be wrong, however, to believe that you can achieve
the impact we seek by focusing on one vertex. We need to conside
r all three in every study.CRITICAL ELEMENTS FOR IMPACTSuccessful
strategyEfficient operations Effective organization We only achi
eve impact when the organizations we serve are successful in impl
ementing the strategies and operational methods we propose.Howeve
r, a recent survey of engagements in which clients failed to impl
ement proposed strategies found, in three cases out of four, that
the client organization was not change-ready or even capable of
implementing the strategy we proposed.To ensure that we have impa
ct, we need to consider organizational issues as we devise strate
gies. We must choose strategies the clients are ready and able to
implement or complement our strategy work with investment in bui
lding the organization’s skills so that the organization can step
up to the challenge the superior strategy poses..3 OUT OF 4 STRA
TEGIES THAT FAIL DO SO BECAUSE OF THE ORGANIZATION’S INABILITY T
O EXECUTE100%=340 responsesPercentMcKinsey recommendations flawed
Client not change-ready or committedOrganization lacked the capab
ilities to execute strategyOtherThe demand for organizational wor
k is increasing.Trends in the marketplace and the evolving nature
of our clients largely explain this increase in demand.The pace
of change in the marketplace is accelerating . A strategic choice
or an operational innovation evokes a rapid reaction from compet
itor. Rarely can a durable competitive advantage be found in thes
e choices. Rather it is the development of a unique organizationa
l capability with the inherent flexibility and commitment to sust
ain world-class performance that provides durable competitive adv
antage in these times of rapid change.The clients we serve are ch
anging as well. They have increasingly hired in-house strategic c
apabilities. Most have built strategy shops close to the CEO. Few
, however, have the in-house capability and objectivity to do the
organizational work required to make change happen.ORGANIZATIONA
L WORK GROWING IN IMPORTANCEEvolving marketplaceQuickening pace o
f strategic adaptationDurable competitive advantage often rooted
in unique organizational capabilitiesEvolving playersMany busines
ses acquiring in-house strategic capabilityMaking change happen r
emains the “neglected art”McKinsey’s engagement mix Percent of ti
meIncreasing demand for help with organization issues and change
management Source: Survey of 23 MGMs across the FirmThe recent ev
olution in our clients has not been missed by our competitors. Ea
ch of our competitors has recently introduced a branded organizat
ional element to their portfolio. Their organizational expertise
figures prominently in their marketing campaigns.COMPETITORS HAVE
BRANDED ORGANIZATION TOOLSMcKinsey’s consulting approach must ev
olve as our clients evolve. These changes provoke a shift in the
nature of our work and an evolution of the role of the associate
on engagements.The increased demand for organizational work impac
ts associates directly. Associates are drawn into leadership role
s on larger teams at an earlier point in their careers. This plac
es greater emphasis on the need for associates to develop quite s
oon after joining McKinsey-superb team leadership skills.EVOLUTIO
N IN McKINSEY’S APPROACHSurvey of 23 MGMs across the FirmBefore
we dive into the organization materials, we should announce one c
ritical caveat: the frameworks you are about to see are only as g
ood as the judgment and insight used to fill them out. The framew
orks are often mere checklists, useful tools to ensure you do not
overlook a key dimension. The OP can provide interview guides an
d questionnaires that you can use to flesh out the frameworks, as
well as applied examples in a range of settings. However, almost
all organizational issues are “situation dependent”, and almost
all client settings are unique. Your judgment, insight, creativit
y, and organizational acumen will determine whether you add value
in the client setting .A CRITICAL CAVEAT“Garbage in, garbage ou
t”Organizational practice frameworksChecklistsSurveys, questionna
iresApplied examplesGarbageGood judgment, keen insight, creativit
y, organizational acumenGarbageClient impactA series of framework
s are available to help clients identify and address organization
al limits on effectiveness or obstacles to change. They also poin
t toward solutions.These frameworks help teams answer two fundame
ntal questions:? What change is needed?? How should the cli
ent implement the change?The OP has derived a set of six attribut
es that characterize high-performing organizations(HPO). By asses
sing whether your client organization exhibits these six attribut
es, you can diagnose whether an organizational performance gap ex
ists as well.Additionally, the 7-Ss will help you identify streng
ths and deficiencies in the organization. The 7-Ss focus teams on
aligning structure, staff, systems, and style to promote behavio
ral change and build skills in pivotal jobholders. By contrasting
the required skill set (at both the organization and the pivotal
jobholder level) with the current skill set, you can often clari
fy the organizational gap that exists.You complete the diagnostic
by filling out the change board. That exercise helps teams under
stand the organizational skill deficits or resistance to change s
o they can deliberately plan to build the necessary skills and wi
llingness to change in the organization.Once the gaps have been i
dentified, the team needs to lay out a change program to close th
e gaps. The transformation triangle highlights the three critical
dimensions of any effective change program-top down, bottom up,
cross-functional. The proper balance among these dimensions depen
ds on the gap, the client setting, and the competitive context.Ev
ery change program contains some mix of six fundamental energizin
g elements. Each must be considered as we design change programs.
This section of the handbook will discuss each framework in turn.
CORE FRAMEWORKSHigh-performing organization attributes7-S framewo
rkWinning formulaPivotal jobsDesign leversOrganizational structur
eStaff Management systemsLeadership styleChange boardAgenda/platf
ormDirection settingStructuringBottom-up energizingTransformation
triangleEnergizing elementsThe OP undertook a study of 10 high-p
erforming companies, true industry leaders, that we knew very wel
l. The companies had sustained pace-setting performance in their
respective industries over 2 decades.These 10 HPOs shared six man
agement attributes, each of which focuses on performance. By comp
aring your client organization to these HPOs, you may identify op
portunities to improve your client organization.“HIGH-PERFORMANCE
COMPANY” ATTRIBUTESDriven by leadersAligned by simple structures
and core processesBased on world-class skillsRejuvenated by well
-developed people systemsBuilt by relentless pursuit of before-th
e-fact strategies/vision Energized by an extraordinarily intense,
performance-driven environmentThe first three of the six common
management attributes:? Driven by leaders. The leaders of thes
e companies had very high performance aspirations. For these lead
ers there was no such notion as “good enough”. At the center of t
hese leadership groups, we consistently found demanding, unreason
able CEOs.? Built by relentless before-the-fact strategies/vis
ions. HPOs spend their time looking forward, not back. Their stra
tegies drive relentlessly for both profitability and growth.?
Energized by an extraordinarily intense, performance-driven envir
onment. HPOs have a demanding, occasionally punishing, work pace.
There is real accountability, especially at the top. HPOs, while
being very good places to work, are not always nice places to wo
rk.ATTRIBUTES OF AN HPOATTRIBUTES OF AN HPO (CONTINUED)The HPO re
search found something else common to the HPOs: all 10 were exper
imenting with self-governance. Self-governance in these HPOs mean
s empowerment with accountability. The HPOs share the common char
acteristic of involving “a wide range of “or “broad cross-section
of” employees in driving for improved performance. Their goal is
to imbue every employee with an owner’s mind-set.Self –governanc
e in these HPOs is different from that practiced in other “engage
d and empowered” companies. In HPOs the single-minded objective o
f empowerment is performance.In the matrix below, the HPOs we stu
died were all in the top half of the matrix (high performance); m
any were reaching, in addition, for the right-hand side of the ma
trix(engaged and empowered).PERFORMANCE AND EMPOWERMENT AT HPOsMo
st large companies start out in the lower left-hand corner of the
matrix (low performance and command-and-control management appro
ach). We discovered that HPOs that have successfully transitioned
to the upper right-hand corner have first achieved high performa
nce and then experimented with and adopted empowerment. Empowerme
nt without first establishing a true performance ethic in the com
pany tends to result in continued low performance.If your client
falls in the lower left-hand corner of this matrix, it needs to c
oncentrate first on building a true performance ethic. Empowermen
t, alone, is unlikely to yield performance improvement.TRANSFORMA
TION PATH7-S FRAMEWORKMcDONALD’S WINNING FORMULAVision : to becom
e the leading restaurant chain in the worldStrategy Shared values
Skills Convenient Good qualityConsistent Family-oriented environm
entFair valueQuality control over all aspects of businessSuperior
site selection Continuous new product developmentStrong promotio
n of products and McDonald’s imageQuality ServiceCleanlinessprice
Organizations usually change in response to discontinuities – eit
her external shocks (such as deregulation ) or internal changes (
such as new leadership) that make it clear that the old , “groove
d” way of doing things is no longer winning. The successful ones
will create a new winning formula that is based on changes in str
ategy, newer or stronger skills, and/or shared values.Contrasting
the new winning formula to the old formula identifies and gauges
the change that the organization is considering and defines the
vision for the change program.A change vision is a creed that sum
marizes what an organization is trying to become and why. As such
, it guides organizational priorities by redefining and recombini
ng business objectives, required institutional skills ,and corpor
ate values about what is important around here.A change vision is
at the heart of top management’s role in improving performance a
nd is often the first step. It provides the vital bridge between
the initial dissatisfaction with the status quo and the first pra
ctical steps taken in a change program – the articulation of a cl
ear target that represents something better that is both logicall
y sound and emotionally appealing.IMPROVING ORGANIZATIONAL PERFOR
MANCEGrooved Redirected Unfrozen Discontinuities External shocksN
ew competitors, economicsNew technologiesDeregulation Internal ch
angesNew aspirationsNew leaderMajor change through peopleNewstrat
egyNew or stronger skillsShared valuesCHANGE VISIONCertain key pe
ople in the organization hold positions that determine success or
failure in instituting a new strategy, skill, or shared value. T
hese people fill what we call pivotal jobs. We will only succeed
in implementing the change vision if we succeed in changing the b
ehavior of pivotal jobholders.At McDonald’s, for example, pivotal
jobs include the centralized purchasers of all raw materials for
all stores, the store managers, and the hourly employees who tak
e and assemble orders.PIVOTAL JOBS What people must doWhat are th
ey ?Positions that have direct impact on delivery of value to the
customer. Typically they -Design the product -Make th
e product -Sell the productPositions that must capably master
new skillsWhere are they?Close to the front lineIn a recent study
at a chain store retailer, the change vision included a signific
ant improvement in in-store convenience. Two positions were ident
ified as pivotal jobs – the store manager and the area operations
manager.This study employed a contrast analysis in two forms. Th
e first considered each element of behavior and defined how the n
ew behavior would need to differ from current practices.A behavio
r contrast analysis often proves helpful in defining precisely ho
w the pivotal job- holders need to change.CONTRAST ANALYSIS Pivot
al jobs: store manager, chain retailer The second analysis contra
sted the percentage of time spent on critical tasks under current
practices and envisioned in the future.CONTRAST ANALYSIS BY PERC
ENTAGE OF TIME SPENT Pivotal job: area operations manager100%Merc
hant/ownerCoachPlayerAdmini-straorORGANIZATIONAL DESIGN LEVERS AT
McDONALD’SWinning formulaPivotal jobsDesign leversOrganizational
structureManagement systemsLeadership styleStaff ORGANIZATIONAL
DESIGN LEVERS AT McDONALD’SWinning formulaPivotal jobsDesign leve
rsOrganizational structureManagement systemsLeadership styleStaff
STRUCTURAL OPTIONS CHANGE BOARDSkill to be built Modified as
appropriate for company E.g., customers, suppliers, trade uni
onsCHANGE BOARD – CHAIN RETAILER EXAMPLEDelivering in-store conve
nienceCHANGE BOARD – CHAIN RETAILER EXAMPLEDelivering in-store co
nvenienceLock in supportCreate shared responsibility for progress
Build a success model from belowForce awareness of realitiesRestr
ucture field organizationTo answer the question, “How should chan
ge happen?” , the OP developed the “organizational transformation
triangle” that summarizes the three basic management tasks when
dealing with change. Their relative emphasis may vary, but all th
ree of them have to be managed to achieve fundamental behavioral
change.TRANSFORMATION TRIANGLEThe well-known GE “workout!” change
program included elements from each dimension of the transformat
ion triangle.GE “WORKOUT!”Top-down direction setting/culture shap
ingNo.1 or No.2 in every business “speed, simplicity, self-confid
ence”Delayering Best practices workshopsBottom-up performance imp
rovementTown meetings: 2- to 5- day interactive sessions“Brand na
me” quality processesOperations: unit-by-unit redesignCore proces
s redesignProject teams to identify cross-functional issuesProces
s mappingThe client should seek an appropriate balance across all
three dimensions of the transformation triangle. Overreliance on
any dimension will impede change.BALANCE ON 3 DIMENSIONS IS KEYT
he OP has defined a wide array of change approaches. Each change
approach strikes a unique balance among the dimensions of the tra
nsformation triangle. Your challenge is finding the change approa
ch that strikes the balance appropriate for your client situation
.OVERVIEW OF 5 PERFORMANCE CHANGE APPROACHESNo matter what change
program is selected, the following six energizing elements shoul
d be addressed. By addressing each one, the client builds the ene
rgy required to make organizations change. ENERGIZING ELEMENTSAmb
itious, measurable objectivesReinforcing feedback Consequences Wi
nning formula Winning leadership groupDoer-driven Fact-basedPeopl
e-intensiveNew mind-setNew skills, behaviorSystems and processStr
uctureRoles Build commitment Establish 2-way flowManage expectati
ons Inspire actionThe OP has a wealth of experience and research
to support the design of each element of a change program.World b
enchmarksProject performance indicators frameworkPerformance maps
Performance contracts pro formaBest practice examplesLeading for
successCEO time-leverage manualAnalytical tool kit frameworkAnaly
tical problem solving workshop“data to chart” video and workbooks
Client advocacy videosSkill/will/diagnosticContinuous improvement
principles workshopBest practice examplesCore process redesignEx
ample role description “7-S” checklistCommunications coordination
team-job specificationsCommunications channels audit Stakeholder
analysisCommunications plan Communications workshopBest practice
examplesPOSSIBLE ACTIVITIES/TOOLSFramework for designing skill-b
uilding programsDiscrete training modules — management skills (MF
S), leadership skills(LFS), building high-performing teams, proje
ct management guide, designing ongoing improvementDiscrete tools
— RJDs, time-usage logs, change-readiness surveys, signaling chan
ge tool kit, how to run a training workshopBeliefs/behavior-promp
t sheet — staff activity surveyBest practice examplesAccount-base
d “action learning” programMultinational skill teams with 6 credi
ble champions Pilot effort with leadership to get buy-in and advi
ceThe leader skill for becoming $1 billionPresident as sponsorInp
ut Account plansPeople trainedOutputsPriceShareAwareness building
– President’s road showSkill building through workshopsReinforce
ment through VBSS network bulletinsAccount teams Global account m
anagersAccount planningVBSSAssociates will often step up to manag
er roles on engagements that address organization issues and/or i
mplement change. These engagements often involve multiple client
teams. Associates assume responsibility for managing one or more
of these client teams. These engagements also seek the active sup
port of a broader set of client managers. Associates assume respo
nsibility for developing influential relationships with critical
client managers. Engagements which focus on organization issues t
herefore provide exceptional opportunities for associates.ASSOCIA
TES ASSUME MANAGER ROLES IN ORGANIZATION ENGAGEMENTSTraditional v
iew of team rolesTeam roles on organization engagementsThe effect
ive associate manager serves three functions:The associate manage
r builds and sustains effective client teams that define, plan, a
nd implement the change .The associate manager leads problem solv
ing on multiple client teams.The associate manager forges a conse
nsus of support for the change vision among critical client manag
ers and ensures that managers maintain the energy level required
to effect the change.All three functions are critical to success.
However, in engagements that address organization issues and /or
implement change, building and sustaining an effective team is o
ften the necessary precondition to success in the other functions
. The client team provides the critical insight, knowledge, and s
kills required to solve the organizational problem. The associate
/ manager needs to build an effective team environment to tap in
to the essential client input. The client team should hold the co
nfidence of the critical client managers. Once the associate mana
ger has earned the endorsement of the client team, the support of
the client manager is much more likely.Consensus builderChief en
gineerFocuser StructurerQuality controllerDevil’s advocateCoach a
nd team developer MANAGERIAL ROLESSince effective teams are so fu
ndamental to success in organization work, the OP has invested co
nsiderable effort in understanding how to build high-performance
teams. Follow these principles to build high-performance teams.PR
INCIPLES OF TEAM BASICSPRINCIPLES OF TEAM BASICSCoach and team de
veloperSource: The Wisdom of TeamsA team’s potential is defined b
y the quality of its membership. The associate manager should, wh
enever possible, participate actively in the selection of team me
mbers. Recent research by the OP has found that most successful c
hange programs were driven by a few impassioned leaders. These “r
eal change leaders” exhibit a common set of characteristics. Loo
k for these attributes as you consider which client people to inc
lude on the team. REAL CHANGE LEADERS“People with a reputation fo
r improving performance through people – and for exceeding expect
ations along the way” Commitment to a better wayCourage to chall
enge existing power basesPersonal initiative to go beyond defined
boundariesMotivation of themselves and othersCaring about how pe
ople are treated and enabled to performStaying under coverA sense
of humor about themselves and their situations Real Change Lead
ers.SOLVING THE PROBLEMChief engineer FocuserStructurerQuality c
ontrollerDevil’s advocateStructure the problem, then let the team
solve itFocus the team on action and work – not process, talk, a
nd reviewKeep the entire team engagedPrepare brief, high – impact
meetingsListen BUILDING CONSENSUSTalk to critical managers early
and oftenUnderstand the motivations of the critical managersAddr
ess issues and concerns directlyInclude key team members in impor
tant discussionsPrepare clear, concise written materialsConsensus
builderWHAT WE HOPE YOU TAKE FROM THIS DOCUMENTWinning performanc
e is based on the integration of strategy and organizationRespect for and understanding of people is at the heart of all changeProblem solving for process is as important as problem solving for issuesAssociates have a significant and rewarding role to play in organization workWHERE CAN AN ASSOCIATE FIND OUT MORE Selected core documents and handbooksThe overview of core of frameworks in Sections 1 and 2 of this document describes the basics and provides a template to better understand client organization issues, which should prove helpful in almost any engagement because no matter what the focus of an engagement is, a basic understanding of the process of change is necessary to focus on the priorities of the clientOnce you are assigned to an engagement of this kind, you may need to read more about some of these frameworks or gather handbooks about the topic. As you may know, PDNet contains a large array of documents that may be useful to you. You can get hard copies of such documents in 24 hours using “PDNet Express” through your local libraryHowever, there are thousands of documents in the Firm’s databases; therefore, the key for efficient data gathering and “getting smart fast” will be to access only a limited and targeted selection of documents when you need them. This section provides you with some hints on key, core documents of the organization practice and related disciplinesAppendix This appendix contains:HPO bulletinsGlossary of 7-S frameworkOrganization transformation triangleEnergizing elementsGLOSSARY OF 7-S FRAMEWORKWinning formulaPivotal jobsDesign leversOrganizational structureManagement systemsLeadership styleStaff STRATEGYINSTITUTIONAL SKILLSSHARED VALUESVISIONPIVOTAL JOBSSTRUCTURESTAFFSYSTEMSSTYLE |
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