A Powerful Tool for Organizational Analysis and Design (Part 2)

In my first article about this topic I described how to use the concept of open vs. closed organizations in order to gain an understanding of the strengths and weaknesses an organization possesses. In order to help a company transform successfully a change manager must adjust the organization appropriately so that its form is optimally matched to its function. Read Part 1 here!

In this article I will go over a case study and show how the model worked on one of my own projects by allowing me first to understand my client and then to successfully help them to adapt to change.

A few years ago I was able to use my analysis on a healthcare Program Management Office (PMO) project. My client wanted to establish a hospital-wide PMO for all of their IT functions, but felt that this kind of centralization would be a very hard sell, because many departments within the hospital had grown their own IT functions over the years: people who were embedded within different teams and had implemented a wide variety of tools and processes.

During interviews with many of the project stakeholders, managers, IT staff and HR personnel I found that the hospital was mostly influenced by financial and cost considerations. Teams judged their employer to be very bureaucratic in its way of working. Procedures were important, job roles for healthcare staff were very clearly described, regulations won out over discretionary judgments and hierarchies mattered. Overall the organization was seen as more cautious in its approach, rather than risk-taking. Interviewees also gave high scores to loyalty as a value in their working environment. All of these markers led me to conclude that overall the organization had more traits of a closed model than an open model.

Closed organizations organize from within rather than being driven mostly by outside factors, and the financial and cost considerations reinforced this assessment. Rules, risk-aversion, hierarchy and chain-of-command are also hallmarks of a closed organization and the feedback I got highlighted all of them.

Interestingly enough as I drilled down into how the IT team members perceived their own team culture I also came across some of the characteristics of more open organizations. People felt that priorities did not stay stable but could change very quickly. Most participants agreed that their workplace was a highly political environment, to the extent that it affected performance. Interviewees also highlighted that their way of working was customer-driven to a very high extent, that the organization was quite idealistic and that they would always go the extra mile to help hospital staff do their jobs and save patients’ lives. They also preferred consensus building when faced with the need to make a decision.

Generally one can find conflicting leadership directives, jostling for power and influence and the value of consensus over unilateral decisions in more open organizations. The same is true for a focus on customer needs, because this is an outside determinant, unlike the more internal financial considerations.

Overall the survey presented the picture of a large organization with a slight tendency towards a closed culture that managed to rally people behind it and inspired loyalty, but which for their IT teams failed to provide the associated focus, clear accountability, leadership and swift decision-making they needed in order to provide the best service they could to their customers.

If I placed this dynamic against the proposed change: the implementation of an overall IT PMO my analysis alerted me to several mistakes I would need to avoid and some powerful change drivers I needed to maximize if I wanted my stakeholders to believe that the PMO would be a win for them and not a threat.

My team had to tread carefully so they would not be seen as introducing yet another layer of bureaucracy. Instead we needed to sell the PMO as a way to shorten decision times, keep directives and requirements stable over time so people could do their jobs and establish clear lines of communication.

It was important to stress that a PMO would help everyone to be able serve their customers better. We set up a structure of standardized customer surveys and customer feedback that we used to report on projects and evaluate project success.

We also decided to make speed of decision making a Service Level Agreement between IT customers, project managers, hospital leadership and the PMO.

Establishing a clearly documented governance process and empowering IT project managers as well as the PMO director to request that everyone followed it reduced some of the politics and behind-the-scenes strong-arming that people had used before to get their pet projects implemented or prioritized over other needed work.

This also became a strong selling point of the PMO to hospital leadership. Because of their focus on financial performance we could show them how in the past IT initiatives had worked against each other and resulted in either only partial results or had even actively reduced the value of other projects. The gate-keeper function of the PMO would largely eliminate this since all projects would be assessed and their impact understood and they could no longer fly under the radar.

The PMO became an important tool to increase accountability and acknowledge and reward the appropriate people behind project success.

In line with the habit of the organization to maintain very clearly defined job roles for doctors and nurses including mandatory training, qualifications and levels of authority we generated a similar structure for our IT project staff which helped project managers to get the appropriate training, eliminated the phenomenon of the “accidental” project manager, allowed HR to make better hiring decisions and attracted better project management talent to the organization.

Overall we tapped into the elements of a closed organization that were already in place to build a robust structure while avoiding to be perceived as yet another layer of useless red tape. We also could use this rigor to remove some of the dysfunction of the more open environment that the IT staff inhabited while using their strength of customer focus as the rallying point behind the new processes that we put in place.

One of the lessons I have learned by working with this model over the years is that organizational models usually attract and retain the kinds of people that enjoy them: closed organizations are sustained by people who like clear boundaries and the stabilizing effects of following processes and routines. They want to understand their own role and responsibilities and have clearly defined relationships with their team-mates, managers and customers.

Open organizations will also attract their own set of employees – they enjoy more of a free-form way to organize themselves, the ability to try out new things, to have a more fluid role and to collaborate spontaneously rather than follow a pre-defined way of working. I sometimes think of it as the start-up mindset, because I have seen these kinds of people leave once an organization reaches a certain level of maturity and needs to introduce more clearly defined processes and standards just to remain manageable. You’ll happily find them joining the next start-up.

In this there is also a lesson for change managers: shifting an organization from open to closed or from closed to open can be done, but client leaders must be aware that if the transition is extreme there will be a price to pay in increased attrition.

It would be quite disruptive to change a relatively closed organization into an open organization over night. Employees would feel insecure, overwhelmed by choices and responsibilities, swamped by the amount of delegation they are facing, and unable to cope with the plurality and conflict of their new environment.

In the opposite situation, stakeholders would resent the loss of freedom, the need to suddenly follow orders, the amount of control that’s taken away from them, and the loss of their individual voice and uniqueness. This is particularly true if the change is following in the tracks of a transition from one company to another during a merger or acquisition.

Change managers need to be aware of these dynamics and talk openly with their clients about some of the people risk involved during far-reaching transformations, such as losing valuable talent.