Turbocharging organization capability a la Google

Implications: Nearly all major companies are operating outdated organizational concepts that support egos and greed but do not use people and technology to maximize investor value. A few companies are challenging these concepts, Google being one, but no company has made the transformation to a truly "intelligent organization". The first company that establishes a true value focused culture and organization which recognises how people drive value and supports them with the technology that is now available will gain tremendous competitive advantage.

Analysis:  Value creation, People, Technology and Ego 
  Implications  
The second Industrial Revolution is in progress now. This revolution will be just as significant as the first in terms of its impact on business. Globalization and technology are creating new opportunities for the way business models are executed.
Most companies are however operating with outdated organizational concepts that are dramatically limiting their ability to create value and returns for investors. A few companies are starting to break the traditional mold and focus their organizations more on driving value through the superior utilization of their people and technology. Coca Cola, IBM and Google are some of the leaders and GE has set a high priority on the disciplines of performance management and quality as key value drivers.
Gary Hamel’s article in the Wall Street Journal on 4/26/2006, “Management a la Google”, focusing on “evolutionary risk factors” illustrates their break with traditional organizational concepts.   People are the only asset that creates value. In some of the highest performing companies in the world people are the only asset.

Most of the best performing companies in the world are still only using a fraction of the value creation potential of their talent pool because they have not clearly established the linkage between Value creation, the Organization of people, the functionality of today’s Technology and the motives of Ego and Greed. Leading companies are starting to break through the traditional hierarchical and siloed concepts and establish flatter, more flexible “intelligent multidimensional organizations” driving competitive advantage through the more effective use of their global talent pool.

These companies represent a major opportunity for investors.   The companies that provide the system solutions to enable companies to make the organizational transformation also offer a significant opportunity for investors. IBM’s recently acquired Cognos and SuccessFactors are good examples of this “business intelligence”sector.  

Analysis  

Nearly all of the major companies in the world are still operating with organizations that were never designed to take advantage of the functionality of today’s rapidly evolving technology. We have a host of ERPs, CRMs and other systems desperately looking for problems to solve. We have however very few companies that understand the linkage between their people’s individual performance, sustainable value creation and how these systems can directly increase the power of their talent pool to maximize value for investors.  

The effectiveness of talent to create value in an organization is dependent on the organization’s ability to match the highest value creating roles with the most qualified talent available. The talent then needs the technology to provide management information that enables them to make the highest quality decisions.   The “intelligent organization” uses technology to manage the working relationships of the global talent pool to achieve business goals, by competencies and experience and not by hierarchy, business unit(silo) or geography. One of the first companies to break the traditional model and achieve part of this has been Coca-Cola. In the 1930s they established the foundation of  their multidimensional organization to maximize their speed to global market dominance. Their organization consists of the core consumer marketing company, The Coca-Cola Company and a global "Coca-Cola System" of  over 1,200 “independent” bottlers that supported their rapid global growth locally.  

Recognizing that the effective global utilization of the talent in The Coca-Cola Company within the global Coca-Cola System was key to maintaining competitive advantage, they created a large globally mobile talent pool.. These are high potential individuals signed on to a globally mobile career within the System, centrally managed by TCCC. This is one of the few examples of a global talent pool being identified and centrally controlled as a corporate asset rather than being “trapped” in local business units.  

The major challenge to Organizational Development and most other aspects of business, is the continually escalating rate of change. The larger the organization the slower the ability to achieve significant change in organizational capability. In order to maximize the effectiveness of a global talent pool it is therefore essential to have a vision of where the organization needs to be in 2 to 3 years. The people that are hired and trained today will directly impact a company’s organizational capability for a considerable time into the future.

Even if a company feels that it is not possible to plan 3 years out it still needs an organizational vision. This can be designed in a way that gives the maximum flexibility for change to handle an unpredictable marketplace. The GLG Council of independent consultants is an example of a very flexible component of organizational capability that can be accessed as required.  

Investors need to understand what business processes a company has in place to support innovation and how organizational capability will be flexible enough to handle the business changes likely to occur in a dynamic marketplace. In particular they need to know how the global talent pool in the company is being identified and managed. An important part of this will be the way key employees are compensated in relation to their performance goals. A recent report identified that companies are currently still unlikely to disclose the nature of these goals and how they are paying executives for performance.  

We have seen a number of examples where technology has impacted the power of the individual to not only generate business value but also increase business risk. Investors should be aware of the business processes that are in place to manage the business risk around key professionals and the controls in place. A critical part of people business risk management should be succession planning and the readiness of successors.  

The “intelligent multidimensional organization” of the future will consider the options of a flat, flexible core company that may be supported by all or some of the following elements:  
-         Employees
-         Outsourcing vendors for support functions
-         Business Alliances/Partners
-         Independent Contractors
-         An engaged global pool of potential new hires to support change and growth  

This also requires a talent pool that is motivated to be flexible in terms of hierarchical position and the tasks they carry out to meet the requirements of current business objectives and available resources. This in turn requires new compensation strategies that reinforces the behavior required.  

In broad terms organizations consist of two types of people, the value drivers, such as the sales force and the supporters that maintain the infrastructure to support the value drivers, such as IT and parts of the Finance function. These support functions are potentially suited to outsourcing where the key roles in the “support” function become value drivers in the outsourcing organization. This is where the top talent in that function is likely to be attracted to and the latest technology will be maintained to drive value. The core company can then focus on maintaining the best organization and infrastructure for its value creators.  

Competitive advantage and sustainable value creation is dependent on a sound business model that focuses on the maximization of the value creation ability of its talent pool. To achieve this requires the definition of a future target organization with an increasing ROI in people. This will be achieved through more effective utilization of the talent pool and the available technology for global communication, information databases, business control and personal development.  

In most companies however, there is still a mismatch between the information that management feels is critical to run the business effectively and the data that their information systems provide. This is a fundamental first step in making the business transformation.  

RJB 2/18/2008