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Strengthening your organisation in a downturn

A strong organisation isn't optional, something to worry about after the crisis.

By Simeon Preston and Marcia Blenko

First published on julio 27, 2009
min read


Who has time to worry about building a stronger organisation in a downturn? But this is when leaders need to ensure their organisations are performing well, so that important decisions get made and executed quickly and effectively. Strengthening the organisation is one of the most powerful levers any company can pull to improve its performance in a recession. It starts by asking a series of questions: What are the critical decisions in this downturn? How should we adjust our structure to address them effectively? How should our roles and processes change? Which of our most experienced people will be able to make and execute key decisions? Which aspects of our culture reinforce decision effectiveness, and which don't? Adopting this "decision lens" is the most important step a company can take to improve performance. It helps leaders focus their efforts where they will have the most impact. Identifying the critical decisions: Every company has its critical decisions. Some will be the big choices, like whether to invest in a new product. Others may be everyday front-line decisions. Toyota, for example, achieved its leading position partly through its reputation for manufacturing quality. To maintain that reputation, Toyota ensured plant workers knew how to make and execute the right quality-related decisions. These decisions are as important now as when Toyota was growing rapidly. If you're in survival mode, the critical decisions will be different, such as whether to overhaul the business model. Testing the structure: Sometimes structure is a serious obstacle to decision-making. In that case, structure must change. For example, Hewlett-Packard's salesforce was organised by customer and its manufacturing units by product. With stalled decisions and people working at cross purposes, performance suffered. When it moved to a product-based structure across the entire company—with accountabilities for decisions clearly defined—decision-making improved, as did profitability. Clarifying roles and processes: Unless people know who's responsible for making and executing critical decisions, stress on an organisation will increase. A tool we call RAPID clarifies accountability for each part of these decisions. The team responsible for a Recommendation gathers information and proposes a course of action. People with Input responsibilities shape the recommendation. An executive who must Agree is anyone who needs to sign off. Eventually, one person will Decide. This person "has the D", ensuring single-point accountability. The final role involves those who Perform or execute the decision. Amid turbulence, clear decision roles boost performance by unclogging bottlenecks. The right people in the right roles: Many companies cut costs through layoffs and attrition. But the people who leave are not always the poorest performers. Those who stay may not have the skills to decide. And companies often fail to consider who they might hire to bolster their capabilities. In downturns, no company can afford to have the wrong people in key decision roles. The key to making the best use of people is a robust, effective performance-management system that has real consequences. Actively managing the culture: Culture underpins an organisation's decisions. In a downturn, leaders keep a strong culture from deteriorating-or transform a culture that hinders good decisions. Understanding that its culture is a competitive advantage, Southwest Airlines reinforces it in hard times. In the early stages of the recession, it maintained staff loyalty (through no involuntary job cuts) and invested in upgrading customer service. It continues to be one of the US leaders for on-time performance, an aspect of the business that customers care deeply about. A strong organisation isn't optional, something to worry about after the crisis. Your organisation's strength will greatly affect how well your company weathers the storm and grows once the storm passes. Simeon Preston is a partner with Bain & Company and a leader in the firm's Southeast Asia Organisation practice. Marcia Blenko is a partner and leads Bain's Global Organisation practice. Adapted from the forthcoming book Winning in Turbulence by Bain & Company, published by Harvard Business Press. Bain Book Winning in Turbulence Learn more about how companies can navigate through turbulent times and succeed as the economy improves.

Who has time to worry about building a stronger organisation in a downturn? But this is when leaders need to ensure their organisations are performing well, so that important decisions get made and executed quickly and effectively.

Strengthening the organisation is one of the most powerful levers any company can pull to improve its performance in a recession. It starts by asking a series of questions:

What are the critical decisions in this downturn?
How should we adjust our structure to address them effectively?
How should our roles and processes change?
Which of our most experienced people will be able to make and execute key decisions?
Which aspects of our culture reinforce decision effectiveness, and which don't?
Adopting this "decision lens" is the most important step a company can take to improve performance. It helps leaders focus their efforts where they will have the most impact.

Identifying the critical decisions: Every company has its critical decisions. Some will be the big choices, like whether to invest in a new product. Others may be everyday front-line decisions.

Toyota, for example, achieved its leading position partly through its reputation for manufacturing quality. To maintain that reputation, Toyota ensured plant workers knew how to make and execute the right quality-related decisions. These decisions are as important now as when Toyota was growing rapidly.

If you're in survival mode, the critical decisions will be different, such as whether to overhaul the business model.

Testing the structure: Sometimes structure is a serious obstacle to decision-making. In that case, structure must change. For example, Hewlett-Packard's salesforce was organised by customer and its manufacturing units by product. With stalled decisions and people working at cross purposes, performance suffered. When it moved to a product-based structure across the entire company—with accountabilities for decisions clearly defined—decision-making improved, as did profitability.

Clarifying roles and processes: Unless people know who's responsible for making and executing critical decisions, stress on an organisation will increase. A tool we call RAPID clarifies accountability for each part of these decisions. The team responsible for a Recommendation gathers information and proposes a course of action. People with Input responsibilities shape the recommendation. An executive who must Agree is anyone who needs to sign off. Eventually, one person will Decide. This person "has the D", ensuring single-point accountability. The final role involves those who Perform or execute the decision. Amid turbulence, clear decision roles boost performance by unclogging bottlenecks.

The right people in the right roles: Many companies cut costs through layoffs and attrition. But the people who leave are not always the poorest performers. Those who stay may not have the skills to decide. And companies often fail to consider who they might hire to bolster their capabilities. In downturns, no company can afford to have the wrong people in key decision roles. The key to making the best use of people is a robust, effective performance-management system that has real consequences.

Actively managing the culture: Culture underpins an organisation's decisions. In a downturn, leaders keep a strong culture from deteriorating-or transform a culture that hinders good decisions.

Understanding that its culture is a competitive advantage, Southwest Airlines reinforces it in hard times. In the early stages of the recession, it maintained staff loyalty (through no involuntary job cuts) and invested in upgrading customer service. It continues to be one of the US leaders for on-time performance, an aspect of the business that customers care deeply about.

A strong organisation isn't optional, something to worry about after the crisis. Your organisation's strength will greatly affect how well your company weathers the storm and grows once the storm passes.

Simeon Preston is a partner with Bain & Company and a leader in the firm's Southeast Asia Organisation practice. Marcia Blenko is a partner and leads Bain's Global Organisation practice. Adapted from the forthcoming book Winning in Turbulence by Bain & Company, published by Harvard Business Press.