Here is a brief excerpt from an article by Gary L. Neilson, Jaime Estupiñán, and Bhushan Sethi for strategy+ business magazine, published by PwC strategy& LLC (formerly Booz & Company). The fundamental guidelines they recommend, drawn from broad and deep real-world experience, can help you reshape your organization to fit your business strategy. To read the complete interview, check out other resources, sign up for email alerts, and obtain subscription information, please click here.

Illustration by Lars Leetaru

* * *

A global electronics manufacturer seemed to live in a perpetual state of re-organization. Introducing a new line of communication devices for the Asian market required reorienting its sales, marketing, and support functions. Migrating to cloud-based business applications called for changes to the IT organization. Altogether, it had reorganized six times in 10 years.

Suddenly, however, the company found itself facing a different challenge. Because of the new technologies that had entered its category, and a sea change in customer expectations, the CEO decided to shift from a product-based business model to a customer-centric one. That meant yet another reorganization, but this one would be different. It had to go beyond shifting the lines and boxes in an org chart. It would have to change the company’s most fundamental building blocks: how people in the company made decisions, adopted new behaviors, rewarded performance, agreed on commitments, managed information, made sense of that information, allocated responsibility, and connected with one another. Not only did the leadership team lack a full-fledged blueprint — they didn’t know where to begin.

This situation is becoming more typical. In the 18th annual PwC survey of chief executive officers, conducted in 2014, many CEOs anticipated significant disruptions to their businesses during the next five years as a result of global trends. One such trend, cited by 61 percent of the respondents, was heightened competition. The same proportion of respondents foresaw changes in customer behavior creating disruption. Fifty percent said they expected changes in distribution channels. As CEOs look to stay ahead of these trends, they recognize the need to change their organization’s design. But for that redesign to succeed, a company must make its changes as effectively and painlessly as possible, in a way that aligns with its strategy, invigorates employees, builds distinctive capabilities, and makes it easier to attract customers.

Today, the average tenure for the CEO of a global company is about five years. Therefore, a major re-organization is likely to happen only once during that leader’s term. The chief executive has to get the reorg right the first time; he or she won’t get a second chance.

The chief executive has to get the reorg right the first time; he or she won’t get a second chance.

Although every company is different, and there is no set formula for determining the appropriate design for your organization, we have identified 10 guiding principles that apply to every company. These have been developed through years of research and practice at PwC and Strategy&, using changes in organization design to improve performance in more than 400 companies across industries and geographies. These fundamental principles point the way for leaders whose strategies require a different kind of organization than the one they have today.

[Here are the first two of ten principles.]

1. Declare amnesty for the past. Organization design should start with corporate self-reflection: What is your sense of purpose? How will you make a difference for your clients, employees, and investors? What will set you apart from others, now and in the future? What differentiating capabilities will allow you to deliver your value proposition over the next two to five years?

For many business leaders, answering those questions means going beyond your comfort zone. You have to set a bold direction, marshal the organization toward that goal, and prioritize everything you do accordingly. Sustaining a forward-looking view is crucial.

We’ve seen a fair number of organization design initiatives fail to make a difference because senior executives got caught up in discussing the pros and cons of the old organization. Avoid this situation by declaring “amnesty for the past.” Collectively, explicitly decide that you will neither blame nor try to justify the design in place today or any organization designs of the past. It’s time to move on. This type of pronouncement may sound simple, but it’s surprisingly effective for keeping the focus on the new strategy.

2. Design with “DNA.” Organization design can seem unnecessarily complex; the right framework, however, can help you decode and prioritize the necessary elements. We have identified eight universal building blocks that are relevant to any company, regardless of industry, geography, or business model. These building blocks will be the elements you put together for your design (see Exhibit 1).

The blocks naturally fall into four complementary pairs, each made up of one tangible (or formal) and one intangible (or informal) element. Decisions are paired with norms (governing how people act), motivators with commitments (governing factors that affect people’s feelings about their work), information with mind-sets (governing how they process knowledge and meaning), and structure with networks (governing how they connect). By using these elements and considering changes needed across each complementary pair, you can create a design that will integrate your whole enterprise, instead of pulling it apart.

You may be tempted to make changes with all eight building blocks simultaneously. But too many interventions at once could interact in unexpected ways, leading to unfortunate side effects. Pick a small number of changes — five at most — that you believe will deliver the greatest initial impact. Even a few changes could involve many variations. For example, the design of motivators might need to vary from one function to the next. People in sales might be more heavily influenced by monetary rewards, whereas R&D staffers might favor a career model with opportunities for self-directed projects and external collaboration and education.

* * *

Here is a direct link to the complete article.

To learn more about PwC strategy& LLC (formerly Booz & Company), please click here.