Reinvention in the Middle Market

Dave Ulrich is a legendary thinker on the modern organization. HR Magazine has called Ulrich “the father of modern Human Resources,” and recognized him with a Lifetime Achievement Award. He has written more than thirty books, and as a founding partner of the RBL Group has worked with more than half of the Fortune 200 companies, helping them re-think the way they work. Ulrich’s latest book is called Reinventing the Organization: How Companies Can Deliver Radically-Greater Value in Fast-Changing Markets, co-authored with Arthur Yeung. NCMM spoke with Ulrich recently about how middle market organizations can reinvent themselves.

 

How do you define an organization?

Ulrich: Organizations can be formally defined through an org chart, but my definition is much simpler. An organization is a collection of individuals who come together to accomplish something around a shared purpose. When leaders start a company, they often work by themselves. But as companies grow, they find that the enterprise, the collection of individuals working as a whole, brings more value than the individual parts. If asked, every leader would say that talent is everything. But when we did research, we actually found that the organization had four times the impact than the aggregated talent. The whole is greater than its parts, like a fist is more powerful than five fingers. Smart organizations hire people who are not just individually exceptional, but who make the whole more valuable than the parts.

Why do middle market organizations and organization structures need to change right now? 

Ulrich: So many organizations today are hierarchies. You’ve got a big box at the top, then smaller boxes under those, like a Christmas tree. Hierarchical organizations would be terrific in a world that's not changing, because you have roles, and rules, and routines, and everybody knows their place. But today’s world and every single industry is changing so rapidly. 

You can't have a hierarchy where you need six levels of approval before you make a decision. You’ve got to move as quickly as the world around you. When you need agility, the organization can't be built around rules, roles, and routines. It's got to be built around moving quickly into and out of new markets. That’s what the new book is about.

How can a middle market organizations define the "right" culture to support this organizational agility?

Ulrich: This is a topic so close to my heart. When you ask what a company's culture is, the most common answers are its values, norms, behaviors, and the way its people do things. I look at it differently, from the outside-in, at how customers see the company’s brand and then how companies keep the brand promise through its internal workings. Brand is an image, an identity that's seen in the marketplace. Disney has a brand for its theme parks: "the happiest place on Earth." That external brand or promise to a customer should translate to the organization’s internal values, its culture. 

I took my eight-year-old granddaughter to a Disney theme park and was grouchy about the high prices for the hotel and everything else. But when my granddaughter got to meet Cinderella, it was a magical, unforgettable moment and she beamed, “thank you for everything, grandpa!” That’s when I understood. Disney’s internal culture and organization is driven around creating those magical moments. We then booked an expensive Disney cruise, and I didn’t love paying the premium price, but it's hard to replace a granddaughter saying, "Grandpa, I love you because you helped me see Cinderella."  

What is the “market-oriented ecosystem,” or MOE, you describe in “Reinventing the Organization”? 

Ulrich: Markets are changing so rapidly today, which creates opportunities. The key question is: How quickly can organizations move to take advantage of these opportunities? We looked at companies who we defined as “market-oriented,” they're looking at seizing emerging opportunities in the future. These companies have created what we call ecosystems, where they have a platform to keep doing their current business, but they can also put small teams onto new opportunities. That's what we call a market-oriented ecosystem.

The governance challenge becomes how do you sustain these small teams so they’re not isolated, so this approach can be scaled. We found that HR could help build that governance framework around talent, culture, information sharing, learning, collaboration, and accountability to sustain these MOEs. When HR builds the systems that sustain those pieces, those opportunity-driven teams working with each other, then this idea of an innovative and agile organization is not just random, it's replicable.

What do employees need to do to make MOEs work?

Ulrich: If you're an employee who likes structure, predictability, and the past leading to the present and the future, the MOE approach is not going to work for you. But if you're an employee who wants opportunity, and a chance to become better, the MOE works. All employees want to have purpose. They want their purpose to be consistent with the company's purpose. Leaders need to create an organization with a sense of purpose, a sense of accomplishment. Then give your people a chance to learn and to grow.

What are the change management principles that middle market companies should be following? 

Ulrich: Leaders have got to create a sense of urgency around change. Why are we doing this new organization logic [MOE] now? Well, we're doing it to win in a fast-changing marketplace. What's the vision? Where are we going? How do we get people to buy into it? What we've discovered in sustaining change is it's almost never linear from A to B. I call it running up a sand dune. You take three steps up, and then you slide back two, and then you go another step, and you have to continually take the initiative to go forward. Creating that momentum with strong communication and incentives is the leader’s role.

What steps can middle market company leaders take now to begin adopting this market-oriented ecosystem approach? 

Ulrich: The first one is knowing where you are today. Then it’s defining: “what do we as a company want to be known for in the market by the customers who will buy our product or service?” Because if you're not creating value for those customers, you’re in trouble. Get your head around an outside-in, customer-centric approach, and define your internal values and structures that way. You have to reinvent constantly, which can be scary. Take a few minutes to pat yourself on the back for all your previous successes, and then move forward. What matters most today is what your customers are looking for. What can you give them that they didn't ask for? Get out of your office. Go visit customers you already have and customers you've lost or never had. Ask them: What's the problem that nobody in my business is giving you an answer to? Not knowing that answer is where it all begins. 

 

Listen to "Dave Ulrich on Reinventing the Organization" on Spreaker.