If you want to change the way organisations are run, you can’t simply walk into a room full of successful executives and tell them they’re wrong. You need to ‘show them the money’. For the past few years, there has to be a groundswell of new organisational models attempting to address the twin issues of employee disengagement and excess control (and associated lack of reactivity/additional costs). The combination of Generation Y workers coming through the ranks and ubiquitous technology mean that we have reached a stage where the way we do business can really be challenged. See this blog for the background story. As part of the RSA Fellows’ Reinventing Work series I led a discussion last week on how to create robust business cases arguing for change. This is important because at some point you are going to persuade someone to make an uncomfortable decision and that person will need to justify it in robust monetary terms. First, what are we up against? – The economist credited with inventing specialised work is Adam Smith. He demonstrated in his pin factory example that he could raise the output of one worker from 20 pins per day to almost 5,000! The industrialist associated with putting this principle to work was Henry Ford. Between 1910 and 1912, through successive innovations to the assembly line, he was able to raise output eightfold and drop the price of the Model T from $950 to $280. It is therefore not surprising that the logic of efficiency and specialisation has continued to permeate our thinking for… 240 years. The problem is that we have now squeezed every efficiency, and the cost of controlling the system creates both dis-economies and an uninspired workforce. So how do we measure the before and after of reorganising work? Here are a few tips from our discussion:
– Make the old v. new model very explicit. In the first round of thinking one tends to be fairly generic e.g. happier employees means lower recruitment costs. In subsequent discussions, as the new model takes shape, specific opportunities pop up e.g. new sources of income, specific savings (from IT costs to catering…) These can then be translated into hard metrics more easily.
– Translate Purpose into metrics. Dutch nursing company Buurtzorg is a remarkable example of purpose driven transformation. Yet what is more important as a change signal is the fact that its overheads are 8% of sales v. 25% for the competition; and that it has achieved a 70% market share in key segments in half a dozen years. Also, push the logic of notional savings: more engaged employees = more creativity. What does this mean in practice? For each organisation it will be different but one can put a value on lower reworks or returns and estimate the financial impact of increased quality.
– Account for both benefits and costs of all types. It is easy to be impressed by the slashing of support functions in transformed organisations but the business case must be robust and include all costs and benefits. For example, self-managing teams need to sacrifice revenue-earning time to solve problems previously managed centrally.
– Separate one-offs from regular costs/savings. In most cases training will be more extensive/expensive and there will be redundancy costs – if only to accommodate employees who cannot find a new role in the new organisational model. Robust case-making can seem like a thankless task and doesn’t sit comfortably with the ambition to create a New Organisational Age. Yet even new organisations need access to capital: the best way to convince a room of successful people about change is to show them how they could be even more successful.