Requisite Restructuring©

We can all agree that it is good to be innovative, creative and successful. The question is how to create the conditions to make it possible to be so without continual restructuring and repeated attacks on the morale of the people.

Restructuring

Restructuring is frequently the focus of corporate projects with the purpose of designing cost-effective organizational structure. Often the achievement of the restructuring objectives leads to disappointment and concern for the companies and their managers, when the company becomes worse off after the restructuring.

Our research shows that one of the reasons is a lack of clarity about an organizational structure’s cost-drivers, and determining optimal targets for the cost-drivers that are a good fit with the company’s overall business objectives.

So, what are the key drivers that form the cost of an organizational structure? In ROII, we identify 4 critical cost drivers:
  • Number of organizational levels.
  • Number of roles per organizational level.
  • Number of people per role type per organizational level.
  • Amount of pay / compensation per role per organizational level.
In the process of designing the restructuring programme companies need to find answers and to set goals about the cost-drivers:
  • What is the right number of organizational levels that our company needs to have to be effective?
  • What is the right number of roles per every organizational level for our company to deliver effectively the value?
  • What is the right number of people for every role type at every level?
  • What is the felt-fair pay / compensation for the work in roles at every organizational level?
If your company does not have substantiated answers to these questions, there is high probability that the restructuring programmes set up to fall short of the targets whilst creating a myriad of productivity problems.

Objective of Requisite Restructuring©:

Design cost-effective organizational structure that fits the complexity of the company’s value chain.

Key Definitions of Requisite Restructuring©:

  • Organizational Structure: The system of role relationships between the positions people hold in working together that establishes the boundaries within which people relate to each other.
  • Role Complexity: The complexity in a role as measured by the time-span of discretion delegated to the role.
  • Time-Span of Discretion (T/S): The time-span of discretion is the targeted completion time of the longest task or task sequence in a role. Time-span measures the level of work complexity in a role.
  • Level of Work (LoW) in Role: The weight of responsibility felt in roles as a result of the complexity of the work in the role. The level of work in any role can be measured by the time-span of discretion of the tasks in that role.

Framework of Requisite Restructuring©:

Ineffective organizational structure (mismatch between the complexity of structure and value chain complexity) has two major cost implications for bottom line:
Cost-effective optimal organizational structure and work organization, the alignment of all the dimensions.
Too much cost associated with the structure (complexity of the structure exceeds the complexity of the values chain): excessive number of levels, number of roles, number of people, over-paid employees, etc.
Under-achieved bottom line or its loss due to lost opportunities or additional cost caused by ineffective value chain management (complexity of the structure is less than the complexity of the value chain): wrong people in wrong roles, ineffective decisions, absence of the work complexity, etc.
Cost-effective optimal organizational structure and work organization, the alignment of all the dimensions.
Too much cost associated with the structure (complexity of the structure exceeds the complexity of the values chain): excessive number of levels, number of roles, number of people, over-paid employees, etc.
Under-achieved bottom line or its loss due to lost opportunities or additional cost caused by ineffective value chain management (complexity of the structure is less than the complexity of the value chain): wrong people in wrong roles, ineffective decisions, absence of the work complexity, etc.
  • Every company is created to deliver a specific product / service that has a value to the society / market.
  • Companies design and manage value chains to produce the product / service with maximum bottom line.
  • Value chains differ in the levels of complexity based on various factors such as number of value chains (single or multiple), complexity of outputs, number of assets, geography of assets production or service delivery (local, regional, national, international), operating revenue, size of employment, etc.
  • There are 8 levels of the value chain complexity.
  • Level of Value Chain Complexity:
    • Map the high-level model of a company’s value chain (primary and secondary activities).
    • Map how these activities are organised into systems hierarchy at present (processes, systems, functions, etc.)
    • Identify the complexity level of the value chain.
  • Value chain is a flow of work to produce a sequence of direct outputs that lead to a final product / service with a value to the society.
  • To ensure uninterrupted flow of direct outputs the management (managerial work) of the value chain must be performed.
  • Work is the exercise of judgment and discretion in making decisions in carrying out goal directed activities over time.
  • Work differs in complexity and there are 8 levels of work complexity.
  • For effective management of the value chain the company needs to deliver the complexity level of work that matches the complexity level of the value chain.

  • Companies use organizational structures to produce and manage the flow of work within the value chain.
  • Organizational structure is a hierarchy of roles and role relationships to produce direct output and delegated output of certain complexity. Thus, an organisational structure consists of two streams:
    • Levels of delegated accountability and authority between the roles.
    • Levels of work that the levels of delegation produces.
  • Cost-effective organizational structure has a match between the number of delegation levels, the number of levels of work that the levels of delegation produces, and the levels of value chain complexity for which the structure is developed.
  • The design of organizational structure includes 4 main structure stages: manifest, extant, assumed and requisite structure.
Manifest Structure (official chart) depicts roles and delegation relationships (“reporting lines”) between the roles as approved by the management – delegation hierarchy:
  • Map all the roles and delegation lines as described on the official chart.
  • Analyse the manifest structure:
    • Identify maximum number of delegation levels in the structure.
    • Map the “ground-based” manifest structure: start with the roles with no subordinates and add layers with 1 subordinate, 2 subordinates and so on.
    • Identify potential gaps / compressions as structural deformations that might require further closer analysis.
  • Assumed structure depicts the pattern of connections between roles as it is assumed to be by the different individuals who occupy positions in the organisation.
  • Assumed structure uncovers real lines of delegation and managerial authority between the roles as perceived by the role holders and might be different from the lines on the manifest structure.
  • Assumed structure is developed based on 4 critical parameters of structural assumptions:
    • Work complexity as felt fair by the role holders.
    • Tasks assigned to the role holders.
    • Perception of who has an actual authority / influence over role holder.
    • And frequency of the interactions between the roles.
  • Assumed structure:
    • Develop the templates for structured interviews and questionnaires based on parameters of structural assumptions.
    • Conduct structured interviews to get the role holders perception of how they think the structure works.
    • Map the assumed structure based on 4 parameters of structural assumptions.
    • Analyse the assumed structure (felt fair complexity, number of delegation levels, delegation lines, etc.)
  • Assumed structure is a better foundation for further analysis of the extant structure than the manifest structure is.
Extant structure shows the levels of work that the structure and roles (levels of delegation) produce:
  • Identify the level of work complexity that a role produces:
    • Conduct interviews with the roles about the work.
    • Use Time-span of discretion measurement to identify the level of work complexity in every role.
  • Map the extant structure by aligning the levels of delegation with the levels of work in the roles.
  • Identify gaps in the organizational structure:
    • Levels of work complexity that are not missing and do not match the complexity of the value chain.
    • Between the levels of delegation there are missing levels of work complexity.
  • Identify compressions in the organizational structure – multiple role in a delegation line that are at the same level of work complexity.
  • Requisite Structure is the only cost-effective structure of work organization to get maximum value from the value chain of the company and is the optimal target for any re-structuring programme.
  • Requisite structure is a hierarchy of roles in which:
    • Every managerial role produces the level of work complexity that is 1 level higher than the level of work complexity produced by subordinate roles.
    • No gaps and compressions exist in the delegation line.
    • Maximum level of work produced at the top of the company matches the level of value chain complexity.
    • Minimum level of work produced matches the level of direct output of the product /service of the company.
  • Requisite structure:
    • Identify the strategy time horizon that matches the complexity of the value chain for which the requisite structure is designed.
    • Develop the strategy (critical success factors, strategy linkage, aligned tasks for every level of work and every primary / secondary activity of the value chain).
    • Perform the functional alignment by identifying the level of work that every primary / secondary activity of the value chain must produce (functional alignment is the procedure of getting the right value chain activities at the right level of work).
    • Establish the structure of roles at the levels of work required to achieve the primary and secondary activities.
    • Assign the primary and secondary activities and their tasks to the roles that match their complexity of work.

Paid fairly.
Over – Paid – excessive cost to the structure.
Under – Paid – difficulty to attract capable employee to perform the level of work effectively, cost-effective.
Paid fairly.
Over – Paid – excessive cost to the structure.
Under – Paid – difficulty to attract capable employee to perform the level of work effectively, cost-effective.
  • Requisite Pay is a system of equitable pay differentials between positions at different levels of work complexity which are experienced by the incumbents as fair and just.
  • Requisite Pay defines the felt-fair compensation for the level of work that a role produces:
    • A managerial role has 1 level higher complexity and 1 level higher pay differential.
    • Peers of a role produces the same level of work and have the same level of pay differential.
    • Subordinates of the role produce the level of work that is 1 level lower and have pay differential that is 1 level lower.
  • Requisite Pay:
    • Define monetary value for the boundaries of every level of work.
    • Conduct study to validate the felt-fair equitable pay differential.
    • Define monetary value for work bands within every level of work.
    • Define monetary value for 6 pay steps within every work band.

  • Requisite Workload is an optimal number of people required to deliver the work of the value chain or any role within the value chain.
  • Roles might be categorised into three categories based on the outputs produced:
    • Roles that produce only direct output (individual contributor).
    • Roles that produce only managerial output (manager).
    • Roles that produce both direct output and managerial output (manager / individual contributor).
  • Requisite Workload for a role:
    • Identify direct outputs produced by the role (direct outputs / direct output support, delegated and aided direct outputs, policy-controlled direct output).
    • Define the quantity / quality of a outputs to be produced by the role.
    • Define actions required to produce the output.
    • Define time required to produce the outputs in accordance to the prescribed standards.
    • Define frequency of the outputs produced.
    • For managerial outputs identify the number of subordinate roles in their span of control.
    • Define Full Time Equivalent (FTE) to produce the outputs.
    • Define FTE for the role based on FTEs of every output produced by the role.

Interested to know more about Requisite Restructuring©?

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Workshop on Requisite Restructuring©

  • For companies who are in search of an optimally cost-effective structure and would like to develop a restructuring programme that helps them to achieve a cost effective structure.
  • For companies who have developed a restructuring programme and would like to evaluate the quality of the programme by getting answers to the 4 restructuring questions.
  • For companies who would like to evaluate how cost-effective their current organizational structure is and how much value is potentially lost due to ineffective structure.
  • Line managers who are accountable for the units that are planned for restructuring.
  • HR / OE managers accountable for supporting Line managers on designing effective organizations.
  • Project managers accountable for restructuring projects.
  • Explain the requisite principles behind Requisite Restructuring©.
  • Educate participants on the steps in designing cost-effective organizational structures.
  • Conduct self-assessment of the current organizational structures.
  • Conduct self-assessment of the restructuring programme approved by the company.
  • Develop the plan to improve organizational structure and / or the quality of the restructuring programme.
  • 4-day workshop.
  • Organizational structures (manifest).
  • Restructuring programme.
  • Strategy of the company, if exists.
  • Pay structure of the company.
  • Job evaluation procedure, if exists.
  • Workload planning / human resource planning procedure, if exists.
  • Rebecca Cason, President of Requisite Organization International Institute.
  • ROII’s advisors with experience in RO implementation worldwide.
  • Moderators with years of organizational design experience.
  • At your premises.
  • At our premises or premises of our partners across the globe (UK, Sweden, USA, Australia, Canada, Moscow, etc.).
Interested to know how cost-effective your structure is?
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Requisite Restructuring© Assessment

  • Select the scope for Requisite Restructuring© Assessment (function, unit, section, the whole company, etc.).
  • Evaluate the complexity of the value chain or its part under selected scope.
  • Establish the level of work complexity required.
  • Analyse the manifest structure of the scope.
  • Analyse the assumed structure of the scope.
  • Analyse the extant structure of the scope.
  • Design the requisite structure of the scope.
  • Evaluate the match between the existing pay structure and requisite structure, and suggest how to align them.
  • Evaluate the workload for every role (FTE) and match with the current FTE.
  • Identify opportunities for cost optimization.
  • Design the restructuring programme to design and implement the cost-effective requisite structure.
  • Up to 4 weeks (depends on the scope).
  • 3 experienced Requisite Advisors (depends on the scope).
  • 3 internal HR / OE specialist for training and development.
  • Value chain mapping.
  • Value chain complexity assessment.
  • Levels of work complexity measurement.
  • Manifest structure analysis.
  • Assumed structure analysis.
  • Extant structure analysis.
  • Requisite Organization Model.
  • Functional alignment.
  • Strategy linkage.
  • Requisite workload assessment.
  • Requisite Felt-Fair Pay system.