How to Activate the Orphan Star Point
Michael Schuster, Ph.D. and Greg Kesler
October 20, 2011

Michael H. Schuster, J.D., Ph.D. is professor of Management Strategy and Chair of the Management Department, U. S. Coast Guard Academy, New London, CT. He is also managing partner at Competitive Human Resources Strategies, LLC (CHRS), a consulting firm based in Narragansett, RI. The author can be reached at
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Gregory Kesler is managing partner in the consulting firm, Kates Kesler, based in Wilton, CT. He writes and lectures extensively on the subject of organization design. He can be reached at
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Companies are becoming more sophisticated in using organization design as a critical tool for driving business growth through new structure and capabilities. It is intuitive that aligning the right measures and reward systems with structure and process is important to organization design. But reward systems are often on the sidelines during the design process. The reasons are many and they need to change with the help of some simple frameworks that provide a basis for diagnosing alignment needs and for making concrete adjustments in incentive programs and metrics to support changes in structure, process and people.

It is more than 35 years since Jay Galbraith (1975) offered the now widely accepted Star Model (See Figure 1) as a lens on organization design that aimed to align structure, process, people and rewards with the business strategy.

Metrics inform employees and managers of what is important and provide leadership with a dashboard for steering business growth. Rewards influence behavior and are intended to align individual actions with organizational goals. The Star Model has been widely adopted largely because of its behavioral point of view on organization design.

Metrics and rewards are a substantial part of bringing those behaviors to life, and yet design practice is not well defined, and the literature is nearly silent on how to align reward systems to an integrated organization design initiative. Rewards systems are the orphan star point.

The wrong incentives may actually make matters worse than no incentives at all. In his famously titled paper, “On the Folly of Rewarding A, while Hoping for B,” Steven Kerr (1975) made the case well. We would extend the argument to suggest a Compensation Hippocratic Oath – first, do no harm.

The Effects of Misalignment

When metrics and pay are not aligned with new organization structures, roles and business processes the unintended consequences are many. Take the example of a significant reorganization of a large industrial products company intended to drive growth in four vertical markets. The design change shifted the organization from a purely regional model with country-based P&L units to four global industry-aligned units. Despite an intent to re-align executive targets and incentives as a part of the initiative, legacy programs prevailed due to a lack of flexibility on the part of corporate compensation programs.

Country managers in the new organization continued to behave as they had in the old. Instead of collaborating across countries and regions to bundle their products with those produced in other country-based businesses they continued to chase business on their own in order to keep their local factories filled with orders. Instead of helping key account leaders in a vertical market to offer higher-value solutions that would have meant greater sales for the overall company they did precisely what they were being incentivized to do.

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