Talent management and organization design are powerful allies. Most companies still treat them as two separate sets of activities. More companies should make this critical connection when looking for results in the areas of:

  • Driving Major Change: Legacy leaders are a common limitation in implementing major organization change. Organizational redesigns are windows of opportunity to upgrade talent. Alignment of leadership characteristics with the market and the organization model may be the single biggest driver of successful re-organization initiatives.
  • Return on Management Investment: Effective layering, roles, decision rights, smart design of P&L centers, and clear roles for corporate functions all drive return on management investment. Great talent can overcome poor organization design. But who would choose such an option?
  • Motivation and Retention: Today’s complex organizations are challenging for leaders. Unnecessary complexity frustrates people and makes it difficult to get things done. Entrepreneurial leaders won’t stick around plodding, bureaucratic organizations.

It is useful for general managers and senior HR executives to have a clear understanding of the interaction between organization design and talent. Here are some examples that are worthy of attention.

  • Covidien, the medical devices leader, has made a lot of effort to differentiate organization design and leadership talent across the business units in its portfolio, from commodity medical supplies to high-growth and acquired start-up business units. Both structure and the selection of executive leaders reflect these critical differences in leadership requirements. Very smart!
  • Product divisions and small autonomous business units drive local ownership, risk taking, etc. That’s a good thing for growing high-potential general management talent. GE and Honeywell mastered this in the past, but the pressure for economies of scale make it harder to do.
  • Functional structures, however, are much more effective in developing functional careers and development – as well as more agile use of talent across businesses. Cisco and Apple have both benefited greatly from this formula.
  • Complex matrix structures attempt to optimize both sets of benefits. It’s all about learning, collaboration and sharing; Nike wants both functional excellence and career paths and consumer focused category business units. Balancing that tension is critical to using the talent most effectively. Leaders who learn to manage that tension progress faster than those that grew up in traditional siloed organizations.
  • Designing organizations in a way that creates specific career development experiences for high-potential people is an often overlooked opportunity. Vary the size of P&L units to create a progression and include multiple business models and geographies with varied challenges. IBM assesses promotability on the basis of “positions to readiness.”
  • Innovation is a critical priority today for all companies. Companies are seeking more integration across functions to speed up new product creation. Small incubators for new growth platforms allow focus, and are very motivating to team members involved. Great places to assign high-potential leaders.

The choice of how to integrate a new acquisition has an enormous, often unintended, consequence on people who choose to stay or not. Cisco mastered this in years past and today companies like Covidien are carefully considering talent retention and organization design in where they place small acquisitions in the larger company.
The more that general managers, HR executives and CEOs think about talent and organization design as tethered management practices the more powerful the impact of change will be on business results.

Greg Kesler
Managing Partner