Enterprise Architecture, Organizational Structure, and Company Performance
by Travis Wissink
Published February 2012
A poor organization structure makes good performance impossible, no matter how good the individual managers may be.
Peter Drucker, The Practice of Management
Acquisitions should be a faster way to achieve your business objectives. But just having the financing is no guarantee of success. To be successful requires more than cross selling to your customers. You have to blend corporate operations and culture to build a cohesive, streamlined organization, and in doing so, also offer even more to increase customer and employee loyalty. Said another way, to be successful and competitive, everything must be aligned.
IT has a big role in acquisitions. In working to accommodate a unified future state, IT organizations face numerous technology challenges. However, in every technology transformation there is always more to a project than the technology. For IT to be successful, the new processes and operational models must be aligned not only with business strategy, but also with what employees are actually doing and how they are being measured. To implement new technology without consideration of reporting structures and corporate cultures is a recipe for failure.
Enterprise architects have a unique opportunity to assess organizational alignment at both the managerial and operational levels. In fact, their ultimate responsibility is to build an architecture that can actually be implemented. That means building a future state roadmap that is sensitive to all current state constraints, whether technological, political, operational, or managerial. However, sometimes management neglects to question legacy decisions, business processes, and investments, and to reconsider the impact of new implementations on organizational accountability. In fact, the enterprise architect often reveals the misalignment between business strategies and organizational models.
Organizational structure is the foundation for all command and control activities. Additionally, the structure supports and organizes the various business capabilities that companies require to achieve their objectives. Empirical studies abound that illustrate the direct relationship between organization structure, competitiveness and innovation. As Peter Drucker states, an inadequate organization structure will not perform well.
We have heard the enterprise architects mantra of IT and business alignment. At a high level, enterprise architects help align information technology investments to business strategies. In proposing viable future states and building roadmaps, enterprise architects can't help but be exposed to some amount of dirty laundry: ; inefficient business processes, ineffective measurement objectives, and misaligned organizational responsibilities. These discoveries are usually byproducts of legacy or holdover organizational structures. The modern enterprise architect has the responsibility to uncover and help resolve these issues so that the IT portfolio and architecture roadmaps can successfully execute.
In an example of this misalignment, managers at one company send employee's employment status and a other employee-centric inquiries to the payroll department. Managers had grown accustomed to sending these requests to payroll when the company was smaller and the HR and Accounting functions were in the same department. But the company has since grown over 3000%, both organically and through acquisitions, and it is still rapidly growing. No one ever questioned if there was a more efficient way to handle these requests. Both HR and Payroll staff know that the human resources department is the optimal location to find answer to questions about an employee's status. In the current form, data is being sent from HR systems to payroll systems. The transfer, storage, and processing of that data takes many resources. Additionally, the accounting staff must be cross-trained to handle the human resources inquiries. The solution was to web-enable the inquiries. This disconnected the manager's requests from the department fulfilling the response. After company managers were trained on the new process, the company moved the inquiry response process from payroll to HR, in the process removing many computing, network, and staff inefficiencies. This restructure allowed the HR and payroll department to operate more effectively. The HR department is now realizing a higher return on investments, managers get more accurate responses in less time, and the payroll department's staff is fully focused on the payroll function.
A bit more complicated example is the evolution of a call center. As competitive companies grow, either through organic growth or acquisition, business functions can sometimes grow and never be realigned into the appropriate department. In one example, a company's entire up-selling and customer service organization resided inside of IT. This happened because IT was the first group to handle customer inquiries from the website. In the early days of the website the IT webmasters would receive emails, and calls to the company phone number regarding website and content issues were also quickly routed to the webmasters. After an ecommerce storefront was quickly deployed, IT also deployed a small call center to handle website and ecommerce customer questions. Web assets grew as a result of the acquisition of a new product line, and so did the call center. The call center took on up-selling responsibilities as well as responsibility for fielding questions on a growing product list -- in direct contrast to the typical process in which an organization's sales division is responsible for up- and cross-selling to all customers, regardless of the touch point. The issue for the organization in this example was that the up-selling processes were intertwined with the website trouble-ticketing process. The entire call center staff consisted of IT help desk operators, cross-trained on up selling and product items. The help desk software had no insight into customer sales histories, and up-selling was based on a crude categorization and understanding of the product list.
The high-level business capabilities in this example are straightforward -- up-sell and website technical assistance. However, the people, processes, and tools were tangled between IT and Sales perspectives. Enterprise Architects identified the tangled, inefficient processes and recommended that the call center would be more effective under the direction of the sales division. After working with both business and IT executives, the solution was to move staff between the IT and sales divisions, untangle the process to provide a clear separation between IT and Sales processes, and implement a feature rich-customer relationship management solution that would give the customer service reps the correct information to most effectively handle customer inquiries and cross- and up-sell where appropriate. After the solution was assembled and deployed customer and employee satisfaction increased and additional sales were attributed to the new solution.
In the end, it's not just about acquisition projects: it is about every enterprise-class project. Enterprise projects are unique in that they require buy-in and support, both economic and political, from more than one operational group. These projects usually represent greater big-picture efficiency and productivity, but they do it at the cost of challenging the status quo and legacy investments. The Enterprise Architect's charter is to help guide, identify, and correct misaligned investments, and sometimes those investments aren't solely in applications -- they could be the organization's structure. It is essential to fully understand organizational models, reporting structures, business processes, and success metrics. As EAs help identify inefficient investments, it may require that business leaders take a hard look at the correctness of their organization structure. Let's heed Drucker's advice and bring together EAs and management to find the correct and most efficient organization.
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About the Author
Travis Wissink is a Director of Enterprise Architecture at Oracle.