How Organizations Work: Taking a Holistic Approach to Enterprise Health

Overview

A groundbreaking approach to successful performance improvement

Almost every executive in business today is faced with the challenge of improving performance, from incremental improvements to wholesale organizational change. Here, a world-renowned expert in organizational improvement asserts that most hard-won changes don't last for long, however, because of the inability to identify the root causes of the problem. How Organizations Work offers a clear, integrated solution to ...

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Overview

A groundbreaking approach to successful performance improvement

Almost every executive in business today is faced with the challenge of improving performance, from incremental improvements to wholesale organizational change. Here, a world-renowned expert in organizational improvement asserts that most hard-won changes don't last for long, however, because of the inability to identify the root causes of the problem. How Organizations Work offers a clear, integrated solution to performance improvement via a new "Enterprise Model"-which takes into account all variables that influence performance. Alan Brache provides a comprehensive "physical exam" for checking an organization's vital signs and a 360-degree picture of how organizational dynamics can be harnessed to effect permanent improvements in performance.

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Editorial Reviews

Soundview Executive Book Summaries
Alan P. Brache, a consultant specializing in strategic and operational improvement, writes that change management initiatives or organizational wellness fads can oversimplify the process. He recognizes that they are noble ideas, but asks, "Do they address the unique needs of your organization?" "Are they sustained long enough to achieve their objectives?"

He compares organizations to humans. Each organ, muscle, bone and nerve plays a unique part within the whole body. A strong contribution from one component cannot make up for deficiencies in others, and understanding each component does not explain the health of the whole person. Body functions are integrated and their interactions are as important as their individual roles. So are the different functions in an organization. By influencing these factors, Brache writes, managers can strive for organizational wellness.

In How Organizations Work, Brache shows companies how they can take a holistic approach to organizational wellness by identifying the different parts that make up the whole. He does this with The Enterprise Model.

The Enterprise Model
Brache's Enterprise Model includes all the variables of a business enterprise. There are four kinds of variables: external variables, or the context in which the organization exists; structural variables including business processes, goals, information management, and organization structure; human variables including leadership, culture, and human capabilities; and variables that are both structural and human, such as strategy and issue resolution. All of these variables work together, and to solve any complex issue, Brache writes, companies cannot address only one. Successful managers of healthy organizations understand that these variables must be treated regularly and holistically to effect change and improve performance.

The external business environment is the context in which a business operates - the areas that can and cannot be controlled. Before focusing on internal variables, Brache writes that an organization must first assess and manage external variables.

The Industry's Value Chain
The first step in addressing external variables is to identify the industry's value chain (notably suppliers and customers) and an organization's current and future place in that value chain. The next step is to identify the other external variables that will have the most influence on a company's business. These external variables include resource providers, competitors, shareholders, the government, the economy, the society and community within which an organization exists, and the parent company.

Once a company's value chain and the other important external variables that affect the success of the business have been identified, an environmental monitoring system must be established. In other words, companies must be sure they have supplemented their internal performance monitors with external performance tracking. Based on information gathered from environmental monitoring, a company must determine future external threats and opportunities and use them to design strategy.

Leadership and Strategy
Next, Brache addresses internal variables. The first is leadership. Leadership is setting an organization's direction and motivating people in that direction. Though all Enterprise Model variables are critical, Brache writes that leadership is "first among equals" and required for development and implementation of all the other components. He offers a four-step plan to address weaknesses in an organization's leadership variable.

Strategy is the framework of choices that determine the nature and direction of an organization. Top management must take the time to develop strategy to position the organization in its external environment and focus decisions, such as who to hire, priority of product development projects, capabilities to build into business processes, the structure of the organization, as well as daily decisions. A strategy must stand up to two reality checks: Will it work? Can we implement it? To address the strategy variable, Brache offers a five-phase plan.

Goals and Measurements
Setting goals and measuring performance range from activity-based costing to the resurgence of Six Sigma. Goals are objectives that reflect what your customers and other external constituencies need so that your organization can thrive. Measures answer the question, "As evidenced by what?" regarding reaching your goals. Brache writes that goals and measurements should be established at five different levels: strategic, business-wide operational, process, departmental, and team or individual goals.

How Organizations Work also focuses on other multi-dimensional plans that can help organizations deal with issues surrounding other internal variables, including culture, human capabilities, business practices, information technology, and organizational structure. The plans for each utilize Brache's holistic approach and provide organizations with the tools to recognize and address deficiencies and improvements.

Why Soundview Likes This Book
How Organizations Work provides companies with a detailed road map that can guide them through making themselves more effective, and delivers the strategies they can use to change their systems and improve their organizations. Brache's analysis is clear and insightful, and his steps for improvements reach far beyond the hype and fads of ad hoc initiatives. This practical guide for organizational transformation presents an integrated framework from which executives and managers can plan rational changes and make them work. Copyright (c) 2002 Soundview Executive Book Summaries

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Product Details

  • ISBN-13: 9780471200338
  • Publisher: Wiley
  • Publication date: 1/28/2002
  • Edition number: 1
  • Pages: 240
  • Product dimensions: 5.90 (w) x 9.10 (h) x 1.00 (d)

Read an Excerpt

How Organizations Work

Taking a Holistic Approach to Enterprise Health
By Alan P. Brache

John Wiley & Sons

ISBN: 0-471-20033-6


Chapter One

Exploring the New Enterprise Model

* AVOIDING THE CHANGE TRAP

A couple of years ago, I addressed an in-house group of telecommunications company executives. I was introduced by the quality director, who was concerned that my message would be seen as too complex for the "distill it to three bullet points" orientation of this group. She wisely began by saying, "We talk a lot about making things simple, and that is good; however, we do not want to make things simpler than they are."

If organizations were simple, we would have broken the code long ago. The typical company or agency would be a well-oiled machine. However, even small enterprises are typically a complex network of interlocking factors.

Executives, most often characterized by short attention spans, dissatisfaction with the status quo, and impatience with the mere mortals in their employ, delight in launching crusades. As in the Middle Ages, the objectives of these improvement crusades are to capture the Holy Land (the target market) and to convert the infidels (prospective customers and current/ potential employees) to the faith. Like the Christian Crusades, they are launched with religious fervor. They are well funded. They are highly visible. They are championed by true believers. They are populated with the best and brightest. And theyproduce mixed results.

Sometimes these improvement crusades are massive and multiyear. In the late 1980s, we saw quality crusades. In the early 1990s, reengineering was the cause célèbre. In the late 1990s, the business landscape was awash in enterprise resource planning. The early 2000s have been characterized by acquisitions juggernauts, modeled after the growth strategy of companies like GE and Tyco. Along the way, these holy wars have spawned denominations and cults that pursue subcrusades that ride under banners such as Six Sigma, high-performance teams, supply chain management, cycle time reduction, activity-based costing, and the balanced scorecard.

The noble intent of these initiatives is beyond question, as is the sincerity of the beliefs that underpin them. The issue is the degree to which growth and efficiency programs (1) address an organization's unique needs, (2) cover all of the variables that influence their success, and (3) are sustained long enough to achieve their objectives.

To change metaphors, improving organizational health is like improving human health. If there were a pill, exercise program, or diet regimen that cured all ills and prevented future maladies, doctors would have even more time for golf. The elixirs that claim to address the full spectrum of physical wellness make it "simpler than it is." The same is true of the potions that tout organizational wellness.

* GETTING TO ORGANIZATIONAL HEALTH

Even after a few thousand years of study, the functionality of a human being-especially the nonmechanical aspects of behavior and performance-is not fully understood. While the owner's manual will become more complete as insights are derived from the recently sequenced genome, mysteries will remain. However, three truths have emerged from the study of anatomy, physiology, and psychology:

1. Each organ, muscle, bone, and nerve plays a unique role.

2. An outstanding contribution from one component of the body-mind engine (well-developed muscles, a robust heart, a strong sense of smell, a quick wit) can not fully compensate for deficiencies in another component (low-capacity lungs, a broken wrist, impaired hearing, poor short-term memory).

3. The understanding of each component does not provide a complete explanation of a person's health. Like a sports team, which may be less or more effective than the sum of its individual players' talents, a body is an integrated system in which the interactions are as important as the individual roles.

These same truths hold true for an organization, be it a business, a part of a business (profit center, product line, region, department, plant, store), a government agency, a union, a charity, a church, or even a family. Organizational health is a function of understanding and managing an intricate and entwined set of variables.

* CHANGING ORGANIZATIONAL DNA

Most people, including those without any visible signs of disease, do not optimize their physical and mental fitness or establish the foundation of a long, healthy life. Similarly, most organizations do not follow a diet and exercise program that maximizes performance. Why? Because most executives and managers:

* Do not understand the factors that influence health. They are probably aware of the importance of leadership and goals and structure, for example, but may not fully grasp the nature and extent of the impact that each has on performance.

* Do not understand how the factors interact. For example, they may not appreciate the ways in which culture affects decision making or the nuances of the symbiotic relationship between business processes and skills.

* Do not know the actions they need to take to manage their organization's health. For example, they may know that information systems need to serve the strategy but not understand how to make that happen. They may understand conceptually that reward systems need to be linked to business processes but not know how to align them.

* Focus on one or two variables, rather than the whole system. They embark on a culture transformation effort or an enterprise resource planning (ERP) system installation or a Total Productive Maintenance initiative without considering the effect of and on other variables. Like other integrated systems-the human body, an automobile engine, a multilateral trade alliance-tinkering with one component can have a positive or negative effect on other components.

Is there anything that is hardwired? The answer is no. Organizations have DNA, made up of their historical products/services, markets, brand, and culture. However, unlike in the human body, organizational DNA can be changed. The transformation begins with understanding.

* PRESCRIPTION FOR ORGANIZATIONAL WELLNESS

A program for managing your organization's health is founded on the answers to four questions:

1. What are the variables that influence your organization's performance?

2. What is the role that each variable should perform?

3. How do the variables interact in a way that contributes to your overall performance mosaic?

4. What can you do to improve performance?

Organizational wellness, like human wellness, is a destination that is never reached. The remainder of this book uses these four questions as the vehicles for describing the journey. To begin, we need an organization model that is the rough equivalent of a cutaway view of the human body. This Enterprise Model, Figure 1.1, will serve as the anchor for our exploration of performance improvement.

* ORGANIZATION PERFORMANCE: KNOWING THE VARIABLES

At the most macro level, there are two sets of performance variables: those that are outside the organization (and, in many cases, outside its control) and those that are internal (and often seem to be out of control). There are three factors in the internal equation: structural variables, human variables, and variables that have both a structural and human dimension.

What Are the External Variables?

Effective physicians and psychologists understand that long-term wellness programs are based on an understanding not only of patients' inner workings but also of external influences on them. Similarly, you are better able to improve your organization's performance if you understand its context, which is made up of these components:

* Customers and customers' customers. The price of admission to the world-class performance game is "profound knowledge" of your customers and the not-yet-customers in your target markets. If your customers are not end users, you can better meet their needs if you know the requirements and buying criteria of those whom they serve.

An industry's value chain is the flow of activities that extends from the first step (for example, identifying potential oil drilling sites) through the last (providing gasoline to consumers). Each step adds value to the one that precedes it.

Value chains are dynamic. By eliminating intermediaries and facilitating business-to-business and business-to-customer linkages, the digital world is turning traditional value chains on their heads. As an organization evolves, it expands and contracts its scope. However, if you freeze-frame your organization at a moment in time, it is occupying a defined space in its industry. Markets serve as the right-hand boundary of your place in this value chain.

* Suppliers and suppliers' suppliers. Suppliers, who represent the left-hand boundary of your organization's position in its value chain, provide the raw material, components, and goods that go into your products and services. They, in turn, may have suppliers.

* Resource providers, which include:

* Schools, companies, and agencies that provide workers.

* Banks and venture capitalists that provide money.

* Academic institutions, research labs, and other companies that provide technology.

* Organizations to which your company or agency outsources functions such as manufacturing, distribution, accounting, market research, and human resource administration.

* Competitors, who meet the needs of the market with similar or substitute products and services.

* Government, which includes elected officials, courts, central banks, and regulatory agencies.

* The economy, which is not merely a function of government. It includes factors such as growth or contraction, inflation or deflation, financial optimism or fear, currency valuations, commodity prices, household income, and job creation.

* The society and community, which have interests in and concerns about quality of life, the environment, employment, and corporate citizenship.

* If your organization is part of a larger entity, your corporate parent, which influences a subsidiary through its strategy, culture, funding, mandates, and priorities.

* Shareholders, who provide funding and general direction in return for equity growth and dividends.

These universal variables may need to be supplemented by industry-specific external factors. For example, weather is a key variable for agriculture and leisure businesses.

Healthy interfaces with these external entities are built on a platform of understanding. For each of the factors defined above:

* How well do you understand the trends, strategy, needs, priorities, and processes of this variable?

* How well do you understand the ways in which this variable does and should influence you?

* How well do you understand the ways in which you do and should influence this variable?

The more deeply you understand these variables, the greater your appreciation for the water in which your organization swims.

These external variables are addressed in more depth in Chapter 2.

What Are the Structural Variables?

Four of the internal variables install a system, procedure, or mechanism for doing business. While these structural variables all need people to make them work, their primary contribution is to establish the floors and framing of the organizational house in which people live.

* Business processes are at the heart of your operations because they are the vehicles through which work gets done. Customer-touch processes include business development, order fulfillment, customer service, and product development. They are supported by internal processes such as hiring, planning, financial reporting, and resource allocation.

While processes are only as good as the people who populate them, you cannot rely on exemplary talent to triumph over flawed systems. Business processes are structural because they provide the steps, protocols, and roles within which people do their jobs.

The business processes variable is addressed in Chapter 5.

* Goals begin with the financial and nonfinancial targets for your overall business. These goals cascade through all organizational levels and ultimately describe the expectations of all individuals and teams. Goals become a management tool through a measurement system in which performance information is gathered, monitored, and used as the basis for problem solving and decision making.

The goals/measurement variable is addressed in Chapter 6.

* Information management is the backbone of an organization. This variable includes your computer systems and the information they house, generate, correlate, and massage. It also includes the facts and perceptions that are in nondigital files and people's heads. In an organization managing this variable well, valuable information and learning are captured and made accessible in a knowledge management system. Those who need information on products, customers, processes, and capabilities can readily access it.

The information/knowledge management variable is addressed in Chapter 9.

* Organization structure is the formal grouping of roles and responsibilities (for example, by function, product, customer, or geography) and the reporting hierarchy. It reflects the positional power in the organization and has a significant influence on workflows, day-to-day management, and career development.

The organization structure variable is addressed in Chapter 10.

What Are the Human Variables?

The three human variables focus on the skills, motivation, and behaviors of people. They explore what people are able to do and what they actually do in their organizational lives.

* Leadership is the set of behaviors through which those with both positional power and influencing power steer the priorities, activities, and results of others in your organization.

Continues...


Excerpted from How Organizations Work by Alan P. Brache Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Foreword.

Acknowledgments.

Chapter 1: Exploring the New Enterprise Model.

Chapter 2: Understanding the External Business Environment.

Chapter 3: Leading the Enterprise.

Chapter 4: Creating Strategic Alignment.

Chapter 5: Rethinking Business Processes.

Chapter 6: Setting Goals and Measuring Progress.

Chapter 7: Reframing Culture.

Chapter 8: Managing Human Capabilities.

Chapter 9: Leveraging Information and Knowledge.

Chapter 10: Putting Organization Structure in Its Place.

Chapter 11: Resolving Business Issues.

Chapter 12: Putting It All Together.

Index.

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