Pivoting organizations | Developing organizations with BI

Pivoting and developing the organization

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Cohesive improvement is key

So far on this website, we have reviewed various general principles for creating more agile organizations. Aspects that stand out are coherence and integration. Research confirms (Collins 2004) that companies which continue to perform very well for several years ensure that everything improves cohesively. Organization and technique, culture and strategy, perseverance and belief, employees and managers, processes, structures and systems all have to reinforce and serve one another. In this way we can cooperate better.

The more cohesion that exists between units, systems and people, the faster and more effective processes can be carried out, even more so when the people are part of one and the same effector. But there is more: we can also more easily adjust processes as a whole and prevent customers being sent from pillar to post. In this article we present a specific model for establishing actual adaptability.

Setting up a front office

Pivoting the organization requires setting up a so-called front office in which many of the products and services are offered through a single point of contact, so that the organization can present itself as a whole. This assumes that we no longer work ‘from the inside out’ but that we arrange the organization ‘from the outside in’. Customer requirements becomes central to the organization, which must be divided into a front office and a back office. Somewhere the business processes will need to ‘split’ to be able to transfer certain tasks and functions to the front office. Some functions – of more complex processes, for example – will remain in the back office.

Where to ‘split’ processes?

The decision where to ‘split’ processes, very much depends on the complexity of those processes. It may be noted that the concept of ‘complexity’ today is relative due to the advancing possibilities in technology. The ‘split’ can therefore increasingly move further on in the process as the relationship between technology and business becomes more and more important. Eventually, many of the processes can be dealt with by the front office.

Definition: pivoting the organization

Pivoting the organization means setting up an integrated (physical) front office according to the principles of integrated services (integration), as well as simultaneously setting up a specialized back office; thus ‘splitting’ up the process.

In essence this means that the organization arranges itself based on process coherence rather than based on product coherence or hierarchy. When we integrate processes, people, and systems better, we can pivot the organization. In other words: we can start working much more customer and process-oriented. Modern information technology and Business Intelligence play an important role here as ‘enablers’. Naturally, organizations can also change without the use of technology, however this will turn out to be much more costly in the long run.

Modern technology plays a crucial role

The following modern technologies play a crucial role when we are pivoting the organization and each effector should be able use them.

TechnologyRole and function
Data warehouses (DWH)operational and tactical management information, policy evaluation and performance management
Customer Relationship Management (CRM)an integrated customer view and customized actions
Workflow management systems (WFM)controlling the back office, integral process management, process optimization and process transparency
Enterprise Application Integration (EAI)single data entry, master data management and registration in core systems
Enterprise portalsintegrating all the above-mentioned systems so that the front office can work with one single system

Standardizing across departments and units

Modern technologies allow for operational data, management information, tasks and knowledge to be equated, standardized and shared across departments and units. Characteristic for this is that the back office – with its specific transaction processing systems – can remain virtually unchanged (except in terms of size), and that the front office – where customer and organization actually do business – can form a unit with the aid of modern IT (sometimes called mid office). Interfaces are placed around the organization and systems, which ensure integration. This is depicted in the following figure.

Modern IT supports the idea of a front and back office

Figure: Modern IT supports the idea of a front and back office

In this way, we can (re)design existing and new business processes without the need for extensive reorganization, for example by moving the ‘split’ further and further back. When we pivot the processing process, we can create an integrated customer view in the front office. We do this, to begin with, by transforming data from various operational systems into information and knowledge, so gaining better insight into processes and performance. Often the need then arises, partly based on the information and knowledge created, to take action in the front office. Work processes will be set up and so-called case managers will manage and monitor the entire process.

The front office can manage the functions in the back office

All this is only possible if we also pivot the response process and ensure that the front office can actually manage the functions and applications in the back office. Subsequently the registration process should pivot to prevent duplicate data entries. It would be a waste of energy if employees, now that they have an integrated customer view, should need to enter data acquired through actions in different systems – with different instructions – in the back office.

Case: black holes in municipal government

After various analyzes of a large number of transactions with citizens and businesses, a city council set up a front office. The idea behind this was that many of the relatively simple products (e.g. ready while you wait) that were formerly produced by the back office could be just as easily executed by the front office. To accomplish this, a number of employees from different departments were transferred to the front office and the organization was pivoted.

Training

Twelve employees started working in the front office – the central desk – but due to their lack of knowledge of all the products offered by the front office, they were not (yet) multifunctional. Most employees had knowledge about one or two specific products. Therefore all twelve employees received training about the other front office products. Consequently, the front office team became much more flexible and capable of dealing with multiple products. The training also addressed the use of the corresponding information systems, which led to the realization that pivoting the organization cannot be effective without integration.

Each system has its own unique interface

The employees needed to be trained to use as many as five different systems, each with its own unique user interface. Consequently, situations arose in which employees entered data in the wrong entry window, or had to enter the same data more than once (in different systems). Although everyone within the organization knew duplicate data existed, it now became clear that this was a major problem. Besides this it often happened that the front office sent requests to the back office where the requests vanished into a, so called, ‘black hole’. Reason for this was that the front office did not have access to all the back office information systems and often did not have a clue as to the status of a certain request or how far the request had progressed.

Lightning speed

Using an enterprise portal all front office and back office processes can be linked by various technologies. In this way, a business process environment including effectors can be created allowing the organization’s eyes and ears, as well as its brains and its hands and feet to respond – as if they were a single process – to both the market and organizational developments with lightning speed. We can achieve an even greater speed of organization – and agility – when we offer customers and suppliers online access to certain parts of the portal. All ingredients for making digital service possible are then optimized and many activities can be ‘outsourced’ to our business partners. The organization is no longer primarily operated by its employees but by its customers and suppliers as well. The virtual intelligent organization has been born.

Why pivot?

The first question that springs to mind is: why do organizations actually need this integration at various levels? Traditionally, most organizations were arranged hierarchically in silos . Many organizations still are today, but why? To answer that question, we need to go back a few centuries. During the demise of manual industry and small-scale craftsmen, halfway through the 18th century, manufacturing organizations started to grow substantially. This was partly due to a principle created by Adam Smith, the author of “An Inquiry into the Nature and Causes of the Wealth of Nations”. He divided complex business processes into small process steps, which were carried out by the ‘technology’ of the time: mostly unskilled laborers.

The laborers were trained to carry out the small steps as quickly and effectively as possible. By combining all the steps Smith designed the first complex organizations. The industrial revolution had begun and Smith’s principle was maintained virtually intact in the centuries to come. Think for example of the textile industry, the mining industry and, later, the automotive industry with Henry Ford as the spiritual father of the assembly line.

This all takes time, effort and proper coordination

Following the advent of automation and diverse mechanical and electronic technologies various refinements were developed and numerous scientists (Taylor, Weber, Mintzberg and others) built upon the principle of Smith. Within the organizations that came into existence, much (unnecessary) exchange took place between departments, often because the various information systems were not linked properly, if at all. Documents, information, money and goods needed to be exchanged between departments and employees often had to work with different systems. This all takes time, effort and proper coordination.

Many organizations today still operate according to the ‘Smith’- principle

Unfortunately, many organizations today still operate according to the ‘Smith’- principle. This in itself is not surprising since it is very efficient to formalize small steps within a complex overall process. To a certain extent routine makes people efficient. The fact that nowadays computers – thankfully – perform the most mind-numbing, routine tasks does not change this. This is the main reason why the back office of an organization can continue to operate in a product oriented way; it provides the necessary efficiency, which can be supported by powerful computers. However, in this day and age – due to the dynamics, the individualization, the liberalization, the globalization and increasing market forces – the back office must be controlled and managed by a smart, market-oriented front office. The front office can oversee things and can respond to individual customer needs or specific customer behavior. Exchanges can be carried out almost automatically , or even be omitted because many of the process steps will now be handled by one and the same team (the front office) also controlling the process.

The pivoting process

We try during the integration process, to, as it were, cut the rigid, bulky sleeves of an organization into smaller pieces (see figure below) by gradually improving collaboration, using Business Intelligence technology as an ‘enabler’. The technology layers ensure coherence and integration and present the back office as if it were one single system.

Naturally, it is not technology alone that plays a role in this process: the organizational culture and structure as well as its management will need to adjust accordingly. Ideally, the reverse happens: the organization itself recognizes the need for pivoting and finds an aid in modern technology. This paves the way for using the possibilities of new technology more rapidly instead of it being imposed on the organization. In practice, the pivoting process does not happen painlessly. Such processes often meet with a lot of resistance and political manoeuvring. Eventually, the process can take years, we can produce an organization that consists of autonomous, flexible and market oriented teams, which presents itself to the outside world as one entity, which is capable of flexibility for the customer and in which the employee is at the centre. Perhaps the term ‘organization’ does not fit this concept exactly. We should therefore speak of a business process environment or of a ‘colony’ of closely cooperating teams.

Pivoting the organization

Figure: pivoting the organization

An intensive and open information exchange

The basis for an effectively operating adaptive and customer and process-oriented organization with effectors is an intensive and open information exchange, supported by modern technology and with a transparent culture to allow this. In order to be able to manage each other, the effectors should know exactly what their ‘input’ and ‘output’ should be and what effect the input will have on the results. In this context, it is of great importance to describe the tasks, competences and responsibilities of each effector. In short: effectors should know about and be able to predict the behavior of other relevant effectors.

Additionally, – in order to respond to fluctuations in supply and demand – effectors must know about the staffing levels and resources of other effectors. The aforementioned technologies and concepts can support this well. We are describing the interrelations between effectors in procedures that may or may not be automated. In doing this, we must however be careful not to create bureaucracy and so nullify the benefits – responding to situations quicker- of standardization and modularization. Instead, we should determine per situation whether it is useful to describe processes structurally.

The processes have been clearly ‘split’ up

Today, we often see that pivoted organizations outsource (parts of) the back office. This has become much easier now that the organization is customer and process-oriented and the processes have been clearly ‘split’ up. Organizations choose to outsource for different reasons, such as cultural differences between back and front office or the simple fact that another organization can do the job better and cheaper.

Conlusion

In conclusion: compartmentalized, hierarchically arranged organizations turn out to be difficult to change. For those organizations, changing and pivoting is a long haul and the success rate is usually low. For the attentive observer it is quite clear that employees and managers hold each other captive in the structure and (authoritarian) culture in the organization. In the process of change, resistance and political games can be a sticking point, which may seriously spoil both the atmosphere and culture within the organization. It is then up to the Board of Directors to demonstrate leadership by sticking its neck out, by showing the way and above all, by trusting people.

In most cases, the problem lies with the manager and not so much – as we might think – with the employees. Managers – middle management in particular – with limited leadership abilities often stick to their ‘compartmentalized’ view and are unwilling to integrate things or simply incapable of doing so. This manager’s kingdom is sacred, after all. We cannot simply expect people to suddenly see the light and start being customer-oriented and entrepreneurial. It is not that they don’t want to, because in the end every one of us feels a certain need for freedom and some responsibility.

Learn more in our Business Intelligence book ‘The Intelligent Organization’ (3rd edition).

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