Healthy organisations create an environment where organisational members have mutual trust and respect for each other, especially in terms of how they decide and implement decisions. They create an environment in which organisational members are empowered to deal with their problems and where problems can be identified, discussed, and solved with mutual trust and respect through cooperation and communication amongst themselves.
When there is mutual trust and respect, there will be more teamwork and collaboration. This constructive and collaborative culture will generate a positive ‘risk culture’ and a collaborative approach to risk management. It builds a higher level of risk maturity for the organisation.
Conflicts are natural
Conflicts are natural in healthy integrated organisations. They come from differentiated styles and the disparity of interests amongst organisational members.
Mutual respect for each other can overcome the conflict that stems from style differentiation (i.e., producer-administrator-integrator-entrepreneur (PAEI)), while mutual trust overcomes the conflict that stems from the disparity of interest (i.e., authority-power-influence (CAPI)).
A healthy organisation has all of its sub-systems integrated and aligned so that it is effective and efficient in the short and long term. This is the primary goal of management.
Create a culture of mutual trust and respect first
Create an organisational culture of mutual trust and respect where conflict is considered natural and necessary for a healthy and integrated organisation that continuously responds to its ever-changing environment. There is cooperation, collaboration, and teamwork to get the job done.
This is the foundational aspect of a collaborative and humanistic organisational culture that will produce a positive ‘risk culture’ and a higher level of risk maturity within the organisation.
Mutual trust and respect can be intentionally created by:
- Identify where the organisation is on its lifecycle.
- Learning how to trust and respect each other.
- Learning to coalesce authority, power, and influence to get things done.
- Have a clear definition of the organisation’s mission and scope of operations as a team.
- Separate long-term from short-term horizontal functions.
- Create a flatter and more agile vertical structure.
- Enhance or redesign information systems to document individual accountability.
- Stretch performance goals and budgets as a team.
- Redistribute cost of cost centres to all profit centres.
- Develop a long-term plan.
- Hire the right personality
- Co-create a flexible incentive system.
Identify where the organisation is on its lifecycle
Identify where the organisation is on its lifecycle, how it got there, and what it needs to do to move to the next desirable stage. Start at where your organisation is at right now.
By putting all the organisational problems on the wall, the need to change is legitimised and energy is created. Once a strong commitment to change is established, the organisation can move promptly toward resolving the problems.
At this stage, determine the health of the organisation. Determine the level of conflicts between the different subsystems and the dominant PAEI styles.
Identify what needs to be done to bring the organisation to its optimal performance level in terms of results and process.
Learning how to trust and respect each other
Learning how to trust and respect each other by identifying and solving problems together. This will be continuous.
Note that trust and respect are hard to build. It requires commitment and effort, But they are easy to be destroyed in seconds.
People learn that functional problems in sales, marketing, production, etc, can be solved. Now the teams are ready to tackle tougher problems.
Learning to coalesce authority, power, and influence to get things done
Learning to coalesce authority, power, and influence to get things done. People need support to enlist the support of peers and subordinates. Collaboration and teamwork are important to creating a healthy organisation.
In-fighting and high levels of politics are destructive unhealthy behaviours.
Generally, it is difficult to enlist the support of one’s boss, the boss of bosses, and other top management to who one does not usually have access. At this point, there is a real sense of control.
The organisation can now look at its goals and structure once people are on the same page in terms of getting things done. This is where the structure follows the mission when the organisation is healthy and ready internally to take on the next external challenge.
The aim of this and previous steps are to create an environment of collaboration and teamwork. It will set the foundation for initiating and responding to change.
Many organisations and consultants start, unfortunately, by defining the goals. But when organisations start with defining their goals without addressing internal problems, it is an exercise in futility. A sick organisation needs to become healthy to fight the next battle.
Once the organisation has become healthy again, organisational members feel that they can make a change; they feel that they can work together. They can work on where they want to go, that is their mission, which is the next step.
Have a clear definition of the organisation’s mission and scope of operations
Once the organisation is back into its healthy state where there is a collaborative culture, have a clear definition of the organisation’s mission and scope of operations as a team.
At this point, the structure must then follow the mission.
Only when people know where the organisation is going can they decide how to structure themselves more effectively to get there.
And to change behaviours, organisational goals must change (say from sales to profits) and the reward system must also change to support the achievement of organisational goals.
Separate long-term from short-term horizontal functions
Develop a system of complementary teams and accountability that determines who is responsible for what, what authority people have to carry out their responsibilities, and how success and achievements are measured and rewarded.
Create an environment of mutual respect for each other to overcome the natural conflict that stems from PAEI style differentiation.
These natural conflicts occur horizontally across the organisational structure. Problems associated with the horizontal structure include no one being responsible for training or conflicts between sales and marketing. These problems are horizontal since we are trying to identify responsibilities, allocate tasks and overcome natural conflicts between PA and EI functions.
Separate long-term entrepreneur-integrator organisational functions from short-term producer-administrator functions. These EI and PA functions must be headed by different people with different skillsets, accountabilities, deliverables, and reward structures.
This step aims to harness conflicts throughout the horizontal organisational structure.
Define and clarify responsibilities within and between functions and units. Match these new responsibilities with appropriate levels of authority. Redesign the compensation and reward systems to motivate the right behaviours based on new responsibilities and expected outcomes.
Create a flatter and more agile vertical structure
Create a flatter and more agile organisational structure where the bulk of the business is organised around flexible communities or teams. This enables decision-making to be effectively distributed throughout the organisation. This also allows for better communication and collaboration across the organisation.
Create an environment of mutual trust for each other to overcome implementation conflict that stems from the disparity of interest – authority, power, and influence.
This impacts the vertical structure of the organisation. Problems associated with the vertical structure include lack of delegation and marketing cannot determine prices. It is vertical since we are dealing with whether an individual can do the job for which they are responsible – the effectiveness of delegation or whether they have sufficient authority, power, and influence.
In a flatter organisational structure, delegation boundaries are minimised. Individuals and teams are forced to collaborate on projects that pursue the organisation’s strategic goals and solve its biggest business challenges.
The goal is to decentralise authority and power into new profit centres as much as possible. This may require a change of leadership.
Enhance or redesign information systems to document individual accountability
Enhance or redesign information systems to capture, document and report on individual accountability for every dollar in and out of the organisation, as well as other key indicators, in a manner that mirrors the new accountabilities and responsibilities of the new structure. Encourage openness, sharing and cooperation of information rather than using the information as a source of power or politics.
To design who should get what information, when and how, be clear on the organisational structure – horizontally and vertically. Then plan for what information is required.
Stretch performance goals and budgets as a team
With a clear mission, responsibilities, authority, and a sense of teamwork, mutual trust and respect can be improved.
Stretch the entire system to find where the weak links are so that you can bring the system to optimum performance.
Stretching reinforces interdependence and mutual collaboration.
Redistribute cost of cost centres to all profit centres
Redistribute the entire cost of cost centres (i.e., HR, IT, accounting, etc.) across all profit centres based on agreed transfer prices. This is referred to as overhead, cost, or resource allocation.
Agree on who is going to pay the bills of cost centres. Profit centre heads will have to decide on their fair share of their cost centre amount based on value and utility.
If accounting is producing reports that no one is using, then it is time to stop that report generation. People will think twice about asking another unit to provide internal services when there is a transfer price involved. This is where service and quality levels can be stipulated.
If the internal unit cannot provide the required service level or quality, then the requestor can go out externally to find value for money services or products, thus creating an internally competitive environment.
Cost centres like finance and human resources are to perform like profit centres with ‘paying’ internal clients. They have to face their internal clients, justify their services, and listen to how their services are going to be paid.
Sharing reinforces interdependence and mutual collaboration.
Develop a long-term plan
Strategic planning can only now be attempted. This is based on the right people having the right information as determined by a functional and vision-aligned structure.
It was pointless to develop a strategic plan before this is achieved as it was biased by the distribution of power that is based on the old dysfunctional structure.
Develop a long-range plan and create a strategic planning system that can increase product lines, market share and profitability.
Hire the right personality
Organisations can easily buy knowledge and skills by hiring people for their accomplishments.
As you need complementary teams that thrive in healthy organisations, we need organisational members who can command and grant mutual trust and respect.
Imagine working with someone who only cares about themselves, who does not care about others, who backstab others to get what they want – would you want to work with or for them in a team? The answer would be a resounding ‘No’.
No one wants to work with someone whom they do not trust and respect. If you believe that your colleagues are not going to take advantage of you, you can trust them to take care of your interest.
Trust and respect in the relationship allow each of you to feel safe, secure, and loved. When your team members feel safe with each other, they feel comfortable to open up, take appropriate risks, and expose vulnerabilities. This encourages feelings of acceptance and the freedom to be confident in being who each of you are – being your authentic selves.
Mutual trust and respect are who the person is – their identity, their personality. It is not what the person knows, or how smart the person is, but someone whom you can trust to take care of your interest, and whom you look up to for who they are as a person.
Co-create a flexible incentive system
The final step is to jointly develop an incentive or reward system that reflects cooperation and team achievement, tailored to individual needs. The system motivates organisational members to perform well and reach their stretched targets in a manner that is consistent with their ‘new’ mission, goals, and accountabilities. Organisations need a coherent system to reward individuals, groups, departments, and corporate achievements.
Each individual and different style is rewarded for different things. This is why reward systems must be customised. Avoid one rule, one style, one behaviour, and one incentive system. Sameness creates bureaucratisation.
Professional bio
As a Chartered Accountant with over 25 years of international risk management and corporate governance experience in the private, not-for-profit, and public sectors, Patrick helps individuals and organizations make better decisions to achieve better results as a corporate and personal trainer and coach at Practicalrisktraining.com.
Given that improving risk culture and maturity has become a top of mind for many executives and risk professionals, he has conducted in-depth research into the topic and written several articles, which can be found at https://practicalrisktraining.com/risk-culture.
Patrick has authored several eBooks including Strategic Risk Management Reimagined: How to Improve Performance and Strategy Execution.
Professional bio
As a Chartered Accountant with over 25 years of international risk management and corporate governance experience in the private, not-for-profit, and public sectors, Patrick helps individuals and organizations make better decisions to achieve better results as a corporate and personal trainer and coach at Practicalrisktraining.com.
Given that improving risk culture and maturity has become a top of mind for many executives and risk professionals, he has conducted in-depth research into the topic and written several articles, which can be found at https://practicalrisktraining.com/risk-culture.
Patrick has authored several eBooks including Strategic Risk Management Reimagined: How to Improve Performance and Strategy Execution.