The revolution is just beginning and we have only seen a tiny fraction of what is to come. The level of experimentation around how busi- nesses operate and structure themselves to deliver valuable experi- ences to their customers and employees is truly inspiring. The top-down hierarchical model that has served the economy for centu- ries is being fundamentally challenged. For this reason, the type of operating model within companies must be factored into our think- ing at this stage as it will determine the most valuable use of our time and efforts when developing EX, and will dictate the role that profes- sionals and leaders play in shaping and engineering EX.
EX does not recognize organizational boundaries as it is an ap- proach that can unify the business around real and tangible outcomes that serve the interests of employer, employees and customers. The reasoning behind this is that to deliver high-quality experiences, or- ganizations must question their very foundations. Their very existence depends on it. The area posing the most immediate threat is how you organize your people to enable and empower them to out-innovate rivals and outperform expectations. For the last century, hierarchy and bureaucracy reigned supreme. Not so now. The winning com- panies have innovated where it really counts and created flatter struc- tures alongside a connected body of progressive people practices.
Networks, formed around experiences, rather than hierarchies, are fuelling growth; businesses that run more like networks huddle their way to the top of their industries while others languish behind with
top-down processes that stifle creativity and divert energy through complex, complicated and overly bureaucratic processes.
The hierarchy, a successful model throughout the ages for the or- ganization of labour, is not done yet though. Flatter structures may take out layers of management, but, ultimately, big decisions still, in a lot of cases, need to be taken by someone near the top. Every system needs accountability and the prerequisite alignment throughout the structure to deliver on the business strategy. It sits somewhere and has a lot to do with each operating context.
Take Haier, for example, this is a company that doesn’t wish to focus on ‘empowering’ or ‘delegating’ to its employees in the tradi- tional sense. According to the CEO, Zhang Ruimin, Haier’s way of navigating the company into the network age is by creating a radical operating model that positions employees as their own boss. To do this, they not only flattened the structure by about 10,000 middle managers, but completely abolished its large hierarchy by creating 4,000 micro-enterprises that are directly accountable to consumers.
The RenDanHeYi model enables smaller, self-organized companies to co-create a long-term relationship directly with customers. It was this model that helped save Haier from the brink of ruin and trans- formed it into a global powerhouse for white goods (Haier, 2019).
This is perhaps one of the more radical companies to highlight in terms of operating model, but it serves as an example of what com- panies can do when they think and lead with customers, employees and connection in mind. Companies are being much bolder in chal- lenging the status quo and are becoming braver in their transformation efforts.
More generally within the economy, structure is a major factor in transformation. Every company wants to be leaner, more agile and closer to the customer especially when more dynamic companies start to outpace and disrupt established rivals. As a direct result of this, the idea that great results stem from top-down practices is rightly being retired as a management concept, but top-down decision-mak- ing is still the ‘norm’ when directing or architecting some of the most important elements of business life, which include a company’s mission, values and structure.
Great organizations are achieving high engagement from their employees, which contributes to performance, productivity and customer satisfaction because they are bold in their thinking and often don’t have the historical baggage when it comes to their business structures. They have nothing to unlearn and forget; they are free to develop their own systems, methods and workplaces optimized to innovate and perform at pace and scale. Yes, structure is important, but more important is the day-to-day experience of working with that structure and the outcomes it delivers. This point alone is why larger companies are questioning how and why they organize them- selves and whether their structure is delivering for clients and employees.
HR operating models
The HR operating model is not off limits either. The function is expe- riencing a huge surge in new tech to support and enable performance, and things are moving fast with examples springing up daily to re- mind people of the limitless potential that new technology can bring to the workplace. This is a radical example, but one that is already catching on. Ilmarinen Mutual Pension Insurance Co., which is Finland’s biggest private investor, made headlines this year with the announcement that it was creating a new HR function fit for the ro- botic age: HR at this company now stands for humans and robotics.
The emphasis now, according to the CEO, Jouko Polonen, is for HR to ‘take responsibility for the changing workplace dynamics’. Experts in robotics now sit in the HR function and are deployed to help the organization and its departments work in new and smarter ways.
The team there even has an actual robot, Tarmo, who gets on with the more mundane tasks within the HR function (Pohjanpalo, 2018).
The challenge, and opportunity, now is that by automating much of the low-value and transactional HR work and utilizing HR chat- bots among other developments, HR as a function is increasingly expected to become a centre of innovation. The function will need to redefine its role to directly impact the holistic EX and its impact on CX and business results. The increasing application of AI and automation does present evidence that disruption in how HR is prac- tised is just getting started. Leadership teams are right to be exploring
new operating models, and the new capabilities that underpin up- graded and progressive approaches to doing good business.
Google, of course, remains a popular example when it comes to the creation of a leading people function. It is rightly viewed as a beacon of insight demonstrating how HR can be effectively set up and practised in a large and leading company. What is also of interest to me is the foundation that HR is and was built on from the very beginning of the company. It is a foundation largely out of reach to many HR professionals. I recall from experience sitting on confer- ence panels with senior Google leaders and making a mental note about the way Google leaders introduced HR. The people function was described as critical to the business and one of the major part- ners to the board and CEO. How many companies can say that? The way in which Google positions HR is not by accident, but by design.
Whether you move directly to an EX function and integrate HR and other employee-facing functions as one connected team, or you build based on alliances, working groups or committees, the key challenge will be to put in place a model that effectively serves and cultivates positive experiences in work and ensures professional relationships, across departments, are in full alignment with EX and CX.