Does your organisational design support innovation?

Does your organisational design support innovation?

Most organisations are not designed to nurture excellence, innovation and growth. However, some meticulously plan the way they are structured, thereby resulting in innovation, to become a commercial success. The author discusses four simple checks and balances to support innovation

RANA KAPOOR

Most organisations are not designed and structured through meticulous planning. They just evolve over time. And, more often than not, the organisational design becomes more and more complex over the years, thereby stifling innovation and execution capabilities.

In my earlier article, I had mentioned that CEOs, be it founders of new age startups or of more mature organisations, need to ask themselves at least once every year; Are we designed for success? He/ she needs to personally craft and fine-tune an organisational design which is execution-friendly and in alignment with the company’s strategy. No other intervention (of the CEO) will affect the long-term success of the business more than this.

At YES Bank, I tend to spend at least 30 per cent of my time in institutionalising such an organisational design culture. And, over time, I have implemented four simple checks and balances.  Each of these simple tests have to pass a 6:3:1 benchmark ratio. I have reason to believe that similar checks and balances would be equally applicable to most organisations across sectors and life cycles, with some contextual refinements.

First test: Market strategy

As a growing organisation, 60 per cent of its efforts need to be focussed on market facing functions (such as new business development), 30 per cent towards retaining and servicing existing clients and business, and 10 per cent towards other support functions. Quite often, without the required middle and back-end support, high growth companies tend to focus excessively on new business development, thus resulting in customer service issues.

Second test: Business mix and future growth

At most times, while 60 per cent of a Bank’s focus is on established businesses and cash cows, it needs to have at least a 30 per cent focus on new, evolving businesses and a 10 per cent focus on innovative ideas. This will ensure that that company doesn’t live QSQT (Quarter Se Quarter Tak).

Furthermore, each of these three groups needs a specialist and distinctive culture. For instance, the cash cow business needs controlled aggression, with a rain-maker ability to create business opportunities with a sense of urgency. And, its output can be fairly and objectively measured. On the other hand, an innovation focussed business needs to be nurtured differently. It should be encouraged to think out of the box, think big, and think different.

Essentially, each of these groups needs to act like a professional entrepreneur on the job. For example, in companies like Google, employees are encouraged to spend at least 10 per cent of their time on innovation in product, process or service.

Third test: Control and accountability

In every business, particularly in banking, it is extremely important to ensure tight process and controls, as a means to ensure operational risk management. However, this should not stifle decision-making either.

Using the 6:3:1 test, as long as not more than 10 per cent of business decisions are escalated to me, and not more than 30 per cent of routine decisions are directed to my reportees, I can be confident that the organisation has been designed to give empowerment and to ensure accountability. The execution, on the other hand, needs monitoring through periodic reviews.

Fourth test: People

In accordance to the 6:3:1 philosophy, 10 per cent of the organisation has to constitute top and senior management (who head business functions or part of business support). They will typically be my direct reportees or one-downs. 30 per cent should be middle management and 60 per cent should be junior and general management. Here, it’s up to our HR and training & development team to ensure that this human capital pipeline is consistent. This constitution will also ensure that there is no redundancy or unnecessary hierarchy in the organisation, thereby ensuring agility, higher productivity, better job descriptions and growth path for the employees.

If the above four simple tests prove affirmative, I would have the confidence and conviction that the organisation is designed to excel, not just for now, but for the years to come as well.

At YES Bank, through professional entrepreneurship we have tried to institutionalise entrepreneurship with the bank. This has helped us drive the ‘One Bank Model’, with all employees as owners-managers-partners, with an embedded ethos of Carpe Diem – seizing the opportunity everyday in the DNA of our bank. We have also attempted to inculcate a culture of professional entrepreneurship that stimulates innovation in products and services through dynamic organisational structures, and most of all, a highly positive mindset to identify opportunities in adversity.


Rana Kapoor is the managing director and CEO of YES Bank. The above article is the second of his three-part series on Business Excellence through design driven innovation.

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