The DecisionDriven

Organization
Forget the organization chart- the secret is to
focus on decisions, not structure.

Submitted To:
Prof. Parvaiz Talib

Submitted By:
Aditya
Sharma(14MBA22)
Prakhar
Jain(14MBAIB11)

Contents
Introduction
Organizational

Structure Yields Performance:

A Myth
- The Case Of Yahoo!
What Drives Better Organizational
Performance??
Decision Audit
Steps In Decision Audit
How To Build A Decision-Driven Organization?
Six Steps To Decision-Driven Reorganization
Final Thoughts

Introduction
It is a popular belief among the CEOs
that organizational structure is a key
determinant of the financial performance
whereas the fact is that a companys
performance is the sum total of the
decisions it makes and the actions it
takes.
Structuring the organization to optimize
decision making and execution is
actually what that helps in yielding
better results.

Organizational Structure Yields

Performance: A Myth
There is a general assumption that
Reorganizing through the restructuring
of the organizational structure of a
company has a direct link with better
performance. BUT, a study of 57
reorganizations conducted by BAIN &
COMPANY found out that more then
two-third of them had no effect
and rather some of them actually
destroyed their value.

...the case of Yahoo

In

Dec.2006, the then-CEO Terry Semel

announced the reorganization of their
company.
They merged 7 product units into a group
called Audience.
Another 7 product units into a group called
Advertisers and Publishers.
A new unit named Technology was
developed to provide infrastructure for
these two new operating group.
Desired Results: to accelerate economies
of scope.

What Drives Better

Organizational Performance??
A companys structure results in
better performance only if it
improves the organizations ability
to make and execute key
decisions better and faster
than competitors.
If the
organizations structure be sync.
with its decisions, then the
structure will work better and
performance will improve.

Continued
Bain and Company conducted
a
study on 760 companies to rate
their decision effectiveness on the
following 4 parameters1. Decision Quality
2. Speed
3. Yield, and
4. Effort

findings of the study

Decision

effectiveness and Financial

results correlated at 95% confidence
level or higher for every country,
industry and company size.
Top-quintile
companies
generated
Average Total Shareholder Returns
nearly 6 percentage points higher.
There
was
no
strong
statistical
relationship between Structure and
Performance.
In reorganization, Decisions rather than
Structure should be the primary focus.

Decision Audit
Executives

mostly begin reorganization

with a SWOT Analysis, and in doing so
they generally ignore the critical
decisions needed to be made.

SWOT

Analysis ideally should be done

while
determining
companys
strategies.

better way to initiate reorganization

process is through Decision Audit.

steps in Decision Audit

1) Identifying key decisions to
create maximum value for
shareholders. These decisions can
be of two typesi) Big, One-off Decisions, and
ii) Small, Routine Decisions
2) Figuring out where in the
organization should these decisions
be made.

How to Build a Decision-Driven

Organization?
To determine what important decisions are, the
management should look at the source of
value in the business and the organize the
macrostructure around them.
Case of British Gas (a division of Centrica)

The company faced serious performance crisis in

2006.
The management examined the sources of
value- profitability by service, by geographic
area, and by customer segment.
Discovered that profitability and growth varied
much more by customer segment than by any
other variable.

MD Phil Bentley decided to re-structure the

company by customer segment.
Established
three separate businesses:
Premier Energy, Energy First and Pay-As-YouGo Energy.
Benefits Reaped
It
helped in placing accountability for
decisions that directly affected customers.
Corporate headquarters could focus on
noncustomer-facing matters.
Helped in improving its performance.
Customer attrition fell from 20% to 10%.
Bad debts fell.
Business grew again for the first time in
years.

Six Steps to Decision-Driven

Reorganization
Identify the organizations key
decisions.

Determine where in the organization

those decisions should happen.

Organize the macrostructure around

sources of value.

Figure out what level of authority decision makers

need.

Align other elements of the organizational system

with those related to decision making.

Help Managers develop the skills and behaviors

necessary to make and execute decisions quickly
and well.

Final Thoughts
Reorganization

done merely on the basis of

re-structuring of the organization chart
generally fails to deliver meaningful
improvement in performance.
A culture of fast, effective decision making
and action through out the organization
enables true flexibility and responsiveness.
Companys
assets,
capabilities
and
structures are useless unless the managers
make the essential decisions and get those
decisions right.
Thus, in this rapidly changing business
landscape, executing right decisions better