[MUSIC PLAYING] GRAYCE CARSON: Hey, Rick. 

RICK VANASSE: Hey, Grayce, how are you? 

GRAYCE CARSON: I'm doing swell. How are you? 

RICK VANASSE: Good, good, good. Good to see you. 

GRAYCE CARSON: You too. 

RICK VANASSE: Yeah. 

GRAYCE CARSON: So lately, we've been talking about organization design models. And I've heard you mention the congruence model. Can you maybe go over that with us today? 

RICK VANASSE: Absolutely. Yeah, no, that's great. It's a great model. So think about a key element of every CEO's job is creating competitive advantage. How do I capture the marketplace? How do I produce a better product or service than the competitor? And think about how often that has included an organization design, a redesign, or a restructuring of some kind or another. And then think about how often have those been successful and how often have those failed? And I hate to say it, but it's more the latter. 

So what if there were a framework or a way of thinking about organization design that actually worked? So that is something that two folks that I've had the pleasure to work with, David Nadler and Michael Tushman, created, and that's called the congruence model. So I'd like to share that with you here today. 

So what does David mean by congruence? So let me read to you his definition of congruence. And this comes from his book by he and Tushman called Competing by Design. So David says, at any given time, the components of an organization have a level of congruence, that is, the degree to which the needs, demands, goals, objectives, and structures of one component of the organization are consistent with and aligned with another. 

So oftentimes you hear us talking about organizational alignment. That's really the core of what the congruence model is all about. So Grayce, here's a diagram of the congruence model. I'd like to break it down into its various components. So the first component in diagnosing an organization and looking for its alignment is to understand its broader ecosystem, the environment within which that organization is functioning. And we break that into two parts. We call them the puts. It's the inputs and the outputs. 

Now, the inputs of an organization are the environment, the resources you have available, raw materials, financial, people, market. It includes the history of the industry, the history of the organization. It includes the technology. What is the leading edge? What is the bleeding edge? The outputs are at the other end of the spectrum. 

And it is the expected outputs at three levels, at a system level, company as a whole, at a unit level, perhaps at a P&L within the organization or within a function, and at the individual level, each employee. So we talk about two components, the two ends of the spectrum, as going from the puts to the puts. 

So the second component I'd like to talk about is strategy. And this is strategy given your understanding of the whole, understanding of the context, the inputs. Think of strategy at two levels. There's the corporate strategy, which is really about the decisions you want to make around your business portfolio, in other words, what businesses do we want to be in? How and where do we want to compete? 

The second is the more detailed. And that's the business strategy. And the business strategy is, given each of those P&Ls, or businesses you've chosen to be in, how do you best configure the limited resources that you have to meet the demands, the opportunities, the challenges for that business for that market? So the strategy is taking what you've learned from the inputs and configuring it in a way that you can say, here's how we want to approach achieving our business results. 

So Grayce, the third component is the transformation process as it is embodied in the organization itself. So think about it. Why does an organization even exist? It exists to take a product or service and transform it from the inputs to the outcomes or outputs. And as you can see from the detail here, there are four elements of the transformation process or four components of the organization. 

So the first component is the actual work. These are the activities within the organization that drive its transformation, raw materials to a product, people's capabilities to a service. So performing this work is one of the primary reasons why an organization even exists. Our goal is to complete this work, get the work done, as efficiently and as effectively as possible with the highest quality output and at the lowest cost. 

The second element are the people. The people are the ones responsible for the tasks, for the activities, for doing the work within that transformation process. And what we want to do is to ensure that the people have the necessary skills and capabilities and knowledge to do the work. 

The second component of the people is we want, as a company, we want to be sure that their personal needs and desires are being met, that they want to continue to work here, that they feel as though they're getting a fair wage and recognition. And probably the most important component is that they're finding meaning in the work that they're doing. 

So increasingly, meaning making is a critical part of the workplace and ensuring that people are finding ways in which they can be fulfilled and find meaning in the work that they're doing on a day to day basis. The third element of the transformation process, or the third element as you're designing an organization, is the formal organization. That's the structures, processes, and systems that we put in place that are necessary to organize and enable our people to get the work done, to make that transformation of our product or service. 

So when you think about it, when you think about when people speak about going through a restructuring or a redesign, typically what they're talking about is the formal organization. It's the boxes and lines. It's who reports to who. Do we have enough of the right people in the right place? Is the reporting relationship correct? That's all very important stuff. 

But if that's all you're doing in an organization design, you're kind of moving deck chairs around on the deck of the Titanic. And it's not going to achieve the results, overall results, that you're looking for. Instead, it's one key element. But that leads us to the fourth component of the transformation or fourth element of an organization. And that's the informal organization. 

And the informal organization is perhaps the most important. Those are the unwritten rules and guidelines that exist that are powerfully influencing people's collective and individual behavior. Guess what we call that? Culture. And so the culture of an organization or the informal organization is where a lot of companies are spending time to build out their values, their expected behaviors. And that's great work. But again, it has to be in alignment with the formal organization, the people, and the actual work that you're doing. So it's alignment of these four things. 

Now, think about most mergers and acquisitions. And if you read HBR or a lot of articles will speak to 70% of mergers and acquisitions fail. Why do they fail? It's not because of inadequate financial due diligence, or market due diligence, or business process integration. It's usually cultural fit. And so especially if you're looking at acquiring or selling with another organization, understanding the informal organization is key. And then it's aligning these four elements that's perhaps most important. 

One thing that I and my fellow former Delta colleagues like to argue is that there's actually a fifth element to this model. And it sits right there in the middle of the four components. And it's called leadership. And if you think about what the role of the leader, particularly the role of the CEO, it's to understand this ecosystem, understand the environment within which you're functioning, those inputs and outputs. It's to articulate a clear corporate strategy, a clear business strategy around each element of that portfolio. And then it's to help people understand and reach alignment, congruence, around the other four elements. 

So I think a key missing component in David's model is that fifth box in the middle called leadership. And then when you step back from this whole process and you say, so how does it all come together, it comes together best by a CEO meeting with their executive team, bringing conversation to the table, finding ways to bring further alignment conversation to the rest of the organization. 

So any good organization design doesn't happen in a back office somewhere. It happens by involving as many people as possible in the right way to participate in creating the alignment across the organization. And a great principle to keep in mind for that is people tend to support what they help create. And that goes for organization design as well. So I hope that was helpful, Grayce, answered a few questions you may have had about what is the congruence model. 

GRAYCE CARSON: Absolutely. Thanks so much, Rick. 

RICK VANASSE: You're welcome. Take care. 

GRAYCE CARSON: Bye bye. 

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